UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 20-F
                      ANNUAL REPORT PURSUANT TO SECTION 13
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                   For the fiscal year ended December 31, 2002

                         Commission file number 1-14814

                    Fomento Economico Mexicano, S.A. de C.V.
             (Exact Name of Registrant as Specified in Its Charter)

                       Mexican Economic Development, Inc.
                 (Translation of Registrant's Name into English)

                              United Mexican States
                 (Jurisdiction of Incorporation or Organization)

                           General Anaya No. 601 Pte.
                               Colonia Bella Vista
                           Monterrey, NL 64410 Mexico
                    (Address of Principal Executive Offices)


Securities registered or to be registered pursuant to Section 12(b) of the Act:

                                                Name of Each Exchange
Title of each class                             On Which Registered
-------------------------------------           -------------------------------
American Depositary Shares, each                New York Stock Exchange
representing ten BD Units, each
consisting of  one Series B Share,
two Series D-B Shares and two Series
D-L Shares, without par value

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

Securities for which there is a reporting obligation pursuant to Section 15(d)
of the Act:
                None

The number of outstanding shares of each of the issuer's classes of capital or
common stock as of December 31, 2002 was:

639,892,590.....    BD Units (the "BD Units"),  each  consisting of one Series B
                    Share,  two Series  D-B  Shares  and two Series D-L  Shares,
                    without  par  value.  The BD  Units  represent  a  total  of
                    639,892,590 Series B Shares, 1,279,785,180 Series D-B Shares
                    and 1,279,785,180 Series D-L Shares.



419,569,500.....    B Units (the "B Units"),  each  consisting  of five Series B
                    Shares without par value.  The B Units  represent a total of
                    2,097,847,500 Series B Shares.


Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days.
                                              Yes|x|       No |_|

Indicate by check mark which financial statement item the registrant has elected
to follow.

                                              |_| Item 17  |x| Item 18

================================================================================


<PAGE>

<TABLE>
<CAPTION>
                                Table of Contents

                                                                                                                Page
<S>             <C>                                                                                             <C>
INTRODUCTION.....................................................................................................1
------------

                  References.....................................................................................1
                  ----------

                  Accounting Principles..........................................................................1
                  ---------------------

                  Currency Translations and Estimates............................................................2
                  -----------------------------------

                  Forward-Looking Information....................................................................2
                  ---------------------------

ITEM 1. NOT APPLICABLE...........................................................................................3
----------------------

ITEM 2. NOT APPLICABLE...........................................................................................3
----------------------

ITEM 3. KEY INFORMATION..........................................................................................3
-----------------------

                  Selected Financial Data........................................................................3
                  -----------------------

                  Dividends......................................................................................5
                  ---------

                  Exchange Rate Information......................................................................6
                  -------------------------

                  Risk Factors...................................................................................8
                  ------------

ITEM 4. INFORMATION ON THE COMPANY..............................................................................18
----------------------------------

                  Overview......................................................................................18
                  --------

                  Corporate Background..........................................................................18
                  --------------------

                  The Panamco Acquisition.......................................................................20
                  -----------------------

                  Ownership Structure...........................................................................21
                  -------------------

                  Significant Subsidiaries......................................................................23
                  ------------------------

                  Business Strategy.............................................................................23
                  -----------------

                  FEMSA Cerveza.................................................................................24
                  -------------

                  Coca-Cola FEMSA...............................................................................39
                  ---------------

                  FEMSA Comercio................................................................................55
                  --------------

                  FEMSA Empaques................................................................................60
                  --------------

                  Logistica.....................................................................................69
                  ---------

                  Perfil Corporativo............................................................................69
                  ------------------

                  FEMSA Servicios...............................................................................69
                  ---------------

                  Description of Property, Plant and Equipment..................................................70
                  --------------------------------------------

                  Capital Expenditures and Divestitures.........................................................72
                  -------------------------------------

                  Regulatory Matters............................................................................73
                  ------------------

                  Insurance.....................................................................................75
                  ---------

ITEM 5.  OPERATING AND FINANCIAL REVIEW AND PROSPECTS...........................................................76
-----------------------------------------------------

                  Critical Accounting Policies..................................................................76
                  ----------------------------

                  New Accounting Pronouncements.................................................................79
                  -----------------------------

                  Operating Results.............................................................................83
                  -----------------

                  Operating Leverage............................................................................85
                  ------------------
</TABLE>
<PAGE>

<TABLE>
<CAPTION>

<S>              <C>                                                                                           <C>
                  Impact of the Panamco Acquisition.............................................................85
                  ---------------------------------

                  Results of Operations.........................................................................86
                  ---------------------

                  Liquidity and Capital Resources..............................................................104
                  -------------------------------

                  Plan for the Disposal of Certain Fixed Assets................................................109
                  ---------------------------------------------

                  U.S. GAAP Reconciliation.....................................................................109
                  ------------------------

ITEM 6.  DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES............................................................111
---------------------------------------------------

                  Directors....................................................................................111
                  ---------

                  Examiner.....................................................................................117
                  --------

                  Senior Management............................................................................118
                  -----------------

                  Executive Officers...........................................................................118
                  ------------------

                  Compensation of Directors and Senior Management..............................................121
                  -----------------------------------------------

                  Executive Incentive Program..................................................................121
                  ---------------------------

                  Stock Incentive Plan.........................................................................122
                  --------------------

                  Share Ownership..............................................................................122
                  ---------------

                  Board Practices..............................................................................123
                  ---------------

                  Employees....................................................................................124
                  ---------

                  Insurance Policies...........................................................................125
                  ------------------

ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS......................................................126
---------------------------------------------------------

                  Major Shareholders...........................................................................126
                  ------------------

                  Related Party Transactions...................................................................126
                  --------------------------

ITEM 8. FINANCIAL INFORMATION..................................................................................129
-----------------------------

                  Consolidated Financial Statements............................................................129
                  ---------------------------------

                  Dividend Policy..............................................................................129
                  ---------------

                  Legal Proceedings............................................................................129
                  -----------------

ITEM 9. THE OFFER AND LISTING..................................................................................132
-----------------------------

                  Description of Securities....................................................................132
                  -------------------------

                  Trading Markets..............................................................................132
                  ---------------

                  Trading on the Mexican Stock Exchange........................................................132
                  -------------------------------------

                  Price History................................................................................133
                  -------------

ITEM 10. ADDITIONAL INFORMATION................................................................................137
-------------------------------

                  Bylaws.......................................................................................137
                  ------

                  Organization and Register....................................................................137
                  -------------------------

                  Voting Rights and Certain Minority Rights....................................................137
                  -----------------------------------------

                  Shareholder Meetings.........................................................................137
                  --------------------

                  Dividend Rights..............................................................................138
                  ---------------
</TABLE>
<PAGE>

<TABLE>
<CAPTION>

<S>               <C>                                                                                           <C>
                  Change in Capital and Withdrawal Rights......................................................139
                  ---------------------------------------

                  Preemptive Rights............................................................................139
                  -----------------

                  Limitations on Share Ownership...............................................................140
                  ------------------------------

                  Other Provisions.............................................................................140
                  ----------------

                  Taxation.....................................................................................141
                  --------

                  Material Contracts...........................................................................144
                  ------------------

                  Documents on Display.........................................................................151
                  --------------------

ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK............................................152
-------------------------------------------------------------------

                  Interest Rate Risk...........................................................................152
                  ------------------

                  Foreign Currency Exchange Rate Risk..........................................................153
                  -----------------------------------

                  Equity Risk..................................................................................154
                  -----------

                  Commodity Price Risk.........................................................................155
                  --------------------

ITEMS 12-14. NOT APPLICABLE....................................................................................156
---------------------------

ITEM 15. CONTROLS AND PROCEDURES...............................................................................157
--------------------------------

ITEMS 16-17. NOT APPLICABLE....................................................................................158
---------------------------

ITEM 18. FINANCIAL STATEMENTS..................................................................................159
-----------------------------

ITEM 19. EXHIBITS 160
-------- --------
</TABLE>

<PAGE>



INTRODUCTION

                                   References

     The terms "FEMSA," "our company," "we," "us," and "our," are used in this
Annual Report to refer to Fomento Economico Mexicano, S.A. de C.V. ("FEMSA")
and, except where the context otherwise requires, its subsidiaries on a
consolidated basis. On May 6, 2003, our subsidiary Coca-Cola FEMSA, S.A. de C.V.
("Coca-Cola FEMSA") acquired Panamerican Beverages, Inc. ("Panamco"). Unless the
context otherwise requires, references to FEMSA do not include Panamco and its
subsidiaries, which were not reflected in our financial statements for the
twelve months ended and as of December 31, 2002.

     We are an integrated beverage company incorporated under the laws of the
United Mexican States ("Mexico"). We are a holding company whose principal
assets are a 99.99% interest in Grupo Industrial Emprex, S.A. de C.V. ("Emprex")
and a 100% interest in Compania Internacional de Bebidas, S.A. de C.V.
("CIBSA"), which are also holding companies incorporated under the laws of
Mexico.

     References herein to "U.S. Dollars," "US$," "Dollars" or "$" are to the
lawful currency of the United States. References herein to "Pesos" or "Ps." are
to the lawful currency of Mexico. References herein to "Argentine pesos" or
"Aps." are to the lawful currency of the Republic of Argentina ("Argentina").
The term "billion" as used in this Annual Report means one thousand million.

     The term "beer" as used in this Annual Report refers generally to fermented
alcoholic beverages brewed from malt and flavored with hops. The term
"hectoliter" means 100 liters or approximately 26.4 U.S. gallons.

     Per capita growth rates and levels, product segments, relative prices and
packaging information contained in this Annual Report with respect to FEMSA
Cerveza, S.A. de C.V. ("FEMSA Cerveza"), our 70%-owned subsidiary engaged in the
production, distribution and marketing of beer, have been computed and are based
upon our statistics and assumptions. FEMSA Cerveza volume figures contained in
this Annual Report refer to invoiced sales volume. Invoiced sales volume
represents the number of hectoliters of beer sold by FEMSA Cerveza's breweries
to unaffiliated distributors and by affiliated distributors to retailers.

     Per capita growth rates and levels, product segments, relative prices and
packaging information contained in this Annual Report with respect to Coca-Cola
FEMSA, our 51%-owned subsidiary engaged in the production, distribution and
marketing of nonalcoholic beverages, have been computed and are based upon
Coca-Cola FEMSA's statistics and assumptions. The term "soft drink" as used in
this Annual Report refers generally to non-alcoholic beverages including those
carbonated or containing natural or artificial flavors and sweeteners. The term
"unit case" refers to 192 ounces of finished beverage product (equivalent to 24
eight-ounce servings) and, when applied to fountain syrup and concentrate,
refers to the volume of concentrate or fountain syrup that is required to
produce 192 ounces of finished beverage product.

     To the extent estimates are contained in this Annual Report, we believe
that such estimates, which are based on internal data, are reliable. Amounts in
this Annual Report are rounded, and the totals may therefore not precisely equal
the sums of the numbers presented.

                              Accounting Principles

     We publish our financial statements in Mexican Pesos and prepare such
financial statements in accordance with Generally Accepted Accounting Principles
in Mexico ("Mexican GAAP"). Mexican GAAP differs in certain significant respects
from Generally Accepted Accounting Principles in the United States ("U.S.
GAAP"). Notes 24 and 25 to the Consolidated Financial Statements provide a
description of the principal differences between Mexican GAAP and U.S. GAAP as
they relate to our company and a reconciliation to U.S. GAAP of majority net
income and majority stockholders' equity.


                                       1
<PAGE>

                       Currency Translations and Estimates

     This Annual Report contains translations of certain Peso amounts into U.S.
Dollars at specified rates solely for the convenience of the reader. These
translations should not be construed as representations that the Peso amounts
actually represent the U.S. Dollar amounts or could be converted into U.S.
Dollars at the rate indicated. Unless otherwise indicated, these U.S. Dollar
amounts have been translated from Pesos at an exchange rate of Ps. 10.459 to
US$1.00, the exchange rate quoted by dealers to FEMSA for the settlement of
obligations in foreign currencies on December 31, 2002. On December 31, 2002 and
on June 13, 2003, the noon buying rates for Pesos as published by the Federal
Reserve Bank of New York were Ps. 10.43 to US$1.00 and Ps. 10.60 to US$1.00,
respectively. See "Item 3. Key Information--Exchange Rate Information" for
information regarding exchange rates since 1998.

     Per capita growth rates and population data have been computed based upon
statistics prepared by Mexico's Instituto Nacional de Estadistica, Geografia e
Informatica (the National Institute of Statistics, Geography and Information, or
the "Mexican Institute of Statistics"), the Federal Reserve Bank of New York,
Banco de Mexico and upon our estimates.

                           Forward-Looking Information

     This Annual Report contains words, such as "believe," "expect" and
"anticipate" and similar expressions that identify forward-looking statements.
Use of such words reflects our views about future events and financial
performance. Actual results could differ materially from those projected in such
forward-looking statements as a result of various factors that may be beyond our
control, including but not limited to effects on our company from changes in our
relationship with or among our affiliated companies, movements in the prices of
raw materials, competition, significant developments in Mexico or international
economic or political situations, or changes in our regulatory environment. In
addition, Coca-Cola FEMSA has recently consummated the acquisition of Panamco,
which exposes us to a variety of new risks and challenges. Accordingly, we
caution readers not to place undue reliance on these forward-looking statements.
In any event, these statements speak only as of their respective dates, and we
undertake no obligation to update or revise any of them, whether as a result of
new information, future events or otherwise.



                                       2
<PAGE>



ITEM 1.  NOT APPLICABLE

ITEM 2.  NOT APPLICABLE

ITEM 3.  KEY INFORMATION

                             Selected Financial Data

     This Annual Report includes (under Item 18) our audited consolidated
balance sheets as of December 31, 2002 and 2001 and the related consolidated
income statements, changes in stockholders' equity and changes in financial
position for the years ended December 31, 2002, 2001 and 2000. Our consolidated
financial statements are prepared in accordance with Mexican GAAP which differs
in certain significant respects from U.S. GAAP. Notes 24 and 25 to our
consolidated financial statements provide a description of the principal
differences between Mexican GAAP and U.S. GAAP as they relate to FEMSA, together
with a reconciliation to U.S. GAAP of net majority income, majority
shareholders' equity and certain other selected financial data. The effects of
inflation accounting under Mexican GAAP have not been reversed in the
reconciliation to U.S. GAAP. See Note 24 to consolidated financial statements.

     On May 6, 2003, our subsidiary Coca-Cola FEMSA acquired Panamco. Panamco is
not reflected in our consolidated financial statements presented in this Annual
Report.

     The following table presents selected financial information. This
information should be read in conjunction with, and is qualified in its entirety
by reference to, our consolidated financial statements, including the Notes
thereto. The selected financial information is presented on a consolidated
basis, and is not necessarily indicative of our financial position or results of
operations at or for any future date or period.



                                      3
<PAGE>
<TABLE>
<CAPTION>

                                                   Selected Consolidated Financial Information
                                                                 Year Ended December 31,
                                       2002(1)     2002          2001            2000           1999           1998
                                       -------    ------        ------          ------         ------         -------
                                      (in millions of U.S. Dollars ("$") and Pesos ("Ps."), except for per share data,
                                            the weighted average number of shares outstanding and operating margin)
<S>                                    <C>        <C>            <C>           <C>         <C>            <C>
Income Statement Data:
Mexican GAAP:
Total revenues...............      $   5,062     Ps.52,941      Ps.50,097    Ps.  47,869    Ps. 43,333    Ps. 41,244
Income from operations(2)....            907         9,491          8,533          7,663         6,925         6,031
Taxes(3) ....................            346         3,624          2,945          2,508         2,158         1,156
Change in accounting principle            --            --           (29)             --            --            --
Net income...................            441         4,613          4,980          3,827         4,528         2,570
Net majority income..........            271         2,837          3,393          2,748         3,436         1,743
Net minority income..........            170         1,776          1,587          1,079         1,092           827
Net majority income per
share(4).....................
Series B Shares..............          0.046         0.478          0.571          0.459         0.574         0.361
Series D Shares..............          0.057         0.597          0.714          0.574         0.717         0.451
Weighted average number of shares
outstanding (millions)

Series B Shares..............        2,737.7       2,737.7        2,737.8        2,745.8       2,746.5       2,553.1
Series D Shares..............        2,559.6       2,559.6        2,559.8        2,591.8       2,594.8       1,821.1

U.S. GAAP:
Total revenues...............      $   5,062     Ps.52,941     Ps. 52,720    Ps.  50,158    Ps. 46,447    Ps. 45,319
Income from operations(2)....            810         8,473          7,452          6,777         6,448         5,792
Change in accounting principle            --            --           (52)             --            20            --
Net minority income..........            172         1,804          1,583          1,154         1,101           810
Net income...................            295         3,083          3,178          2,571         2,218         1,007
Net income per share(4)
Series B Shares..............          0.050         0.519          0.535          0.429         0.370         0.209
Series D Shares..............          0.062         0.649          0.669          0.537         0.463         0.261

Balance Sheet Data:
Mexican GAAP:
Total assets.................      $   5,737     Ps.60,004     Ps. 51,136    Ps.  48,115    Ps. 46,617    Ps. 46,466
Current liabilities..........          1,128        11,794          8,706          8,348         8,429         8,395
Long-term debt(5)............            937         9,803          7,117          7,698         8,023         9,973
Other long-term liabilities..            535         5,594          5,308          5,352           935         1,189
Capital Stock................            390         4,081          4,081          4,086         4,107         4,107
Total shareholders' equity...          3,137        32,813         30,005         26,717        29,230        26,909
Majority interest............          2,200        23,015         21,173         18,797        20,888        18,758
Minority interest............            937         9,798          8,832          7,920         8,342         8,151

U.S. GAAP:
Total assets.................      $   7,236     Ps.75,677      Ps.67,525    Ps.  66,822    Ps. 65,363     Ps.65,129
Current liabilities..........          1,300        13,601         10,544         10,585        10,760        10,247
Long-term debt(5)............          1,040        10,875          8,181          7,722         8,030        10,066
Other long-term liabilities..            462         4,829          4,824          6,292         6,379         5,841
Capital Stock................            390         4,081          4,081          4,086         4,107         4,107
Shareholders' equity.........          3,515        36,767         35,196         33,885        32,564        31,277
Minority interest............            918         9,605          8,780          8,338         7,630         7,699

Other information:
Mexican GAAP:
Depreciation(6)..............      $     227      Ps.2,378      Ps. 2,290    Ps.   2,415    Ps.  2,166    Ps.  1,845
Capital expenditures(7)......            530         5,540          5,314          4,571         4,351         5,352
Operating margin(8)..........          17.9%         17.9%          17.0%          16.0%         16.0%         14.6%

U.S. GAAP:
Depreciation(6)..............      $     238     Ps.2,491      Ps. 2,356     Ps.  2,496    Ps.  2,315    Ps.  1,799
Operating margin(8)..........          16.0%         16.0%          14.1%          13.5%         13.9%         12.8%
</TABLE>

                                       4
<PAGE>

(1)  Translation to U.S. Dollar amounts at an exchange rate of Ps. 10.459 to
     US$1.00 solely for the convenience of the reader.
(2)  Includes income from operations and participation in results of affiliated
     companies.
(3)  Includes income tax, tax on assets and employee profit sharing.
(4)  The net income (after changes in accounting principles) per Series B Share
     and per Series D Share was calculated in accordance with Bulletin B-14 of
     Mexican GAAP, which is similar to SFAS No. 128 of U.S. GAAP. The following
     table presents the calculations of the weighted average number of shares
     and income per share allocation:

<TABLE>
<CAPTION>

                                                     Series B Shares                       Series D Shares
                                          ------------------------------------- --------------------------------------
                                                Number of           Weighted          Number of           Weighted
                                                Shares              Average           Shares              Average
                                               -------------      -------------      -------------       -------------
     <S>                                        <C>               <C>               <C>                 <C>
     At December 31, 1998....................  2,746,546,090      2,553,110,930      2,594,794,360       1,821,053,690
         Allocations of earnings.............                            52.87%                                 47.13%
     At December 31, 1999....................  2,746,546,090      2,746,546,050      2,594,794,360       2,594,794,360
         Allocations of earnings.............                            45.85%                                 54.15%
         Repurchase of our shares in              6,750,000
         2000 from October 29, 2000 to
         December 29, 2000...................                           736,246        27,000,000            2,944,984
     At December 31, 2000.................... 2,739,796,090       2,745,809,844      2,567,794,360       2,591,849,376
         Allocations of earnings.............                            45.85%                                 54.15%
     Repurchase of our shares in 2001             2,056,000
          from January 4, 2001 to
          January 16, 2001...................     2,004,647          8,224,000           8,018,586
     At December 31, 2001.................... 2,737,740,090      2,737,791,443      2,559,570,360       2,559,775,774
         Allocation of earnings..............                           46.11%                                 53.89%
     At December 31, 2002.................... 2,737,740,090      2,737,740,090      2,559,570,360       2,559,570,360
         Allocation of earnings..............                           46.11%                                 53.89%
</TABLE>

(5)  Includes long-term bank loans minus the current portion of long-term debt.
(6)  Includes bottle breakage.
(7)  Includes investments in property, plant and equipment and deferred charges.
(8)  Operating margin is calculated by dividing income from operations by total
     revenues.

                                    Dividends

     Subject to extraordinary economic events and to the factors described below
that affect our financial situation and liquidity, which may affect whether or
not dividends are declared and the amount of such dividends, we intend to pay
aggregate dividends of approximately 15% to 30% of net income. We do not expect
to be subject to any contractual restrictions on our ability to pay dividends,
although our subsidiaries may be subject to such restrictions. Because we are a
holding company with no significant operations of our own, we will have
distributable profits and cash to pay dividends only to the extent that we
receive dividends from our subsidiaries. Accordingly, there can be no assurance
that we will pay dividends or as to the amount of any dividends.

     Subject to certain exceptions contained in the Deposit Agreement (the "ADR
Deposit Agreement") dated April 13, 1998, among FEMSA, Citibank, N.A. (the "ADR
Depositary") and all holders and beneficial owners from time to time of American
Depositary Shares evidenced by American Depositary Receipts ("ADRs") issued
under the ADR Deposit Agreement, any dividends distributed to U.S. holders of
our ADRs will be paid to the ADR Depositary in Pesos and will be converted by
the ADR Depositary into U.S. Dollars. As a result, exchange rate fluctuations
may affect the U.S. Dollar amount actually received by holders of our ADRs.
Although the Mexican government does not currently restrict the ability of
Mexican and foreign persons or entities to convert Pesos to U.S. Dollars or
other currencies or to transfer other currencies out of Mexico, we cannot give
any assurance that the Mexican government will not institute a restrictive
exchange control policy in the future. Any restrictive exchange control policy
could affect the ADR Depositary's ability to convert dividends received in Pesos
into U.S. Dollars for purposes of making a distribution to holders of the ADRs.


                                       5
<PAGE>

     Effective January 1, 2002, Mexican income tax legislation does not require
Mexican companies to withhold income tax on dividend payments to Mexican or
non-Mexican stockholders. Accordingly, income tax was not withheld from dividend
payments made by FEMSA in May of 2003.

     The table below sets forth for each year the nominal amount of dividends
per share that we declared in Pesos and in U.S. Dollars at the indicated
exchange rates on each of the respective payment dates for the period 1999 to
2003:
<TABLE>
<CAPTION>

                                                    Dividends by FEMSA-1999 to 2003
                    --------------- ---------------------- ------------- ------------ --------------- -------------------
                    Fiscal Year                            Per Series                 Per Series D
                    with Respect                           B Share       Per Series   Share
                    to which        Aggregate Amount of    Dividend      B Share      Dividend        Per Series D
                    Dividend was    Dividend Declared      (Nominal      Dividend     (Nominal        Share Dividend
Date Dividend Paid  Declared        (Nominal Pesos)(2)     Pesos)        (US$)(1)     Pesos)          (US$)(1)
------------------  ------------    -------------------    -----------   ----------   ------------    -------------------
<S>                      <C>         <C>                    <C>            <C>           <C>         <C>
July 1, 1999....         1998       Ps. 359,402,342        Ps. 0.0600    $0.0064      Ps. 0.07500     $0.0080
July 31, 2000...         1999       Ps. 503,163,279        Ps. 0.0840    $0.0090      Ps. 0.10500     $0.0112
May 21, 2001....         2000       Ps. 435,790,703        Ps. 0.0734    $0.0082      Ps. 0.09170     $0.0103
May 31, 2002....         2001       Ps. 664,966,740        Ps. 0.1120    $0.0116      Ps. 0.14000     $0.0145
May 30, 2003....         2002       Ps. 397,792,604        Ps. 0.0670    $0.0065      Ps. 0.08375     $0.0081
-------------------------------------------------------------------------------------------------------------------------
</TABLE>

(1)  Translated to U.S. Dollars at the corresponding noon buying rate of the
     Federal Reserve Bank of New York.

(2)  The aggregate amount of dividend declared is determined by the per series
     dividend amount multiplied by the number of shares outstanding at the date
     the dividend is declared:

    Date Dividend Paid        Outstanding Shares
    ------------------        ------------------
                           Series B        Series D
    July 1, 1999        2,746,546,090   2,594,794,360
    July 31, 2000       2,746,546,090   2,594,794,360
    May 21, 2001        2,737,740,090   2,559,570,360
    May 31, 2002        2,737,740,090   2,559,570,360
    May 30, 2003        2,737,740,090   2,559,570,360

                            Exchange Rate Information
-------------------------------------------------------------------------------

     Mexican Peso

     In 1997 and for much of 1998, the foreign exchange markets were volatile as
a result of financial crises in Asia and Russia and financial turmoil in
countries including Brazil and Venezuela. The Peso declined during this period.
However, it remained relatively stable through 1999, 2000 and most of 2001.
Towards the end of 2001 and the beginning of 2002, the Peso appreciated
considerably against the U.S. Dollar and even more so against other currencies.
The value of the Peso peaked in March 2002 at Ps. 9.00 per U.S. Dollar. In the
next twelve months, the Peso steadily depreciated, reaching an exchange rate of
Ps. 11.235 per U.S. Dollar in March of 2003, representing a devaluation of
approximately 25%. The weakening of the Peso corresponds to a period of mounting
geopolitical instabilities and sagging financial markets in which the U.S.
Dollar also depreciated significantly against the Euro. There can be no
assurance that the Mexican government will maintain its current policies with
regard to the Peso or that the Peso will not further depreciate significantly.

     The following table sets forth, for the periods indicated, the high, low,
average and period-end noon buying rates of the Federal Reserve Bank of New
York, expressed in Pesos per U.S. Dollar. The rates have not been restated in
constant currency units. All amounts are stated in Pesos.

                                       6
<PAGE>
<TABLE>
<CAPTION>

                                                                          Exchange Rate
                                                     ------------------------------------------------------------
                                                     High               Low           Average(1)       Period End
                                                     ----               ---           ----------       ----------
<S>                                                  <C>               <C>             <C>             <C>
1998.........................................        10.63              8.04            9.24              9.90
1999.........................................        10.60              9.24            9.56              9.48
2000.........................................        10.09              9.18            9.47              9.62
2001.........................................         9.97              8.95            9.33              9.16
2002.........................................        10.43              9.00            9.75             10.43
Three months ended March 31, 2003............        11.24             10.32           10.90             10.78



2002:                                               High              Low                            Period End
                                                    ----              ---                            ----------
     January.................................      9.2500            9.0950                             9.1520
     February................................      9.1700            9.0480                             9.1300
     March...................................      9.1140            9.0005                             9.0005
     April...................................      9.3750            9.0020                             9.3750
     May.....................................      9.7130            9.4075                             9.6525
     June....................................      9.9800            9.6050                             9.9800
     July....................................      9.9697            9.6130                             9.8000
     August..................................      9.9620            9.7380                             9.9185
     September...............................     10.3500            9.9785                            10.2120
     October.................................     10.2220            9.9470                            10.1500
     November................................     10.3420           10.0920                            10.1540
     December................................     10.4250           10.1025                            10.4250

2003:
     January.................................     10.9780           10.3210                            10.9020
     February................................     11.0640           10.7740                            11.0285
     March...................................     11.2350           10.6610                            10.7820
     April...................................     10.7700           10.3080                            10.3080
     May.....................................     10.4240           10.1130                            10.3400
     June(2).................................     10.7390           10.2440                            10.6000
</TABLE>

__________________

(1)   Average of end of month rates.
(2)   From June 1, 2003 to June 13, 2003.



                                       7
<PAGE>

                                  Risk Factors

Risks Related to Our Company

     FEMSA Cerveza

     Unfavorable economic conditions in Mexico and the United States may affect
FEMSA Cerveza's business.

     Demand for FEMSA Cerveza's products in Mexico may be affected by the
economic slowdown in the United States and Mexico. In particular, demand in our
northern stronghold regions, where there are a large number of border towns, has
been effected by the disproportionate impact of the downturn in the United
States. In addition, our exports to the United States may be affected by reduced
demand in the United States or a reduction in prices by our competitors. Any
depreciation of the Peso in connection with these downturns may negatively
effect our results of operations because a significant portion of our costs and
expenses are denominated in or determined by reference to U.S. Dollars.

     Uncertainty in commodity prices of raw materials used in beer production
may result in increased costs.

     FEMSA Cerveza purchases a number of commodities for the production of its
products (principally barley, malt and hops) from Mexican producers and in the
international markets. The prices of such commodities can fluctuate and are
determined by global supply and demand and other factors, including changes in
exchange rates, over which FEMSA Cerveza has no control. There can be no
assurance that FEMSA Cerveza will be able to recover increases in the cost of
raw materials. See "Item 4. Information on the Company--FEMSA Cerveza--Raw
Materials."

     Labatt, through a joint venture with FEMSA Cerveza, has significant rights
that may allow Labatt to influence the conduct of FEMSA Cerveza's business.

     Labatt Brewing Company Limited ("Labatt") owns 30% of the capital stock of
FEMSA Cerveza. FEMSA Cerveza's relationship with Labatt gives Labatt significant
rights, which may allow Labatt to influence the conduct of FEMSA Cerveza's
business. Under the bylaws of FEMSA Cerveza, Labatt may appoint four directors
to FEMSA Cerveza's 15 member Board of Directors. As long as Labatt or its
controlled affiliates or permitted transferees hold certain shares of FEMSA
Cerveza representing at least 20% of the outstanding capital stock, Labatt has
the right to approve the appointment of the senior operating vice presidents of
FEMSA Cerveza and veto certain decisions of the Board of Directors. In addition,
an affiliate of Labatt ("Labatt USA"), 30% of which is owned by FEMSA Cerveza,
is the exclusive importer of FEMSA Cerveza's brands into the United States. As
such, FEMSA Cerveza's exports to the United States may depend on Labatt. See
"Item 10. Additional Information--Material Contracts--FEMSA Cerveza." On April
29, 2002, a subsidiary of FEMSA Cerveza filed a lawsuit against certain
affiliates of Labatt to enjoin the integration of the beer brands of Beck's
North America ("Beck's") into the beer distribution portfolio of Labatt USA.
FEMSA Cerveza believes that the proposed integration requires the approval of
the affirmative vote of the Directors appointed by FEMSA Cerveza. On May 23,
2002 a preliminary injunction was issued to prevent the integration of Beck's
into the Labatt USA portfolio. Certain affiliates of Labatt appealed this ruling
on May 28, 2002 and the appellate argument took place on August 7, 2002. The
United States Court of Appeals has not yet issued a ruling on the defendant's
appeal. See "Item 8. Financial Information--Legal Proceedings." An ongoing
dispute between FEMSA Cerveza and Labatt may have an effect on our relations
with Labatt and potentially our exports in the United States.

     FEMSA Cerveza's sales in the Mexican market may depend on its ability to
compete with Grupo Modelo.

     FEMSA Cerveza faces competition in the Mexican beer market from Grupo
Modelo, S.A. de C.V. ("Grupo Modelo"). FEMSA Cerveza's ability to compete
successfully in the Mexican beer market will have a significant impact on its
Mexican sales. See "Item 4. Information on the Company--FEMSA Cerveza--The
Mexican Beer Market."


                                       8
<PAGE>

     Competition from imports in the Mexican beer market is increasing.

     Imports do not currently constitute a significant portion of the Mexican
beer market. Under the North American Free Trade Agreement ("NAFTA"), the
tariffs applicable to imported beers from the United States and Canada were
eliminated in January 2001. In the first half of 2002, the strength of the Peso
versus the U.S. Dollar resulted in increased presence of imports in retail
outlets, particularly in northern Mexico. In addition, during 2002, some
supermarket chains began directly importing beer and selling it at discount
prices. FEMSA Cerveza believes that imports will continue to represent a small
percentage of the Mexican beer market. Increased import competition, however,
could lead to greater competition in general, and there can be no assurance that
such a trend would not affect FEMSA Cerveza. See "Item 4. Information on the
Company--FEMSA Cerveza--The Mexican Beer Market."

     Regulatory developments in Mexico could affect FEMSA Cerveza's business.

     FEMSA Cerveza's business is subject to a variety of different Mexican
government regulations, both federal and local, and may be affected by changes
in law, regulation or regulatory policy. Actions of Mexican federal and local
authorities, in particular changes in governmental policy with respect to excise
and value-added tax laws, cold beer regulation or the beer industry practice of
"tied-customer arrangements," which are agreements with retailers to sell and
promote its products, may have a material adverse impact on FEMSA Cerveza's
business, financial conditions and results of operations.

     Federal regulation of beer consumption in Mexico is primarily effected
through a 25% excise tax and a 15% value-added tax. We do not anticipate an
increase in these taxes, but federal regulation relating to excise taxes may
change in the future, resulting in an increase or decrease in the tax. Local
regulations are primarily effected through the issuance of licenses, which
authorize retailers to sell alcoholic beverages. Other regulations affecting
beer consumption in Mexico vary according to local jurisdictions and include
limitations on the hours during which restaurants, bars and other retail outlets
are allowed to sell beer. See "Item 4. Information on the Company--FEMSA
Cerveza--The Mexican Beer Market."

     A water supply shortage could affect FEMSA Cerveza's business.

     FEMSA Cerveza purchases water from government entities and obtains pump
water from its own wells pursuant to concessions granted by the Mexican
government.

     FEMSA Cerveza believes that its water concessions will satisfy its current
and future water requirements. There can be no assurance, however, that isolated
periods of adverse weather will not affect FEMSA Cerveza's supply of water to
meet its future production needs in any given period, or that its concessions
will not be terminated by the Mexican government or prove insufficient to meet
its water demand.

     Coca-Cola FEMSA

     A prolonged economic slowdown may affect Coca-Cola FEMSA's profit margin.

     If the Mexican economy falls into a recession or if inflation and interest
rates increase significantly, demand for soft drinks may decrease as consumers
find it more difficult to pay for Coca-Cola FEMSA's products or demand may shift
to lower margin products or lower margin presentations. Because a large
percentage of our costs are fixed costs, Coca-Cola FEMSA may not be able to
maintain its costs and expenses at their current levels and its profits margins
may suffer as a result. This could have a material adverse effect on Coca-Cola
FEMSA's financial condition and results of operation.

     Coca-Cola FEMSA's business depends significantly on its relationship with
The Coca-Cola Company.

     Approximately 98% of Coca-Cola FEMSA's net sales in 2002 were derived from
the distribution of Coca-Cola trademark beverages. Coca-Cola FEMSA produces,
markets and distributes Coca-Cola trademark beverages through standard bottler
agreements. These bottler agreements with The Coca-Cola Company cover all of
Coca-Cola FEMSA's present territories, including the Panamco territories.
Through its rights under the bottler agreements, The Coca-Cola Company has the
ability to exercise substantial influence over the conduct of Coca-Cola FEMSA's
business. See "Item 10. Additional Information--Material Contracts-- Coca-Cola
FEMSA--Bottler Agreements."


                                       9
<PAGE>

     Under Coca-Cola FEMSA's bottler agreements, The Coca-Cola Company may
unilaterally set the price for its concentrate. Furthermore, in conjunction with
The Coca-Cola Company, Coca-Cola FEMSA prepares a three-year general business
plan that is submitted to its board of directors for approval. The Coca-Cola
Company may require that Coca-Cola FEMSA demonstrate its financial ability to
meet its plans and may terminate Coca-Cola FEMSA's rights to produce, market and
distribute soft drinks in territories with respect to which such approval is
withheld. Coca-Cola FEMSA is prohibited from bottling any soft drink product
without The Coca-Cola Company's authority or consent. The Coca-Cola Company has
the exclusive right to import and export Coca-Cola trademark beverages to and
from Coca-Cola FEMSA's territories. In addition, Coca-Cola FEMSA may not
transfer control of its bottling rights for a territory without the consent of
The Coca-Cola Company.

     Coca-Cola FEMSA is dependent on The Coca-Cola Company to renew its bottler
agreements. The two bottler agreements that cover Coca-Cola FEMSA's Mexican
Territories (other than those acquired from Panamco) will each expire in 2013,
and the Buenos Aires bottler agreement will expire in 2004. These bottler
agreements are automatically renewable for additional ten-year terms, unless
either party gives notice within a specified time period of its intention not to
renew the agreement. The bottler agreements covering Panamco's Mexican
subsidiaries have a ten-year term ending in 2005 while the Panamco bottler
agreements in Guatemala, Nicaragua, Costa Rica, Panama, Colombia, Venezuela and
Brazil have five year terms. Coca-Cola FEMSA's bottler agreements, and therefore
its right to distribute Coca-Cola trademark beverages, are subject to
termination by The Coca-Cola Company in the event of default by Coca-Cola FEMSA
or upon expiration at their term. No assurance can be given that Coca-Cola
FEMSA's bottler agreements will be renewed upon the expiration of their
respective terms. Non-renewal of the bottler agreements would have a material
adverse effect on Coca-Cola FEMSA's business, financial condition, prospects and
results of operations. See "Item 10. Additional Information--Material
Contracts-- Coca-Cola FEMSA--Bottler Agreements."

     The Coca-Cola Company indirectly owns 39.6% of Coca-Cola FEMSA's
outstanding capital stock, representing 46.4% of the voting rights in Coca-Cola
FEMSA. The Coca-Cola Company is entitled to appoint four of Coca-Cola FEMSA's 18
directors and certain of Coca-Cola FEMSA's executive officers and, except under
limited circumstances, has the power to veto significant decisions of Coca-Cola
FEMSA's board of directors. The Coca-Cola Company thus has the power to affect
the outcome of all actions requiring approval by Coca-Cola FEMSA's board of
directors and, except in certain limited situations, has the power to affect the
outcome of all actions requiring approval of Coca-Cola FEMSA's shareholders. See
"Item 10. Additional Information--Material Contracts--Coca-Cola
FEMSA--Shareholders' Agreement."

     Coca-Cola FEMSA has incurred significant new indebtedness as a result of
the Panamco acquisition.

     In connection with the acquisition of Panamco and the refinancing of the
existing indebtedness of Panamco, Coca-Cola FEMSA incurred and assumed
approximately US$2.5 billion of debt (including existing debt of Panamco). This
new debt includes a bridge facility due in April 2004 in the amount of
approximately US$833 million. Coca-Cola FEMSA now has significantly more
indebtedness than it has had historically, and Coca-Cola FEMSA has agreed to
certain covenants that impose restrictions on the conduct of its business. In
connection with the refinancing of the bridge facility, Coca-Cola FEMSA may be
required to agree to additional restrictions or less favorable terms than it has
obtained to date. The increase in debt may reduce the amount of cash otherwise
available to Coca-Cola FEMSA to invest in its business or meet its obligations
and may prevent Coca-Cola FEMSA in the future from obtaining additional
financing or completing refinancings on terms favorable to it. Because Coca-Cola
FEMSA has significant indebtedness in U.S. Dollars and its sales are now in a
number of currencies other than U.S. Dollars, its ability to service its
indebtedness may be affected by changes in exchange rates or interest rates or
in economic conditions in the different countries in which Coca-Cola FEMSA now
operates, particularly Mexico.

     Coca-Cola FEMSA may fail to realize the contemplated benefits from
integrating Panamco's Mexican operations.


                                       10
<PAGE>

     Coca-Cola FEMSA expects to realize benefits from the Panamco acquisition by
integrating the Mexican operations of both companies. Coca-Cola FEMSA's ability
to realize any benefits, however, depends on Coca-Cola FEMSA's success in
applying its operational practices and integrating the organizational structures
of the two operations. Coca-Cola FEMSA may fail or be delayed in realizing any
operational benefit from this integration, and it may need to invest significant
capital and resources in the acquired business or incur other costs in order to
achieve this integration.

     Taxes on soft drinks could affect Coca-Cola FEMSA's business.

     Coca-Cola FEMSA's products are subject to excise and value-added taxes in
many of the countries in which it operates. The imposition of new taxes or
increases in taxes on Coca-Cola FEMSA products may affect its business,
prospects, financial conditions and results of operations. Coca-Cola FEMSA can
give no assurance that any governmental authority in any country where it
operates will not impose or increase any such taxes in the future.

     Voluntary price restraints or statutory price controls would limit
Coca-Cola FEMSA's ability to increase prices and may affect its results.

     Voluntary price restraints or statutory price controls in any of the
countries in which Coca-Cola FEMSA operates may have a material adverse effect
on its business, prospects, financial conditions and results of operations.
Although Mexican bottlers have been free to set prices for carbonated soft
drinks without governmental intervention since January 1996, such prices were
once subject to statutory price controls and, later, to voluntary price
restraints, which effectively limited Coca-Cola FEMSA's ability to increase
prices in the Mexican market without governmental consent. See "Item 4.
Information on the Company--Regulatory Matters--Price Controls." Coca-Cola FEMSA
can give no assurance that governmental authorities in any country where it
operates will not impose voluntary price restraints or statutory price controls.

     Increases in the price of raw materials may increase Coca-Cola FEMSA's cost
of sales and may affect its results of operations.

     Coca-Cola FEMSA uses high fructose corn syrup ("HFCS") and sugar as
sweeteners in its products. In 2002, Coca-Cola FEMSA converted its Mexican
bottling facilities to sugar-cane based production following the imposition of a
20% excise tax on carbonated soft drinks sweetened with HFCS. In addition, the
prices of certain materials used in the bottling of Coca-Cola FEMSA's products,
including aluminum cans, plastic bottles, bottle closures (both steel and
plastic), other packaging materials and HFCS, are quoted in U.S. Dollars and
therefore may increase if the U.S. Dollar appreciates against the currency of
any country in which Coca-Cola FEMSA operates, particularly against the Mexican
Peso. See "Item 4. Information on the Company--Coca-Cola FEMSA--Raw Materials."

     Increases in the price of raw materials, including increases that may occur
as a result of import duties, import restrictions or fluctuations in exchange
rates, will increase Coca-Cola FEMSA's cost of sales and affect net earnings to
the extent Coca-Cola FEMSA is unable to increase its sales prices. Coca-Cola
FEMSA cannot ensure that its raw materials prices will not increase in the
future.

     A water shortage could affect Coca-Cola FEMSA's business.

     Water is an essential component of soft drinks. Coca-Cola FEMSA obtains
water from various sources in its territories, including springs, wells, rivers
and municipal water companies. In Mexico, Coca-Cola FEMSA both purchases water
from municipal water companies and pumps water from its own wells pursuant to
concessions granted by the Mexican government. Coca-Cola FEMSA obtains
approximately 90% and 100%, respectively, of the water used in soft drink
production in the Valley of Mexico and the Southeast of Mexico pursuant to these
concessions, which the Mexican government granted based on studies of the
existing and projected groundwater supply. The Mexican government under certain
circumstances may terminate Coca-Cola FEMSA's existing water concessions. See
"Item 4. Information on the Company--Regulatory Matters--Water Supply Law."


                                       11
<PAGE>

     Coca-Cola FEMSA cannot ensure that water will be available in sufficient
quantities to meet its future production needs in any territory in which it
operates, or that its concessions and permits will not be terminated by
governments in any such territory or prove sufficient to meet Coca-Cola FEMSA's
water supply needs.

     A shortage of key materials used in the production of Coca-Cola FEMSA
products could affect Coca-Cola FEMSA's business.

     Pursuant to the bottler agreements with The Coca-Cola Company, Coca-Cola
FEMSA is required to purchase concentrate exclusively from The Coca-Cola
Company. In addition, Coca-Cola FEMSA must purchase other supplies, including
containers, closures, cases, cartons and other packages and labels, only from
manufacturers approved by The Coca-Cola Company. See "Item 4. Information on the
Company--Coca-Cola FEMSA--Raw Materials." Access to these materials could be
affected by strikes, weather conditions, exchange controls, governmental
controls or national emergency situations. Any shortage of these materials could
affect Coca-Cola FEMSA's business, results of operations, prospects, or
financial condition.

     Competition from other bottlers could affect Coca-Cola FEMSA's business.

     The beverage industries in the Mexican and Buenos Aires Territories, as
well as in many of the Panamco territories, are highly competitive. Coca-Cola
FEMSA's principal competitor in the Mexican Territories is The Pepsi Bottling
Group ("PBG"), the largest bottler worldwide of PepsiCo, Inc. ("PepsiCo").
Coca-Cola FEMSA's principal competitor in Buenos Aires is Buenos Aires
Embotelladora S.A. ("BAESA"), a large PepsiCo bottler. Companhia de Bebidas das
Americas ("AmBev"), the largest brewer in Latin America, has recently acquired
an important stake of BAESA. In addition, in each of Coca-Cola FEMSA's
territories, Coca-Cola FEMSA competes with various other bottlers and
distributors of nationally and regionally advertised soft drinks. Coca-Cola
FEMSA faces increased competition in many of its territories from producers of
low cost beverages, commonly referred to as "B" brands. Coca-Cola FEMSA's
ability to maintain existing prices or implement price increases depends to a
great extent on competitive conditions and the effect of such prices on sales
volume. Price discounting has been a means of maintaining or increasing sales
volume share in our territories. This may have an effect on Coca-Cola FEMSA's
results of operations. Although Coca-Cola FEMSA believes that it is well
positioned to meet its objective of maintaining or increasing Coca-Cola FEMSA's
sales volume at satisfactory price levels in the various territories in which it
competes, competition is likely to continue or intensify, particularly after the
acquisitions of Pepsi Gemex, S.A. de C.V., the PepsiCo bottler in Mexico, by PBG
and of BAESA by AmBev. Coca-Cola FEMSA can give no assurance that it can meet
its objective of increased sales volume or that price discounting will not
continue to have an effect on its results of operations.

         Coca-Cola FEMSA's compliance with environmental regulations could
         result in a material adverse effect on Coca-Cola FEMSA's results of
         operations or financial condition.

     Environmental laws and regulations and their enforcement are becoming
increasingly more stringent in many countries in Latin America. Such costs may
have a material adverse effect on Coca-Cola FEMSA's future results of operations
or financial condition.

     FEMSA Comercio

     Competition from other retailers in Mexico could affect our company's
business.

     The Mexican retail sector is highly competitive. FEMSA participates in the
retail sector primarily through FEMSA Comercio, S.A. de C.V. ("FEMSA Comercio")
.. FEMSA Comercio's Oxxo convenience stores face competition on a regional basis
from 7-Eleven, Super Extra, AM/PM and Circle K stores. Oxxo convenience stores
also face competition from numerous small chains of retailers in some regions
across Mexico. There can be no assurance that FEMSA Comercio will not be
affected by an increase in competition.

     Oxxo convenience stores are highly sensitive to economic conditions in
Mexico.

     Due to the nature of the convenience store market, convenience stores often
sell certain products at a premium. The convenience store market is thus highly
sensitive to economic conditions as an economic slowdown is often accompanied by
a decline in consumer purchasing power, which in turn results in a decline in
the overall consumption of our main product categories. During periods of
economic slowdown, Oxxo stores may experience a decline in traffic per store and
purchases per customer, which may result in a decline in operating revenue.


                                       12
<PAGE>

     FEMSA Empaques

     FEMSA Empaques' beverage can operation is highly sensitive to economic
conditions, competition from alternative beverage presentations and exchange
rate fluctuations.

     The aluminum can operations of Fabricas Monterrey, S.A. de C.V. ("Famosa"),
a subsidiary of FEMSA Empaques, S.A. de C.V. ("FEMSA Empaques"), are sensitive
to economic conditions because beverage can presentations are more expensive to
the consumer than alternative presentations. In addition, FEMSA Empaques'
beverage can business exclusively serves the beverage industry and therefore is
vulnerable to shifts in demand for beverage products. Furthermore, beverage can
presentations also compete with alternative beverage presentations such as glass
and non-returnable polyethylene terephtalate ("PET") presentations. Demand for
beverage cans has decreased in recent years due to a shift toward non-returnable
PET presentations in the soft drink industry. See "Item 4. Information on the
Company--FEMSA Empaques--Products--Beverage Cans and Can Ends." In addition,
since FEMSA Empaques' operating expense structure is Peso-denominated while its
revenues are linked to the U.S. Dollar, the operating margins of FEMSA Empaques'
beverage can operations could be pressured if the Peso were to strengthen
against the U.S. Dollar.

     The Mexican beverage can industry may be currently operating at levels of
overcapacity, which may result in decreases in price.

     Certain significant competitors in the beverage can industry operate at
average levels of capacity utilization below 60%. We cannot guarantee that some
of these businesses will not practice aggressive pricing strategies in order to
increase their sales volume. See "Item 4. Information on the Company--FEMSA
Empaques--Products--Beverage Cans and Can Ends."

     Crown cap presentations face competition from alternative beverage
presentations.

     FEMSA Empaques' crown cap business exclusively serves the soft drink and
beer industries, and therefore is vulnerable to shifts in demand for those
products. Crown cap glass bottle presentations also compete with alternative
beverage presentations such as can and non-returnable PET presentations. Demand
for crown caps has decreased in recent years due to a shift toward returnable
and non-returnable PET presentations in the soft drink industry. See "Item 4.
Information on the Company--FEMSA Empaques--Products--Beverage Cans and Can
Ends."

     FEMSA Empaques' sales of glass bottles may be affected by competition and
from alternative beverage presentations.

     FEMSA Empaques' principal domestic competitor in the sale of glass bottles
is Vitro, S.A. ("Vitro"). There can be no assurance that FEMSA Empaques will not
be affected by price competition from Vitro or other producers of glass bottles
or alternative containers. See "Item 4. Information on the Company--FEMSA
Empaques--Products--Glass Bottles."

     Moreover, like the beverage can business, FEMSA Empaques' glass bottle
business exclusively serves the beverage industry and thus is vulnerable to
shifts in preferences for those products and presentations. Demand for glass
bottle presentations has declined in recent years due to a shift towards
non-returnable PET presentations for soft drinks. See "Item 4. Information on
the Company--FEMSA Empaques--Glass Bottles." There can be no assurance that
there will not be a further shift in demand towards such alternative
presentations which would have an effect on our glass bottle operations.


                                       13
<PAGE>

     Risks Related to Our Principal Shareholders and Capital Structure

     A majority of the voting shares are held by a Voting Trust, which
effectively controls the management of our company, and whose interests may
differ from those of other shareholders.

     A voting trust (the "Voting Trust"), comprised mainly of five families,
owns 27.8% of our capital stock and 53.8% of our capital stock with full voting
rights, consisting of the Series B Shares. Consequently, the Voting Trust has
the power to elect a majority of the members of our Board of Directors and to
play a significant or controlling role in the outcome of substantially all
matters to be decided by our shareholders. The interests of the Voting Trust may
differ from those of our other shareholders. See "Item 7. Major Shareholders and
Related Party Transactions" and "Item 10. Additional Information--Bylaws--Voting
Rights and Certain Minority Rights."

     Holders of Series D-B and D-L Shares have limited voting rights.

     Holders of Series D-B and D-L Shares have limited voting rights and are
only entitled to vote on specific matters, such as changes in our corporate
form, a dissolution or liquidation and the cancellation of the registration of
the Series D-B and D-L Shares. See "Item 7. Major Shareholders and Related Party
Transactions--Major Shareholders" and "Item 10. Additional
Information--Bylaws--Voting Rights and Certain Minority Rights."

     Holders of ADRs may not be able to vote at our shareholder meetings.

     Our shares are traded on the New York Stock Exchange in the form of ADRs
(under the ticker "FMX"). There can be no assurance that holders of our shares
through ADRs will receive notices of shareholder meetings from our ADR
Depositary in sufficient time to enable such holders to return voting
instructions to the ADR Depositary in a timely manner. Under certain
circumstances, a person designated by us may receive a proxy to vote the shares
underlying ADRs for which no voting instructions are received by the ADR
Depositary at a shareholder meeting.

     Holders of ADRs may not be able to participate in any future preemptive
rights offering and as a result may be subject to dilution of their equity
interests.

     Under Mexican law, if we issue new shares for cash as a part of a capital
increase, we must generally grant our shareholders the right to purchase a
sufficient number of shares to maintain their existing ownership percentage.
Rights to purchase shares in these circumstances are known as preemptive rights.
We may not be legally permitted to allow holders of our shares through ADRs in
the United States to exercise any preemptive rights in any future capital
increases unless (i) we file a registration statement with the SEC with respect
to that future issuance of shares or (ii) the offering qualifies for an
exemption from the registration requirements of the U.S. Securities Act of 1933
(the "Securities Act"). At the time of any future capital increase, we will
evaluate the costs and potential liabilities associated with filing a
registration statement with the SEC, as well as the benefits of preemptive
rights to holders of our shares through ADRs in the United States and any other
factors that we consider important in determining whether to file a registration
statement.

     There can be no assurance that we will file a registration statement with
the SEC to allow holders of our shares through ADRs in the United States to
participate in a preemptive rights offering. In addition, under current Mexican
law, the sale by the ADR Depositary of preemptive rights and the distribution of
the proceeds from such sales to the holders of our shares through ADRs is not
possible. As a result, the equity interest of holders of our shares through ADRs
would be diluted proportionately. See "Item 10. Additional
Information--Bylaws--Preemptive Rights."

     Developments in other emerging market countries may affect prices of our
shares.

     The market value of our securities may be affected by the reactions of
investors to economic and other conditions in emerging market countries other
than Mexico (including emerging market countries in Asia), even though economic
conditions in such countries may differ significantly from economic conditions
in Mexico. There can be no assurance that the market value of our shares would
not be affected by events elsewhere, especially in emerging market countries.


                                       14
<PAGE>

     Exchange rate fluctuations may affect the value of our shares.

     Fluctuations in the exchange rate between the Peso and the U.S. Dollar will
affect the U.S. Dollar value of an investment in our shares and of dividends and
other cash distributions on those shares. See "--Exchange Rate Information."

     Risks Related to Mexico

     Economic developments in Mexico may affect our business and results of
operations.

     Our financial condition and results of operations are generally affected by
the strength of the Mexican economy, which affects the demand for soft drinks
and beer. The revenue derived from this demand is the principal source of our
earnings, and this demand generally declines during periods of economic
difficulty.

     Mexico is exposed to economic downturns that may originate internally or as
a repercussion of other nations' economic crises. In recent years, economic
crises in Asia, Brazil, Russia and other emerging markets have affected the
Mexican economy and could do so again. In addition, the performance of the U.S.
economy is having an increasing effect on the performance of the Mexican
economy. If the Mexican economy falls into a recession or if inflation and
interest rates increase significantly, our financial condition and results of
operations could suffer material adverse consequences because, among other
things, demand for our products may decrease as consumers find it economically
more difficult to purchase such products.

     Depreciation of the Peso relative to the U.S. Dollar could affect our
financial condition and results of operations.

     Our sales volume may decrease following a devaluation or depreciation of
the Peso if consumption of beverages declines as a result of any ensuing impact
on personal income, employment or other economic shock. Future significant
depreciation of the Peso is likely to reduce our sales volume, which may have a
material adverse effect on our results of operations.

     Declines in the value of the Peso relative to other currencies, in
particular the U.S. Dollar, increase our interest costs in Pesos relative to our
indebtedness and result in foreign exchange losses that could affect our ability
to meet our interest and principal obligations under our indebtedness. As of
December 31, 2002, 69.6% of our indebtedness was denominated in U.S. Dollars,
and we may incur additional non-Peso-denominated indebtedness. The value of the
Peso has been subject to significant fluctuations with respect to the U.S.
Dollar in the past and may be subject to significant fluctuations in the future.
The Peso was relatively steady in 1998, 1999, 2000 and 2001, with average rates
of Ps. 9.15, Ps. 9.56, Ps. 9.47 and Ps. 9.33, respectively. However, in 2002 and
the beginning of 2003, the Peso significantly fluctuated in value relative to
the U.S. Dollar from Ps. 9.00 to Ps. 11.24. During the first six months of 2002,
the Peso maintained a generally appreciated level against the U.S. Dollar and
reached Ps. 9.00 at the end of March 2002. During the second half of the year,
the Peso depreciated and ended December at Ps. 10.43. No assurance can be given
that the Peso will not further depreciate in value relative to the U.S. Dollar
in the future.

     Furthermore, severe devaluation or depreciation of the Peso may also result
in disruption of the international foreign exchange markets and may limit our
ability to transfer or to convert Pesos into U.S. Dollars and other currencies
for the purpose of making timely payments of interest and principal on our
indebtedness.

     While the Mexican government does not currently restrict, and for many
years has not restricted, the right or ability of Mexican or foreign persons or
entities to convert Pesos into U.S. Dollars or to transfer other currencies out
of Mexico, the government could institute restrictive exchange rate policies in
the future. To the extent that there are currency fluctuations, they are likely
to continue to have an effect on our financial condition, results of operations
and cash flows in future periods.


                                       15
<PAGE>

     Political events in Mexico could affect Mexican economic policy and our
operations.

     Mexican political events may also significantly affect our operations and
the performance of Mexican securities, including our securities. In the Mexican
national elections held on July 2, 2000, Vicente Fox of the Partido Accion
Nacional (National Action Party or "PAN") won the presidency. His victory ended
more than 70 years of presidential rule by the Partido Revolucionario
Institucional (the Institutional Revolutionary Party or "PRI"). Neither the PRI
nor the PAN succeeded in securing a majority in the Mexican Congress or Senate.

     President Fox assumed office on December 1, 2000. While the transition from
the previous administration was smooth, President Fox has since encountered
strong opposition to some of his proposed reforms in both Congress and the
Senate, where opposition parties such as the PRI and the Partido de la
Revolucion Democratica (the Democratic Revolution Party or "PRD") have
frequently joined forces to block PAN initiatives. Such legislative gridlock
could slow down the progress of reforms in Mexico and could have a material
adverse effect on our business, financial condition and results of operations.
New legislative elections for federal and state congress, as well as for some
state governors and city mayors, will be held in July 2003, and the effects on
the political situation in Mexico are uncertain.

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

     The annual rate of inflation, as measured by changes in the Mexican CPI,
was 9.0% for 2000, 4.4% for 2001 and 5.7% for 2002. On June 17, 2003 the 28-day
Cetes rate, a benchmark interest rate for Mexican government treasury
securities, was 5.31%. However, higher inflation and higher interest rates in
Mexico may affect our costs and thus, our business, financial condition and
results of operations.

     Risks Related to Argentina

     Developments in Argentina may affect Coca-Cola FEMSA's business.

     In recent years, Argentina has faced significant economic and political
instability, including a contracting economy, a drastic currency devaluation,
high unemployment, the introduction of exchange controls and social unrest.
After a series of failed governments, Nestor Kischner was appointed president of
Argentina in May 2003. It is premature to predict the way in which the new
government will seek to address the economic crisis. The Argentine crisis has
had, and continues to have, a material adverse effect on Coca-Cola FEMSA's
operations in Argentina. Coca-Cola FEMSA has experienced declining net sales in
Argentina since 1998. In 2001, Coca-Cola FEMSA recognized a loss generated by
the devaluation of the Argentine peso against the U.S. dollar against Coca-Cola
FEMSA's original investment in Argentina, and in 2002 a substantial portion of
the goodwill generated by the acquisition of Coca-Cola FEMSA's Argentine
operations was impaired. Coca-Cola FEMSA can give no assurance that future
developments in the Argentine economic policies and political environment will
not have a material adverse effect on Coca-Cola FEMSA's business, financial
condition, prospects and results of operations.

         Risks Related to New Territories Acquired by Coca-Cola FEMSA

         Coca-Cola FEMSA now conducts business in countries throughout Latin
         America in which it has not previously operated and that may present
         different or greater country risk than Mexico or Argentina.

     As a result of the Panamco acquisition, Coca-Cola FEMSA has expanded its
geographic reach from Mexico and Argentina to include Guatemala, Nicaragua,
Costa Rica, Panama, Colombia, Venezuela and Brazil. Many of these countries
present different or greater country risk than Mexico and Argentina. Coca-Cola
FEMSA has not previously conducted business in Panamco's territories. It may
face competitive pressures that are different than those it has historically
faced. In Brazil, Coca-Cola FEMSA competes against both AmBev, a Brazilian
company with a portfolio of brands that includes Pepsi and local brands with
flavors such as guarana, and "B" brands or "Tubainas," which are small, local
producers of low cost flavored soft drinks that represent an important portion
of the soft drink market. In addition, distribution and marketing practices in
some of these territories differ from Coca-Cola FEMSA's historical practices.
Several of Panamco's territories have a lower level of pre-sale as a percentage
of total distribution than Coca-Cola FEMSA is accustomed to having in its
territories, and the product and presentation mix varies from territory to
territory with customer preferences. Coca-Cola FEMSA may have to adapt its
marketing and distribution strategies to effectively compete. Its inability to
compete effectively may have an adverse effect on its future operating results.



                                       16
<PAGE>



ITEM 4.  INFORMATION ON THE COMPANY

                                    Overview

     We are a Mexican company headquartered in Monterrey, Mexico. Our principal
executive offices are located at General Anaya No. 601 Pte., Colonia Bella
Vista, Monterrey, NL 64410, Mexico. Our telephone number at this location is
(52-81) 8328-6000. Our website is http://www.femsa.com. We are organized as a
Sociedad Anonima de Capital Variable under the laws of Mexico. Our company was
incorporated on May 30, 1936 and has a duration of 99 years.

     We hold either directly or indirectly all or a majority of the capital
stock of the following principal holding companies (each a "subholding
company"):

-    FEMSA Cerveza, which engages in the production, distribution and marketing
     of beer;

-    Coca-Cola FEMSA, which engages in the production, distribution and
     marketing of soft drinks;

-    FEMSA Comercio, which operates convenience stores; and

-    FEMSA Empaques, which engages in the production and distribution of
     beverage-related packaging materials.

     We hold all of our subholding companies through our 99.99% subsidiary
Emprex, other than Coca-Cola FEMSA, which is held through our wholly-owned
subsidiary CIBSA. As of December 31, 2002, our interests in Emprex and CIBSA
together represent 98% of our consolidated total assets.

     In addition to the subholding companies, we indirectly own Perfil
Corporativo, S.A. de C.V. ("Perfil Corporativo") through Emprex. Perfil
Corporativo engages in the production and distribution of concentrate for our
proprietary soft drink brands Mundet and Mundet light. We also directly own
FEMSA Logistica, S.A. de C.V. ("FEMSA Logistica"), which is held directly by
FEMSA and which provides logistics services to FEMSA subsidiaries other than
FEMSA Cerveza and third party clients.

     Prior to January 1, 2003, Emprex also owned an interest in Logistica CCM,
S.A. de C.V. ("Logistica CCM"), which provides logistics services solely to
FEMSA Cerveza. On January 1, 2003, Logistica CCM merged into FEMSA Cerveza to
make FEMSA Cerveza more comparable with the rest of the beer industry. The
merger did not affect our ownership percentage in FEMSA Cerveza. For the purpose
of this Annual Report, Logistica CCM and FEMSA Logistica and their combined
financial results are presented together and referred to as "Logistica" unless
otherwise specified. Although the two companies had different capital structures
and shareholders, they were managed by the same management team throughout 2002.

                              Corporate Background

     FEMSA traces its origins to the establishment of Mexico's first brewery,
Cerveceria Cuauhtemoc, S.A. de C.V. ("Cuauhtemoc"), which was founded in 1890 by
four Monterrey businessmen: Francisco G. Sada, Jose A. Muguerza, Isaac Garza and
Jose M. Schneider. The company is controlled by descendants of certain of the
founders of Cuauhtemoc.

     In 1891, the first year of production, Cuauhtemoc produced 2,000
hectoliters of beer. By 1935, the brewery operations had expanded significantly
and Cuauhtemoc produced 293,000 hectoliters of beer. Cuauhtemoc continued to
expand through additions to existing plant capacity and through acquisitions of
other Mexican breweries, the first of which was completed in 1935. Over the next
30 years, Cuauhtemoc acquired four more breweries, and since then has continued
to increase its production capacity, reaching approximately 32.2 million
hectoliters in 2002.

     The strategic integration of the company dates back to 1936 when Famosa was
established to supply crown caps to the brewery. The packaging operations were
expanded in 1957 when Grafo Regia, S.A. de C.V. ("Grafo Regia") was formed to
produce labels and flexible packaging for the company's beer operations. During
this period, these operations were part of what was known as the "Monterrey
Group," which also included interests in banking, through Financiera
Aceptaciones, S.A., which later became Banca Serfin, S.A. ("Banca Serfin");
steel, through Hojalata y Lamina, S.A. ("Hylsa"); and other packaging
operations, through Empaques de Carton Titan, S.A. ("Titan").


                                       17
<PAGE>

     In 1974, the Monterrey Group was split between two branches of the
descendants of the founding families of Cuauhtemoc. Hylsa and Titan formed the
basis for the creation of Corporacion Siderurgica, S.A. (later Grupo Industrial
Alfa, S.A. de C.V.), controlled by the Garza Sada family, and the beverage and
banking operations were consolidated under the FEMSA corporate umbrella,
controlled by the Garza Laguera family. FEMSA's shares were first listed on the
Bolsa Mexicana de Valores, S.A. de C.V. (the "Mexican Stock Exchange") on
September 19, 1978. Between 1977 and 1981, FEMSA diversified its operations
through acquisitions in the soft drink and mineral water industries, the
establishment of the first convenience stores under the trade name Oxxo, and
investments in the hotel, construction, auto parts, food and fishing industries,
which were subsequently divested. These investments were financed in large part
with foreign bank borrowings.

     In August 1982, the Mexican government suspended payment on its
international debt obligations and nationalized the Mexican banking system.
These actions precipitated an economic and debt crisis that lasted for several
years. In 1985, in the midst of this crisis, certain controlling shareholders of
FEMSA acquired a controlling interest in Cerveceria Moctezuma, S.A.
("Moctezuma") (then Mexico's third-largest brewery) and related companies in the
packaging industry through the holding company Grupo Cermoc, S.A. de C.V.
("Grupo Cermoc"). At the time of the acquisition, Grupo Cermoc was in severe
financial difficulty, which exacerbated the financial difficulties of FEMSA as
well. As a result, FEMSA undertook an extensive corporate and financial
restructuring that was completed in December 1988 (the "1988 Restructuring").

     Pursuant to the 1988 Restructuring, the shareholders' interests in the
company and Grupo Cermoc were combined through the contribution by the company
of the shares of the company's operating subsidiaries to Grupo Cermoc, a
publicly listed Mexican company. The shares of the company's subsidiaries
contributed to Grupo Cermoc represented approximately 75% of the new company,
while the companies that originally formed part of Grupo Cermoc accounted for
the remaining 25%. In conjunction with this combination of interests,
approximately US$1.3 billion of aggregate liabilities of the company and Grupo
Cermoc were restructured. Grupo Cermoc is the entity currently known as Emprex.
The debt restructuring, which included a capital increase and a capitalization
of part of the existing debt, resulted in a dilution of FEMSA's interest in
Emprex to 60%. In addition, pursuant to the 1988 Restructuring, FEMSA divested
its interests in non-core assets, including its investments in the hotel, auto
parts and food businesses. As part of the 1988 Restructuring, Citicorp
International Holdings, Inc. ("Citicorp") acquired 15% of Emprex's shares. In
1992, FEMSA purchased approximately 8.5% of Emprex's shares from Citicorp
pursuant to an option agreement that had been entered into between FEMSA and
Citicorp in 1988. FEMSA simultaneously sold approximately 0.8% of Emprex's
shares in the market. As a result of these transactions, FEMSA's interest in
Emprex increased to approximately 68%.

     In August 1991, FEMSA repurchased approximately 30% of its shares from a
dissident minority shareholder. In October 1991, certain majority shareholders
of FEMSA acquired a controlling interest in Bancomer, S.A. ("Bancomer"). The
investment in Bancomer was undertaken as part of the Mexican government's
reprivatization of the banking system, which had been nationalized in 1982. The
Bancomer acquisition was financed in part by a US$610 million indirect
subscription by Emprex's shareholders, including FEMSA, of shares in Grupo
Financiero Bancomer, S.A. de C.V. (currently Grupo Financiero BBVA Bancomer,
S.A. de C.V. ("BBVA Bancomer")), the Mexican financial services holding company
that was formed to hold a controlling interest in Bancomer. In recognition that
not all of Emprex's shareholders wished to participate in the financial services
sector, in February 1992, FEMSA offered Emprex's shareholders the opportunity to
exchange the BBVA Bancomer shares to which they were entitled for Emprex shares
owned by FEMSA. Pursuant to this exchange facility, a small number of Emprex
shareholders exchanged 124,553,926 BBVA Bancomer shares for 30,466,062 Emprex
shares. FEMSA's interest in Emprex declined to approximately 62% as a result.

     FEMSA's repurchase of the shares held by the dissident minority shareholder
and the participation by Emprex's shareholders in the Bancomer transaction were
financed through a bridge facility extended to FEMSA and Emprex that was
subsequently repaid. Part of the repayment of FEMSA's obligations under the
bridge facility was accomplished through a sale in 1992 of an 11% interest in
Emprex to a European portfolio investor, which reduced FEMSA's interest in
Emprex to 51.04%. In August 1996, the shares of BBVA Bancomer that were received
by FEMSA in the exchange with Emprex's shareholders were distributed as a
dividend to FEMSA's shareholders. At the same time, certain shareholders of
FEMSA participated in a capital increase in FEMSA, the proceeds of which were
used to reduce FEMSA's outstanding debt. As a result of the distribution of the
shares of BBVA Bancomer to FEMSA's shareholders, the company ceased to have any
beneficial interest in BBVA Bancomer.


                                       18
<PAGE>

     Emprex's obligations pursuant to the bridge facility were refinanced
through a series of transactions that included the divestiture of the mineral
water business in April 1992 and the successful completion of a US$300 million
Euro-bond offering in July 1992. Subsequent to the repayment of the bridge
facility, Emprex began a series of strategic transactions to strengthen the
competitive positions of its operating subsidiaries. These transactions included
the sale of a 30% strategic interest in Coca-Cola FEMSA to a wholly-owned
subsidiary of The Coca-Cola Company and a subsequent public offering of
Coca-Cola FEMSA shares, both of which occurred in 1993, and the sale of a 22%
strategic interest in the beer subsidiary, FEMSA Cerveza, to Labatt in 1994.
Labatt subsequently increased its interest in FEMSA Cerveza to 30%.

     In 1998, we completed a reorganization (the "Reorganization") that (i)
simplified our capital structure by converting our outstanding capital stock at
the time of the Reorganization into BD Units and B Units, and (ii) united the
shareholders of FEMSA and the former shareholders of Emprex at the same
corporate level through an exchange offer that was consummated on May 11, 1998
(the "Exchange Offer"). Pursuant to the Exchange Offer, FEMSA exchanged ADRs
representing 10 BD Units for outstanding Emprex ADRs or Emprex Series B Shares.
As part of the Reorganization, FEMSA listed ADRs on the New York Stock Exchange
representing BD Units, and listed the BD Units and the B Units on the Mexican
Stock Exchange. Additionally, upon completion of the Reorganization the name of
FEMSA was changed from "Valores Industriales, S.A." to "Fomento Economico
Mexicano, S.A. de C.V." and the name of Emprex was changed from "Fomento
Economico Mexicano, S.A. de C.V." to "Grupo Industrial Emprex, S.A. de C.V."

     Prior to the completion of the Exchange Offer, FEMSA owned 51.04% of the
shares of Emprex. Upon the completion of the Exchange Offer, FEMSA owned 98.7%
of the outstanding shares of Emprex, which amount increased to 99.99% through a
tender offer by the company for the outstanding Emprex shares. The
Reorganization did not give rise to a change in control. Those shareholders of
the company that held a majority of the voting shares of the company (which, in
turn, held a majority of the voting shares of Emprex) before the Reorganization
continued to hold a majority of the company's Series B Shares, which are the
only shares of capital stock of FEMSA with full voting rights, after the
Reorganization. See "Item 10. Additional Information--Bylaws--Voting Rights and
Certain Minority Rights."

     In July 2002, as a result of the spin-off of Emprex, CIBSA was created as a
new company whose sole asset is an equity interest in Coca-Cola FEMSA.

                             The Panamco Acquisition

     On May 6, 2003, Coca-Cola FEMSA completed the acquisition of Panamco (the
"Panamco Acquisition"). The transaction was first announced on December 23,
2002. Pursuant to the Panamco Acquisition, holders of Panamco common stock,
excluding The Coca-Cola Company, received an aggregate amount of US$2.150
billion in cash, while The Coca-Cola Company received approximately 304 million
unlisted Series D Shares of Coca-Cola FEMSA in exchange for all its Panamco
shares, valued at the time of closing at US$674 million. Additionally, Coca-Cola
FEMSA assumed US$885 million of Panamco's debt as of December 31, 2002. The
transaction was financed with US$1.978 billion in newly acquired debt at the
Coca-Cola FEMSA level, a US$260 million equity contribution from FEMSA through
its subsidiary CIBSA and cash on hand. The current corporate name of Panamco is
Corporacion Interamericana de Bebidas, S.A. de C.V.

     The combination created the second largest Coca-Cola bottler in the world,
with franchise presence in Mexico, Guatemala, Nicaragua, Costa Rica, Panama,
Colombia, Venezuela, Brazil and Argentina, including most of these countries'
capital cities and large urban centers. Upon closing of the transaction, FEMSA's
economic ownership of Coca-Cola FEMSA was reduced to 45.7% and voting ownership
became 53.6%.

     See also "- Coca-Cola FEMSA--The Panamco Acquisition."


                                       19
<PAGE>


                               Ownership Structure

         Our business is operated through our subholding companies as shown in
the following diagram and table:

                    Subholding Companies--Ownership Structure


                  -----------
                  |         |
                  |         |
                  |  FEMSA  |
                  |         |
                  |         |
                  -----------
                       |
                       |
     |----------------------------------------
     |                                       |
     |99.99%(1)                              |99.99%
-----------                            ------------
|         |                            |          |
|         |                            |          |
|  CIBSA  |                            |  Emprex  |
|         |                            |          |
|         |                            |          |
-----------                            ------------
     |                                       |
     |                                       |
     |                       ----------------+------------------
     |                       |               |                 |
     |45.7%(2)               |70%            |100%             |100%
-----------            ------------     ------------     ------------
|         |            |          |     |          |     |          |
|  Coca-  |            |          |     |          |     |          |
|  Cola   |            |  FEMSA   |     |  FEMSA   |     |  FEMSA   |
|  FEMSA  |            |  Cerveza |     |  Comercio|     |  Empaques|
|         |            |          |     |          |     |          |
-----------            ------------     ------------     ------------




     (1)  The remaining 0.01% portion is held indirectly by FEMSA through
          Emprex.
     (2)  After giving effect to the Panamco Acquisition. Panamco is a
          wholly-owned subsidiary of Coca-Cola FEMSA. FEMSA owns 53.6% of the
          voting interest of Coca-Cola FEMSA.


                         Subholding Companies--Overview


                   Coca-Cola     FEMSA Cerveza    FEMSA        FEMSA
                     FEMSA                       Comercio     Empaques
                   ----------    --------------  --------     --------

Industry.....     Soft Drinks      Beer            Retail      Packaging

Strategic         The Coca-Cola
Partner......     Company          Labatt          None        None





                                       20
<PAGE>

<TABLE>
<CAPTION>



                         Operations by Segment--Overview
                       Year Ended December 31, 2002(1)(2)

                       Coca-Cola           FEMSA            FEMSA             FEMSA
                         FEMSA            Cerveza          Comercio         Empaques        Logistica(3)
                   -----------------------------------------------------------------------------------------
                     Pesos      %      Pesos      %     Pesos      %      Pesos      %     Pesos       %
                     -----      -      -----      -     -----      -      -----      -     -----       -
<S>                   <C>      <C>    <C>       <C>     <C>     <C>       <C>      <C>     <C>       <C>
Total Revenues..     17,620     33.3   20,815    39.3   12,740     24.1    6,599    12.5    1,458     2.8
Income from
  Operations(4).      4,440     46.8    3,546    37.4      487     5.1       905     9.5      119(5)  1.3
Total Assets....     16,040     26.7   28,416    47.4    5,374      9.0    6,230    10.4      765     1.3
Employees.......     14,457     34.7   15,611    37.5    5,125     12.3    4,088     9.8    1,803     4.3
------------------
</TABLE>

(1)  The sums of the financial data for each of our segments and percentages
     with respect thereto differ from our consolidated financial information due
     to intercompany transactions, which are eliminated in consolidation, and
     certain non-operating assets and activities of FEMSA, including corporate
     services.
(2)  Expressed in millions of Pesos, except for employees.
(3)  On January 1, 2003, Logistica CCM was merged into FEMSA Cerveza. Beginning
     January 1, 2003, Logistica will no longer be reported as a separate
     segment.
(4)  After deduction of management fees paid to FEMSA. Such management fees are
     eliminated in consolidation, with the exception of the management fee paid
     by FEMSA Cerveza to Labatt.
(5)  Excludes operating expenses of Ps. 29 million in connection with e-commerce
     projects.

<TABLE>
<CAPTION>

                Total Revenues Summary by Geographic Location (1)

                                                                            Year Ended December 31,
                                                  Country           2002             2001              2000
   <S>                                           <C>              <C>               <C>               <C>
   FEMSA Cerveza...........................       Mexico           20,815            20,703           19,841
   Coca-Cola FEMSA Mexico..................       Mexico           16,198            15,181           14,478
   Coca-Cola FEMSA Buenos Aires............       Argentina         1,422             1,549            1,557
   FEMSA Comercio..........................       Mexico           12,740            10,732            8,957
   FEMSA Empaques..........................       Mexico            6,599             6,577            6,929
   Logistica...............................       Mexico            1,458             1,540            1,549
   Consolidated total revenues.............                        52,941            50,097           47,869
-----------------------------
</TABLE>

(1)  Expressed in millions of Pesos. The sum of the financial data for each
     segment may differ from our consolidated financial information due to
     intercompany transactions, which are eliminated in consolidation.





                                       21
<PAGE>



                            Significant Subsidiaries

     The following table sets forth our significant subsidiaries as of the date
of this Annual Report.
<TABLE>
<CAPTION>


                                                                                    Jurisdiction of    Percentage
Name of Company                                                                     Establishment      Owned
                                                                                    ----------------   ----------
<S>                                                                                   <C>                <C>
CIBSA                                                                                 Mexico             99.99

     Coca-Cola FEMSA                                                                  Mexico             45.70(1)
             Propimex, S.A. de C.V..................................................  Mexico             45.70
             Inmuebles del Golfo, S.A. de C.V.......................................  Mexico             45.70
             Refrescos y Aguas Minerales, S.A. de C.V...............................  Mexico             45.70
             Coca-Cola FEMSA de Buenos Aires, S.A...................................  Argentina          45.70
             Corporacion Interamericana de Bebidas, S.A. de C.V. (Panamco)..........  Mexico             45.70(2)

Emprex                                                                                Mexico             99.99

     FEMSA Cerveza                                                                    Mexico             70.00
             Cerveceria Cuauhtemoc Moctezuma, S.A. de C.V...........................  Mexico             70.00
             Cervezas Cuauhtemoc Moctezuma, S.A. de C.V.............................  Mexico             70.00

     FEMSA Comercio                                                                   Mexico            100.00
             Cadena Comercial Oxxo, S.A. de C.V.....................................  Mexico            100.00
             Impulsora de Mercados de Mexico, S.A. de C.V...........................  Mexico            100.00

     FEMSA Empaques                                                                   Mexico            100.00
             Fabricas  Monterrey, S.A. de C.V.......................................  Mexico            100.00
             Grafo Regia, S.A. de C.V...............................................  Mexico            100.00
             Silices de Veracruz, S.A. de C.V.......................................  Mexico            100.00
             Vendo de Mexico, S.A. de C.V...........................................  Mexico            100.00
</TABLE>

------------------
(1)   FEMSA owns 53.60% of the capital stock with full voting rights.
(2)   This entity was acquired on May 6, 2003.


                                Business Strategy

     We are a beverage company. Our soft drink operation, Coca-Cola FEMSA, is
currently the second largest bottler of Coca-Cola products in the world, and our
brewing operation, FEMSA Cerveza, is both a significant player in the Mexican
beer market as well as a major exporter in key international markets including
the United States. Coca-Cola FEMSA and FEMSA Cerveza are our core businesses,
which together define our identity and are the main avenues of our future
growth.

     As a beverage company, we understand the importance of connecting with our
end consumers by interpreting their needs, and ultimately delivering the right
products to them for the right occasions. We strive to achieve this by
developing superior brand equity, expanding our already significant distribution
capabilities and improving the efficiency of our operations. We continue to
improve our information gathering and processing systems in order to better know
and understand what our consumers want and need, and we are improving our
production and distribution by more efficiently leveraging our asset base.

     Our ultimate objectives are achieving sustainable revenue growth, improving
profitability and increasing the return on invested capital in each of our
operations. We are confident that by achieving these goals we will create
sustainable value for our shareholders.

     Our beverage businesses are supported by a large convenience store
operation, FEMSA Comercio, as well as by FEMSA Empaques, a world-class glass
bottle and aluminum can operations. These two businesses provide us with
strategic competitive advantages, and are also complemented by additional
support businesses that manufacture crown caps and closures, commercial
refrigerators, labels and flexible packaging, thermo-molded plastics and
chemical products.

     We believe that the competencies that our businesses have developed are
replicable in other geographic regions. This underlying principle guided our
consolidation efforts in 2002, which culminated by reaching an agreement for
Coca-Cola FEMSA to acquire Panamco on December 22, 2002. The continental
platform that this new combination produces--encompassing a significant
territorial expanse in Mexico and Central America, plus most of the large urban
centers in South America--may provide us with ample opportunities to create
value through both an improved ability to execute and the use of superior
marketing tools.

     During 2002, FEMSA Cerveza continued to be immersed in a transformation
process that has developed key competencies aimed at strengthening its
consumer-focused orientation, namely excellence in execution, brand building
capabilities, efficient asset utilization and the development of a powerful
information system infrastructure. Coca-Cola FEMSA widened its operating profit
margins by continuously extending its product line and reducing its expenses per
unit, while applying strategic measures to cope with the difficult economic
environment in Argentina. In addition, FEMSA Comercio further accelerated the
expansion of the Oxxo convenience store chain by opening more than 400 stores.

                                  FEMSA Cerveza

     Overview and Background

     FEMSA Cerveza is one of our core subholding companies, and one of the two
leading beer producers in Mexico measured in terms of sales volume. In 2002,
FEMSA Cerveza sold 23.811 million hectoliters of beer. As of December 31, 2002,
FEMSA Cerveza was ranked the twelfth-largest brewery in the world in terms of
sales volume. FEMSA Cerveza exports its products to more than 67 countries
worldwide, with North America being its most important export market, followed
by certain markets in Asia, Europe and Latin America. FEMSA Cerveza's principal
operating subsidiary is Cerveceria Cuauhtemoc Moctezuma, S.A. de C.V. ("CCM").

     In September 1994, Labatt acquired 22% of FEMSA Cerveza for US$510 million
and was granted an option to acquire an additional 8%. On December 1, 1994,
FEMSA Cerveza and Labatt entered into a joint venture agreement whereby both
parties agreed to combine their United States beer businesses through their
joint ownership of Labatt USA LLC and Latrobe Brewing Company LLC, which we
collectively refer to as Labatt USA. FEMSA Cerveza owns 30% of Labatt USA. In
July 1995, Interbrew N.V./S.A. ("Interbrew"), a Belgian holding company with
extensive brewing interests worldwide, acquired Labatt. On May 15, 1998, Labatt,
through its holding company, Stellamerica Holdings Limited ("Stellamerica"),
exercised the option to acquire an additional 8% interest in FEMSA Cerveza for a
total amount of US$221.6 million. Currently, Stellamerica holds 18.42% of FEMSA
Cerveza and Labatt holds 11.58%.

     Business Strategy

     FEMSA Cerveza's strategic objectives are to meet the demand for quality
beer products and to expand market penetration in Mexico and abroad,
particularly in the United States, by promoting profitable volume growth and
higher consumption per capita. The specific strategies that FEMSA Cerveza is
implementing to achieve these objectives include: (i) targeting the consumer
with strong brand names; (ii) fostering stronger commercial relationships with
retailers; (iii) enhancing operational efficiency and system-wide productivity;
and (iv) increasing market penetration in FEMSA Cerveza's profitable export
markets, with special emphasis on the southwestern United States.


                                       22
<PAGE>
<TABLE>
<CAPTION>

1.  Targeting the consumer with strong brand names requires:
<S>                  <C>
Differentiating     Market segmentation, flexible product and brand positioning
brand portfolio     are particularly suited to FEMSA Cerveza, given the range of
through offerings   products in its brand portfolio. Furthermore, we believe
market              that as the Mexican economy improves, Mexican beer consumers
segmentation and    will place increasing value on differentiated product
brand positioning   offerings, which should provide FEMSA Cerveza with a
                    competitive advantage in the domestic market. See
                    "--Marketing Strategy."


Implementing an     FEMSA Cerveza has been implementing integrated marketing
integrated          strategies centered on a combination of advertising
marketing           campaigns, promotions, channel marketing and consumption
strategy            activation events. See "--Marketing Strategy."


Increasing           A key component of FEMSA Cerveza's strategy is focused on
consumption          increasing consumption per capita. This is done by focusing
per capita           on increasing the number of people who choose beer as their
                     drink of choice (broadening our consumer base) by means of
                     promotion and coverage and by developing new consumption
                     opportunities (deepening our consumer base) through
                     strategic sponsorships and consumer activation.

Defining             We believe that we can capitalize on regional brand
regional             loyalties and increase the effectiveness of marketing and
portfolios           distribution by defining targeted regional brand portfolios.



Brewing and           Quality plays a central role in a consumer's purchase and
distributing the      consumption decision. FEMSA Cerveza devotes significant
highest quality       efforts and resources to ensure the quality, freshness and
beer                  superior taste of our beers.



Tailoring the          With the benefit of state-of-the-art information-gathering
product offering       capabilities, "pre-sale" systems (systematic on-site visits
to the                 to collect advance orders) and sophisticated market research
distribution           resources, FEMSA Cerveza will be able to tailor the brand
channel                portfolios to each marketing channel. This entails a
                       comprehensive analysis of the characteristics of the point
                       of sale and its customers. Systematic management of brand
                       portfolio per channel ensures the delivery of the optimal
                       number of Store Keeping Units ("SKUs"), higher product
                       rotation and greater efficiency of secondary distribution
                       networks, and it enables the implementation of revenue
                       management strategies. See "--Retail Distribution."


Sharpening              FEMSA Cerveza's brand communication strategy fosters the
brand                   development of brand personality, emphasizes key brand
communication           attributes such as freshness and coldness and seeks to
strategy                maximize consumer preference for its products by ensuring
                        consistency of marketing content in promotional
                        communications and materials.
</TABLE>

                                       23
<PAGE>
<TABLE>
<CAPTION>


2.  Fostering stronger commercial relationships with retailers requires:
<S>                <C>
Establishing        FEMSA Cerveza aims to develop mutually profitable
profitable and      partnerships with retailers to foster loyalty, retail
long-lasting        productivity and growth. FEMSA Cerveza's ultimate commercial
relationships       objective is not to sell beer to retailers, but to help the
with retailers      retailer sell beer to the consumer. Acknowledging the fact
                    that its customer base (both on-premise and off-premise) has
                    different consumption needs, FEMSA Cerveza implements client
                    differentiation strategies that involve different commercial
                    terms, promotional strategies, levels of refrigeration
                    equipment and point of sale marketing materials depending on
                    the characteristics of individual retailers.

Supporting the      By providing our salespeople with more sophisticated tools
sale process        to address the customer's needs, we are able to offer better
with a              service, improve the negotiation terms, extract better
functional          information from the marketplace and closely monitor
technology          coverage, pricing and competition. These are components of a
platform            higher value proposition for the beer retailer. See
                    "--Retail Distribution."


Implementing        The effectiveness of channel marketing strategies hinges on
channel             successful execution at the point of sale. FEMSA Cerveza
marketing           applies diverse merchandising techniques (including the
strategies          optimal product mix, installation of special merchandising
                    and refrigeration equipment, advice on product layout and
                    visibility) with the view of co-opting the retailer as a
                    partner. See "--Retail Distribution" and "--Marketing."

Achieving           FEMSA Cerveza selects its retailers with the objective of
balanced and        having a balanced customer base by market, an adequate mix
profitable          of on- and off-premise coverage (such as mom-and-pops,
market coverage     convenience stores, restaurants, etc.) and a balance of
                    image versus volume coverage (for instance, an upscale
                    restaurant that is mainly considered an image account versus
                    a beer depot which is a volume account ). FEMSA Cerveza's
                    management is committed to optimizing retail coverage and
                    engaging solely in selective expansion with a priority on
                    growing profitable volumes.


Implementing and    We have defined commercial policies governing the trade
complying fully     relationship with our retailers. These policies seek to
with our            improve the level of client service and establish benchmarks
commercial          for effective inventory management, credit terms and
policies            frequency of visits.
</TABLE>


                                       24
<PAGE>
<TABLE>
<CAPTION>


3.  Enhancing operational efficiency and improving system-wide productivity
    requires:
<S>                 <C>
Enhancing           We believe that implementing an Enterprise Resource Planning
information         System or ERP to serve as an internal monitoring tool will
technology          improve operating efficiency. An ERP consists of software
platforms           that integrates all departments and functions across a
                    company onto a single computer system that can serve each
                    department's particular needs in coordination with other
                    stages of the value chain. We are currently implementing an
                    ERP platform that should be fully operational by 2004.

Instituting         Integrated planning processes are a critical component of
integrated          the strategic plan of FEMSA Cerveza as they ensure that
planning processes  efforts throughout the organization are aligned towards
                    achieving our objectives. Integrated planning processes
                    result in the development of specific programs and effective
                    resource allocation. In addition, FEMSA Cerveza tracks the
                    performance of such programs, ensures that the organization
                    remains within budget, determines concrete benchmarks for
                    performance and provides constant learning-by-doing.

Optimizing the      FEMSA Cerveza is fostering a well-aligned network of third
structure of        party distributorships that operate under franchise
the distribution    agreements to complement its own network of warehouses and
system              local sales organizations. See "--Primary Distribution."

Engaging in         In recent years, FEMSA Cerveza has expanded production
marginal capacity   capacity through additional investments in existing
investments         facilities. Under current plans, FEMSA Cerveza will
                    continue to expand capacity by investing in existing
                    facilities through 2005. See "--Plants and Facilities."

Improving internal  FEMSA Cerveza continues to implement information technology
logistics           platforms to improve coordination between manufacturing and
                    distribution in order to optimize production cycles, improve
                    capacity utilization and enhance system-wide inventory
                    management.

Leveraging          We continuously promote an open and innovative spirit in our
relationships       business relationships with FEMSA Comercio and FEMSA
with affiliates     Empaques.

Maintaining the     FEMSA Cerveza is committed to maintaining world-class
highest standards   brewing facilities using sophisticated technological
of quality in       production standards while maximizing its return on
production          investment. The International Standards Organization ("ISO")
facilities          has certified all of FEMSA Cerveza's breweries.

4.  Increasing market penetration in the Southwestern United States involves:

Capitalizing on     FEMSA Cerveza is committed to increasing its market share in
the opportunities   California, Arizona, New Mexico and Texas (the "Sun Belt
presented by a      States"), which have a significant Hispanic population with
growing Sun Belt    fast growing income per capita.
market
</TABLE>

                                       25
<PAGE>

Leveraging on the   The proximity of the Sun Belt States to FEMSA Cerveza's
proximity with      strong-hold markets enables us to leverage on the cultural
northern Mexico     similarities between the southwestern United States and
                    northern Mexico. FEMSA Cerveza, in conjunction with Labatt
                    USA, has advanced in the process of harmonizing brand
                    communication strategies in the United States and in Mexico
                    although recent developments have led to certain differences
                    with Labatt USA's management. See "Item 8. Financial
                    Information--Legal Proceedings--Labatt USA Litigation."

     Product Overview

     FEMSA Cerveza currently operates six breweries in Mexico with an aggregate
annual installed capacity of approximately 32.246 million hectoliters. In 2002,
FEMSA Cerveza sold an aggregate volume of 23.811 million hectoliters, of which
21.856 million hectoliters were sold in the Mexican market and 1.955 million
hectoliters were sold abroad. FEMSA Cerveza produces and distributes 14 brands
of beer in up to nine different presentations, resulting in a portfolio of 51
different product offerings. The most important brands in FEMSA Cerveza's
portfolio include: Tecate, Carta Blanca, Sol, Superior, Indio and XX Lager.
These six brands, all of which are distributed throughout Mexico, accounted for
approximately 99% of FEMSA Cerveza's domestic sales volume in 2002.

     The Mexican Beer Market

     The Mexican beer market is the seventh-largest beer market in the world in
terms of industry sales volume and is characterized by (i) a duopoly in domestic
beer production; (ii) regional market share differences; (iii) the prevalence of
government licensing regulation; (iv) favorable demographics in the beer
drinking population; and (v) macroeconomic factors affecting the level of beer
consumption.
<TABLE>
<CAPTION>
<S>                                      <C>
Duopoly in       Since 1985, Mexico has effectively had only two independent
domestic beer    domestic beer producers, FEMSA Cerveza and Grupo Modelo.
production       Grupo Modelo, a publicly traded company based in Mexico
                 City, is the holding company of 76.8% of Diblo, S.A. de C.V.
                 ("Diblo"), which operates the brewing and packaging
                 subsidiaries of Grupo Modelo. Grupo Modelo's principal beer
                 brands are Corona, Modelo, Victoria and Pacifico. Grupo
                 Modelo's Corona brand currently commands the largest single
                 brand market share in Mexico. This brand is distributed
                 nationally, while Victoria is distributed primarily in
                 Mexico City and the surrounding areas and Pacifico is sold
                 principally along the Pacific coastal regions. Modelo
                 Especial, Modelo Light and Pacifico are Grupo Modelo's
                 domestic metal can presentations. In addition, Grupo Modelo
                 produces Corona in a can presentation for sale in the export
                 markets.

                Historically, beer imports have not been a significant
                factor in the Mexican beer market, as they were subject to
                tariffs of up to 20%. Under NAFTA, the tariff on imported
                beer from the United States and Canada was gradually reduced
                and eventually eliminated in January 2001. Notwithstanding
                the reduction in tariff levels, imported beers accounted for
                less than 2.5% of the total Mexican beer market during 2002.
                FEMSA Cerveza believes that tariff elimination has had a
                limited effect on the Mexican beer market because imported
                beers are largely premium and super-premium products sold in
                aluminum cans, which is a more expensive means of packaging
                in Mexico than beer sold in returnable bottles. Furthermore,
                supermarkets are the most likely channel for imports, and
                currently represent a relatively small proportion of the
                channel mix for the beer industry. However, periods of
                strength of the Peso with respect to the U.S. Dollar, such
                as the one which occurred in the first half of 2002, lower
                the price of imported beer to the consumer and may result in
                increased demand for imported beer in the Mexican market.
</TABLE>

                                       26
<PAGE>
<TABLE>
<CAPTION>

<S>            <C>    <C>    <C>    <C>    <C>    <C>
Regional          FEMSA Cerveza and Grupo Modelo each dominate the Mexican
marketc share     beer market in separate regions of the country. FEMSA
differences       Cerveza has a dominant sales position in the northern and
                  southern areas of Mexico while Grupo Modelo has a dominant
                  sales position in central and western Mexico. We believe
                  that this regional domination can be traced in part to
                  consumer loyalty to the brand of beer that has historically
                  been associated with a particular region. For example, FEMSA
                  Cerveza's Carta Blanca brand was first produced in
                  Monterrey, Nuevo Leon, in 1891. The strong regional identity
                  in Monterrey and surrounding northeastern areas is reflected
                  in the region's preference for Carta Blanca and other FEMSA
                  Cerveza brands.

                    We also believe that regional market strength is a function
                    of the proximity of the breweries to the markets they serve.
                    Transportation costs restrict the most efficient
                    distribution of beer to a geographic area of approximately
                    300 to 500 kilometers surrounding a brewery. Generally,
                    FEMSA Cerveza commands a majority of the beer sales in
                    regions that are nearest to its largest breweries. FEMSA
                    Cerveza's largest breweries are in Orizaba, Veracruz, and in
                    Monterrey, Nuevo Leon. Grupo Modelo's largest breweries are
                    located in Mexico City, Oaxaca and Zacatecas. Grupo Modelo's
                    recent completion of the brewery in Zacatecas may improve
                    its ability to market its products in north central Mexico.

                    The northern region of Mexico has traditionally enjoyed a
                    higher per capita income level, attributable in part to its
                    rapid industrialization within the last 50 years and to its
                    commercial proximity to the United States. In addition, per
                    capita beer consumption is also greater in this region due
                    to its warmer climate and a more ingrained beer culture.
</TABLE>

<TABLE>
<CAPTION>

                                                Mexican Regional Demographic Statistics

                                                                                                 Per Capita GDP
                                    Percent of                                Per Capita              2002
                                       2002                                    2002 Beer       -------------------
                                       Total          Percent of Total      Consumption(1)         (Thousands
                                   Population(1)         2002 GDP(1)           (Liters)             of Pesos)
<S>                                    <C>                <C>                    <C>                  <C>
Region
Northern....................           26.3%               31.4%                 78.0              Ps. 65.9
Southern....................           22.6                15.3                  45.0                  37.5
Central.....................           51.1                53.3                  39.1                  57.7
Country Total...............          100.0%              100.0%                 50.7              Ps. 55.3
                                      ======              ======                =====              ========
</TABLE>

Sources:  Mexican Institute of Statistics and FEMSA Cerveza's estimates.
(1)  Estimated.


Government        The Mexican federal government effects regulation of beer
regulation        consumption in Mexico primarily through taxation while local
                  governments in Mexico effect regulation primarily through
                  the issuance of licenses that authorize retailers to sell
                  alcoholic beverages.

                  Federal taxes on beer currently represent 43.75% of the
                  total retail price of beer to the consumer and include a 25%
                  excise tax and a 15% value-added tax. Beer excise tax has
                  remained constant at 25% since January 1998. The tax
                  component of retail beer prices is significantly higher in
                  Mexico than in the United States, where taxes on average
                  represent approximately 18.3% of the retail price to the
                  consumer.


                                       27
<PAGE>

                  The number of retail outlets authorized to sell beer is
                  controlled by local jurisdictions, which issue licenses
                  authorizing the sale of alcoholic beverages. Other
                  regulations regarding beer consumption in Mexico vary
                  according to local jurisdiction and include limitations on
                  the hours during which restaurants, bars and other retail
                  outlets are allowed to sell beer and other alcoholic
                  beverages. FEMSA Cerveza has developed efforts that address
                  these limitations at various levels, promoting better
                  education of responsible consumption of beer with government
                  and civil authorities. For instance, as part of its ongoing
                  community activities, FEMSA Cerveza has been a very active
                  sponsor of a nationwide designated driver program.

                  Since July 1984, Mexican federal regulation has required
                  that all forms of beer packaging carry a warning advising
                  that excessive consumption of beer is hazardous to one's
                  health. In addition, the Ley General de Salud (the "Mexican
                  General Health Law"), requires that all beers sold in Mexico
                  maintain a sanitation registration with the Secretaria de
                  Salud (the "Ministry of Health").


Demographics of   We estimate that annual per capita beer consumption for the
beer drinking     total Mexican population remained stable at approximately 51
population        liters in 2002. The legal drinking age in Mexico is 18.
                  However, at least 34% of the Mexican population is under the
                  age of 18 and, therefore, is not considered to be part of
                  the beer drinking population. We consider the population
                  segment of men between the ages of 18 and 45 to be FEMSA
                  Cerveza's primary market. Based on historical trends and
                  what management perceives as the continued social acceptance
                  of beer consumption, FEMSA Cerveza believes that general
                  population growth will result in an increase in the number
                  of beer consumers in Mexico.

                  Based on historical trends as measured by the Mexican
                  Institute of Statistics, we expect the Mexican population to
                  grow at an average annual rate of approximately 1.3% per
                  year over the period 2002 to 2007. We estimate that, over
                  the next ten years, approximately one million additional
                  people per year will become potential beer consumers due to
                  the natural aging of the Mexican population.

                  In 2002, Mexico's annual per capita beer consumption was
                  approximately 51 liters compared to approximately 81 liters
                  in the United States. Generally speaking, countries with
                  higher per capita beer consumption have relatively higher
                  per capita income. Per capita income in Mexico in 2002 was
                  equivalent to approximately US$6,371 compared to a per
                  capita income of approximately US$36,347 in the United
                  States. FEMSA Cerveza identifies approximately 60% of its
                  consumers as blue collar, 29% as white collar and the
                  remaining 11% as students, unemployed, retirees or other.

Macroeconomic       We believe that consumption activity in the Mexican beer
influences          market is heavily influenced by the general level of
affecting           economic activity in Mexico, the country's gross wage base,
beer consumption    changes in real disposable income and employment levels. As
                    a result, the beer industry reacts sharply to economic
                    change. The industry generally experiences high volume
                    growth in periods of economic strength and slower volume
                    growth or volume contraction in periods of economic
                    weakness. Domestic beer sales declined in 1982, 1983 and
                    1995. These sales decreases correspond to periods in which
                    the Mexican economy experienced severe disruptions.
                    Similarly, the economic weakness observed in 2001 and 2002
                    corresponds to a reduction in domestic beer sales in 2002.


                                       28
<PAGE>

     Annual Price Increases

     In 2002, FEMSA Cerveza implemented a selective price increase for its
products across different regions of the country. The rollout began in February
and was completed by mid-March. Management's objective was to keep real price
levels stable. Since actual inflation for the year was lower than expected, the
price increase represented a real increase of approximately 90 basis points. For
the entire Mexican beer industry, however, the real retail price of beer
increased by only 40 basis points in 2002, as shown below.


                  Mexican Beer Industry
    Cumulative Real Retail Beer Price Index: 1998-2002

                      (1998 = 100%)
===========================================================

                  Year Ended December 31,
        2002       2001       2000       1999      1998
        ----       ----       ----       ----      ----
       108.0      107.6      107.6      102.6      100.0
====
Source:  Banco de Mexico



     FEMSA Cerveza's Beer Sales Volume

     FEMSA Cerveza's aggregate beer sales volume totaled 23.811 million
hectoliters in 2002, a decrease of 0.2% from total sales volume of 23.861
million hectoliters in 2001. In 2002, FEMSA Cerveza's domestic sales volume
decreased by 0.7% to 21.856 million hectoliters and export sales volume
increased by 6.1% to 1.955 million hectoliters.
<TABLE>
<CAPTION>

                                                        FEMSA Cerveza Beer Sales Volumes
                                                         (In Thousands of Hectoliters)

                                            2002         2001         2000          1999         1998
        <S>                                 <C>         <C>            <C>          <C>          <C>
        Domestic Sales Volume............  21,856       22,018       21,868        22,197       21,501
        Export Sales Volume..............   1,955        1,843        1,728         1,511        1,322
        Total Sales Volume...............  23,811       23,861       23,596        23,708       22,823
</TABLE>

     FEMSA Cerveza's domestic sales volume recorded a five-year compounded
average growth rate of 0.4% for the period 1998-2002. This compares with the
negative 0.5% five-year compounded average growth rate of the Mexican GDP.
Domestic net sales for the same period recorded a 3.1% compounded average growth
rate. Domestic sales volume is closely correlated to Mexican GDP growth, and we
believe this relationship has been reinforced by FEMSA Cerveza's deliberate
effort to return the price level of beer in the period spanning from 1995 to
2001 to its historic level and to maintain such level in 2002. Currently, FEMSA
Cerveza's strategy continues to focus on increasing consumption of its products
while improving the real price of beer through revenue management strategies.

     FEMSA Cerveza's Beer Presentations

     FEMSA Cerveza produces beer in returnable glass bottles and kegs and in
non-returnable metal cans and glass bottles. The following table shows the
percent of total sales volume by presentation for the year ended December 31,
2002:


                                       29
<PAGE>
<TABLE>
<CAPTION>

                                           FEMSA Cerveza's Total Beer Volume by Presentation
                                                        As of December 31, 2002

<S>                                                               <C>
Presentation
Returnable Bottle--325 ml...................................      24.7%
Returnable Bottle--1 liter..................................      38.4
Returnable Bottle--190 ml...................................       5.1
     Subtotal Returnable Bottles............................      68.2
Non-returnable Bottle--325 ml and 190 ml....................       7.6
Cans........................................................      22.5
Kegs........................................................       1.7
     Total..................................................     100.0%
</TABLE>
<TABLE>
<CAPTION>

<S>                                      <C>
Returnable presentations                 The most popular form of packaging in the Mexican beer market is the
                                         returnable bottle.  FEMSA Cerveza believes that the popularity of the
                                         returnable bottle is attributable to its lower price to the consumer.
                                         While returnable bottles generally cost approximately twice as much to
                                         produce as non-returnable bottles, returnable bottles may be reused as many
                                         as 30 times before being recycled.  As a result, beer producers are able to
                                         charge lower prices for beer in returnable bottles.

Non-returnable presentations             FEMSA Cerveza's domestic presentation mix is weighted slightly more to
                                         non-returnable presentations than the industry in general, reflecting FEMSA
                                         Cerveza's broader presentation portfolio.  Export volume is entirely
                                         packaged in non-returnable presentations, including glass and cans.
                                         Because cans are the most expensive presentation, followed by
                                         non-returnable bottles, we believe that demand for presentations in cans is
                                         highly sensitive to economic factors.  During periods when the Mexican
                                         economy is weak, non-returnable bottle volumes generally increase at the
                                         expense of metal can volumes.
</TABLE>


                                       30
<PAGE>

     Relative Pricing in the Mexican Market

     Returnable bottles and kegs are the least expensive beer presentation on a
per-milliliter basis. Cans have historically been priced approximately 40%
higher than returnable bottles, and non-returnable bottles are generally priced
approximately 30% higher than returnable bottles. The consumer preference for
presentations in cans has varied considerably over the past 20 years, rising in
periods of economic prosperity and declining in periods of economic austerity,
reflecting the price differential between these forms of packaging.

     In 2002, FEMSA Cerveza reduced slightly the relative price of its
non-returnable presentations as compared to the 325 milliliters returnable glass
presentation. The relative price of the can presentation and the non-returnable
glass presentation as compared to the 325 milliliters returnable glass
presentation was 1.37 and 1.27, respectively, as of December 31, 2002. As of the
date of this Annual Report, FEMSA Cerveza had not made significant changes to
its pricing schedule as compared to 2002.
<TABLE>
<CAPTION>

                                            Domestic Beer Relative Pricing by Presentation
                                                        As of December 31, 2002

                   Presentation                                               Relative Prices(1)
                   ------------                                               ------------------
                  <S>                                                               <C>
                   Returnable Bottle--325 ml.....................................    1.00
                   Returnable Bottle--1 liter....................................    0.88
                   Returnable Bottle--190 ml.....................................    1.13
                   Non-Returnable Bottle--325 ml and 190 ml......................    1.27
                   Cans..........................................................    1.37
                   Kegs..........................................................    0.99
</TABLE>

                    (1)  Relative prices are based on information provided by
                         FEMSA Cerveza with respect to its products and reflect
                         wholesale prices excluding taxes. The 325 ml.
                         returnable bottle was used as the reference price for
                         calculating relative prices.

     Exports

     FEMSA Cerveza's export strategy focuses on the United States market,
concentrating efforts on the markets in the Sun Belt States bordering Mexico. We
believe that the Sun Belt States are FEMSA Cerveza's greatest potential market
outside of Mexico.

     Total export sales volume of 1.955 million hectoliters represented 8.2% of
FEMSA Cerveza's total beer sales volume in 2002 and accounted for 6.2% of FEMSA
Cerveza's total revenues. The following table highlights FEMSA Cerveza's export
volumes and total revenues:
<TABLE>
<CAPTION>

                                     FEMSA Cerveza Export Summary


                                                             Year Ended December 31,
                                              2002         2001        2000        1999        1998
<S>                                           <C>           <C>          <C>        <C>        <C>
Export Sales Volume(1)....................   1,955        1,843       1,728       1,511       1,322
     Volume Growth........................     6.1%         6.6%       14.4%       14.3%        7.0%
Percent of Total Sales Volume.............     8.2%         7.7%        7.3%        6.4%        5.8%


------------------------------------------
Export Revenues
     Millions of Pesos(2)................  1,275.9      1,230.0     1,243.8     1,198.0     1,188.3
     Millions of U.S. Dollars(3).........    127.4        122.8       114.5       100.6        88.0
     Revenue Growth (US$)................      3.7%         7.3%       13.8%       14.3%       10.0%
Percent of Total Sales...................      6.2%         5.9%        6.4%        6.4%        6.8%
------------------
Source:  FEMSA Cerveza.
</TABLE>

(1)  Thousands of hectoliters.
(2) Constant Pesos as of December 31, 2002.
(3)  Export revenues are invoiced and collected in U.S. Dollars.


                                       31
<PAGE>

     FEMSA Cerveza currently exports its products to more than 67 countries. The
principal export markets for FEMSA Cerveza are North America, Europe, Asia and
Latin America. In 2002, export sales volume to these areas accounted for 92.2%,
2.9%, 2.8% and 2.1%, respectively, of FEMSA Cerveza's total export sales volume.

     FEMSA Cerveza's affiliate, Labatt USA, is the importer of FEMSA Cerveza's
brands in the United States. Labatt USA manufactures and distributes Rolling
Rock and is also the U.S. importer of Labatt's Canadian brands and of European
brands such as Lowenbrau, Stella Artois, Boddingtons, Leffe and Carlsberg. A
United States subsidiary of FEMSA Cerveza has obtained an injunction to prevent
the integration of Beck's into the beer distribution portfolio of Labatt USA.
See "Item 3. Key Information--Risk Factors" and "Item 8. Financial
Information--Legal Proceedings--Labatt USA Litigation." Sales of FEMSA Cerveza's
brands contributed 34.1% of Labatt USA's volume in 2002, representing 8.1%
volume growth from 2001 levels.

     On April 9, 2003, FEMSA and Interbrew jointly announced that Labatt USA
would introduce Bass Ale into its portfolio of brands for a twelve to eighteen
month trial period beginning July 1, 2003. This temporary arrangement gives
Labatt USA distribution and marketing responsibility for Bass Ale in the United
States, and also gives Labatt USA a twelve to eighteen month period to establish
the best development plan for the brand in the United States. During the period
of the agreement, Labatt USA and its shareholders, Interbrew and FEMSA Cerveza,
will continue to assess the desirability of a longer-term arrangement for Labatt
USA to serve as the United States distributor of Bass Ale. This agreement also
allows the existing core brands of the Labatt USA portfolio to benefit from
incremental marketing support and sales resources.

     In August 2002, FEMSA Cerveza began licensing the production and
distribution of its Sol brand to Holsten-Brauerei AG ("Holsten"), a
Hamburg-based brewer. This venture enables FEMSA Cerveza to leverage Holsten's
extensive knowledge of the German beer market and offer a fresher product to a
wider audience, while still complying with the exact quality specifications of
the Mexican brew. In 2002, Holsten distributed the existing inventory of Sol for
commercialization in Germany and began brewing and distributing the brand in
2003.

     FEMSA Cerveza's principal export brands are Tecate, XX Lager, Dos Equis
(Amber) and Sol. These brands collectively accounted for 95% of FEMSA Cerveza's
export sales volume for the year ended December 31, 2002.


                               FEMSA Cerveza's Principal Export Brands
                                    Year ended December 31, 2002

                                                           Percent of
                                                          Total Export
       Brand                                                 Volume
       Tecate.............................................    60.5%
       XX Lager and Dos Equis (Amber).....................    22.7
       Sol................................................    11.9
       Bohemia............................................     2.3
       Carta Blanca.......................................     2.6

       Total..............................................   100.0%

Primary  Distribution

     FEMSA Cerveza's primary distribution is from its production facilities to
its distribution centers' warehouses. FEMSA Cerveza has historically utilized
Logistica CCM's specialized freight services. As of January 1, 2003, Logistica
CCM was merged into FEMSA Cerveza. This integration is expected to have a small
positive effect on the operating margins of FEMSA Cerveza.

     FEMSA Cerveza delivers to a combination of company-owned and third-party
distributors. In 2002, approximately 70% of FEMSA Cerveza's domestic sales
passed through 244 company-owned distribution centers. The remaining 30% was
sold through 120 independent distributors operating under agreement with FEMSA
Cerveza. In an effort to improve the efficiency and alignment of the
distribution network, FEMSA Cerveza is adjusting its relationship with
independent distributors by implementing franchise agreements and as a result,
achieving economies of scale through alignment with FEMSA Cerveza's operating
systems. A franchise agreement is offered only to those distributors that meet
certain standards of operating capabilities, performance and alignment. FEMSA
Cerveza will eventually acquire those distributors that do not meet these
requirements. Through this initiative FEMSA Cerveza expects to increase its
volume through company-owned distribution centers to approximately 80% in the
next 2 years.


                                       32
<PAGE>

     Retail Distribution

     The main sales outlets for beer in Mexico are small, independently-owned
"mom and pop" grocery stores, dedicated beer depositos, liquor stores and bars.
Supermarkets account for only a small percentage of beer sales in Mexico. In
addition, FEMSA Comercio operates a chain of more than 2,216 convenience stores
under the trade name Oxxo which exclusively sell FEMSA Cerveza's brands. FEMSA
Cerveza owns 644 retail outlets under the tradename Matador and SIX. These are
operated by FEMSA Comercio. See "--FEMSA Comercio--SIX and Matador Stores."
FEMSA Cerveza believes that its affiliation with FEMSA Comercio is an important
element in its market penetration and pricing strategies. See "--FEMSA
Comercio."
<TABLE>
<CAPTION>

                                     Distribution of FEMSA Cerveza Domestic Sales Volume By Outlet
                                                     Year ended December 31, 2002

                <S>                                                                <C>
                  Points of Sale
                  Small Grocery Stores........................................     22.9%
                  Beer and Liquor Stores......................................     30.5
                  Mini-markets and Convenience Stores.........................     15.0
                  Other Points of Sale........................................     10.7
                                                                                -----------
                         Subtotal.............................................     79.1

                  Consumption Centers
                  Bars........................................................     10.0
                  Restaurants.................................................      4.9
                  Nightclubs..................................................      2.0
                  Other Consumption Centers...................................      4.0
                                                                                -----------
                         Subtotal.............................................     20.9
                                                                                -----------
                         Total................................................    100.0%
                                                                                ===========
</TABLE>

     In 2001, FEMSA Cerveza began implementing pre-sale processes. As of the
date of this Annual Report, approximately 76% of our sales volume was sold
through a pre-ordering system, which consists of systematic on-site visits to
collect advance orders. One of the primary objectives of pre-sale is to separate
sales from distribution to ensure more reliable market access and to enhance
efficiency by reducing the number of secondary distribution routes in otherwise
highly fragmented markets. Overall, in markets where pre-sale has been
implemented, we have experienced a 95% reduction in unsold product and a net
reduction in distribution personnel. Furthermore, pre-sale has enabled FEMSA
Cerveza to collect customer and consumer information directly from the
marketplace, which then becomes valuable in defining brand portfolios by
channel. See "--Marketing Strategy."

     The Mexican retail market is fragmented and characterized by a
preponderance of small outlets that are unable and unwilling to maintain
meaningful inventory levels. Consequently, FEMSA Cerveza must make frequent
product deliveries to its retailers. The existence of pre-sale systems
facilitates systematic product delivery and helps discipline product inventory
at the point of sale. FEMSA Cerveza served more than 265,000 retailers as of
December 31, 2002 and its distribution network operates approximately 1,800
retail distribution routes. This is significantly lower than the number of
routes in operation in 2001, and reflects the reconfiguration in distribution
logistics as a result of the implementation of pre-sale in many of our key
markets.

     Enterprise Resource Planning

     Since 2001, FEMSA Cerveza has embarked in the implementation of an
Enterprise Resource Planning or ERP system at various levels of the
organization, with the ultimate objective of possessing an information and
control platform that supports all commercial activities nationwide and
correlates them with the administrative and business development decision-making
process occurring in our central office. The ERP system has gone through a
development phase in which the design, organization and configuration of various
components of the system have been evaluated. In this phase, special care has
been given to defining functions and procedures, which in some cases have
spanned departmental divisions, in order to produce a cohesive set of operating
processes. Some basic modules have been implemented successfully and according
to schedule both at our central office and throughout the company. These modules
assist finance, shared services, maintenance and equipment functions, among
others. These ERP modules operate under the SAP(R) software platform.


                                       33
<PAGE>

     In 2002, FEMSA Cerveza focused on designing the commercial nodes of the
ERP. These integrated packages, which will eventually support all aspects of
sales and marketing at each one of FEMSA Cerveza's sales and distribution
organizations, implement pioneering technology provided by I-S Beverage(R) for
the administration and control of commercial activities. Additional attributes
of these nodes include the application of data management solutions designed to
create an intelligence base from market-gathered indicators that will aid in the
strategic decision-making process.

     Marketing Strategy

     The principal marketing objectives of FEMSA Cerveza are:

-    ensuring coherence between point of sale marketing and sales activities by
     linking the promotional programs of each brand with its respective
     communication and advertising campaigns;

-    exploiting channel marketing and market research functions;

-    defining and implementing differentiated strategies to promote the image of
     each brand; and

-    capturing new sales or consumption opportunities through innovative
     solutions in product and package offering, refrigeration, visibility and
     sponsorships.

Focus on Consumer: Brand Positioning and Market Segmentation

     FEMSA Cerveza's marketing strategy relies on a diverse brand and
presentation portfolio to effectively serve all consumer and geographic segments
of the Mexican beer market. FEMSA Cerveza's product portfolio consists of brands
at different stages of market development. The strategy for each brand is
dictated by its potential to either capture additional consumers or increase
frequency of consumption in each market. The objective of FEMSA Cerveza's
marketing is to position each of its four major brands as the principal brand in
the respective region of dominance. The leading brands and their targeted
domestic markets are Tecate in the northwest, Carta Blanca in the northeast, Sol
in the central region and Superior in the south. FEMSA Cerveza believes that
this strategy allows it to leverage the brand equity and market position of its
flagship products in their respective territories. In addition, FEMSA Cerveza
plans to use other brands in its portfolio to complement, and thereby
strengthen, its regional offering and to assist in creating a richer pricing
scheme.

     By defining brand positioning and the relevant promotional strategies to be
executed by the sales team, FEMSA Cerveza's marketing efforts seek to establish
connections between the consumer and FEMSA Cerveza's brands. The brand
architecture and concept derived from brand positioning are founded on rigorous
market research that evaluates, among other things, the brand's attributes from
the consumer's perspective. Furthermore, periodic market research is conducted
in several markets to monitor brand health attributes--such as brand awareness,
recent trial, purchase intent, and first favorite--to help FEMSA Cerveza keep
accurate track of the status of the image of each brand. The branding
specialists also rely on this market-obtained data to better target products and
promotions.

Focus on Retailer: Channel Marketing

     FEMSA Cerveza believes that defining channel strategies is just as
important as defining brand positioning. Therefore, FEMSA Cerveza has
established a channel marketing function within the marketing division whose
objective is to understand the strategic relevance of the different channels
across markets in order to define brand portfolios per channel. A channel refers
to a category or sub-category of point of sale, such as supermarkets, beer
depots, restaurants, etc. Channel marketing is responsible for:


                                       34
<PAGE>

-    establishing the optimal promotional programs for each channel;

-    identifying the most effective combination and position for merchandising
     material; and

-    providing refrigeration equipment at the point of sale.

     Channel marketing is also responsible for new channel development that
could foster additional consumption opportunities for FEMSA Cerveza's brands.

     Channel marketing and coverage will be strengthened considerably with the
use of electronic maps of certain cities. These maps superimpose crucial
information--socioeconomic strata, micro market share, outlet location and
channel characteristics--allowing sales managers and marketing strategists to
implement differentiated tactics such as revenue management and portfolio
segmentation. FEMSA Cerveza is in the initial development stages of this sales
tool.

Integrated Marketing

     With the objective of further aligning the brand and channel strategies
with the sales teams, FEMSA Cerveza began implementing integrated marketing
programs that combine the functions of the sales and marketing divisions. An
integrated marketing program promotes a brand through simultaneous deployment of
media communications, intense marketing efforts and sponsorship of events,
increasing the effectiveness of the sales force by bridging the gap between the
brand and the channel.

     Jointly, our brand and channel experts define an integrated brand strategy,
which will be implemented in each type of market and in each designated channel
by a specialized team responsible for designing the communication and marketing
materials, including promotional programs that reflect the brand's strategy.
FEMSA Cerveza utilizes the following forms of sales promotion: television,
radio, billboards and point of sale material, as well as channel specific
promotions, promotional material, refrigeration equipment and branded
merchandise such as plastic furniture and neon signs to dress the point of sale.
The implementation team is responsible for the delivery of the specific brand
programs to the sales force, which is ultimately responsible for their market
execution.

Product and Package Innovation

     FEMSA Cerveza has established a working system that identifies, develops
and ultimately launches product/package innovation alternatives to create
incremental volume and/or incremental value for its business. This system has a
structured set of components--functions and criteria--to help innovative ideas
materialize into feasible rollouts in an optimal way. Currently, the product
development initiatives at FEMSA Cerveza do not contemplate the introduction of
new brands or the retirement of existing ones.

     Plants and Facilities

     FEMSA Cerveza currently operates six breweries with an aggregate monthly
production capacity of 2,687 thousand hectoliters, equivalent to approximately
32.2 million hectoliters of annual capacity. Each of FEMSA Cerveza's breweries
has received ISO 9002 certification. A key consideration in the selection of a
site for a brewery is its proximity to potential markets, as the cost of
transportation is a critical component of the overall cost of beer to the
consumer. FEMSA Cerveza's breweries are strategically located across the country
and as a result serve FEMSA Cerveza's distribution system well. The newest
brewery, located in Navojoa, Sonora, began production in late 1991.


(Embedded Picture)


                                       35
<PAGE>

<TABLE>
<CAPTION>


                     FEMSA Cerveza Facility Capacity Summary
                          Year ended December 31, 2002

                                                                 Average                                Average Capacity
                                                                 Monthly(1)      Average Annualized     Utilization
                                                                 ----------      -------------------    ----------------
                                                                          (in Thousands of Hectoliters)
<S>                                                               <C>               <C>                  <C>
Brewery
Orizaba.................................................            600              7,200                77.4%
Monterrey...............................................            629              7,550                81.2
Toluca..................................................            450              5,400                69.4
Navojoa.................................................            350              4,200                66.2
Tecate..................................................            390              4,680                63.4
Guadalajara.............................................            268              3,216                65.0
   Total................................................          2,687             32,246                72.2%
                                                                  =====             ======                ======
</TABLE>

(1)   Average monthly installed capacity during 2002.


     Between 1998 and 2002, FEMSA Cerveza increased its average monthly
production capacity by approximately 242,000 hectoliters through additional
investments in existing facilities. During 2002, FEMSA Cerveza expanded average
monthly capacity in the Tecate and Monterrey breweries to achieve a production
of 390,000 and 629,000 hectoliters, respectively. FEMSA Cerveza's management
believes that it will be able to continue to adequately expand its production
capacity by investing in existing facilities.

     FEMSA Cerveza operates seven effluent water treatment systems to treat the
water used by the breweries. The effluent treatment system at the Orizaba
brewery is a joint venture among FEMSA Cerveza, several other local companies
and the government of the state of Veracruz.

     Seasonality

     Demand for FEMSA Cerveza's beer is highest in the Mexican summer season,
and consequently, brewery utilization rates are at their highest during this
period. While capacity utilization rates averaged approximately 72.2% in 2002
and 73.9% in 2001, peak utilization in the summer season was in excess of 79% in
2002 and 85% in 2001. Demand for FEMSA Cerveza's products decreases during the
months of November, January and February primarily as a result of colder weather
in the northern regions of Mexico. Demand for FEMSA Cerveza's products tends to
increase in the month of December reflecting consumption during the holiday
season.

     Raw Materials

     Malted barley, hops, certain grains, yeast and water represent the
principal ingredients used in manufacturing FEMSA Cerveza's beer products. These
inputs are generally available in the open market. FEMSA Cerveza satisfies its
commodity requirements through purchases from various sources, including
purchases pursuant to contractual arrangements and purchases in the open market.
The prices and supply sources of raw materials are determined by, among other
factors, the level of crop production, weather conditions, export demand and
government regulations and legislation affecting agriculture. Hops is the only
ingredient that is not available domestically. FEMSA Cerveza imports hops
primarily from the United States and Europe.

     The principal source of barley for the Mexican beer industry is the
domestic harvest. If domestic production is insufficient to meet the industry's
requirements, barley (or its equivalent in malt), can be sourced from the
international markets. Pursuant to NAFTA, an annual duty-free import quota for
barley (or its equivalent in malt) was set at 150,000 tons in 1994. This quota
is subject to an annual increase of 5%. Additional quantities may be imported in
years in which the beer industry can demonstrate that domestic production and
the allowable import quota are insufficient to meet demand. It is estimated that
in 2002, the Mexican beer industry imported 213,477 tons of barley pursuant to
the applicable quota and an additional amount of approximately 12,920 tons,
significantly lower than the additional amount imported in 2001, as a result of
favorable domestic barley output. Barley consumption by the Mexican beer
industry is approximately 553,667 tons per annum. Prior to NAFTA, domestic
barley prices were significantly higher than international barley prices. Since
the implementation of NAFTA, domestic barley prices have declined, and local
producers now generally price their crop so that, after accounting for
transportation and other import-related expenses, imported barley and barley
purchased from the domestic market result in the same cost to the domestic
purchaser.


                                       36
<PAGE>

     Purchases from FEMSA Empaques

     FEMSA Cerveza obtains its packaging materials primarily from its affiliate,
FEMSA Empaques. In 1994, FEMSA Cerveza's principal operating subsidiaries
entered into a packaging supply agreement (the "FEMSA Cerveza Supply Agreement")
with FEMSA Empaques. See "--FEMSA Empaques" and "Item 10. Additional
Information--Material Contracts--FEMSA Cerveza--Supply Agreement." As of
December 31, 2002, FEMSA Empaques supplied 100% of FEMSA Cerveza's bottle,
aluminum can, bottle cap and label requirements.

                          Coca-Cola FEMSA

     Overview and Background

     Coca-Cola FEMSA is the largest Coca-Cola bottler in Latin America,
representing approximately 40% of Coca-Cola volumes in Latin America, and the
second largest bottler of Coca-Cola products in the world, as measured by sales
volume in unit cases sold in 2002. Coca-Cola FEMSA operates in Mexico (a
substantial part of central Mexico, including Mexico City and Southeast Mexico),
Guatemala (Guatemala City and surrounding areas), Nicaragua (nationwide), Costa
Rica (nationwide), Panama (nationwide), Colombia (most of the country),
Venezuela (nationwide), Brazil (greater Sao Paulo, Campinas, Santos and part of
Mato Grosso do Sul) and Argentina (Federal Capital and surrounding areas,
referred to in this Annual Report as Gran Buenos Aires).

The Panamco Acquisition

     On May 6, 2003, Coca-Cola FEMSA completed the acquisition of Panamco, then
the largest soft drink bottler in Latin America and one of the three largest
bottlers of Coca-Cola products in the world, as measured by sales volume in unit
cases sold in 2002. Panamco is now Coca-Cola FEMSA's wholly-owned subsidiary.
Panamco produces and distributes Coca-Cola trademark beverages in its bottling
territories in Mexico, Guatemala, Nicaragua, Costa Rica, Panama, Colombia,
Venezuela and Brazil, along with bottled water, beer and other beverages in some
of these territories. In 2002, Panamco reported net sales of US$2,357.9 million,
operating income of US$131.2 million and net income of US$33.2 million, under
U.S. GAAP. Panamco sold approximately 1,228.1 million unit cases in 2002.
Additional information regarding Panamco's operations and recent performance can
be found in its annual report filed with the SEC on Form 10-K on March 28, 2003
and its quarterly report filed with the SEC on Form 10-Q on May 6, 2003. Such
reports do not constitute part of this Annual Report and are not incorporated by
reference into this Annual Report.

     The Panamco acquisition significantly increases the geographic diversity of
Coca-Cola FEMSA's operations, although the Mexican operations of both companies
represent by far the largest single portion of Coca-Cola FEMSA's business,
representing 53% of the combined volume for the two companies in 2002. This
geographic diversification will present significant new challenges as Coca-Cola
FEMSA will be conducting business in territories where it has not previously
operated and will expose Coca-Cola FEMSA to new economic, political, currency
exchange and other risks.

     Integration

     Coca-Cola FEMSA is currently planning and taking certain initial steps
towards the integration of Panamco's operations with its own. Coca-Cola FEMSA's
objective is to achieve complete integration in the operations and management of
the two companies' Mexican operations, which Coca-Cola FEMSA believes complement
each other in numerous areas, with the goal of realizing important synergies in
distribution, back-office operations, manufacturing and procurement, including
through the closure and integration of facilities and headcount reductions.
Coca-Cola FEMSA will maintain its corporate headquarters in Mexico City, and
will have divisional headquarters in the following three regions:

-    Mexico with divisional headquarters in Mexico City;

-    Latin Centro (covering territories in Guatemala, Nicaragua, Costa Rica,
     Panama, Venezuela and Colombia) with divisional headquarters in San Jose,
     Costa Rica; and

-    Mercosur (covering territories in Brazil and Argentina) with divisional
     headquarters in Sao Paulo, Brazil.


                                       37
<PAGE>

Coca-Cola FEMSA is in the process of evaluating the operations and strategies of
Panamco's businesses outside Mexico, and has begun to replicate some of
Coca-Cola FEMSA's management practices and systems throughout its new
territories.

     Acquisition Cost

     The cost of the acquisition was approximately US$3.7 billion. The
acquisition was financed as follows:

-    US$1,978 billion of new debt (including approximately US$373 million used
     to refinance existing Panamco indebtedness);

-    US$260 million from a capital investment by FEMSA through CIBSA;

-    US$674 million notional amount of Coca-Cola FEMSA Series D Shares issued to
     subsidiaries of The Coca-Cola Company;

-    US$285 million in cash; and

-    US$512 million of assumed debt.

     Additionally, Coca-Cola FEMSA incurred other costs and expenses related to
the transaction, which it has been paying with cash on hand.

     As part of the acquisition, all shareholders of Panamco, other than The
Coca-Cola Company and its subsidiaries, received cash in exchange for their
shares. The Coca-Cola Company and its subsidiaries received Coca-Cola FEMSA
Series D Shares in exchange for its equity interest in Panamco of approximately
25%. This increased The Coca-Cola Company's beneficial ownership of Coca-Cola
FEMSA's total share capital from 30% to 39.6% and its beneficial ownership of
Coca-Cola FEMSA's voting share capital from 37% to 46.4%.

     Coca-Cola Memorandum

     In connection with the signing of the agreement for the acquisition of
Panamco, The Coca-Cola Company and FEMSA memorialized certain understandings
primarily relating to operational and business issues that affect Coca-Cola
FEMSA following the completion of the acquisition. The terms are as follows:

-    The current stockholder arrangements between FEMSA and The Coca-Cola
     Company will continue in place. See "Item 10. Additional
     Information--Material Contracts--Coca-Cola FEMSA--Shareholders' Agreement."

-    FEMSA will continue to consolidate Coca-Cola FEMSA's financial results.

-    The Coca-Cola Company and FEMSA will continue to discuss in good faith the
     possibility of implementing changes to Coca-Cola FEMSA's capital structure
     in the future.

-    There will be no changes in concentrate incidence pricing or marketing
     support by The Coca-Cola Company during the first year of operations
     following the acquisition. After such time, The Coca-Cola Company will have
     complete discretion to implement any changes with respect to these matters,
     but any decision in this regard will be discussed with Coca-Cola FEMSA and
     will take its operating condition into consideration.

-    The Coca-Cola Company may require the establishment of a different
     long-term strategy for Brazil. If, after taking into account Coca-Cola
     FEMSA's performance in Brazil, The Coca-Cola Company does not consider it
     to be part of this long-term strategic solution for Brazil, then Coca-Cola
     FEMSA will sell its Brazilian franchise to The Coca-Cola Company or its
     designee at fair market value. Fair market value would be determined by
     independent investment bankers retained by each party at their own expense
     pursuant to specified procedures.

                                       38
<PAGE>

-    FEMSA, The Coca-Cola Company and Coca-Cola FEMSA will meet to discuss the
     optimal Latin America territorial configuration for the Coca-Cola bottling
     system. During these meetings, Coca-Cola FEMSA will consider all possible
     combinations and any asset swap transactions that may arise from these
     discussions. In addition, Coca-Cola FEMSA will entertain any potential
     combination as long as it is strategically sound and done at fair market
     value.

-    Coca-Cola FEMSA would like to keep open strategic alternatives that relate
     to the integration of carbonated soft drinks and beer. The Coca-Cola
     Company, FEMSA and Coca-Cola FEMSA would explore these alternatives on a
     market-by-market basis at the appropriate time.

-    The Coca-Cola Company will sell to CIBSA, FEMSA's subsidiary that holds
     shares of Coca-Cola FEMSA, upon CIBSA's request, a sufficient number of
     Coca-Cola FEMSA's shares to permit CIBSA to beneficially own 51% of
     Coca-Cola FEMSA's outstanding capital stock (assuming that CIBSA does not
     sell any shares and that there are no issuances of Coca-Cola FEMSA's stock
     other than as contemplated by the acquisition). This understanding will be
     in place until May 2006. In this proposed sale, CIBSA would pay the higher
     of:

-    the prevailing market price per share at the time of the sale; and

-    the sum of $2.216 per share plus The Coca-Cola Company's carrying costs.

-    Coca-Cola FEMSA may be entering some markets where significant
     infrastructure investment may be required. The Coca-Cola Company and FEMSA
     will conduct a joint study that will outline strategies for these markets,
     as well as the investment levels required to execute these strategies.
     Subsequently, it is intended that FEMSA and The Coca-Cola Company will
     reach agreement on the level of funding to be provided by each of the
     partners. The parties intend that this allocation of funding
     responsibilities would not be overly burdensome for either partner.

-    Subject to the execution and delivery of mutually satisfactory definitive
     agreements, The Coca-Cola Company intends to grant Coca-Cola FEMSA a
     stand-by line of credit in the principal amount of US$250 million. The
     purpose of this line of credit would be to support investments that
     Coca-Cola FEMSA may need to make during economically difficult periods
     prior to the third anniversary of the completion of the acquisition.
     Coca-Cola FEMSA is currently in the process of negotiating definitive
     documentation for this facility.

Business Strategy

     With the acquisition of Panamco, Coca-Cola FEMSA is now the largest bottler
of Coca-Cola trademark beverages in Latin America.

     Coca-Cola FEMSA seeks to provide its shareholders with an attractive return
on their investment by increasing Coca-Cola FEMSA's profitability. The key
factors in achieving profitability are increasing the sales volume of Coca-Cola
FEMSA's products at a competitive price while improving operational efficiencies
by implementing the best practices throughout Coca-Cola FEMSA. To achieve these
goals Coca-Cola FEMSA continues its efforts in:

-    implementing marketing strategies and programs designed to increase
     consumer demand for its products;

-    replicating its successful practices throughout the whole value chain
     within the territories recently acquired;

-    expanding and enhancing presentation and brand portfolios in order to meet
     consumer demand and to promote market presence growth;

-    rationalizing bottling capacity to increase the utilization of existing
     assets;

-    streamlining production and distribution processes for improved operating
     efficiencies;

-    integrating operations through advanced information technology; and

-    enhancing the quality of management at all levels.


                                       39
<PAGE>

     Coca-Cola FEMSA seeks to increase per capita consumption of soft drinks in
the territories in which it operates. To that end, Coca-Cola FEMSA's marketing
teams continuously develop sales strategies tailored to the different
characteristics of Coca-Cola FEMSA's various territories and channels. Coca-Cola
FEMSA continues to develop its product portfolio to better meet market demand
and maintain its overall profitability. To stimulate and respond to consumer
demand, Coca-Cola FEMSA continues to introduce new products and new
presentations. See "--Coca-Cola FEMSA Products." Coca-Cola FEMSA also seeks to
increase placement of refrigeration equipment, including promotional displays,
through the strategic placement of such equipment in retail outlets in order to
showcase and promote its products. In addition, because Coca-Cola FEMSA views
its relationship with The Coca-Cola Company as integral to its business
strategy, it uses market information systems and strategies developed with The
Coca-Cola Company to improve its coordination with the worldwide marketing
efforts of The Coca-Cola Company. See "--Marketing."

     Coca-Cola FEMSA seeks to rationalize its distribution capacity to improve
the efficiency of its operations. Coca-Cola FEMSA has closed several
under-utilized centers and shifted distribution activities to other existing
facilities. Coca-Cola FEMSA has a capital expenditure program that includes
investments in production and distribution facilities, information systems,
bottles, cases and coolers. Coca-Cola FEMSA believes that this program will
allow Coca-Cola FEMSA to maintain the capacity and flexibility to create and
respond to consumer demand for non-alcoholic beverages. In 2002, Coca-Cola
FEMSA's capital expenditure program reached Ps. 1,341 million (approximately US$
128.2 million), a 28.7% increase over 2001. See "Item 5--Capital
Expenditures--Coca-Cola FEMSA." In each of Coca-Cola FEMSA's facilities,
Coca-Cola FEMSA seeks to increase productivity through infrastructure and
process reengineering for improved asset utilization.

     Finally, Coca-Cola FEMSA focuses on management quality as a key element of
its growth strategies and remains committed to fostering the development of
quality management at all levels. Both FEMSA and The Coca-Cola Company provide
Coca-Cola FEMSA with managerial experience and depth. To build upon these
skills, Coca-Cola FEMSA also offers management training programs and programs
designed to enhance Coca-Cola FEMSA's executives' abilities.

Coca-Cola FEMSA's Markets

     As of December 31, 2002, Coca-Cola FEMSA's subsidiaries operated in three
geographically defined territories:

-    Valley of Mexico Territory: Comprised of the Mexico City metropolitan area,
     including a substantial portion of the adjacent State of Mexico;

-    Southeast of Mexico Territory: Comprised of the States of Tabasco and
     Chiapas and portions of the States of Oaxaca and Veracruz; and

-    Buenos Aires Territory: Comprised of the Federal District of Buenos Aires,
     Argentina and a significant part of the Gran Buenos Aires metropolitan
     area.



                                       40
<PAGE>



     The Valley of Mexico Territory and the Southeast of Mexico Territory
together compose Coca-Cola FEMSA's Mexican Territories. The following maps show
the locations of Coca-Cola FEMSA's territories at December 31, 2002.



                               Mexican Territories

(Embedded Picture)





                                       41
<PAGE>

     The characteristics of these three territories are very diverse. The Valley
of Mexico Territory is densely populated and has a large number of competing
soft drink brands and higher per capita income than the Southeast of Mexico. The
Southeast of Mexico Territory is a large and mountainous area with lower
population density, lower per capita income and lower per capita consumption of
soft drink products compared with the Valley of Mexico. The Buenos Aires
Territory is densely populated and has lower per capita consumption of soft
drink products as compared with the Mexican Territories. Per capita income has
been negatively affected by macroeconomic conditions in Argentina.

     With the acquisition of Panamco, Coca-Cola FEMSA has extended its
geographic reach to include markets in Guatemala, Nicaragua, Costa Rica, Panama,
Colombia, Venezuela and Brazil and has further expanded its geographic reach in
Mexico.



                                       42
<PAGE>



Coca-Cola FEMSA Products

     As of December 31, 2002, Coca-Cola FEMSA's subsidiaries produced, marketed
and distributed the following Coca-Cola and Mundet trademark beverages:
<TABLE>
<CAPTION>

        <S>                                                                <C>
         Mexican Territories                                              Buenos Aires Territory
         -------------------                                              ----------------------
         Coca-Cola                                                        Coca-Cola
         Coca-Cola light                                                  Coca-Cola light
         Sprite                                                           Sprite
         Sprite light                                                     Sprite light
         Fanta                                                            Fanta
         Fresca                                                           Quatro
         Lift                                                             Kin
         Delaware Punch                                                   Tai
         Ciel                                                             Schweppes
         Beat                                                             Hi-C
         Senzao                                                           Crush
         Ciel Mineralizada                                                Black Fire
         Powerade
         Sidral Mundet
         Sidral Mundet light
         Prisco
         Mickey Aventuras
         Kin Light
         Nestea
</TABLE>

     Coca-Cola FEMSA's single most important brand is Coca-Cola, which accounted
for 71.1% of the total consolidated sales volume in 2002. Sprite, Fanta and
Lift, our next largest brands in consecutive order, accounted for 4.3%, 4.1% and
4.1%, respectively, of the sales volume in 2002.

     Coca-Cola FEMSA sells Coca-Cola trademark beverages in containers
authorized by The Coca-Cola Company, which consist of a variety of returnable
and non-returnable presentations in the forms of glass bottles, cans, and
plastic bottles made of PET. In addition, Coca-Cola FEMSA sells some Coca-Cola
trademark beverage syrups in containers designed for soda fountain use, which
Coca-Cola FEMSA refers to as fountain containers.

     Pursuant to an agreement between The Coca-Cola Company and Cadbury,
Schweppes PLC ("Cadbury"), The Coca-Cola Company acquired Cadbury's beverage
brands in Argentina in July 1999 allowing Coca-Cola FEMSA to distribute Cadbury
beverages in Coca-Cola FEMSA's Buenos Aires Territory. In 2001, Coca-Cola FEMSA
suspended the sale and distribution of Cadbury beverages in our Mexican
Territories.

Sales

     In evaluating the development of local sales territories, Coca-Cola FEMSA
and The Coca-Cola Company measure, among other factors, the per capita
consumption of Coca-Cola trademark beverages. Per capita consumption data for a
territory is determined by dividing management's estimate of applicable
aggregate consumption figures within the territory (in bottles, cans, powders
and fountain containers) by the estimated population within such territory and
is expressed on the basis of the number of eight-ounce servings consumed
annually per capita. In Coca-Cola FEMSA's Valley of Mexico and Southeast
Territories, estimated per capita annual consumption of Coca-Cola FEMSA's
Coca-Cola trademark beverages in 2002 was 462 eight-ounce servings and 287
eight-ounce servings, respectively, lower than the estimated national average of
487 eight-ounce servings. In Coca-Cola FEMSA's Buenos Aires Territory (including
the Pilar area), estimated per capita annual consumption of Coca-Cola FEMSA's
products in 2002 was approximately 258 eight-ounce servings, higher than the
national average in Argentina of 204 eight-ounce servings. Coca-Cola FEMSA's
data shows that per capita consumption grew in recent years in the Mexican
Territories, and Coca-Cola FEMSA believes that general population growth in
Mexican Territories will result in increased sales in those territories.


                                       43
<PAGE>

     Total unit case sales volume of Coca-Cola FEMSA's products increased 2.1%
in 2002 compared to 2001. See "Item 5. Operating and Financial Review and
Prospects--Results of Operations--Coca-Cola FEMSA"

     The following table illustrates the historical sales volume for the Valley
of Mexico Territory, the Southeast of Mexico Territory and the Buenos Aires
Territory:
<TABLE>
<CAPTION>

                                            Combined Sales Volume
                                           Year ended December 31,
                            ------------------------------------------------------
                              2002       2001       2000       1999       1998
                            ---------- ---------- ---------- ---------- ----------
                                (Millions of unit cases, except percentages)
<S>                           <C>        <C>        <C>        <C>        <C>
Company Total..........       620.3      607.8      582.6      544.2      519.6
% Growth...............         2.1%       4.3%       7.0%       4.7%      18.6%
</TABLE>


                        Product and Packaging Mix Summary

     Mexican Operations. In the Mexican Territories, in 2002 Coca-Cola FEMSA
sold a majority of its beverages at small retail stores to customers who take
the beverages home or elsewhere for consumption. Coca-Cola FEMSA also sells
products in the "on-premise" segment, which consists of (i) sales through
sidewalk stands, restaurants, bars and various types of dispensing machines and
(ii) sales through "point of sale" programs in concert halls, auditoriums and
theaters by means of a series of arrangements with Mexican promoters. The vast
majority of Coca-Cola FEMSA's sales to all of these outlets is on a cash basis.

     In 2002, approximately 97.2% of Coca-Cola FEMSA's unit case sales in the
Mexican Territories were of Coca-Cola trademark beverages. Sales volume of
Coca-Cola trademark beverages in the Mexican Territories increased by 3.0% in
2002 as compared to 2001. Coca-Cola FEMSA attributes this increase to (i)
increased packaging options provided by Coca-Cola FEMSA to consumers, (ii) the
strengthening of the Coca-Cola FEMSA brand portfolio through the introduction of
new flavored soft drinks, (iii) continued marketing efforts and (iv) successful
promotional activities.

     The following tables highlight historical sales volume mix and total sales
in the Mexican Territories for Coca-Cola FEMSA products:
<TABLE>
<CAPTION>

                           Valley of Mexico Territory

                                                                       Year ended December 31,
                                                ------------ ------------- ------------ ---------------- -----------
                                                   2002          2001         2000           1999           1998
                                                ------------ ------------- ------------ ---------------- -----------
Unit Case Volume Mix by Category                                         (in percentages)
<S>                                                <C>          <C>           <C>         <C>           <C>
Colas.........................................      71.9%       76.1%         76.9%        76.2%        75.5%
Flavored Soft Drinks..........................      22.2        20.2          20.6         21.5         21.7
Total Carbonated Soft Drinks..................      94.1        96.3          97.5         97.7         97.2
Water.........................................       4.2         3.6           2.5          2.3          2.8
Other Categories(1)...........................       1.7         0.1           -            -            -
                                                ------------ ------------- ------------ ------------ ---------------
  Total.......................................    100.0%       100.0%        100.0%       100.0%       100.0%

(1) Includes Powerade, Nestea, Kin Light and Mickey Aventuras.


Unit Case Volume                                                      (millions of unit cases)
Coca-Cola trademark beverages.................    366.5         355.4        341.1         314.9        302.4
Other Beverages...............................     11.8           0.9          2.4           2.0          2.1
                                                ------------- ------------ ------------- ------------ ---------------
  Total.......................................    378.3         356.3        343.5         316.9        304.5
                                                ============= ============ ============= ============ ===============
  % Growth....................................      6.2%          3.7%         8.4%          4.1%        17.3%
</TABLE>


                                       44
<PAGE>

<TABLE>
<CAPTION>

                          Southeast of Mexico Territory

                                                                      Year ended December 31,
                                                 ------------ ------------- ------------ ------------ -------------
                                                    2002          2001         2000         1999          1998
                                                 ------------ ------------- ------------ ------------ -------------
Unit Case Volume Mix by Category                                         (in percentages)
<S>                                                   <C>         <C>            <C>        <C>          <C>
Colas.......................................           71.5%     72.4%         73.9%        73.9%        72.5%
Flavored Soft Drinks........................           21.3      21.4          20.5         20.1         21.0
Total Carbonated Soft Drinks................           92.8      93.8          94.4         94.0         93.5
Water.......................................            6.3       6.1           5.6          6.0          6.5
Other Categories(1).........................            0.9       0.1           -            -            -
                                                 ------------ ------------- ------------ ------------ -------------
  Total.....................................         100.0%     100.0%        100.0%       100.0%       100.0%
                                                 ============ ============= ============ ============ =============

   (1)   Includes Powerade, Nestea, Kin Light and Mickey Aventuras.


Unit Case Volume                                                     (millions of unit cases)
  Coca-Cola trademark beverages.............         124.4      121.1         116.0         99.9         95.3
  Other Beverages...........................           2.0        0.5           1.6          1.3          1.4
                                                 ------------ ------------- ------------ ------------ -------------
   Total....................................         126.4      121.6         117.6        101.2         96.7
                                                 ============ ============= ============ ============ =============
   % Growth.................................           3.9%       3.4%         16.2%         4.7%        27.9%
</TABLE>


                    Combined Mexican Territories Sales Volume

<TABLE>
<CAPTION>
                                                                      Year ended December 31,
                                                 ------------ ------------ ------------ -------------- ------------
                                                    2002         2001         2000          1999          1998
                                                 ------------ ------------ ------------ -------------- ------------
Unit Case Volume                                                     (millions of unit cases)
<S>                                                   <C>      <C>            <C>          <C>           <C>
Total.......................................          504.7    477.9          461.1        418.1         401.2
% Growth....................................            5.6%     3.6%          10.3%         4.2%         19.8%
</TABLE>


     In 2002, Coca-Cola FEMSA introduced The Coca-Cola Company trademark
powdered products under the Kin Light brand, a diet-flavored powder. It offered
Kin Light on a complimentary basis to its customers in order to better examine
this category's potential and evaluate consumption patterns and price
strategies. Coca-Cola FEMSA's sales volume for 2002 in the Mexican Territories
includes 6.3 million unit cases of Kin Light.

     Since 1995, Coca-Cola FEMSA has introduced a number of new presentations in
the Mexican Territories. These include 2.5 and 2.0-liter returnable plastic
bottles, 1.0-liter non-returnable plastic bottles, 8oz non-returnable glass
bottles, 0.25-liter non-returnable plastic bottles and 0.6-liter plastic contour
bottles to replace the 0.5-liter non-returnable glass and plastic presentations.

     Coca-Cola FEMSA's most popular soft drink presentations are the 2.0-liter
returnable plastic bottles, the 0.6-liter non-returnable plastic contour bottle
and the 2.0-liter non-returnable plastic bottle, which accounted for 27.9%,
23.0% and 16.4%, respectively, of Coca-Cola FEMSA's total soft drink sales
volume in 2002 in the Mexican Territories.

     In recent years, the packaging trend in the soft drink industry in Mexico
has moved toward non-returnable presentations. Total non-returnable
presentations (excluding fountain and powders) represented 60.6% of total sales
in the Mexican Territories in 2002 as compared to 57.5% in 2001 and 55.7% in
2000. During 2002, Coca-Cola FEMSA refocused its packaging mix strategy to
reinforce its sales of returnable packages. Returnable plastic and glass
presentations offer consumers a more affordable product. The price of a
2.0-liter returnable package is approximately 17% less than the same size
non-returnable package. These returnable products are mainly sold to small store
retailers, which represent the largest distribution channel in the Mexican
market, who benefit from returnable bottles' lower price per ounce of product,
allowing them to compete with larger supermarkets. Returnable packages present
an opportunity to attract new customers and maintain customer loyalty because
they make Coca-Cola trademark beverages more attractive to price-sensitive
consumers. Coca-Cola FEMSA believes that its continued commitment to returnable
bottle availability will allow it to compete with low-price entrants to the
Mexican soft drink market.


                                       45
<PAGE>

         Multi-serving presentations (those presentations of more than
1.0-liter) are an important component of Coca-Cola FEMSA's product mix. In 2002,
multi-serving presentations represented 46.9% of Coca-Cola FEMSA's total soft
drink sales in the Mexican Territories, as compared to 48.4% in 2001. Although
the volume of multi-serving presentations has decreased slightly in the last
couple of years, Coca-Cola FEMSA expects that demand for multi-serving
presentations will increase after the launch of the 2.5-liter Coca-Cola
presentation. Coca-Cola FEMSA believes that the popularity of multi-serving
presentations is primarily attributable to the lower price per ounce of product
in larger presentations.

         The following table sets forth Coca-Cola FEMSA's unit case volume mix
by presentation in the Mexican Territories:
<TABLE>
<CAPTION>

                                                                     Year ended December 31,
                                                 ------------ ------------ ------------ ------------ -------------
                                                    2002         2001         2000         1999          1998
                                                 ------------ ------------ ------------ ------------ -------------
Unit Case Volume Mix by Presentation                                     (in percentages)
<S>                                                 <C>           <C>        <C>          <C>            <C>
Valley of Mexico
   Returnable.................................     33.7%         39.3%        42.2%        40.6%        48.0%
   Non-returnable (1).........................     64.0          58.4         55.5         57.3         50.0
   Fountain...................................      2.3           2.3          2.3          2.1          2.0
Southeast of Mexico
   Returnable.................................     43.7%         44.6%        50.3%        56.7%        60.8%
   Non-returnable (1)........................      55.6          54.8         49.1         42.8         38.8
   Fountain...................................      0.7           0.6          0.6          0.5          0.4
</TABLE>

(1) Includes powders for 2002.


     Argentine Operations

     In the Buenos Aires Territory, in 2002, Coca-Cola FEMSA sold the majority
of its products in the take-home segment, which consists of sales to customers
who take the beverages home or elsewhere for consumption. In 2002, the
percentage of sales through supermarkets decreased, to 23.4% in 2002 from 28.4%
in 2001.

     In 2002, 100% of Coca-Cola FEMSA's unit case sales in the Buenos Aires
Territory were of Coca-Cola trademark beverages. Sales volume of Coca-Cola
trademark beverages in the Buenos Aires Territory decreased 11.0% in 2002 as
compared to 2001.


                                       46
<PAGE>

     The following tables highlight historical sales volume mix and total sales
volumes in the Buenos Aires Territory:
<TABLE>
<CAPTION>

                             Buenos Aires Territory

                                                                    Year ended December 31,
                                                 -----------------------------------------------------------------
                                                    2002         2001         2000         1999          1998
                                                 ------------ ------------ ------------ ------------ -------------
Unit Case Volume Mix by Category                                         (in percentages)
<S>                                                   <C>        <C>          <C>         <C>           <C>
Colas.......................................         68.3%        69.7%        75.8%        75.9%        76.9%
Flavored Soft Drinks........................         30.4         29.0         23.5         23.4         22.1
  Total Carbonated Soft Drinks..............         98.7         98.7         99.3         99.3         99.0
Water.......................................          0.8          0.5          0.6          0.7          1.0
Other Categories(1).........................          0.5          0.8          0.1          -            -
                                                 ------------ ------------ ------------ ------------ -------------
  Total.....................................        100.0%       100.0%       100.0%       100.0%       100.0%
                                                 ============ ============ ============ ============ =============

Unit Case Volume                                                     (millions of unit cases)
Total.......................................        115.6        129.9        121.5        126.1        118.4
% Growth....................................        (11.0)%        6.9%        (3.7)%        6.5%        14.8%
</TABLE>


(1)  Including Hi-C

     In 2002, 2.25-liter and 1.5-liter non-returnable plastic bottles accounted
for 47.2% and 18.5% of total soft drink sales volume, respectively. In order to
minimize the impact of the deteriorated economic situation in Argentina,
Coca-Cola FEMSA launched new returnable presentations such as a 1.25-liter
returnable glass presentation, which accounted for almost 10% of Coca-Cola
FEMSA's sales volume in 2002, to increase the affordability of Coca-Cola FEMSA's
products in this territory.

     The following table sets forth Coca-Cola FEMSA's unit case volume mix by
presentation in the Buenos Aires Territory:
<TABLE>
<CAPTION>

                                                                 Year ended December 31,
                                                   ---------- --------- ---------- ---------- ----------
                                                     2002       2001      2000       1999       1998
                                                   ---------- --------- ---------- ---------- ----------
Unit Case Volume Mix by Presentation                                 (in percentages)
Buenos Aires
  <S>                                                    <C>     <C>        <C>        <C>       <C>
   Returnable.................................         12.4%       5.8%      9.8%      10.3%     10.8%
   Non-returnable.............................         82.9       89.1      83.7       83.9      83.3
   Fountain...................................          4.7        5.1       6.5        5.8       5.9
</TABLE>

Marketing

     Coca-Cola FEMSA relies extensively on advertising, sales promotions and
non-price related retailer incentive programs designed by local affiliates of
The Coca-Cola Company to target the particular preferences of its soft drink
consumers. Coca-Cola FEMSA, in conjunction with The Coca-Cola Company, has
developed a sophisticated marketing strategy to promote the sale and consumption
of Coca-Cola FEMSA's products. Through the use of advanced information
technology, Coca-Cola FEMSA has gained customer and consumer information that
allows Coca-Cola FEMSA to tailor its marketing strategies to the types of
customers located in each of its territories and to meet the specific needs of
the various market segments Coca-Cola FEMSA serves.

     Retailer Incentive Programs

     Incentive programs include providing retailers with commercial
refrigerators for the display and cooling of soft drink products at little or no
charge, free point-of-sale display materials and complimentary soft drink
products. Coca-Cola FEMSA seeks, in particular, to increase the number of
distribution coolers among retailers to increase the visibility and consumption
of its products and to ensure that they are sold at the proper temperature.
Sales promotions include sponsorship of community activities, sporting, cultural
and social events and consumer sales promotions such as contests, sweepstakes
and product giveaways.

                                       47
<PAGE>

     Advertising

     In addition, Coca-Cola FEMSA advertises in all major communications media.
Coca-Cola FEMSA also focuses attention on increasing brand recognition by
consumers and improving its customer relations. National advertising campaigns
are designed and proposed by The Coca-Cola Company's local affiliates, with
Coca-Cola FEMSA's input at the local or regional level.

     Channel Marketing

     In order to provide a more dynamic and specialized marketing of Coca-Cola
FEMSA's products, Coca-Cola FEMSA's marketing strategy is to segment its market
and develop targeted marketing efforts for each segment or distribution channel.
This channel marketing strategy entails a comprehensive and detailed analysis of
the purchasing patterns and preferences of various groups of soft drink
consumers in each of the various types of locations or distribution channels
where they might potentially purchase Coca-Cola trademark beverages. In response
to this analysis, Coca-Cola FEMSA tailors its product, price, packaging and
distribution strategies to meet the particular needs and exploit the potential
of each channel.

     Coca-Cola FEMSA believes that the implementation of its channel marketing
strategy also enables Coca-Cola FEMSA to respond to competitive initiatives with
channel-specific responses as opposed to market-wide responses. This focused
response capability isolates the effects of competitive pressure in a specific
channel, thereby avoiding costlier market-wide responses. Coca-Cola FEMSA's
channel marketing activities are facilitated by its management information
systems. Coca-Cola FEMSA has invested significantly in creating such systems,
including hand-held computers for most of its sales routes in the Valley of
Mexico, Southeast of Mexico and Buenos Aires Territories to support the
gathering of product, consumer and delivery information required to implement
Coca-Cola FEMSA's channel marketing strategies effectively.

     Cooperative Marketing Budget

     Coca-Cola FEMSA's total marketing expenditures made in the Mexican
Territories increased 8.3% to Ps. 667.6 million in 2002 from Ps. 616.0 million
in 2001. In the Buenos Aires Territory, Coca-Cola FEMSA's marketing expenditures
decreased 38.5% to approximately Aps.15.2 million (Ps. 47.2 million) from
Aps.24.7 million (Ps. 70.2 million) in 2001. Under the 2002 and 2001 cooperative
marketing budgets, The Coca-Cola Company contributed to Coca-Cola FEMSA's
marketing expenditures by approximately matching the amount Coca-Cola FEMSA
spent on these marketing efforts in each respective year. See "--Bottler
Agreements."

Product Distribution

     The following table provides an overview of Coca-Cola FEMSA's product
distribution infrastructure and retail network as of December 31, 2002:

                          Product Distribution Summary

                                Mexico Argentina
Distribution Centers...............            53             3
Sales Routes.......................         1,486           201
Number of Retailers (1)............       283,650        76,400

(1)   Estimated


     Mexican Territories

     Coca-Cola FEMSA subcontracts to its affiliate FEMSA Logistica the
transportation of finished products to Coca-Cola FEMSA's distribution centers
from its Mexican production facilities. From the distribution centers, Coca-Cola
FEMSA then distributes its finished products to retailers through Coca-Cola
FEMSA's own fleet of trucks. Coca-Cola FEMSA's distribution centers range from
large warehousing facilities and re-loading centers to small deposit centers. In
addition to Coca-Cola FEMSA's fleet of trucks, Coca-Cola FEMSA distributes its
products in certain locations through a fleet of electric carts and hand-trucks
in order to comply with local environmental and traffic regulations.


                                       48
<PAGE>

     Coca-Cola FEMSA believes that service visits to retailers and frequency of
deliveries are essential elements in an effective distribution system for soft
drink products. Accordingly, Coca-Cola FEMSA has continued to expand its
pre-sale system in the Valley of Mexico Territory and throughout the main cities
in the Southeast of Mexico Territory. The pre-sale program separates the sales
and delivery functions, allowing sales personnel to sell products prior to
delivery and enabling trucks to be loaded with the mix of products that
retailers need and desire, thereby increasing distribution efficiency. Under the
pre-sale program, sales personnel also provide merchandising services during
retailer visits, which Coca-Cola FEMSA believes enhances the presentation of its
products at the point of sale.

     Buenos Aires Territory

     At December 31, 2002, Coca-Cola FEMSA operated three distribution centers
in the Buenos Aires Territory. Coca-Cola FEMSA also utilizes the pre-sale system
in the Buenos Aires Territory and distributes its products by means of its own
fleet of trucks and non-affiliate transportation subcontractors and through
independent wholesalers. In addition, in designated zones independent
wholesalers purchase Coca-Cola FEMSA's products at a discount from the wholesale
price and resell the products to retailers. Independent wholesalers distributed
approximately 6% of Coca-Cola FEMSA's products in Argentina in 2002.

     At December 31, 2002, Coca-Cola FEMSA made approximately 92% and 94% of its
sales through the pre-sale system in Coca-Cola FEMSA's Mexican and Buenos Aires
Territories, respectively.

Competition

     Although Coca-Cola FEMSA believes that its products enjoy wider recognition
and greater consumer loyalty than those of its principal competitors, the soft
drink segments of the Mexican and Argentine beverage markets are highly
competitive. Coca-Cola FEMSA's principal competitors are local bottlers of
PepsiCo, beverage brands and other bottlers and distributors of national and
regional soft drink brands. PBG recently bought Coca-Cola FEMSA's main
competitor in Mexico. Coca-Cola FEMSA faces increased competition in many of its
territories from producers of low cost beverages, commonly referred to as "B"
brands.

     Recently, price discounting and packaging have joined consumer sales
promotions, customer service, and non-price retailer incentives as the primary
means of competition among soft drink bottlers. Coca-Cola FEMSA believes that
the introduction of new presentations has been a major competitive technique in
the soft drink industry during recent years. See "--Sales."

     Coca-Cola FEMSA's ability to maintain existing prices or implement price
increases depends to a great extent on competitive conditions and the effect of
such prices on sales volume. Price discounting has been a means of maintaining
or increasing sales volume share in our territories. As a result of the Panamco
acquisition, Coca-Cola FEMSA now faces competitive pressures that are different
than those it has historically faced. In Brazil, Coca-Cola FEMSA competes
against both AmBev, a Brazilian company with a portfolio of brands that includes
Pepsi and local brands with flavors such as guarana, and "B" brands or
"Tubainas," which are small, local, producers of low cost flavored soft drinks
that represent an important portion of the soft drink market. In addition,
distribution and marketing practices in some of these territories differ from
Coca-Cola FEMSA's historical practices. Several of Panamco's territories have a
lower level of pre-sale as a percentage of total distribution than Coca-Cola
FEMSA is accustomed to having in its territories, and the product and
presentation mix varies from territory to territory with customer preferences.
Coca-Cola FEMSA may have to adapt its marketing and distribution strategies to
effectively compete. Coca-Cola FEMSA's inability to compete effectively may have
an adverse effect on Coca-Cola FEMSA's future operating results.

     Coca-Cola FEMSA's principal competitors in the Mexican Territories are
bottlers of PepsiCo products, whose territories overlap but are not co-extensive
with its own. These competitors include Pepsi Gemex in the Valley of Mexico
Territory, recently acquired by PBG, the largest bottler of PepsiCo globally,
and several other PepsiCo bottlers in the Southeast of Mexico Territory. In
addition, Coca-Cola FEMSA competes with Cadbury and with national and regional
brands in both of Coca-Cola FEMSA's Mexican Territories.


                                       49
<PAGE>

     In the Buenos Aires Territory, Coca-Cola FEMSA's main competitor is BAESA,
a PepsiCo bottler, which is owned by Argentina's principal brewery, Quilmes
Industrial S.A. In addition to BAESA, competition has intensified over the last
several years with the entrance of a number of competitors offering generic,
low-priced soft drinks as well as many other generic products and private label
proprietary supermarket brands that are produced by contract bottlers.

Seasonality

     Sales of Coca-Cola FEMSA's products are seasonal, as Coca-Cola FEMSA's
sales levels generally increase during the summer and the Christmas holiday
season. In the Mexican Territories, Coca-Cola FEMSA typically achieves its
highest sales during the summer months (April through September) as well as
during the Christmas holidays in December. In the Buenos Aires Territory,
Coca-Cola FEMSA's highest sales levels occur during the summer months (October
through March) and the Christmas holidays.

Raw Materials

     Pursuant to the bottler agreements with The Coca-Cola Company, Coca-Cola
FEMSA is required to purchase concentrate for all Coca-Cola trademark beverages
from companies designated by The Coca-Cola Company. The price of concentrate for
all Coca-Cola trademark beverages is a percentage of the average price Coca-Cola
FEMSA charges to its retailers that is set pursuant to periodic negotiations
with The Coca-Cola Company. Historically, concentrate has been purchased in the
local currency of the territory. In addition to concentrates, Coca-Cola FEMSA
purchases sweeteners, carbon dioxide, glass and plastic bottles, cans, closures
and fountain containers, as well as other packaging materials. The bottler
agreements provide that, with respect to Coca-Cola trademark beverages, all
containers, closures, cases, cartons and other packages and labels may be
purchased only from manufacturers approved by The Coca-Cola Company, which
includes FEMSA Empaques.

     None of the materials or supplies that Coca-Cola FEMSA uses is presently in
short supply, although the supply of specific materials could be affected by
strikes, weather conditions, governmental controls or national emergency
situations.

     Mexican Territories

     Coca-Cola FEMSA purchases some glass bottles, closures, plastic cases,
cardboard products, commercial refrigerators and certain lubricants and
detergents for bottling lines from subsidiaries of FEMSA Empaques at competitive
prices. Coca-Cola FEMSA purchases its returnable plastic bottles from
Continental PET Technologies de Mexico, S.A. de C.V, a subsidiary of Continental
Can, Inc., which has been the exclusive supplier of returnable plastic bottles
to The Coca-Cola Company and its bottlers in Mexico. Coca-Cola FEMSA purchases
the large majority of its non-returnable plastic bottles, as well as pre-formed
plastic ingots for the production of non-returnable plastic bottles, from ALPLA
Fabrica de Plasticos, S.A. de C.V., an authorized provider of PET for The
Coca-Cola Company.

     Coca-Cola FEMSA purchases some can presentations from Industria Envasadora
de Queretaro, S.A. de C.V. ("IEQSA"), a bottler cooperative in which it holds an
approximate 19.6% interest. Both Coca-Cola FEMSA and IEQSA purchase a portion of
their empty can supply requirements from Famosa, a subsidiary of FEMSA Empaques.

     Coca-Cola FEMSA obtains water from groundwater sources under concessions
obtained from the Mexican government and held by Coca-Cola FEMSA's various
subsidiaries. Coca-Cola FEMSA also obtains water from the municipalities where
bottling plants are located. See "--Regulatory Matters--Water Supply Law."
Coca-Cola FEMSA believes that such sources provide an adequate supply of water
to meet Coca-Cola FEMSA's current and projected requirements in Mexico. In
addition, Coca-Cola FEMSA obtains carbon dioxide gas from domestic sources.


                                       50
<PAGE>

     Sweeteners are combined with water to produce basic syrup, which is added
to the concentrate as the sweetener for the soft drink. Coca-Cola FEMSA may
utilize raw or refined sugar or HFCS as sweeteners in its products. The
Coca-Cola Company authorizes the use of a sugar/HFCS mix. Coca-Cola FEMSA has
discontinued, however, using HFCS due to the Mexican excise tax imposed in
January 2002 to soft drinks sweetened with HFCS. Aspartame, an artificial
sweetener for diet sodas, is included in the concentrates of Coca-Cola light and
Sprite light, which are purchased from The Coca-Cola Company, and Mundet light,
which is purchased from Promotora de Marcas Nacionales, S.A. de C.V.

     Coca-Cola FEMSA regularly purchases sugar from Promotora Mexicana de
Embotelladoras, S.A. de C.V., ("PROMESA"), a cooperative of Coca-Cola bottlers.
These purchases are regularly made under one-year agreements between PROMESA and
each bottling subsidiary for the sale of sugar at a price that is determined
monthly based on the cost of sugar to PROMESA. The agreements incorporated by
reference standard industry provisions relating to the quality and delivery of
the sugar.

     In December 2001, the Mexican government expropriated the sugar industry in
Mexico. To administer this industry, the Mexican government entered into a trust
agreement with Nacional Financiera, S.N.C. ("Nafin"), a Mexican government-owned
development bank, pursuant to which Nafin acts as trustee. During 2002,
Coca-Cola FEMSA also purchased sugar directly from Nafin.

     Sugar may also be obtained through purchases in the international market.
However, imported sugar is presently subject to import duties, the amount of
which is set by the Mexican government. Although there are currently no
statutory price controls for sugar in Mexico, increases in the price of sugar,
which may occur in the event that import duties increase or import restrictions
on sugar are imposed, will increase Coca-Cola FEMSA's cost of sales. To the
extent Coca-Cola FEMSA is unable to pass along their full amount to the
consumer, such increases would affect Coca-Cola FEMSA's cost of sales.

     Historically, Coca-Cola FEMSA has bought HFCS from domestic sources at
prices competitive to the price of sugar. In 2001, the Mexican government
imposed a 20% excise tax, effective January 1, 2002, on carbonated soft drinks
sweetened with HFCS. As a result Coca-Cola FEMSA converted its Mexican bottling
facilities to sugar-cane-based production in early 2002. On January 1, 2003, the
Mexican government broadened the reach of this tax by imposing, a 20% excise tax
on carbonated soft drinks produced with any non-sugar sweetener, including HFCS.

     The following table set forth the average real price increase or decrease
of sugar as purchased from Coca-Cola FEMSA's suppliers over the course of each
year.

    Average Real Price Increase (Decrease) of Sugar in the Mexican Territories

                                2002      2001      2000      1999        1998
                                ----      ----      ----      ----        ----
Change over previous year (1)   4.6%     (6.3)%   (10.2)%    (12.7)%      2.2%

(1)  After the imposition of a Mexican excise tax on soft drinks sweetened with
     HFCS on January 1, 2002, Coca-Cola FEMSA purchased greater amounts of
     refined sugar than in the past, which increased its sugar costs.


     Of the raw materials required in the bottling of its products, the prices
of aluminum cans, plastic bottles, bottle closures (both steel and plastic),
other packaging materials and HFCS are quoted in U.S. Dollars and therefore are
affected by the fluctuation of the Mexican Peso against the U.S. Dollar.
Coca-Cola FEMSA has historically passed on increases in these costs to its
customers in the form of price increases. During 2002, the average real unit
price in Mexican Pesos of these Dollar-denominated costs increased as a result
of the appreciation of the Mexican Peso against the U.S. Dollar. Except for
those discussed in this paragraph, Coca-Cola FEMSA purchases all of its raw
materials for its Mexican Territories in Pesos, including soft drink
concentrate.


                                       51
<PAGE>

     Buenos Aires Territory

     Coca-Cola FEMSA purchases glass bottles, plastic trays and other raw
materials from several domestic sources. Coca-Cola FEMSA purchases pre-formed
plastic ingots, as well as returnable plastic bottles, at competitive prices
from Complejo Industrial PET S.A. ("CIPET"), a local subsidiary of Embotelladora
Andina S.A., a Coca-Cola bottler with operations in Argentina, Chile and Brazil,
and other international suppliers. Coca-Cola FEMSA purchases crown caps from
local and international suppliers.

     Coca-Cola FEMSA purchases its can presentations for distribution to its
customers in Buenos Aires from Complejo Industrial CAN S.A. ("CICAN"). In
December 1996, The Coca-Cola Company sold CICAN to a group of bottlers that
included Coca-Cola FEMSA de Buenos Aires. Under the terms of the shareholders'
agreement among these bottlers, CICAN is managed as a joint venture. As of
December 31, 2002, Coca-Cola FEMSA de Buenos Aires owned a 48.1% equity in
CICAN.

     Coca-Cola FEMSA obtains water for its plant in Buenos Aires from Aguas
Argentinas S.A., a private company responsible for managing the public water
supply. Coca-Cola FEMSA believes that this source provides an adequate supply of
water to meet the needs for its Argentine operations. Praxair Argentina S.A.
provides Coca-Cola FEMSA's requirements of carbon dioxide gas.

     In Argentina, Coca-Cola FEMSA principally uses HFCS sweetener in its
products, although it may use sugar in the future. Aspartame, an artificial
sweetener for diet sodas, is included in the concentrate of Coca-Cola light and
Sprite light, which Coca-Cola FEMSA purchases from The Coca-Cola Company.

     The following table sets forth the average real price increase or decrease
of HFCS as purchased form Coca-Cola FEMSA's suppliers over the course of each
year.

   Average Real Price Increase (Decrease) of HFCS in the Buenos Aires Territory

                                       2002       2001       2000      1999
                                       ----       ----       ----      ----
Change over previous year              53.0%      8.9%      (7.4)%    (14.3)%


     Purchases from FEMSA Empaques

     In 2002, Coca-Cola FEMSA purchased crown caps, plastic bottle caps, cans,
commercial refrigerators, lubricants, detergents, plastic cases and
substantially all of its returnable glass bottle requirements for its Mexican
operations from FEMSA Empaques under several supply agreements. The aggregate
amount of these purchases was Ps. 403.3 million in 2002. In addition, some
canned beverages in the Mexican Territories are purchased from IEQSA, which in
turn purchases a portion of empty cans from Famosa, a subsidiary of FEMSA
Empaques.

                                 FEMSA Comercio

     Overview and Background

     FEMSA Comercio operates the largest chain of convenience stores in Mexico
under the trade name Oxxo. As of December 31, 2002, FEMSA Comercio operated
2,216 Oxxo stores located in 24 states of the country, with a particularly
strong presence in the northern part of Mexico. FEMSA Comercio also operated 60
Bara stores concentrated in the central region of Mexico.

     FEMSA Comercio, the largest single customer of FEMSA Cerveza and of the
Coca-Cola system in Mexico, was established by FEMSA in 1978 when two Oxxo
stores were opened in Monterrey, one store in Mexico City and another in
Guadalajara. The motivating factor behind FEMSA's entrance into the retail
industry was to enhance beer sales through company-owned retail outlets as well
as to gather information on customer preferences. In 2002, sales of beer through
Oxxo represented 4.5% of FEMSA Cerveza's domestic sales volume as well as
approximately 13.3% of FEMSA Comercio's revenues. A typical Oxxo store carries
2,515 different SKUs in 37 main product categories, a figure which represents a
significant increase in the number of products historically distributed in Oxxo
stores.


                                       52
<PAGE>

     In recent years, FEMSA Comercio has gained relevance as an effective
distribution channel for our beverage products, as well as a rapidly growing
point of contact with our end consumers. Based on the knowledge that location
plays a major role in the long-term success of a retail operation such as a
convenience store, as well as a role in our continually improving ability to
accelerate and streamline the new-store development process, we have focused on
a strategy of rapid, profitable growth. We continue to add selling space across
Mexico, even as macroeconomic variables have weakened in some parts of the
country, particularly along the Mexican northern border with the United States,
in furtherance of our long-term view of our businesses. FEMSA Comercio opened
257, 297 and 437 net new Oxxo stores in 2000, 2001 and 2002, respectively, each
year representing a new record. The accelerated expansion yielded total revenue
growth of 18.7% to reach Ps. 12.740 billion in 2002, while same store sales
increased 2.5% which was considerably above the retail industry average. FEMSA
Comercio received approximately 508 million customers in 2002 compared to 419
million in 2001.

     Business Strategy

     A fundamental element of FEMSA Comercio's business strategy is to utilize
its leading position in the convenience store market to grow in a cost-effective
and profitable manner. As a market leader in convenience store retailing, based
on internal company surveys, management believes that FEMSA Comercio has an
in-depth understanding of its markets and significant expertise in operating a
multiple store chain. FEMSA Comercio intends to continue increasing its store
base while capitalizing on the market knowledge gained at existing stores.

     FEMSA Comercio has developed proprietary models to assist in identifying
appropriate store locations, store formats and product categories. The model
utilizes location-specific demographic data and FEMSA Comercio's experience in
similar locations to fine tune the store format and product offerings to the
target market. Market segmentation is becoming an important strategic tool, and
it should increasingly allow FEMSA Comercio to improve the operating efficiency
of each location and the overall profitability of the chain.

     FEMSA Comercio has made and will continue to make significant investments
in technology to improve its ability to capture customer information from its
existing stores and to improve its overall operating performance. Approximately
90% of the products carried through Oxxo stores are bar-coded, and 100% of the
Oxxo stores are equipped with point of sale systems that are integrated into a
company-wide computer network.

     FEMSA Comercio has adopted innovative promotional strategies in order to
increase store traffic and sales. In particular, FEMSA Comercio prices
high-frequency items (such as beverages, snacks and cigarettes) at competitive
prices. FEMSA Comercio's ability to implement this strategy profitably is partly
attributable to the size of the Oxxo chain, as FEMSA Comercio is able to work
together with its suppliers to implement revenue-management strategies through
differentiated promotions. Oxxo's national and local marketing and promotional
strategies are an effective revenue driver and a means of reaching new segments
of the population while strengthening the Oxxo brand. For example, the
organization refined its expertise in executing cross promotions (discounts on
multi-packs or sales of complementary products at a special price) and targeted
promotions to attract new customer segments, such as housewives, by expanding
the offerings in the grocery product category in certain stores.

     To implement such revenue management strategies, FEMSA Comercio created a
division in charge of product category management, such as beverages, fast food
and perishables, to enhance and better utilize its consumer information base and
market intelligence capabilities. FEMSA Comercio is implementing an ERP system,
which will allow FEMSA Comercio to redesign its key operating processes and
enhance the usefulness of its market information going forward.


                                       53
<PAGE>

     Store Locations

     With 2,276 stores in Mexico as of December 31, 2002 (2,216 Oxxo stores and
60 Bara stores), FEMSA Comercio operates the largest convenience store chain in
Latin America (measured by number of stores). Oxxo stores are concentrated in
the northern part of Mexico, but also have a growing presence in central Mexico
and the Gulf coast.

     FEMSA Comercio has aggressively expanded its number of stores over the past
several years. The average investment required to open a new store varies,
depending on such factors as location and format and whether the store is opened
in an existing retail location or requires construction of a new store. FEMSA
Comercio is generally able to use supplier credit to fund the initial inventory
of new stores.
<TABLE>
<CAPTION>


                                      Growth in Oxxo Stores

                                                         Year Ended December 31,
                                          2002        2001        2000        1999         1998
                                          ----        ----        ----        ----         ----
<S>                                        <C>        <C>          <C>        <C>        <C>
Total Oxxo Stores...................     2,216       1,779       1,482       1,225        1,027
Store Growth (%)....................      24.6%       20.0%       21.0%       19.3%        12.1%
</TABLE>


     FEMSA Comercio expects to continue the growth trend established over the
past several years by emphasizing growth in areas of high economic potential in
existing markets and by expanding in underserved and unexploited markets.
Management believes that the southeast part of Mexico is particularly
underserved by the convenience store industry.

     The identification of locations and pre-opening planning in order to
optimize the results of new stores are important elements in FEMSA Comercio's
growth plan. FEMSA Comercio continuously reviews store performance against
certain operating and financial benchmarks to optimize the overall performance
of the chain. Stores unable to maintain benchmark standards are generally
closed. Between December 1998 and December 31, 2002, a period during which the
total number of stores increased by 1,189 units, 1,278 new stores were opened
and 89 stores were closed.

     Competition

     Oxxo competes in the convenience store segment of the retail market with
7-Eleven, Super Extra and Circle-K as well as other local brands of convenience
stores. The format of these stores is similar to the format of the Oxxo stores.
Based on an internal market survey conducted by FEMSA Comercio, management
believes that, as of December 31, 2002, there were approximately 3,940 stores in
Mexico that could be considered part of a convenience store chain or network.
Oxxo is the leading chain in Mexico operating more than half of these stores.
Furthermore, FEMSA Comercio operates in 24 states and has much broader
geographical coverage than any of its competitors.

     Market and Store Characteristics

     Market Characteristics

     FEMSA Comercio is placing increased emphasis on market segmentation and
differentiation of store formats to more appropriately serve the needs of
customers on a location-by-location basis. The principal segments include
residential neighborhoods, commercial and office locations, stores near schools
and universities, along with other types of specialized locations.

     Approximately 71% of Oxxo's clientele is between the ages of 15 and 35.
FEMSA Comercio also segments the market according to demographic criteria,
including income level.


                                       54
<PAGE>

     Store Characteristics

     The average size of an Oxxo store is approximately 115 square meters of
selling space, excluding space dedicated to refrigeration, storage or parking.
The average constructed area of a store is approximately 182 square meters and,
when parking areas are included, the average store size increases to
approximately 412 square meters.
<TABLE>
<CAPTION>


                      FEMSA Comercio--Operating Indicators
                                                                        Year Ended December 31,
                    (percentage change against previous year)
                                                         2002          2001        2000           1999          1998
                                                         ----          ----        ----           ----          ----
<S>                                                     <C>            <C>           <C>          <C>          <C>
Total Store Sales..............................          18.7%         19.8%        28.4%         19.2%         12.1%
Comparative Store Sales(1) ....................          (2.5)%         0.1%         6.9%          6.5%         11.4%
Same-Store Sales(2) ...........................           2.5%          4.5%        10.9%          8.1%         12.5%

Beer-related data:                                                       (percentage of total)

Beer sales as % of Oxxo stores sales...........         13.3%         13.6%         14.0%         14.7%         14.5%
Oxxo store sales as a % of
   FEMSA Cerveza's volume......................          4.5%          3.9%          3.7%          3.0%          2.7%
</TABLE>

(1) Comparative-store sales growth is calculated by comparing average monthly
    sales per store of those sites with more than 18 months of operation.

(2) Same-store sales growth is calculated by comparing the sales of stores
    existing on December 31 of the base year with more than twelve months of
    operation and still in operation on December 31 of the following year. Going
    forward, FEMSA Comercio will reflect this calculation as its main same store
    benchmark.

     Beer, telephone cards, soft drinks and cigarettes represent the main
product categories for Oxxo stores. FEMSA Comercio has an exclusivity agreement
with FEMSA Cerveza. As a result of this agreement Oxxo stores only carry beer
brands produced by FEMSA Cerveza. See "Item 10. Additional Information--Material
Contracts--FEMSA Cerveza." Prior to 2001, Oxxo stores had informal agreements
with Coca-Cola bottlers, including Coca-Cola FEMSA in the Valley of Mexico, to
sell only their products. In 2001, a limited number of Oxxo stores commenced the
sale of Pepsi Cola products in certain cities in northern Mexico, as part of a
defensive competitive strategy.

     Approximately 90% of the Oxxo stores are operated by independent managers
responsible for all aspects of store operations. The managers are commission
agents and are not employees of FEMSA Comercio. Each store manager is the legal
employer of the store's staff, which typically numbers six people. FEMSA
Comercio continually invests in on-site operating personnel, with the objective
of promoting loyalty, customer-service and low personnel turnover in the stores.

     Advertising and Promotion

     FEMSA Comercio's marketing efforts include both specific product promotions
and image advertising campaigns. These strategies seek to increase store traffic
and sales, and to reinforce the Oxxo name and market position.

     FEMSA Comercio manages its advertising on three levels depending on the
nature and scope of the specific campaign: local or store-specific, regional and
national. Store-specific and regional campaigns are closely monitored to ensure
consistency with the overall corporate image of Oxxo stores and to avoid
conflicts with national campaigns. FEMSA Comercio primarily uses point of
purchase materials, flyers, handbills and print and radio media for promotional
campaigns, although television is used occasionally for the introduction of new
products and services. The Oxxo chain's image and brand name are presented
consistently across all stores, irrespective of location.


                                       55
<PAGE>

     Inventory and Purchasing

     FEMSA Comercio has placed considerable emphasis on improving operating
performance. As part of these efforts, FEMSA Comercio continues to invest in
extensive information management systems to improve inventory management.
Electronic data collection has enabled FEMSA Comercio to reduce average
inventory levels. Inventory replenishment decisions are carried out on a
store-by-store basis.

     Management believes that the Oxxo chain's scale of operations provides
FEMSA Comercio with a competitive advantage in its ability to realize strategic
alliances with suppliers. General category offerings are determined on a
national level, although purchasing decisions are implemented on a local,
regional or national level, depending on the nature of the product category.
Given the fragmented nature of the retail industry in Mexico in general, Mexican
producers of beer, soft drinks, bread, dairy products, snacks, cigarettes and
other high-frequency products have established proprietary distribution systems
with extensive direct distribution routes. As a result, almost 75% of the
products carried by the Oxxo chain are delivered directly to the stores by
suppliers. Other products with longer shelf lives are distributed to stores by
FEMSA Comercio's distribution system, which includes five regional warehouses
located in Monterrey, Mexico City, Guadalajara, Mexicali and Leon. The
distribution centers operate a fleet of 165 trucks that make deliveries to each
store approximately every week.

     Seasonality

     Oxxo stores experience periods of high demand in December, as a result of
the holidays, and in July and August as a result of increased consumption of
beer and soft drinks during the hot summer months. The months of November and
February are generally the weakest sales months for Oxxo stores. In general,
colder weather during these months reduces store traffic and consumption of cold
beverages.

     SIX and Matador Stores

     In addition to the Oxxo stores, FEMSA Comercio operates a chain of
approximately 644 retail outlets under the trade names SIX and Matador owned by
FEMSA Cerveza pursuant to a management arrangement. This arrangement establishes
that a fixed charge per outlet will be negotiated on an annual basis, the amount
of which is designed to compensate FEMSA Comercio for management services and
out-of-pocket expenses. The SIX and Matador stores are primarily beverage and
snack outlets, and therefore, their product categories are considerably
narrower, and average store size is considerably smaller than those of the Oxxo
stores. FEMSA Comercio has managed the SIX and Matador stores since 1994.

     Bara Discount Chain

     In 1999, FEMSA Comercio began testing a business model to operate a
multi-site discount grocery store chain targeted to serve basic consumption
needs of the lower socioeconomic segments of the Mexican population. FEMSA
Comercio's management selected the city of Leon, Guanajuato to launch a test
pilot operation of the Bara discount grocery store chain.

     The average selling space of a Bara store is 258 square meters,
approximately 2 times larger than selling space of an Oxxo store. The investment
per site, however, is very similar to an Oxxo store because it follows a simpler
format. The Bara store is more heavily weighted to food and grocery items
compared to an Oxxo store, and relies more heavily on internal distribution
systems. Despite the important distinctions with the convenience store format,
FEMSA Comercio's management believes that FEMSA Comercio has the knowledge and
skills required to profitably operate and manage a multi-site chain and has
developed the abilities to successfully participate in the discount grocery
market in Mexico. During 2002, 18 new Bara stores were opened, and as of
December 31, 2002, there were 60 Bara stores in operation.


                                       56
<PAGE>

                                 FEMSA Empaques

     Overview and Background

     FEMSA Empaques is a Mexican holding company whose operating subsidiaries
produce and distribute a wide variety of packaging materials, primarily oriented
to provide packaging solutions to the beverage industry. FEMSA Empaques' main
subsidiaries produce the following products:

-    aluminum beverage cans and ends;

-    bottle caps and other closures;

-    glass beverage bottles;

-    labels and other flexible packaging materials; and

-    commercial refrigeration equipment.

<TABLE>
<CAPTION>

             Overview of FEMSA Empaques' Principal Product Lines and Markets

                                                               Labels and
                       Beverage     Crown Caps     Glass       Flexible      Commercial
Markets                Cans         & Closures     Bottles     Packaging     Refrigerators
<S>                    <C>              <C>         <C>          <C>            <C>
Beer..............       X             X             X             X              X
Soft Drinks.......       X             X             X             X              X
Other.............                                                 X              X
</TABLE>

     FEMSA Empaques' operating subsidiaries have generally evolved from the
internal supply departments of our beverage subsidiaries into packaging market
leaders in their own right. Famosa, which is FEMSA Empaques' oldest subsidiary,
was established in 1936 to supply crown caps to the Cuauhtemoc brewery. Between
1936 and the late 1970's, we added flexible packaging, plastic and chemical
operations to our packaging capabilities. FEMSA Empaques' glass and paper
operations were originally part of Grupo Cermoc and became part of our company
pursuant to the 1988 Restructuring.

     We have determined that certain operations within FEMSA Empaques, namely
glass, cans and crown caps and closures, are important for our core beverage
operations. Furthermore, the structure of the industry for some of these
products warrants our ownership of these businesses to balance the pricing and
supply conditions in order to adequately support our beverage operations. We are
therefore committed to keeping those operations as part of our business going
forward. Certain other operations, such as labels and flexible packaging,
coolers, plastics and chemical products, face more competitive conditions in
their respective industries and are relatively less relevant to our core
operations, and therefore, we have indicated our intention to divest those
operations as opportunities present themselves. The price, terms and timing of
these divestitures have not been established.

     Sales to affiliates remain a significant portion of FEMSA Empaques'
business. In 2002, sales to affiliates represented 58.3% of FEMSA Empaques'
total revenues of Ps. 6.599 billion. In certain product categories, however,
FEMSA Empaques has also established itself as a world-class supplier to
unaffiliated parties. For example, more than 70.6% of FEMSA Empaques' sales of
crown caps and flexible packaging materials were sold to unaffiliated third
parties in 2002. In addition, FEMSA Empaques believes that it has developed a
significant presence in the export market. Approximately 11.1% of FEMSA
Empaques' total revenues were generated through export sales in 2002. FEMSA
Empaques operates 12 production facilities and 17 service centers throughout
Mexico.

     Business Strategy

     FEMSA Empaques' strategic objective is to transform raw materials at the
lowest cost possible into high quality packaging products for customers in the
beer, soft drinks, food and packaged consumer products industries. FEMSA
Empaques places particular emphasis on reducing costs through productivity gains
and waste reduction, providing customers with technical service as a means of
ensuring production quality and competitive differentiation, and investing in
human and capital resources to facilitate cost reduction and competitiveness.


                                       57
<PAGE>

     FEMSA Empaques has also placed significant emphasis on customer service
throughout its operating subsidiaries. FEMSA Empaques' management seeks to
ensure customer satisfaction, as measured primarily by the number of customer
returns, order turn-around time and response time to changing customer needs.

     Within the FEMSA business portfolio, FEMSA Empaques performs a relevant
role as it supplies essential packaging materials, particularly for FEMSA
Cerveza. Given its position as strategic supplier, FEMSA Empaques is focused on
leveraging its existing capacity by providing packaging solutions to select
third parties. Capital expenditures are for maintenance or replacement projects
and are primarily funded internally.

     Customers and Products

     Originally, the primary function of FEMSA Empaques was to provide our beer
and soft drink subsidiaries with high-quality packaging materials at competitive
prices, which is reflected in FEMSA Empaques' product mix. However, FEMSA
Empaques increased its penetration with unaffiliated third parties in recent
years with the objective of improving capacity utilization and fixed cost
absorption to continue to reduce the cost of packaging products for its beverage
affiliates. Currently, FEMSA Empaques' main third-party customers include
Cadbury, unaffiliated Coca-Cola bottlers, Casa Pedro Domecq, S.A. de C.V.,
Compania Nestle, S.A. de C.V., Labatt, Miller Brewing Co., Coors Brewing
Company, Colgate-Palmolive, S.A. de C.V., and Galletera Mexicana, S.A. de C.V.
The following table sets forth an allocation of FEMSA Empaques' revenues by
product line and client category:
<TABLE>
<CAPTION>

                           FEMSA Empaques--Revenue Allocation by Product and Client

                                                                  Year Ended December 31,
                                                    2002     2001        2000         1999           1998
                                                    ----     ----        ----         ----           ----
<S>                                                 <C>       <C>         <C>          <C>           <C>
Product Categories
Containers
   Metal Products...........................        48.8%    48.6%       52.5%        50.2%          52.3%
     Beverage Cans..........................        32.7     32.4        36.6         35.8           39.4
     Crown Caps.............................        10.5     10.8        10.3          9.0            7.6
     Food Cans..............................         5.6      5.4         5.6          5.4            5.3
   Glass Products...........................        22.0     20.5        19.0         19.9           17.3
   Chemical Products........................         5.7      5.5         5.2          3.9            3.2
   Total Containers.........................        76.5%    74.6%       76.7%        74.0%          72.8%
Packaging
   Paper and Cardboard(1)...................         0.0%    0.0%        0.0%         7.5%            6.7%
   Labels and Flexible Packaging............         9.8     9.1         8.6          7.0             6.9
   Total Packaging..........................         9.8%    9.1%        8.6%         14.5%          13.6%
Commercial Products
   Refrigerators............................         9.3%    12.4%       10.7%        8.2%           10.4%
   Plastic Products.........................         4.4     3.9         4.0          3.3             3.2
   Total Commercial Products................        13.7     16.3        14.7         11.5           13.6
          Total Revenues....................       100.0%    100.0%      100.0%       100.0%        100.0%
Client Categories
Coca-Cola FEMSA.............................        17.4%    12.9%       14.6%         11.6%         17.0%
FEMSA Cerveza...............................        40.9     43.5        38.8          40.2          36.3
Third Parties...............................        41.7     43.6        46.6          48.2          46.7
     Domestic Third Parties.................        30.6     33.8        36.1          40.2          38.6
     Export Third Parties...................        11.1     9.8         10.5           8.0           8.1
          Total Revenues....................       100.0%    100.0%      100.0%       100.0%        100.0%
</TABLE>


(1)  We concluded the sale of our cardboard subsidiary (Corrugados Tehuacan,
     S.A. de C.V.) at the end of May 2000. Revenues from the paper and cardboard
     operations are included in this table for 1998 and 1999.


                                       58
<PAGE>

     Capital Investments

     Over the past five years, FEMSA Empaques has invested approximately Ps. 1.5
billion in capital improvement and expansion projects, most of which took place
in 1998. These projects have included the expansion of can and can-lid capacity,
the installation of a plastic closure facility and a new commercial refrigerator
facility. We believe that these investments, coupled with ongoing efforts to
reduce costs and streamline operating processes, are largely responsible for the
significant productivity gains realized by FEMSA Empaques over the past decade.
However, we maintain that current and future capital investments in FEMSA
Empaques should be determined solely by the packaging requirements of our
beverage subsidiaries.

     Beverage Cans and Can Ends

     Famosa began production of three-piece steel cans for the beverage industry
in 1959 at its plant in Ensenada, Baja California. In 1969, the Toluca plant
also began producing steel beverage cans, and in 1977, the Toluca plant was the
first plant in Latin America to produce two-piece steel cans. Two-piece
all-aluminum cans were first produced by Famosa at the Ensenada plant in 1982,
and this technology was incorporated into the Toluca plant in 1991. Both the
Ensenada and Toluca plants were retooled in 1991 to produce standard two-piece
aluminum cans. Aluminum "stay-on tab" can ends were produced for the first time
at Famosa's Monterrey plant in 1991.

     Famosa currently operates six production lines, four that produce aluminum
beverage can bodies (in Ensenada and Toluca) and two that produce can ends (in
Monterrey). We believe that Famosa's production facilities utilize world-class
processes and state-of-the-art technology. Famosa has a technology exchange
agreement with Ball Corporation ("Ball") for the licensing and cross-licensing
of beer and soft drink can technology. Ball has recognized FEMSA Empaques'
Monterrey and Ensenada can production facilities as the benchmark for Ball's
licensees worldwide. See "Item 10. Additional Information--Material
Contracts--FEMSA Empaques--Ball Licensing Agreement."

     Aggregate annual production capacity at the two plants in Ensenada and
Toluca for beverage can bodies is approximately 3.2 billion cans, and capacity
utilization was approximately 92.2% in 2002. Can ends are produced at Famosa's
Monterrey facility, which has an annual capacity of 4.0 billion can ends and had
an average utilization of 88.4% in 2002.

     The beverage can industry in Mexico primarily serves the beer, soft drink
and juice industries. The beer industry accounted for approximately 53.6% of
industry-wide sales of 6.1 billion cans in 2002. The soft drink and
non-carbonated beverage industries accounted for an estimated 39.3% and 7.1% of
2002 industry volume sales, respectively.

     FEMSA Empaques' activities in the beverage can segment are oriented towards
the beer, soft drink, and juice industries. We believe that FEMSA Empaques
provides its beverage can customers with internationally competitive prices and
a high level of technical service. Design quality and innovation are important
competitive tools in the beverage can industry, and we believe that FEMSA
Empaques maintains a leadership position in these competitive characteristics
while remaining a low-cost producer.
<TABLE>
<CAPTION>

                                      FEMSA Empaques--Beverage Can Volume

                                                                     Year Ended December 31,
                                                      ------------------------------------------------------
                                                      2002        2001         2000        1999        1998
                                                      ----        ----         ----        ----        ----
<S>                                                    <C>        <C>          <C>         <C>          <C>
FEMSA Empaques sales volume (in Millions of
units)                                               3,000       2,808        3,001       3,216       3,020
Sales by client:
     FEMSA Cerveza..........................          45.7%        50.5%       44.9%       43.5%       40.7%
     Coca-Cola FEMSA........................          11.0%         6.7%       12.6%        9.7%       12.2%
     Third parties..........................          43.3%        42.8%       42.5%       46.8%       47.1%
          Domestic third parties............          28.9%        35.1%       33.7%       40.6%       37.1%
          Export third parties..............          14.4%         7.7%        8.8%        6.2%       10.0%
               Total........................         100.0%       100.0%      100.0%      100.0%      100.0%
                                                     ======       ======      ======      ======      ======
</TABLE>


                                       59
<PAGE>

     FEMSA Empaques is the leading Mexican beverage can manufacturer based on
sales volume. Other competitors in the Mexican beverage can industry are
Corporativo de Envases, S.A. de C.V., which produces beverage can, crown and
plastic caps and PET bottles; Crown Cork de Mexico, S.A. de C.V., which produces
beverage cans; and Vitro American National Can, S.A. de C.V., which only
produces beverage can bodies.

     Crown Caps and Closures

     Famosa currently manufactures crown caps and closures at its Monterrey
plant. Famosa's production of container closures dates back to 1920, when, as a
division of Cuauhtemoc, Famosa began producing ceramic bottle tops. In 1936,
Famosa was formally incorporated as a separate entity. Between 1926 and 1942,
Famosa began to engage in other activities in addition to the manufacture of
crown caps, including malt processing and production of cardboard. Over time,
certain of these activities became independent of Famosa. Malt processing, for
example, is now carried out by subsidiaries of FEMSA Cerveza, and the cardboard
operations were sold in May 2000.

     In 1973, liquid Polyvinyl Chloride, or PVC, replaced the cork liner that
traditionally had been used in bottle caps as a sealing agent. Famosa was the
pioneer in introducing this process in Mexico. Famosa began a modernization
program in 1990 that included the installation of new production lines and
improvements in the printing and sealing lines. Currently, Famosa's crown cap
plant is one of the largest and most modern facilities of its kind in the world.
Current annual production capacity at the Monterrey facility is approximately 16
billion crown caps. Famosa operates 10 crown cap production lines in Monterrey.
Capacity utilization in 2002 was approximately 89.6%.

     The principal clients for crown caps and closures are the domestic and
international beverage industries. Famosa has been a leading Mexican supplier of
crown caps throughout its history. FEMSA Empaques' management attributes FEMSA
Empaques' leadership position in the industry to its product quality,
customer-service orientation and product development expertise.
<TABLE>
<CAPTION>

                                    FEMSA Empaques--Crown Caps and Closures
                                                                     Year Ended December 31,
                                                       2002         2001        2000         1999        1998
                                                       ----         ----        ----         ----        ----
<S>                                                  <C>            <C>        <C>          <C>          <C>
FEMSA Empaques sales volume
(in Millions of units)... ......................       14,287       14,028      13,404       12,765      11,048
Sales by client:
     FEMSA Cerveza..............................        27.4%       27.9%       29.0%        30.9%       33.5%
     Coca-Cola FEMSA............................         5.6%        5.4%        5.9%         6.0%        8.5%
     Third parties..............................        67.0%       66.7%       65.1%        63.1%       58.0%
         Domestic third parties.................        11.9%       15.7%       18.9%        20.8%       27.1%
         Export third parties...................        55.1%       51.0%       46.2%        42.3%       30.9%
               Total............................       100.0%      100.0%      100.0%       100.0%      100.0%
                                                       ======      ======      ======       ======      ======
</TABLE>

     The crown cap industry in Mexico primarily serves the soft drink and beer
industries. In 2002, the soft drink industry utilized approximately 38% of the
total industry volume of 19.5 billion crown caps while the beer industry
utilized the remaining 62%.

     Demand for crown caps in Mexico has decreased in recent years due to shifts
in packaging options in both the beer and soft drink industries. As a result of
the poor economic climate in Mexico in the mid-1990's, the beer industry
experienced a shift in demand towards larger packaging presentations, and
therefore, the number of crown caps required by the industry declined. Demand by
the soft drink industry has also contracted, primarily as a result of the
increasing use of PET bottles, which use plastic caps as closures. In response
to this trend, in 1998 FEMSA Empaques added a plastic cap production unit to its
existing facilities. The current installed capacity of this unit is 1.1 billion
caps per year.


                                       60
<PAGE>

     FEMSA Empaques has been able to minimize the impact of reduced demand by
its beverage affiliates through sales to an increasing number of domestic third
party clients and through exports. Export demand accounted for 55.1% of FEMSA
Empaques' crown cap production in 2002.

     Domestic third-party customers include Cadbury and unaffiliated Coca-Cola
bottlers. FEMSA Empaques' principal export customers for crown caps include
Labatt, Miller Brewing Co., Latrobe Brewing Company LLC and Coors Brewing Co.
For the eighth consecutive year, in 2002, Miller's "Partners in Excellence
Program" recognized Famosa as Miller's best crown cap supplier.

     FEMSA Empaques' principal domestic competitor in crown caps and closures is
Corporativo de Envases, S.A. de C.V., whose main clients are Coca-Cola and Pepsi
Cola bottlers.

Glass Bottles

     FEMSA Empaques' production of glass bottles began in 1948 as a department
of Moctezuma. In 1976, these operations were expanded to include a silica sand
plant in Acayucan, Veracruz. In 1979, the bottling department acquired
"press-blow" technology through Hermann Heye, Kommanditgesellschaft ("Heye
Glass") of Germany to produce narrow-neck beer bottles. As part of the 1988
Restructuring, Moctezuma's glass operations became part of FEMSA Empaques and
were incorporated under the name Silices de Veracruz, S.A. de C.V. ("Sivesa").

     FEMSA Empaques' glass bottle production facilities are located in Orizaba,
Veracruz. Sivesa's plant includes three glass furnaces with an aggregate glass
production capacity of 264,855 tons per year (the equivalent of 1,182 million
bottles). Sivesa completed the construction of the third glass furnace at the
end of 1996, which increased production capacity by approximately 360 million
bottles per year. As of December 31, 2002, Sivesa's capacity utilization was
approximately 89.8%.

     In 1993, Sivesa opened a bottle decorating plant in Nogales, Veracruz and
began supplying decorated glass bottles to Coca-Cola FEMSA and FEMSA Cerveza.
The Nogales plant has an aggregate bottle decoration capacity of 480 million
bottles per year. In addition, FEMSA Empaques owns Silice del Istmo, S.A. de
C.V. ("Sisa") which operates a silica sand mine with an annual capacity of
360,000 tons per year.

     Given the historical capacity constraints at Sivesa, coupled with the
demand by FEMSA Cerveza and Coca-Cola FEMSA for bottles, all of Sivesa's output
in the past was sold to FEMSA Cerveza and Coca-Cola FEMSA. In June 1998, Sivesa
began selling glass bottles to domestic third party clients for the first time
to compensate for the reduction in the purchase of glass bottles by Coca-Cola
FEMSA as a result of the rapid change in the presentation mix to non-returnable
PET presentations in Coca-Cola FEMSA's Mexican operations.

     The sales to third-party clients did not compensate for the reduction in
demand from Coca-Cola FEMSA. Therefore, FEMSA Empaques' glass bottle sales
volume decreased in 1999 and 2000. In 2001 and 2002, this trend reverted as
Coca-Cola FEMSA picked up its demand for glass bottles with the introduction of
a new 8 oz. Coca-Cola non-returnable presentation.

     Sivesa's production technology is "press-blow," which allows Sivesa to
produce high-strength, low-weight bottles. FEMSA Empaques' management believes
that these bottle characteristics benefit FEMSA Cerveza and Coca-Cola FEMSA
because the bottles produced by Sivesa require less energy and fewer raw
materials in the production process. Furthermore, the lightweight characteristic
of the bottles reduces transportation expense. As a result, Sivesa is able to
supply its affiliates with a high-quality product at competitive prices.


                                       61
<PAGE>
<TABLE>
<CAPTION>

                                         FEMSA Empaques--Glass Bottles

                                                                  Year Ended December 31,
                                                2002          2001            2000           1999          1998
                                                ----          ----            ----           ----          ----
<S>                                            <C>            <C>            <C>             <C>          <C>
FEMSA Empaques sales volume (in
Millions of Bottles)...................        1,053           972            790            856           990
Sales breakdown by client:
     FEMSA Cerveza.....................         68.2%         59.8%           69.6%          73.4%         50.7%
     Coca-Cola FEMSA...................         21.0%          8.6%            3.5%           2.2%         36.1%
     Third parties.....................         10.8%         31.6%           26.9%          24.4%         13.2%
          Domestic third parties.......          9.8%         26.6%           21.2%          21.5%         11.1%
          Export third parties.........          1.0%          5.0%            5.7%           2.9%          2.1%
                                             --------      --------        --------      ---------     ---------
                 Total.................        100.0%        100.0%          100.0%         100.0%        100.0%
                                             ========      ========        ========      =========     =========
</TABLE>

     The soft drink and beer industries accounted for approximately 16% and 62%,
respectively, of total Mexican demand for glass containers in 2002. In 2002,
Sivesa sold 68.2% of its output to FEMSA Cerveza and 21.0% to Coca-Cola FEMSA.
This represented approximately 100% of FEMSA Cerveza's bottle requirements and
approximately 99% of Coca-Cola FEMSA's bottle requirements.

     FEMSA Empaques' principal domestic competitor in the glass bottle industry
is Vitro. Vitro has historically been the dominant player in the Mexican glass
industry. In addition, Nueva Fanal, S.A. de C.V., an affiliate of Grupo Modelo,
sells most of its glass bottle production to Grupo Modelo. Management believes
that FEMSA Empaques is currently a technological leader and a low-cost producer
of beverage bottles in Mexico. Management attributes this position to the fact
that FEMSA Empaques was the first Mexican glass producer to employ the more
efficient "press-blow" technology in addition to the traditional "blow-blow"
process.

Other

     Labels and Flexible Packaging

     FEMSA Empaques' subsidiary, Grafo Regia, began operations in 1954 as the
label manufacturing division of Cuauhtemoc. Grafo Regia's principal product
lines are beer labels, flexible packaging for soaps, cereal box liners, soft
drink labels, packaging for powdered drinks and packaging for the confectionery
industry. Grafo Regia's facilities are located in Monterrey and have an annual
production capacity of 13,500 tons of flexible packaging. In 2002, Grafo Regia
operated at approximately 96% of capacity.
<TABLE>
<CAPTION>

                  FEMSA Empaques--Labels and Flexible Packaging
                        Sales Volumes and Marketing Data
                                                                    Year Ended December 31,
                                                  2002          2001           2000      1999          1998
                                                  ----          ----           ----      ----          ----
<S>                                                  <C>        <C>           <C>         <C>          <C>
Labels (In Millions)
FEMSA Empaques sales volume.................      4,688         4,871         4,786       4,365         3,608
Sales breakdown by client:
     FEMSA Cerveza..........................       58.7%        59.4%         69.1%       63.0%          74.6%
     Coca-Cola FEMSA........................       25.1%        22.2%         23.2%       19.0%          10.4%
     Third parties..........................       16.2%        18.4%          7.7%       18.0%          15.0%
                                                --------   -----------     ---------     -------       --------
           Total............................      100.0%        100.0%        100.0%      100.0%         100.0%
                                                ========   ===========     =========     =======       ========

Flexible Packaging (tons)
FEMSA Empaques sales volume.................     10,875         8,414         6,847        6,765         7,363
Sales breakdown by client:
     FEMSA Cerveza and Coca-Cola FEMSA......
                                                   14.4%           7.1%          7.9%         7.2%          8.5%
     Domestic third parties.................       82.3%          89.5%         88.2%        80.5%         80.9%
     Export third parties...................        3.3%           3.4%          3.9%        12.3%         10.6%
                                               ---------    -----------     ---------     --------      --------
           Total............................      100.0%         100.0%        100.0%       100.0%        100.0%
                                                 =======    ===========     =========     ========      ========
</TABLE>


                                       62
<PAGE>

     In 2002, Grafo Regia's sold 58.7% of its label production to FEMSA Cerveza
and 25.1% to Coca-Cola FEMSA. Third-party customers, who are primarily
unaffiliated soft drink bottlers, accounted for the remaining 16.2% of
production in 2002. Principal flexible packaging third-party clients include
Colgate-Palmolive, S.A. de C.V., Warner Lambert de Mexico, S.A. de C.V.,
Galletera Mexicana, S.A. de C.V. and Fabrica de Jabon La Corona, S.A. de C.V.

     Grafo Regia is a leading label producer in Mexico. Novacel, S.A. de C.V.
("Novacel") is the second largest market participant. Novacel has strong ties to
Grupo Industrial Bimbo, S.A. de C.V. and Celanese Mexicana, S.A. de C.V. The
flexible packaging industry is highly fragmented. The market leader is Policel,
S.A. de C.V., which has strong ties to Sabritas, S.A. de C.V., a Pepsi Cola
affiliate. Another relevant competitor is Aluprint, S.A. de C.V.

     Commercial Refrigerators

     Vendo de Mexico, S.A. de C.V. ("Vendo") began operations in Mexico City in
1941 and was acquired by Moctezuma in 1979. Since 1982, Vendo has both produced
refrigeration equipment and provided its customers with full repair service and
preventive maintenance programs.

     Vendo produces vertical and horizontal commercial refrigerators and ice
chambers for the soft drink, beer and food industries. Management believes that
Vendo is the Mexican market leader in beverage refrigeration and is a
technological leader with respect to design, operating efficiency and
after-sales service.

     In 2002, Vendo sold approximately 93,549 refrigeration units, 79.1% of
which were sold to affiliates. Management believes that Vendo's growth reflects
the marketing strategies of FEMSA Cerveza and Coca-Cola FEMSA, both of which
have emphasized the use of refrigeration as a competitive tool in the
marketplace because consumers are more likely to make impulse purchases of
chilled beverages.

     Given FEMSA Cerveza's objective of ensuring wide availability of its
products cooled at below zero degrees Celsius, Vendo began manufacturing a
specialized beer cooler designed to maintain the product between zero degrees
and minus three degrees Celsius at all times. Recent models of these specialized
coolers have improved energy saving capacity and continue to enhance the
appearance of the point of sale as they are covered with brand merchandising
material and innovative designs. FEMSA Cerveza's management believes that these
specialized coolers are an important marketing and merchandising tool that will
contribute to better sale of these products. See "--FEMSA Cerveza--Business
Strategy."

     Plant Locations

     The following map shows the locations of FEMSA Empaques' principal
production facilities:


(Embedded Picture)

     Raw Materials

     The principal raw materials used by FEMSA Empaques include aluminum, steel,
paper, aluminum foil, silica sand, soda ash and polyethylene. FEMSA Empaques is
vertically integrated in silica sand mining, and FEMSA Empaques' silica sand
mine has been able to easily satisfy all of FEMSA Empaques' silica sand
requirements. With the exception of aluminum, all of these products are
available from a variety of domestic and international sources. FEMSA Empaques
purchases aluminum and steel directly from qualified suppliers on a contractual
basis. These contracts generally have terms of six months or one year and
specify prices free-on-board at FEMSA Empaques' plants. Companies such as Alcoa,
Nittetsu-Shoji, Reynolds Aluminum, and Kaiser Aluminum have been selected as
qualified suppliers.


                                       63
<PAGE>

     With respect to other raw materials, FEMSA Empaques' policy is to seek at
least three bids for each purchase and to identify reliable low cost, high
quality suppliers. FEMSA Empaques purchases polyethylene from Dioplas, S.A.,
Resirene, S.A. and Petroleos Mexicanos ("PEMEX").

     Seasonality

     Demand for FEMSA Empaques' products is closely correlated to demand in the
beverage industry. However, as a supplier to the beverage industry, FEMSA
Empaques' peak demand periods generally precede the peak beverage seasons.

                                Logistica

     Logistica began operations on April 1, 1998. Logistica's principal
objective is to provide integrated logistics support for its clients' supply
chain, beginning with the supply of raw materials to production centers and
ending with the distribution of finished products, including the management of
carriers and other supply chain services. At the end of 1999, management
restructured the operations of Logistica, resulting in the division of assets of
Logistica into two subholding companies: Logistica CCM and FEMSA Logistica.
Logistica CCM provided logistics services solely to FEMSA Cerveza and was
jointly owned by us (70%) and by Labatt (30%). FEMSA Logistica serves Coca-Cola
FEMSA, FEMSA Empaques and third-party clients that either supply or participate
directly in the Mexican beverage industry or in other industries. As of January
1, 2003, Logistica CCM was merged into FEMSA Cerveza. However, during 2002, and
for the purposes of this Annual Report, we refer to Logistica CCM and FEMSA
Logistica jointly as "Logistica."

     Logistica recorded total revenues of Ps. 1.458 billion and operating income
of Ps. 118.8 million (excluding operating expenses in connection with e-commerce
projects of Ps. 29 million) for the year ended December 31, 2002. Logistica
derived 83% of its revenues in 2002 from services to FEMSA Cerveza, Coca-Cola
FEMSA and FEMSA Empaques. The remaining 17% was derived from FEMSA Logistica's
main third party clients, such as IEQSA, Bonafont, S.A. de C.V., Alpla Mexico,
S.A. de C.V. and Manufacturas Cifunsa, S.A. de C.V.

     As of December 31, 2002, Logistica had a total workforce of 1,803
employees, of which 57% were qualified drivers, 17% were mechanics and the
remaining 26% were commercial, technical and administrative staff. The truck
fleet under management, both owned and leased, as of December 31, 2002 was
composed of 667 tractors, 1,910 trailers, and 704 dollies. To cover the national
territory on a continuous basis, the logistics team utilizes nine main service
centers and seven relay stations and manages five warehouses strategically
located across Mexico.

                               Perfil Corporativo

     Perfil Corporativo, S.A. de C.V. ("Perfil Corporativo"), is a wholly-owned
subsidiary of Emprex whose principal assets are the Mundet brands of soft drinks
and certain concentrate production equipment including two apple juice plants
located in the states of Chihuahua and Durango. The Mundet brands enjoy broad
recognition in Central Mexico with more than 100 years of history in this
territory and are viewed by consumers in the Mexican market as having beneficial
health attributes due to their juice-based formula and product pasteurization.
On November 2, 2001, Coca-Cola FEMSA entered into two franchise bottling
agreements under which Coca-Cola FEMSA became the sole franchisee for the
production, bottling, distribution and sale of Mundet brands in the Valley of
Mexico and most of its Southeast Mexico Territory. Each franchise agreement has
a term of ten years and will expire on November 2, 2011. The bottling provisions
are automatically renewable for ten-year terms, subject to non-renewal by either
party with notice to the other party. Other terms and conditions of the
franchise agreements are similar to the current arrangements that Coca-Cola
FEMSA has entered into with The Coca-Cola Company for the bottling and
distribution of Coca-Cola trademark soft drink beverages. In addition, Perfil
Corporativo has honored pre-existing franchise agreements with other bottlers
for the bottling and distribution of Mundet products.

     We are currently focused on strengthening the brand equity of the Mundet
brands. Sales volume for Mundet products in 2002 was approximately 21 million
unit cases.


                                       64
<PAGE>

                                 FEMSA Servicios

     FEMSA Servicios is a direct subsidiary of Emprex and employs all of our
corporate staff, including the personnel managing the areas of finance,
corporate accounting, taxation, legal, planning, human resources and internal
audit. FEMSA Servicios directs, controls, supervises and reviews the operations
of our subholding companies. In conjunction with these activities, FEMSA
Servicios' executive personnel are largely responsible for our subholding
companies' relationships with regulatory and governmental agencies. In addition,
FEMSA Servicios is an active participant in our subholding companies' community
relations programs, including public and investor relations. Furthermore, FEMSA
Servicios is principally responsible for our relationships with strategic
partners for FEMSA Cerveza and Coca-Cola FEMSA.

     FEMSA Cerveza, FEMSA Empaques and FEMSA Comercio pay Emprex management fees
for the services provided to them by FEMSA Servicios. In addition, FEMSA Cerveza
and Coca-Cola FEMSA have each entered into a services agreement with FEMSA
Servicios pursuant to which they pay for specific services.

                  Description of Property, Plant and Equipment

     As of December 31, 2002, we owned all of our manufacturing facilities and
substantially all of our warehouses and distribution centers. Our properties
primarily consisted of production and distribution facilities for our beer, soft
drink and packaging operations, and office space, all of which were located in
Mexico and Argentina. In addition, FEMSA Comercio owns approximately 10% of the
Oxxo store locations, while the other stores are located in properties that are
rented under long-term lease arrangements with unaffiliated third parties.

     The table below sets forth the location, principal use and production area
of our production facilities, and the subholding company that owns such
facilities:
<TABLE>
<CAPTION>

                         Production Facilities of FEMSA
                              On December 31, 2002


Subholding Company          Location                                    Principal Use                     Production Area
                                                                                                       (thousand sq. meters)
<S>                        <C>                                           <C>                                     <C>
FEMSA Cerveza
                            Monterrey, Nuevo Leon.....................  Brewery                                 209
                            Tecate, Baja California Norte.............  Brewery                                  90
                            Navojoa, Sonora...........................  Brewery                                 463
                            Toluca, Estado de Mexico..................  Brewery                                 374
                            Guadalajara, Jalisco......................  Brewery                                  97
                            Orizaba, Veracruz.........................  Brewery                                 246
Coca-Cola FEMSA
                            Mexico, Distrito Federal.................   Soft Drink Bottling Plant                 4
                            Toluca, Estado de Mexico..................  Soft Drink Bottling Plant                13
                            Los Reyes la Paz, Estado de Mexico........  Soft Drink Bottling Plant                 5
                            Cuautitlan, Estado de Mexico..............  Soft Drink Bottling Plant                 9
                            San Cristobal de las Casas, Chiapas.......  Soft Drink Bottling Plant                 3
                            Oaxaca, Oaxaca............................  Soft Drink Bottling Plant                 3
                            Ixtacomitan, Tabasco......................  Soft Drink Bottling Plant                12
                            Juchitan, Oaxaca..........................  Soft Drink Bottling Plant                 2
                            Buenos Aires, Argentina...................  Soft Drink Bottling Plant                17
FEMSA Empaques
                            Monterrey, Nuevo Leon.....................  Crown Caps and Can Lids                  51
                            Ensenada, Baja California Norte...........  Beverage and Food Cans                   33
                            Toluca, Estado de Mexico..................  Beverage Cans                            22
                            Mazatlan, Sinaloa.........................  Food Cans                                 9
                            Orizaba, Veracruz.........................  Glass Bottles                            23
                            Nogales, Veracruz.........................  Bottle Decoration                        26
                            Acayucan, Veracruz........................  Silica Sand Mine                          7
                            Monterrey, Nuevo Leon.....................  Lubricants, Detergents                    5
                            Orizaba, Veracruz.........................  Lubricants, Detergents                    3
                            Monterrey, Nuevo Leon.....................  Labels and Flexible Packaging            23
                            San Juan del Rio, Queretaro...............  Plastic Furniture and Cases              31
                            San Juan del Rio, Queretaro...............  Refrigeration Equipment                  25

</TABLE>

                                       65
<PAGE>


     The table below sets forth the book value as of December 31, 2002 of the
plant, property and equipment for each of our segments, FEMSA and other plant,
property and equipment owned by us.
<TABLE>
<CAPTION>

                     Property, Plant and Equipment of FEMSA
                              On December 31, 2002
                 In Millions of U.S. Dollars ($) and Pesos (Ps.)

                                                                               % Subholding
                                                                                  Company          % Total
<S>                                                      <C>          <C>              <C>
FEMSA Cerveza
     Production Facilities......................        $ 1,111.9     Ps.11,629.7       72.7%
     Distribution Facilities....................            368.5         3,854.0       24.1
     Other......................................             48.7           509.2        3.2
                                                             ----           -----        ---
   Subtotal FEMSA Cerveza.......................          1,529.1        15,992.9      100.0%        53.8%
                                                          -------        --------      -----         ----

Coca-Cola FEMSA
     Valley of Mexico Territory.................            409.9         4,286.7       61.5
     Southeast Mexico Territory.................            172.4         1,803.5       25.9
     Buenos Aires Territory.....................             74.6           780.3       11.2
     Other......................................              9.4            98.6        1.4
                                                              ---            ----        ---
   Subtotal Coca-Cola FEMSA.....................            666.3         6,969.1      100.0%        23.4%
                                                            -----         -------      -----         ----

FEMSA Comercio..................................            165.2         1,728.3      100.0%         5.8%

FEMSA Empaques
     Famosa.....................................            188.2         1,968.9       51.6
     Grafo Regia................................             30.7           320.6        8.4
     Sivesa and Sisa............................            110.8         1,158.8       30.4
     PTM........................................             19.4           203.0        5.3
     Quimiproductos.............................              2.7            28.0        0.7
     Vendo......................................             12.8           134.2        3.5
                                                             ----           -----        ---
   Subtotal FEMSA Empaques......................            364.6         3,813.5      100.0%        12.8%
                                                            -----         -------      -----         ----

Logistica.......................................             43.1           451.1         --          1.5%

FEMSA and Other.................................             76.4           798.6        2.7%
                                                             ----           -----        ---
   Total FEMSA..................................        $ 2,844.7     Ps.29,753.5                   100.0%
                                                        =========       =========                   =====
</TABLE>

                      Capital Expenditures and Divestitures

     Our consolidated capital expenditures for the years ended December 31,
2002, 2001 and 2000 were Ps. 5.540 billion, Ps. 5.314 billion and Ps. 4.571
billion, respectively and were for the most part financed from cash from
operations generated by our subsidiaries. These amounts were invested in the
following manner:
<TABLE>
<CAPTION>

                              Capital Expenditures

                                                                            Year Ended December 31,
                                                           --------------------------------------------------------
In Millions of Pesos                                           2002                  2001                  2000
                                                           ------------         -------------         -------------
<S>                                                            <C>                 <C>                   <C>
FEMSA Cerveza
     Production..........................                    Ps. 705                Ps. 894             Ps. 757
     Distribution........................                         383                   505                 429
     Market Investment...................                       2,039                 2,122               1,814
     Others..............................                          39                    12                  24
                                                           ------------         -------------         -------------
          Subtotal.......................                       3,166                  3,533              3,024
                                                           ------------         -------------         -------------
Coca-Cola FEMSA
   Mexican Territories
     Production and Distribution............................      543                    514                504
     Bottles................................................      252                    170                214
     Deferred charges and other investments.................      483                    246                161
   Buenos Aires Territory
     Production and Distribution............................       46                     44                 36
     Bottles................................................       26                      3                 10
     Deferred charges and other investments.................      (9)                   (21)                 --
                                                           ------------         -------------         -------------
          Subtotal..........................................    1,341                    956                925
                                                           ------------         -------------         -------------
FEMSA Comercio..............................................      824                    615                542
FEMSA Empaques
     Metal Products.........................................       68                     17                 18
     Glass Bottles..........................................      120                     27                 65
     Plastic................................................       37                     10                 33
     Flexible...............................................       14                     37                 19
     Others.................................................        6                     --                 26
                                                           ------------         -------------         -------------
          Subtotal..........................................      245                     91                161
                                                           ------------         -------------         -------------
Logistica...................................................       12                    117               (88)
FEMSA and others............................................      (48)                     2                  7
                                                           ------------         -------------         -------------
          Total................................             Ps. 5,540              Ps. 5,314          Ps. 4,571
                                                            =========              =========          =========
</TABLE>


     FEMSA Cerveza

     Production

     During 2002, FEMSA Cerveza invested approximately Ps. 705 million in its
production facilities, of which Ps. 470 million was spent on equipment
substitution and upgrades and approximately Ps. 235 million on expansion
projects in existing production facilities. The principal capacity expansion
projects occurred in the Monterrey, Orizaba and Tecate breweries. FEMSA
Cerveza's monthly installed capacity as of December 31, 2002 was 2.7 million
hectoliters equivalent to an annualized installed capacity of 32.2 million
hectoliters.

     Distribution

     In 2002, FEMSA Cerveza invested Ps. 383 million in its distribution
network. Approximately Ps. 118 million of this amount was invested in the
replacement of the distribution fleet, Ps. 105 million in land and buildings and
improvements to leased properties dedicated to various distribution functions,
Ps. 21 million in information systems and office equipment for the distribution
units, and the remaining Ps. 139 million in other distribution-related
investments.


                                       66
<PAGE>

     Market-related Investments

     During 2002, FEMSA Cerveza invested approximately Ps. 2.0 billion in
market-related activities and brand support in the domestic market. A
significant amount of these investments were directed to tied-account agreements
with retailers and commercial support to owned and third-party distributors.
Investments in retail agreements with tied customers that exceed a one-year term
are capitalized and amortized over the life of the agreement. In general, FEMSA
Cerveza's retail agreements are for a period of three to four years. Other
market-related investments include the purchase of refrigeration equipment,
coolers, plastic furniture and other promotional items. These items are placed
with retailers as a means of facilitating the retailers' ability to service
consumers and to promote the image and profile of FEMSA Cerveza's brands.

     Coca-Cola FEMSA

     During 2002, capital expenditures by Coca-Cola FEMSA in Mexico and
Argentina totaled approximately Ps. 1,341 million. Capital expenditures in the
Mexican Territories amounted to Ps. 1,278 million and included the launching of
the second phase of a project to increase the installed capacity of its Toluca
plant, improving the efficiency of its distribution infrastructure by placing
refrigeration equipment and by further improving information technology. Capital
expenditures for the Buenos Aires Territories totaled Ps. 63 million, which was
utilized primarily for equipment replacement and upgrades in information
technology.

     FEMSA Comercio

     FEMSA Comercio's principal investment activity is the construction and
opening of new stores. During 2002, FEMSA Comercio opened 457 new Oxxo stores.
The amount invested in 2002 dedicated to the opening of new stores and
improvements to leased properties was Ps. 753 million. In addition, FEMSA
Comercio invested Ps. 23 million in the opening of new Bara discount stores and
Ps. 48 million in ERP system software.

     FEMSA Empaques

     In 2002, FEMSA Empaques invested a total of Ps. 245 million. Net
investments in the metal products production facilities, which include aluminum
cans and crown caps, amounted to Ps. 68 million, primarily for plant
improvement, equipment substitution and the purchase of real estate property. In
addition, FEMSA Empaques invested Ps. 120 million in the overhaul of one of its
main glass furnaces.

     Logistica

     In 2002, Logistica divested Ps. 16 million worth of transportation
equipment and invested Ps. 8 million in land and equipment and Ps. 20 million in
information technology, for a net capital expenditure of Ps. 12 million.

                               Regulatory Matters

     Competition Legislation

     Mexico. The Ley Federal de Competencia Economica (the Federal Economic
Competition Law, or the "Mexican Competition Law") became effective on June 22,
1993. The Mexican Competition Law and the Reglamento de la Ley Federal de
Competencia Economica (the "Regulations of the Mexican Competition Law"),
effective as of March 9, 1998, regulate monopolies and monopolistic practices
and require Mexican government approval of certain mergers and acquisitions. The
Mexican Competition Law subjects the activities of certain Mexican companies,
including us, to closer regulatory scrutiny. In addition, the regulations of the
Mexican Competition Law prohibit members of any trade association from reaching
any agreement relating to the price of their products.


                                       67
<PAGE>

     Argentina. The Ley de Defensa de la Competencia (the "Argentine Competition
Law") became effective on December 8, 1980. The purpose of the Argentine
Competition Law is to guarantee the free development of the Argentine markets
and to penalize conduct that obstructs competition. The Argentine Competition
Law regulates the activities of Argentine companies including Coca-Cola FEMSA
Buenos Aires and Repare.

     Management believes that we are currently in compliance in all material
respects with Mexican and Argentine competition legislation. There is an ongoing
procedure before the Mexican Antitrust Commission with respect to exclusivity
arrangements with retailers of Coca-Cola soft drinks. We believe that the
outcome of the procedure will not have a material adverse effect on our
financial condition. See "Item 8. Financial Information--Legal
Proceedings--Antitrust Proceedings."

     Price Controls of Soft Drinks

     Mexico. Prior to 1992, prices of carbonated soft drinks were regulated by
the Mexican government. From 1992 to 1995, the industry was subject to voluntary
price restraints. However, in response to the devaluation of the Peso relative
to the U.S. Dollar in 1994 and 1995, the Mexican government adopted an economic
recovery plan to control inflationary pressures in 1995. As part of this plan,
the Mexican government encouraged the Asociacion Nacional de Productores de
Refrescos y Aguas Carbonatadas, A.C. (the "National Association of Bottlers") to
engage in voluntary consultations with the Mexican government with respect to
price increases for returnable presentations, limiting our ability to pass on
increases in the prices of raw materials. Such voluntary consultations were
terminated in 1996. There have been no price controls in effect after 1996.

     Argentina. In December 1989, price controls on soft drinks in Argentina
were abolished. The Argentine government may, however, reinstate formal price
controls at its discretion at any time.

     We cannot ensure you that either the Mexican government or the Argentine
government will not reinstate price control on soft drinks in the future.

     Environmental Matters

     Mexico. Our Mexican operations are subject to Mexican federal and state
laws and regulations relating to the protection of the environment. The
principal federal environmental laws are the Ley General de Equilibrio Ecologico
y Proteccion al Ambiente (the General Law of Ecological Equilibrium and
Protection of the Environment or the "Mexican Environmental Law"), which is
enforced by the Secretaria de Medio Ambiente, Recursos Naturales y Pesca (the
Ministry of the Environment, Natural Resources and Fisheries, or "SEMARNAP") and
the Ley Federal de Derechos (the "Mexican Federal Law of Governmental Fees").
The Mexican Federal Law of Governmental Fees requires that Mexican manufacturing
plants pay a fee for the discharge of residual waste water to drainage. Under
the Mexican Environmental Law, rules have been promulgated concerning hazardous
substances and water, air and noise pollution. SEMARNAP can bring administrative
and criminal proceedings against companies that violate environmental laws, and
it also has the power to close non-complying facilities. In particular, Mexican
environmental laws and regulations require that Mexican companies file periodic
reports with respect to air and water emissions and hazardous wastes and set
forth standards for waste water discharge that apply to their operations. In
order to comply with these standards, we have installed and plan to continue
installing water treatment systems for the drainage of liquids in our
facilities. We are also subject to certain minimal restrictions on the operation
of delivery trucks in Mexico City. We have undertaken programs designed to
facilitate compliance with air, waste, noise and energy standards established by
current Mexican federal and state environmental laws, including a program to
install catalytic converters and liquid petroleum gas in delivery trucks for our
facilities in Mexico City.

     The level of environmental regulation and enforcement in Mexico has
increased in recent years. We expect this trend to continue and to be
accelerated by international agreements between Mexico and the United States. To
the extent that new environmental regulations are promulgated in Mexico, we may
be required to incur additional remedial capital expenditures to comply with the
concessions regulations. Management is not aware of any pending regulatory
changes that would require additional remedial capital expenditures in a
significant amount.


                                       68
<PAGE>

     Argentina. Our Argentine operations are subject to Argentine federal and
provincial laws and regulations relating to the protection of the environment.
The most significant of these are regulations concerning waste water discharge,
which are enforced by the Secretaria de Recursos Naturales y Ambiente Humano
(the Ministry of Natural Resources and Human Environment) and the Secretaria de
Politica Ambiental (the Ministry of Environmental Policy). Coca-Cola FEMSA
Buenos Aires' Alcorta plant meets waste water discharge standards and is in
compliance with these standards.

     Management believes that we are currently in compliance in all material
respects with Mexican and Argentine federal and state environmental laws and
regulations.

     Water Supply Law

     Mexico. FEMSA Cerveza and Coca-Cola FEMSA purchase water directly from
municipal water companies and pump water from their own wells pursuant to
concessions obtained from the Mexican government on a plant-by-plant basis.
Water use in Mexico is regulated primarily by the Ley de Aguas Nacionales de
1992 (including regulations issued thereunder, the "Mexican 1992 Water Law"),
which created the Comision Nacional de Aguas (the "National Water Commission"),
charged with overseeing the national system of water use. Under the Mexican 1992
Water Law, the National Water Commission may grant concessions for the use of a
specific volume of ground or surface waters. In practice, the National Water
Commission generally grants concessions for terms of five, ten and fifteen years
depending on the supply of groundwater in each region. Concessionaires may
request concession terms to be extended upon termination. The Mexican government
is authorized to reduce the volume of ground or surface water granted for use by
a concession by whatever volume of water that is not used by the concessionaire
for three consecutive years. Our management believes that we are in compliance
with the terms of our existing concessions and that such concessions satisfy our
current water requirements in Mexico. We cannot assure you, however, that
groundwater will be available in sufficient quantities to meet future production
needs.

     Argentina. Coca-Cola FEMSA Buenos Aires does not currently require a permit
to obtain water in Argentina. Because Coca-Cola FEMSA Buenos Aires' Alcorta
plant does not use water from underground sources, no permit for water use is
necessary. Instead, Coca-Cola FEMSA Buenos Aires obtains water for the Alcorta
plant from Aguas Argentinas, a privately-owned concessionaire of the Argentine
government. We can give no assurances, however, that water will be available in
sufficient quantities to meet the future production needs of Coca-Cola FEMSA
Buenos Aires.

     Health Regulation

     Mexico. Our Mexican subsidiaries are required to obtain licenses from the
Ministry of Health for their plants and distribution centers and to register the
products they sell with the Ministry of Health. Our management believes that our
Mexican subsidiaries are currently in compliance in all material respects with
such requirements.

     Argentina. While most laws applicable to our Argentine bottling
subsidiaries are enforced at the federal level, sanitation regulations are
primarily enforced at the provincial and municipal level. There are no licenses
or permits required for the manufacture or distribution of soft drinks in Buenos
Aires. However, our Argentine bottling subsidiaries' production facilities are
subject to registration with federal and provincial authorities and to
supervision by municipal health agencies which certify compliance with
applicable laws. Management believes that such subsidiaries are currently in
compliance in all material respects with such regulatory requirements.

     Insurance

     We maintain an "all risk" insurance policy covering our properties (owned
and leased), machinery and equipment and inventories as well as losses due to
business interruptions. The policy covers damages caused by natural disaster,
including but not limited to hurricane, hail, earthquake and damages caused by
human acts, including, but not limited to, explosion, fire, vandalism, riot and
losses incurred in connection with goods in transit. In addition, we maintain an
"all risk" liability insurance policy that covers product liability. We purchase
our insurance coverage through an insurance broker. The policies are issued by
Allianz in Mexico and Argentina, and the coverage is partially reinsured in the
international reinsurance market.



                                       69
<PAGE>



ITEM 5.  OPERATING AND FINANCIAL REVIEW AND PROSPECTS

     The following discussion should be read in conjunction with, and is
qualified in its entirety by reference to, our consolidated financial
statements, including the Notes thereto. Our consolidated financial statements
were prepared in accordance with Mexican GAAP, which differ in certain
significant respects from U.S. GAAP. Notes 24 and 25 to our consolidated
financial statements provide a description of the principal differences between
Mexican GAAP and U.S. GAAP as they relate to us, and a reconciliation to U.S.
GAAP of net majority income, majority shareholders' equity and certain other
selected financial data.

                          Critical Accounting Policies

     The preparation of our consolidated financial statements requires that we
make estimates and assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and expenses
during the reporting period. We base our estimates and judgments on historical
experience and on various other factors that we believe to be reasonable under
the circumstances, the results of which form the basis for making judgments
about the carrying values of assets and liabilities. Actual results may differ
from these estimates under different assumptions or conditions. Our significant
accounting policies are described in Notes 3 and 4 to our consolidated financial
statements. On an on-going basis, we evaluate our estimates and judgments, and
we believe our most critical accounting policies that imply the application of
estimates and/or judgments are:

     Revenue recognition

     We recognize revenues when title transfers or services are rendered to
unaffiliated customers. Our primary revenue sources are our beer and soft drink
beverage operations, as well as retail operations through the Oxxo convenience
store chain.

     We consider the title transferred when a product is shipped to an
independent wholesaler or a retail customer. For retail operations, revenue is
recognized when customers buy products in our stores.

     Allowance for doubtful accounts

     We determine our allowance for doubtful accounts based on an evaluation of
the aging of our receivable portfolio. The amount of the allowance contemplates
our historical loss rate on receivables and the economic environment in which we
operate. Our beer operations represent the most important part of the
consolidated allowance for doubtful accounts as a result of the credit FEMSA
Cerveza extends to retailers, on terms and conditions in accordance with
industry practices. Soft drink and retail sales are generally realized in cash.

     Bottles and cases; allowance for bottle breakage

     We classify bottles and cases in accordance with industry practices. As
such, for FEMSA Cerveza, bottles and cases are classified as inventories and for
Coca-Cola FEMSA as fixed assets. In both cases, breakage is expensed as
incurred, and returnable bottles and cases are not depreciated. Coca-Cola FEMSA
determines depreciation of bottles and cases only for tax purposes.

     We periodically compare the book breakage expense with calculated
depreciation expense, estimating a useful life of four years for returnable
glass bottles, one year for returnable plastic bottles and four years for
returnable cases. Such useful lives are determined in accordance with our
business experience. The annual calculated depreciation expense has been similar
to the annual book breakage expense. Whenever we decide to discontinue a
particular returnable presentation and retire it from the market, we write-off
the discontinued presentation through an increase in the breakage expense.


                                       70
<PAGE>

     Property, plant and equipment

     Property, plant and equipment are depreciated over their useful lives. The
estimated useful lives represent the period we expect the assets to remain in
service and to generate revenues. We base our estimates on independent
appraisals and the experience of our technical personnel.

     We describe the methodology used to restate imported equipment in Note 4(g)
to our consolidated financial statements, which includes applying the exchange
and inflation rates of the country of origin utilized as permitted by Mexican
GAAP. We believe this method more accurately presents the fair value of the
assets than restated cost determined by applying inflation factors derived from
the Mexican CPI.

     Coca-Cola FEMSA is currently conducting appraisals of the assets acquired
in connection with the Panamco acquisition, in order to present their values in
accordance with Mexican GAAP. Coca-Cola FEMSA is considering making new
investments to upgrade and modernize certain of Panamco's plant and equipment
and writing off or closing others.

     Valuation of goodwill and long-lived assets

     As we discuss in Note 4(i) to our consolidated financial statements,
goodwill is the difference between the price paid and book value (substantially
equal to fair value as a result of restatement for the effects of inflation
under Mexican GAAP) of the stock and/or net assets acquired. For Mexican GAAP
purposes, this difference is amortized over a period of 20 years and is recorded
in the currency used to make the investment since such investment will be
recovered in such currency. We calculate the restatement by applying the
inflation rate of the country of origin, then translating into Pesos at the
year-end exchange rate.

     We continually review the carrying value of our goodwill and long-lived
assets for accuracy. We review for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable based on our projections of anticipated future cash flows. While we
believe that our estimates of future cash flows are reasonable, different
assumptions regarding such cash flows could materially affect our evaluations.

     Due to the uncertainty and instability of the economic environment in
Argentina, we wrote down in the third quarter of 2002, Ps. 401.8 million
(A$129.5 million) of the goodwill generated by the acquisition of the
territories served by our wholly owned subsidiary Coca-Cola FEMSA de Buenos
Aires. Given the present economic situation in Argentina, we believe that the
current net asset value (A$288.6 million) of our foreign subsidiary is fairly
valued, and although we can give you no assurance, we do not expect to recognize
additional impairments in the future in Argentina. With the exception of the
write-down in the third quarter of 2002, our evaluations throughout the year and
up to the date of this filing, did not lead to any other significant impairment
of goodwill or long-lived assets.

     Under Mexican GAAP, the remaining value of goodwill will continue to be
amortized in the income statement for 2003. Changes in economic or political
conditions in Argentina or in our business, however, may cause us to change our
current assessment. Consolidated goodwill related to Argentina as of December
31, 2002 amounted to A$49.0 million.

     Under U.S. GAAP, SFAS No. 142, "Goodwill and Other Intangible Assets," went
into effect in 2002. Under this standard, goodwill is no longer subject to
amortization, but instead is subject to an initial impairment review in 2002 and
subsequent impairment test to be performed annually by us, unless an event
occurs or circumstances change by which it becomes more likely than not that a
reporting unit reduces its fair value below its carrying amount, in which case
an interim impairment test must be performed. Our impairment review indicates
that no impairment charge is required as of the beginning of 2003.

     We have not yet concluded our valuation of Panamco's assets and
liabilities. However, we expect that the excess purchase price over the fair
value of Panamco's tangible assets and liabilities will be primarily recorded as
intangible assets with indefinite lives, consisting principally of Coca-Cola
FEMSA's rights under its bottler agreements. Starting January 2003, consistent
with U.S. GAAP, intangible assets with indefinite lives are not subject to
amortization under Mexican GAAP, but are subject to annual impairment tests. We
can give no assurance that our expectations will not change as a result of new
information or developments.


                                       71
<PAGE>

     Executory contracts

     As part of the normal course of business, we frequently invest in the
development of our beer distribution channels through a variety of commercial
agreements with different retailers in order to generate sales volume. These
agreements are considered to be executory contracts, and accordingly the costs
incurred under such contracts are recognized as performance under the contracts
is received.

     These agreements require cash disbursements in advance to certain retailers
to fund activities intended to generate volume, which are compensated in the
future as sales are invoiced. These disbursements are considered to be
market-related investments that are capitalized as deferred charges and included
in other assets. The amortization of amounts capitalized is presented as a
reduction of net sales in relation to the volume sold to each retailer. The
period of amortization averages from three to four years, the normal term of the
commercial agreements.

     We periodically evaluate the carrying value of deferred charges. If the
carrying value is considered to be impaired, such assets are written down as
appropriate. The accuracy of the carrying value is based on our ability to
accurately predict certain key variables such as sales volume, prices and other
industry and economic factors. Predicting these key variables involves
uncertainty about future events; however, the assumptions used are consistent
with our internal planning.

     Income taxes

     We recognize deferred tax assets and liabilities based on the differences
between the financial statement carrying amounts and the tax bases of assets and
liabilities. We regularly review our deferred tax assets for recoverability and
establish a valuation allowance based on historical taxable income, projected
future taxable income and the expected timing of the reversals of existing
temporary differences. If these estimates and related assumptions change in the
future, we may be required to record additional valuation allowances against our
deferred tax assets resulting in additional income tax expense.

     Beginning in 2003, the statutory income tax rate will be reduced one
percentage point per year through to 2005, when the rate will be 32%. In
accordance with this tax rate reduction, we decided to recognize under Mexican
GAAP in December 2001, a reduction in deferred income tax liabilities and in the
income tax provision for the year of Ps. 238 million, based on the expected
dates of reversal of the temporary differences. Depreciation of fixed assets
represents the most important temporary difference that will be reversed in the
future years at a lower rate. For U.S. GAAP, a change in the statutory tax rate
may not to be considered until the enactment date, which is January 1, 2002.

     Labor liabilities

     Our labor liabilities are comprised of pension plan, seniority premium and
post-retirement medical services. The determination of our obligations and
expenses for pension and other post-retirement benefits is dependent on our
selection of certain assumptions used by actuaries in calculating such amounts.
We evaluate our assumptions at least annually. Those assumptions are described
in Note 14 to our consolidated financial statements and include, among others,
the discount rate, expected long-term rate of return on plan assets and rates of
increase in compensation costs and certain employee-related factors, such as
turnover, retirement age and mortality. In accordance with Mexican GAAP, actual
results that differ from our assumptions are accumulated and amortized over
future periods and therefore, generally affect our recognized expenses and
recorded obligations in such future periods. While we believe that our
assumptions are appropriate, significant differences in our actual experience or
significant changes in our assumptions may materially affect our pension and
other post-retirement obligations and our future expense. The following table is
a summary of the three key assumptions to be used in determining 2003 annual
pension expense, along with the impact on pension expense of a 1% change in each
assumed rate.


                                       72
<PAGE>
<TABLE>
<CAPTION>

                                                   2003 rate              Impact of 1% change
                Assumption                        (in real terms)             (millions)(1)(2)
           ----------------------------------- ---------------------- ---------------------------------
         <S>                                            <C>                     <C>
           Discount rate                                6.0%                 + Ps. 2,240
                                                                             - Ps. 2,799
           Salary growth rate                           2.0%                 + Ps. 2,658
                                                                             - Ps. 2,338
           Long-term asset return                       6.0%                 + Ps. 2,240
                                                                             - Ps. 2,799
</TABLE>

           (1) The impact is not the same for an increase of 1% as for a
               decrease of 1% because the rates are not linear.
           (2) "+" refers to an increase of 1%; "-" indicates a decrease of 1%.


                          New Accounting Pronouncements

     Mexican GAAP

     Bulletin B-5, "Informacion Financiera por Segmentos" (Financial Information
by Segment) ("Bulletin B-5"): In April 2003, Bulletin B-5, issued by the Mexican
Institute of Public Accounts ("IMCP"), went into effect superseding the
provisions in International Accounting Standard ("IAS") No. 14, "Segment
Reporting," which was suppletory based on the provisions in Bulletin A-8,
"Aplicacion Supletoria de Normas Internacionales de Contabilidad" (Suppletory
Application of International Accounting Standards), with respect to disclosing
financial information by segment. The provisions of this new bulletin are
substantially similar to those of IAS No. 14; however, they incorporate a
managerial focus, which requires at a minimum disclosure of the segment
information that is used by management to make decisions. These new provisions
do not change the segment information previously presented by us. We do not
anticipate that this new standard will have a significant impact on our
financial position or results of operations.

     Bulletin C-8, "Activos Intangibles" (Intangible Assets) ("Bulletin C-8"):
In January 2002, the IMCP issued new Bulletin C-8, and its provisions are
mandatory for fiscal years beginning January 1, 2003. Bulletin C-8 supersedes
the former Bulletin C-8, and establishes that project development costs should
be capitalized if they fulfill the criteria established for recognition as
assets. Any start-up expenses incurred after the effective date of this bulletin
should be recorded as an expense unless they meet certain criteria. The
unamortized balance of capitalized start-up expenses under the former Bulletin
C-8 will continue to be amortized. Bulletin C-8 requires identifying all
intangible assets to reduce as much as possible the goodwill relative to
business combinations. We do not anticipate that this new standard will have a
significant impact on our financial position or results of operations.

     Bulletin C-9, "Pasivo, Provisiones, Activos y Pasivos Contingentes y
Compromisos" (Liabilities, Reserves, Contingent Assets and Liabilities, and
Commitments) ("Bulletin C-9"): In December 2002, the IMCP issued new Bulletin
C-9, and its provisions are mandatory for fiscal years beginning January 1,
2003. Bulletin C-9 supersedes the former Bulletins C-9 "Pasivos" (Liabilities),
and C-12, "Contingencias y Compromisos" (Contingencies and Commitments),
establishes additional guidelines clarifying accounting for liabilities,
reserves, and contingent assets and liabilities and commitments, and establishes
new standards for the use of present value techniques to measure liabilities and
accounting for the early settlement of obligations. We do not anticipate that
this new standard will have a significant impact on our financial position or
results of operations.


                                       73
<PAGE>

     Bulletin C-12, "Instrumentos Financieros con Caracteristicas de Pasivo, de
Capital o de Ambos" (Financial Instruments with Characteristics of Liabilities,
Equity or Both) ("Bulletin C-12"): In May 2003, the IMCP issued Bulletin C-12,
whose provisions are mandatory for fiscal years beginning January 1, 2004,
although early application is encouraged. C-12 incorporates the related portions
of other bulletins issued by the IMCP with respect to the issuance of debt,
capital or compound financial instruments, as well as those standards considered
necessary for the accounting recognition of such instruments. As a result, C-12
indicates the basic distinctions between liabilities and equity and establishes
the rules for the initial classification and measurement of the liability and
equity components of compound financial instruments. Subsequent recognition and
measurement of the liability and equity components of financial instruments
remains subject to previously issued applicable standards. We do not anticipate
that this new standard will have a significant impact on our financial position
or results of operations.

     Bulletin C-15, "Detrioro en el Valor de los Activos de Larga Duracion y su
Disposicion" (Impairment in the Value of Long-Lived Assets and Their Disposal)
("Bulletin C-15"): In March 2003, the IMCP issued Bulletin C-15, whose
application is mandatory for financial statements of periods beginning on or
after January 1, 2004, although early application is encouraged. C-15
establishes, among others, new principles for the calculation and recognition of
impairment losses for long-lived assets and their reversal. It also provides
examples of indicators of possible impairment in the carrying amount of tangible
and intangible long-lived assets in use, including goodwill. The calculation of
such loss requires the determination of the recoverable value, which is now
defined as the greater of the net selling price of a cash-generating unit and
its value in use, which is the present value of discounted future net cash
flows. The accounting principles issued prior to this new bulletin used future
net cash flows, without requiring the discounting of such cash flows. We do not
anticipate that this new standard will have a significant impact on our
financial position or results of operations.

     U.S. GAAP

     SFAS No. 143, "Accounting for Asset Retirement Obligations" ("SFAS No.
143"): In June 2001, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 143, which became
effective for us beginning in 2003 and will be adopted accordingly. SFAS No. 143
addresses financial accounting and reporting for obligations associated with the
retirement of tangible long-lived assets and the associated asset retirement
costs. It applies to legal obligations associated with the retirement of
long-lived assets that result from the acquisition, construction, development
and/or normal operation of a long-lived asset, except for certain obligations of
lessees. This statement requires that the fair value of a liability for an asset
retirement obligation be recognized in the year in which it is incurred if a
reasonable estimate of the fair value can be made. The associated asset
retirement costs are capitalized as part of the carrying amount of the
long-lived asset. We do not anticipate that this new standard will have a
significant impact on our financial position or results of operations.

     SFAS No. 145, "Rescission of FASB Statements No. 4, 44, and 64, Amendment
of FASB Statement No. 13, and Technical Corrections" ("SFAS No. 145"): In April
2002, the FASB issued SFAS No. 145, which requires that gains and losses from
extinguishment of debt in all years presented be classified as extraordinary
items only if they meet the criteria of APB Opinion 30, "Reporting the Results
of Operations--Discontinued Events and Extraordinary Items."

     The amendment of SFAS No. 13, "Accounting for Leases," eliminates an
inconsistency between the required accounting for sale-leaseback transactions
and the required accounting for certain lease modifications that have economic
effects that are similar to sale-leaseback transactions. The new standard will
be effective for financial statements issued for fiscal years beginning after
May 15, 2002 and lease transactions occurring after May 15, 2002, with early
application encouraged. We plan to adopt this new standard in 2003. We do not
anticipate that this new standard will have a significant impact on our
financial position or results of operations.

     SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal
Activities"("SFAS No. 146"): In June 2002 the FASB issued SFAS No. 146, which
nullifies Emerging Issues Task Force ("EITF") Issue No. 94-3, "Liability
Recognition for Certain Employee Termination Benefits and Other Costs to Exit an
Activity (including Certain Costs Incurred in a Restructuring)." The principal
difference between SFAS No. 146 and EITF 94-3 relates to its requirement that a
liability for a cost associated with an exit or disposal activity be recognized
and measured initially at fair value when the liability is incurred, as opposed
to recognition under EITF 94-3 at the date of an entity's commitment to an exit
plan. The provisions of SFAS No.146 will be effective for exit or disposal
activities that are initiated after December 31, 2002, with early application
encouraged. Previously issued financial statements may not be restated, and the
provisions of EITF 94-3 shall continue to apply for an exit activity initiated
under an exit plan prior to the initial application of SFAS No. 146. We plan to
adopt this new standard in 2003. We do not anticipate that this new standard
will have a significant impact on our financial position or results of
operations.


                                       74
<PAGE>

     FASB Interpretation No. 45, "Guarantor's Accounting and Disclosure
Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of
Others" ("FIN 45"): In November 2002, the FASB issued FIN 45, which requires
that the guarantor recognize, at the inception of certain guarantees, a
liability for the fair value of the obligation undertaken in issuing such
guarantee. FIN 45 also requires additional disclosure requirements about the
guarantor's obligations under certain guarantees that it has issued. The initial
recognition and measurement provisions of this interpretation are applicable on
a prospective basis to guarantees issued or modified after December 31, 2002,
and the disclosure requirements are effective for financial statement periods
ending after December 15, 2002. We do not expect the adoption of FIN 45 will
have a material impact on our financial position, results of operations or cash
flows.

     EITF Issue 02-16, "Accounting by a Customer (Including a Reseller) for
Certain Consideration Received from a Vendor" ("EITF 02-16"): In January 2003,
the EITF concluded in EITF 02-16, whose provisions are required for financial
statements for fiscal years beginning after December 15, 2002, with pro forma
retroactive disclosure encouraged. EITF 02-16 addresses the accounting for cash
consideration received from a vendor by a reseller of a vendor's products. The
EITF reached a consensus that cash consideration represents a reimbursement of
costs incurred by the customer to sell the vendor's products and should be
characterized as a reduction of that cost when recognized in the customer's
income statement if the cash consideration represents a reimbursement of a
specific, incremental, identifiable cost incurred by the customer in selling the
vendor's products or services. Accordingly, the payments received by Coca-Cola
FEMSA from The Coca-Cola Company for cooperative advertising, discussed in Note
4(j) to our consolidated financial statements, are properly classified as a
reduction of selling expenses. As a result, this new bulletin will have no
impact on our financial statements.

     SFAS No. 149, "Amendment of Statement 133 on Derivative Instruments and
Hedging Activities" ("SFAS No. 149"): In April 2003, the FASB issued SFAS No.
149, which amends and clarifies financial accounting and reporting for
derivative instruments, including certain derivative instruments embedded in
other contracts and for hedging activities under SFAS No. 133. The changes in
this statement improve financial reporting by requiring that contracts with
comparable characteristics to be accounted for similarly. The new standard will
be effective for contracts entered into or modified after June 30, 2003, except
as stated below, and for hedging relationships designated after June 30, 2003.
In addition, except as stated below, all provisions of this statement should be
applied prospectively.

     The provisions of this statement that relate to SFAS No. 133,
implementation issues that have been effective for fiscal quarters that began
prior to June 15, 2003, should continue to be applied in accordance with their
respective effective dates. We do not anticipate that this new standard will
have a significant impact on our financial position or result of operations.

     SFAS No. 150, "Accounting for Certain Financial Instruments with
Characteristics of both Liabilities and Equity" ("SFAS No. 150"): In May 2003,
the FASB issued SFAS No. 150, which aims to eliminate diversity in practice by
requiring that the following three types of financial instruments be reported as
liabilities by their issuers:

-    mandatorily redeemable instruments (i.e., instruments issued in the form of
     shares that unconditionally obligate the issuer to redeem the shares for
     cash or by transferring other assets);

-    forward purchase contracts, written put options, and other financial
     instruments not in the form of shares that either obligate or may obligate
     the issuer to settle its obligation for cash or by transferring other
     assets; and

-    certain financial instruments that include an obligation that (1) the
     issuer may or must settle by issuing a variable number of its equity shares
     and (2) has a "monetary value" at inception that (a) is fixed, (b) is tied
     to a market index or other benchmark (something other than the fair value
     of the issuer's equity shares), or (c) varies inversely with the fair value
     of the equity shares, for example, a written put option.

     To date these types of instruments have been variously reported by their
issuers as liabilities, as part of equity, or between the liability and equity
sections (sometimes referred to as "mezzanine" reporting) of the balance sheet.
The provisions of SFAS No. 150 are effective for financial instruments entered
into or modified after May 31, 2003, and pre-existing instruments effective at
the beginning of the first interim period beginning after June 15, 2003. We do
not expect that the adoption of SFAS No. 150 will have a material impact on our
financial position, results of operations or cash flows.



                                       75

<PAGE>



                                Operating Results

         The following table sets forth our consolidated income statement for
the years ended December 31, 2002, 2001 and 2000:
<TABLE>
<CAPTION>

                                                                              Year Ended December 31,
                                                           ---------------------------------------------------------------
In Millions of U.S. Dollars and Millions of Constant            2002(1)         2002            2001            2000
                                                              -----------     --------        --------        --------
<S>                                                               <C>          <C>           <C>            <C>
Pesos as of December 31, 2002

Net sales...................................................  $ 5,043       Ps.  52,746     Ps. 49,952      Ps. 47,805
Other operating revenues....................................       19               195            145              64
                                                                   --      ------------     ----------      ----------
     Total revenues.........................................    5,062            52,941         50,097          47,869
Cost of sales...............................................    2,521            26,364         24,871          23,729
                                                                -----      ------------     ----------      ----------
     Gross profit...........................................    2,541            26,577         25,226          24,140
                                                                -----      ------------    -----------     -----------
Operating expenses:
     Administrative.........................................      446             4,659          4,608           4,424
     Sales..................................................    1,196            12,511         12,118          12,090
                                                                -----      ------------     ----------      ----------
          Total operating expenses..........................    1,642            17,170         16,726          16,514
                                                                -----      ------------     ----------      ----------
Income from operations......................................      899             9,407          8,500           7,626
Participation in affiliated companies.......................        8                84             33              37
                                                                    -      ------------     ----------      ----------
                                                                  907             9,491          8,533           7,663
                                                           ----------      ------------     ----------      ----------
     Interest expense......................................      (87)             (906)          (948)         (1,160)
     Interest income.......................................       43               446            476             441
                                                                  --      ------------      ---------       ---------
                                                                 (44)             (460)          (472)           (719)
     Foreign exchange gain (loss)..........................      (31)            (325)            230          (1,121)
     Gain (loss) on monetary position......................       37               389            (40)            269
                                                                   --      ------------     -----------     ----------
                                                                  (38)            (396)          (282)         (1,571)
Other income (expenses), net...............................       (82)            (858)          (297)            243
                                                                  ----     -------------    -----------     ----------
Income for the year before income tax, tax on
      assets and employee profit sharing..................        787            8,237          7,954           6,335
Income tax, tax on assets and employee profit  sharing....        346            3,624          2,945           2,508
                                                                           ------------     ----------      ----------
Net income before change in accounting principle..........        441            4,613         5,009           3,827
Change in accounting principle............................         --               --           (29)             --
                                                                   --      ------------    ------------    -----------
Consolidated net income for the year........................   $  441       Ps.   4,613     Ps.  4,980      Ps.  3,827
                                                                  ===      ============     ==========      ==========
Net majority income.........................................      271             2,837          3,393           2,748
Net minority income.........................................      170             1,776          1,587           1,079
                                                                  ---      ------------    -----------     -----------
                                                            $     441       Ps.   4,613    Ps.   4,980      Ps.  3,827
                                                           ==========      ============    ===========     ===========
</TABLE>

(1)  Translation to U.S. Dollar amounts at an exchange rate of Ps. 10.459 to
     US$1.00 solely for the convenience of the reader.




                                       76
<PAGE>



         The following table sets forth certain financial information for each
of our segments for the years ended December 31, 2002, 2001 and 2000. See Note
23 to our consolidated financial statements for additional information by
segment.
<TABLE>
<CAPTION>

                                                                         Year Ended December 31,
In Millions of Pesos                                                 2002          2001           2000
       Net Sales
        <S>                                                         <C>          <C>            <C>
           FEMSA Cerveza......................................      20,632         20,551        19,709
           Coca-Cola FEMSA....................................      17,492         16,612        15,968
           FEMSA Comercio (1).................................      12,740         10,731         8,956
           FEMSA Empaques.....................................       6,581          6,569         6,919
           Logistica..........................................       1,455          1,532         1,549

       Total Revenues
           FEMSA Cerveza......................................      20,815         20,703        19,841
           Coca-Cola FEMSA....................................      17,620         16,730        16,035
           FEMSA Comercio (1).................................      12,740         10,732         8,957
           FEMSA Empaques.....................................       6,599          6,577         6,929
           Logistica..........................................       1,458          1,540         1,549

       Cost of Sales
           FEMSA Cerveza......................................       8,926          8,927         8,838
           Coca-Cola FEMSA....................................       8,130          7,738         7,773
           FEMSA Comercio (1).................................       9,367          7,976         6,655
           FEMSA Empaques.....................................       4,994          5,057         5,221
           Logistica..........................................       1,249          1,329         1,337

       Gross Profit
           FEMSA Cerveza......................................      11,889         11,776        11,003
           Coca-Cola FEMSA....................................       9,490          8,992         8,262
           FEMSA Comercio (1).................................       3,373          2,756         2,302
           FEMSA Empaques.....................................       1,605          1,520         1,708
           Logistica..........................................         209            211           212

       Income from Operations(2)
           FEMSA Cerveza(3)...................................       3,546          3,326         3,141
           Coca-Cola FEMSA....................................       4,440          3,873         3,080
           FEMSA Comercio (1).................................         487            297           304
           FEMSA Empaques.....................................         905            856         1,009
           Logistica(4).......................................         119             99           114

       Depreciation
           FEMSA Cerveza......................................       1,114            991           966
           Coca-Cola FEMSA(5).................................         713            793           930
           FEMSA Comercio (1).................................          90             81            84
           FEMSA Empaques.....................................         262            246           252
           Logistica..........................................          33             36            48
</TABLE>


                                       77
<PAGE>


<TABLE>
<CAPTION>

       Percentages
        <S>                                                          <C>             <C>            <C>
       Gross Margin(6)
           FEMSA Cerveza......................................         57.6%          57.3%         55.8%
           Coca-Cola FEMSA....................................         54.3%          54.1%         51.7%
           FEMSA Comercio (1).................................         26.5%          25.7%         25.7%
           FEMSA Empaques.....................................         24.4%          23.1%         24.7%
           Logistica..........................................         14.4%          13.8%         13.7%

       Operating Margin(7)
           FEMSA Cerveza......................................         17.0%          16.1%         15.8%
           Coca-Cola FEMSA....................................         25.2%          23.2%         19.2%
           FEMSA Comercio (1).................................          3.8%           2.8%          3.4%
           FEMSA Empaques.....................................         13.7%          13.0%         14.6%
           Logistica..........................................          8.2%           6.4%          7.4%
</TABLE>


(1)  For purposes of financial reporting and business discussion of our retail
     operations in this Annual Report, FEMSA Comercio and Oxxo Express are
     presented together as "FEMSA Comercio."
(2)  Includes management fees paid to Emprex (and to Labatt in the case of FEMSA
     Cerveza).
(3)  Includes equity method from affiliated companies including Labatt USA.
(4)  Excludes operating expense in connection with e-commerce project which
     amounted to Ps. 29 million, Ps. 42 million, and Ps. 29 million for the
     years 2002, 2001 and 2000, respectively.
(5)  Includes breakage of bottles.
(6)  Gross margin calculated with reference to net sales.
(7)  Operating margin calculated with reference to total revenues and after
     deduction of management fees.


                               Operating Leverage

     The operating subsidiaries of FEMSA Cerveza, Coca-Cola FEMSA and FEMSA
Empaques are engaged, to varying degrees, in capital-intensive activities. The
high utilization of the installed capacity of the production facilities of our
subholding companies results in better fixed cost absorption, as increased
output results in higher revenues without additional fixed costs. Absent
significant increases in variable costs, gross profit margins will expand when
production facilities are operated at higher utilization rates. Alternatively,
higher fixed costs will result in lower gross profit margins in periods of lower
output.

     In addition, the commercial operations of FEMSA Cerveza and Coca-Cola FEMSA
are carried out through extensive distribution networks, the principal fixed
assets of which are warehouses and trucks. The distribution systems of both
FEMSA Cerveza and Coca-Cola FEMSA are designed to handle large volumes of
beverages. Fixed costs represent an important proportion of the total
distribution expense of both FEMSA Cerveza and Coca-Cola FEMSA. Generally, the
higher the volume that passes through the distribution system, the lower the
fixed distribution cost as a percentage of the corresponding revenues. As a
result, operating margins improve when the distribution capacity is operated at
higher utilization rates. Nonetheless, periods of decreased utilization because
of lower volumes will negatively impact our operating margins.

     Companies with structural characteristics that result in margin expansion
in excess of sales growth are referred to as having high "operating leverage."

                        Impact of the Panamco Acquisition

     We will begin consolidating the results of Panamco during the second
quarter of 2003 and, under Mexican GAAP; Panamco's results will be reflected in
our financial statements starting on May 6, 2003, the date of the acquisition.
Panamco has historically prepared its financial statements in accordance with
U.S. GAAP in U.S. Dollars. We have historically and will continue to prepare our
financial statements in accordance with Mexican GAAP in Mexican Pesos. When
presented in Mexican GAAP and in Mexican Pesos as part of our consolidated
results, the results of Panamco may be significantly different from and may not
be comparable to those reported by Panamco for prior periods. We may not provide
separate financial statements for Panamco for future periods. In addition,
because Panamco will not be included in our financial statements for periods
prior to the second quarter of 2003, our future quarterly results will be
comparable starting with the third quarter of 2004 as compared to the third of
2003 and our future annual results will be comparable starting with the full
year of 2005 as compared to the full year of 2004.


                                       78
<PAGE>

     Panamco has recorded significantly lower operating margins than Coca-Cola
FEMSA in recent years, reflecting in part deterioration of macroeconomic and
political conditions in some of the countries in which it operates and
competitive pressures. Coca-Cola FEMSA's ability to maintain its margins will
depend on its ability to generate synergies from the combination of the Mexican
operations and to put in place new strategies in some of Panamco's territories,
as well as on macroeconomic conditions throughout Latin America. Additional
information regarding the Panamco acquisition can be found in the Coca-Cola
FEMSA Annual Report on Form 20-F filed with the SEC on June 27, 2003, which does
not constitute part of this Annual Report and is not incorporated by reference
into this Annual Report.

           Results of Operations for the Year Ended December 31, 2002
                  Compared to the Year Ended December 31, 2001

FEMSA Consolidated

     Total Revenues

     FEMSA's consolidated total revenues increased by 5.7% to Ps. 52.941 billion
for the year ended December 31, 2002, from Ps. 50.097 billion for the year ended
December 31, 2001. Consolidated net sales increased by 5.6% to Ps. 52.746
billion in 2002 from Ps. 49.952 billion in 2001 and represented 99.6% of total
revenues in 2002, compared to 99.7% in 2001. FEMSA Comercio, whose total revenue
increased 18.7%, contributed significantly to the growth in consolidated revenue
with the opening of 437 net new Oxxo stores, and Coca-Cola FEMSA, whose total
revenues grew 5.3%, was also a significant contributing factor. FEMSA Cerveza
faced weak demand in the northern markets throughout the year, but posted
revenue growth of 0.5% aided by steady demand and successful performance in the
central and southern markets. FEMSA Empaques capitalized on strong demand for
its main product lines in the second half of the year and closed the year with
0.3% growth in revenue.

     Gross Profit

     Our consolidated gross profit increased by 5.4% to Ps. 26.557 billion in
2002 from Ps. 25.226 billion in 2001. As gross profit increased at a slightly
lower rate than net sales, our consolidated gross profit margin was 50.4%, a
decrease of 10 basis points over 2001. In addition, our dollar-linked variable
cost of sales became more expensive on a real basis because of the depreciation
of the Peso in the second half of 2002. The decrease in gross profit margin was
only partially offset by operational efficiencies achieved in our manufacturing
facilities, such as increased productivity and strategic procurement.

     Income from Operations

     Our consolidated operating expenses (including goodwill amortization and
management fees paid to Labatt) increased by 2.7% in 2002 to Ps. 17.170 billion
from Ps. 16.726 billion in 2001. As a percentage of total revenues, consolidated
operating expenses decreased by 100 basis points to 32.4% in 2002.

     Consolidated administrative expenses increased by 1.1% to Ps. 4.659 billion
in 2002 from Ps. 4.608 billion, primarily reflecting the net effect of the
following:

-    increases in administrative expenses at Coca-Cola FEMSA, mainly reflecting
     investments in preparation for a large acquisition, such as administrative
     consultants and expanding managerial staff, plus certain system upgrades in
     Mexico;

-    slight increases in administrative expenses at FEMSA Comercio, related to
     its expansion, and at FEMSA Empaques, reflecting investments in ERP
     systems; and

-    slight decrease in FEMSA Cerveza's administrative expenses as a result of
     efforts to contain expenses.


                                       79
<PAGE>

     Some of our subsidiaries pay management fees to FEMSA in consideration for
corporate services provided to such subsidiaries. Our subsidiaries' payments of
management fees are eliminated in consolidation and thus have no effect on our
consolidated operating expense, with the exception of the management fee paid by
FEMSA Cerveza to Labatt, which amounted to Ps. 118 million in 2002 compared to
Ps. 124 million in 2001. Goodwill amortization corresponding to Coca-Cola FEMSA
amounted to Ps. 37 million in 2002 compared to Ps. 101 million in 2001,
reflecting the goodwill impairment related to Coca-Cola FEMSA Buenos Aires (see
"--Coca-Cola FEMSA").

     Consolidated selling expenses increased by 3.2% to Ps. 12.511 billion in
2002 from Ps. 12.118 billion in 2001, mainly reflecting the combination of:

-    growth in FEMSA Comercio's selling expenses as the chain expands at a rapid
     pace, requiring a proportional operating expense infrastructure and a
     larger infrastructure required to manage the expansion of the chain; and

-    reduction in Coca-Cola FEMSA's selling expenses reflecting expense
     containment measures in Mexico and lower marketing expenses and payroll
     optimization in Argentina.

     We incur various expenses related to the distribution of our products. We
include these types of costs in the selling expenses line of our income
statement. During 2002 and 2001, our distribution costs amounted to Ps. 3,299
million and Ps. 3,581 million, respectively. The exclusion of these charges from
our cost of sales line may result in the amounts reported as gross profit not
being comparable to other companies, who may include all expenses related to
their distribution network in cost of sales when computing gross profit (or an
equivalent measure).

     All of our principal businesses reported increases in their respective
income from operations, which produced growth in consolidated income from
operations (after participation in the results of affiliated companies) for the
full year 2002 of 11.2% to Ps. 9.491 billion from Ps. 8.533 billion in 2001. Our
consolidated operating margin increased 90 basis points to 17.9% of consolidated
total revenues. Coca-Cola FEMSA was our primary driver of profitability growth,
posting a 14.6% increase in its income from operations. FEMSA Cerveza and FEMSA
Comercio each generated similar amounts of incremental operating profit in 2002,
contributing to the consolidated result with growth rates of 5.3% and 44.3%,
respectively, in their operating income (before management fees).

FEMSA Cerveza

     Total Revenues

     FEMSA Cerveza's net sales increased by 0.4% to Ps. 20.632 billion in 2002
from Ps. 20.551 billion in 2001. Other revenues, which consist mainly of income
from the sale of manufacturing byproducts and sundries in retail locations owned
by FEMSA Cerveza, totaled Ps. 183 million in 2002, 20.1% higher than in 2001.
Total revenues for FEMSA Cerveza increased by 0.5% to Ps. 20.815 billion in 2002
from Ps. 20.703 billion in 2001. The increase in revenues in 2002 was primarily
attributable to the net effect of the following:

-    0.2% decrease in total sales volume; and

-    0.6% improvement in real total revenue per hectoliter sold for the full
     year 2002, derived primarily from a 7.0% nominal increase in the domestic
     price of beer (on a weighted average basis) implemented during the first
     quarter of 2002. FEMSA Cerveza's average revenue per hectoliter in 2002 was
     Ps. 866.5, including domestic and export sales.

     Domestic volume declined by 0.7% to 21.856 million hectoliters, as FEMSA
Cerveza continued to experience the adverse effects of the deterioration in
disposable income in the northern region of Mexico. FEMSA Cerveza has greater
exposure to the markets in the northern regions, where it sells approximately
56% of its domestic volume. Over the past two years we have observed a
progressive deterioration in the economy that has disproportionately affected
the northwest region, as its higher concentration of border towns makes it more
susceptible to the U.S. economy. The central and southern regions have been more
protected from this economic slowdown. For example, we estimate that employment
in the manufacturing and retail industries in the north declined approximately
4.6% in 2002, compared to an estimated decline of 0.3% and 0.4% in the central
and southern regions, respectively. At the same time, our sales volumes in the
north declined 2.9%, while those in the rest of the country grew by
approximately 1.9%. Another factor that materially affected our ability to sell
more of our beer products in the north was a higher presence of beer imports,
particularly during the period of Peso appreciation against the U.S. Dollar in
the first half of 2002. On a quarterly basis, domestic volume trends were as
follows: a 2.2% volume decline in the first quarter, marginal growths of 0.1%
and 0.3% in the second and third quarters respectively, and a decline of 1.3% in
the fourth quarter of 2002, all relative to the comparable quarters of 2001.
Pricing in the domestic market increased by 0.9% in real terms, averaging Ps.
886 per hectoliter in 2002.


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     Export volume grew by 6.1% to 1.955 million hectoliters in 2002, and
represented 8.2% of the total volume sold by FEMSA Cerveza. Volume sold to North
America, FEMSA Cerveza's main export market, increased by 8.2% and accounted for
92.2% of FEMSA Cerveza's export volume. Export volume to Europe and Asia
declined 17.6% and 25.7%, respectively, compared to 2001 and accounted for 2.9%
and 2.8% of total export sales. Average pricing in the export market decreased
by 2.2% in real terms, averaging Ps. 653 per hectoliter in 2002. Export revenues
increased by 3.7% to Ps. 1.276 billion in 2002 and in U.S. Dollar terms, export
revenues increased by 3.7% to US$127 million.

     In 2002, we adopted EITF Consensus No. 01-9, "Accounting for Consideration
Given By a Vendor to a Customer or Reseller of the Vendor's Products," issued by
the FASB. This consensus requires certain selling expenses incurred by FEMSA
Cerveza previously classified as operating expenses to be reclassified as
deductions from revenue. Amortizations that were previously classified as
selling expenses in the amount of Ps. 851 million for 2001 were reclassified as
a reduction in net sales in accordance with this EITF consensus.
Correspondingly, during 2002 we classified Ps. 951 million as a reduction in net
sales.

     Gross Profit

     FEMSA Cerveza's cost of sales for 2002 remained flat at Ps. 8.926 billion
compared to 2001. FEMSA Cerveza's gross profit increased by 1.0% to Ps. 11.889
billion in 2002 from Ps. 11.776 billion in 2001. As a percentage of net sales,
gross margin increased by 30 basis points to 57.6% in 2002, reflecting
enhancements in manufacturing productivity and savings in the plant-to-warehouse
logistics. Cost trends for FEMSA Cerveza's principal raw materials (malting
barley, hops, aluminum cans and glass bottles) remained relatively stable
throughout 2002. The favorable effect of the appreciation of the Peso against
the U.S. Dollar on Dollar-denominated costs during the first half of the year
was more than offset by a depreciation of the Peso against the U.S. Dollar
during the latter half of 2002.

     Income from Operations

     FEMSA Cerveza's operating expenses decreased by 0.4% to Ps. 8.035 billion
in 2002 from Ps. 8.069 billion in 2001 and represented 38.6% of total revenues
in 2002, compared to 39.0% of total revenues in 2001. Administrative expenses
decreased by 0.7% to Ps. 2.175 billion in 2002 from Ps. 2.190 billion in 2001,
reflecting continued expense containment practices across the organization and
an average headcount reduction. Selling expenses decreased by 0.3% to Ps. 5.860
billion in 2002 and represented 28.2% of total revenues. Our success in
containing selling expenses and generating operational savings resulted from the
following:

-    warehouse rationalization across all markets;

-    presale logistics, which by separating the sales and delivery functions
     have reduced significantly unsold load in delivery trucks; and

-    improved resource utilization, which resulted in a net reduction of sales
     routes.

FEMSA Cerveza has continued to invest in the development of its new competitive
business model, which has entailed budgeted expenditures in information
technology platforms (including the ERP system), acquisition of third party
distributorships, high-impact marketing campaigns and deployment of commercial
equipment (such as refrigerators and point-of-sale displays). See "Item 4.
Information on the Company--FEMSA Cerveza--Business Strategy."


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     FEMSA Cerveza recorded Ps. 84 million in 2002 for participation in the
results of affiliated companies (including Labatt USA) compared to Ps. 33
million in 2001. FEMSA Cerveza's income from operations, before deduction of
management fees paid to us and to Labatt, increased by 5.3% to Ps. 3.938 billion
in 2002 over Ps. 3.740 billion recorded in 2001. In 2002, FEMSA Cerveza's
operating margin before deduction of management fees increased by 80 basis
points to 18.9% of total revenues. Management fees amounted to Ps. 392 million
and represented 1.9% of total revenues in 2002 compared to Ps. 413 million
recorded in 2001, which represented 2.0% of total revenues in 2001. FEMSA
Cerveza's income from operations after deduction of management fees amounted to
Ps. 3.546 billion, 6.6% more than in 2001.

Coca-Cola FEMSA

     Total Revenues

     Coca-Cola FEMSA recorded net sales of Ps. 17.492 billion in 2002, a 5.3%
increase over net sales of Ps. 16.612 billion in 2001. Revenue growth was
primarily attributable to strong volume growth and a steady improvement in the
average price per unit case in the Mexican Territories, which more than offset
the volume contraction observed in the Buenos Aires Territories. Other revenues,
which consist mainly of income from toll production agreements with a
neighboring Coca-Cola Bottler in Argentina, whereby Coca-Cola FEMSA has been
producing Coca-Cola brand beverages for sale in its territories, amounted to Ps.
128 million in 2002, 9.6% higher than in 2001. Total revenues for Coca-Cola
FEMSA increased by 5.3% to Ps. 17.620 billion in 2002 from Ps. 16.730 billion in
2001.

     Coca-Cola FEMSA recorded volume growth of 5.6% to 505 million unit cases in
the combined Mexican Territories and an improvement in the real revenue per unit
case of 1.1% during 2002. These improvements resulted in revenue growth of 6.7%
to Ps. 16.133 billion in the combined Mexican Territories for 2002. We believe
that the principal volume drivers in the Mexican Territories in 2002 were:

-    strong performance of Mundet beverages and still water, particularly the
     new 5-liter jug of Ciel;

-    continued expansion in the flavor and "new categories" segments with the
     introduction of new and exciting products, such as Beat, Mundet, Mickey
     Adventures, Kin Light and Nestea; and

-    modest volume growth in the core cola portfolio.

     In the Buenos Aires Territory, Coca-Cola FEMSA operated in a very depressed
economic environment in 2002. Volume decreased by 11.0% to 116 million unit
cases in a year that started off with a severe economic crisis that hampered
demand for our products. Coca-Cola FEMSA responded to this challenging market
with the objectives of defending the brand equity of its brands, regaining
market share from b-brands, extracting positive cash flow, and performing
overall damage containment. As the year progressed, the commercial strategies
implemented by Coca-Cola FEMSA yielded a more favorable outcome, closing the
year with volume growth in the fourth quarter of 2002. The principal strategies
implemented were:

-    shifting the mix back to returnable packages, which jumped from 5.8% of the
     mix in 2001 to 12.4% in 2002; led by the 1.25-liter glass returnable
     presentation of Coca-Cola, Fanta and Sprite; and

-    continuing to promote the core Coca-Cola brand while further developing the
     value protection brands (Tai and Crush).

Together these strategies allowed Coca-Cola FEMSA to defend its pricing
structure and produced an increase in average revenue per unit case of 2.1% in
2002 compared to 2001. The reduction in total revenue was limited to 8.2%.

     Gross Profit

     Coca-Cola FEMSA's cost of sales increased by 5.1% to Ps. 8.130 billion in
2002 from Ps. 7.738 billion in 2001, and its gross profit increased by 5.5% to
Ps. 9.490 billion from Ps. 8.992 billion in 2001. Gross margin expanded by 20
basis points to 54.3% in 2002. Coca-Cola FEMSA's Mexican operations experienced
a gross margin expansion of 90 basis points for the full year 2002, resulting
mainly from solid revenue growth characterized by greater fixed cost absorption
as a result of growth in volumes. The Buenos Aires operation's gross margin
dropped 990 basis points to 36.0% of net sales for the full year 2002, due to
lower absorption of fixed costs as a result of lower volumes, higher prices of
raw materials and a larger depreciation charge in Argentina in connection with
the reevaluation of fixed assets of foreign origin, as a consequence of the
devaluation of the Argentine peso.


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     Income from Operations

     Operating expenses for 2002 decreased by 0.1% to Ps. 5.013 billion. As a
percentage of total revenues, operating expenses decreased 160 basis points to
28.4% in 2002. Administrative expenses in Mexico remained flat as a proportion
of total revenues when compared to 2001; in absolute terms, they increased 7.9%
mainly reflecting investments in preparation for a large acquisition, such as
systems upgrades, administrative consultants and reinforcing managerial staff.

     Administrative expenses for the Buenos Aires Territory grew 17.6% relative
to 2001, due mainly to higher depreciation in local currency in connection with
a reevaluation of our foreign currency-denominated assets.

     Selling expenses for Coca-Cola FEMSA in Mexico increased by 0.2% in 2002,
which represents a reduction of 130 basis points relative to total revenues,
reflecting improvements in operations in Mexico. Selling expenses also decreased
in the Buenos Aires Territories in 2002, as a result of lower marketing expenses
and headcount reduction combined with adjusted salaries.

     Goodwill amortization for 2002 was Ps. 37.3 million, compared to Ps. 100.7
million for 2001, reflecting impairment in the goodwill as a result of the
difficult economic situation in Argentina. In July 2002 Coca-Cola FEMSA recorded
an impairment of Aps.139 million (US$37 million) in the value of its Buenos
Aires investment, valuing its Argentine operation at Aps.289 million (US$86
million). Currently, under Mexican GAAP, goodwill is amortized gradually in the
income statement through a straight-line method for a 20-year period. Coca-Cola
FEMSA's income from operations after amortization of goodwill increased by 14.6%
to Ps. 4.440 billion in 2002 from Ps. 3.873 billion in 2001, reflecting the net
effect of the following:

-    an increase of 15.5% in income from operations of Coca-Cola FEMSA's Mexican
     operations; and

-    a decline of 66.8% in income from operations of Coca-Cola FEMSA's Argentine
     operations.

Coca-Cola FEMSA's operating margin increased by 200 basis points to 25.2% of
total revenues in 2002 from 23.2% of total revenues in 2001.

FEMSA Comercio

     Total Revenues

     FEMSA Comercio's total revenues increased by 18.7% in 2002 to Ps. 12.740
billion from Ps. 10.732 billion in 2001. The increase of total revenues of FEMSA
Comercio was mainly a result of the aggressive expansion of the Oxxo convenience
store chain, which added 437 net new stores during the year. We believe that the
strong revenue growth rate of the Oxxo chain is primarily attributable to:

-    site scouting capabilities;

-    nationwide presence;

-    efficient store setup model, including the "store commissioner" business
     model; and

-    aggressive expansion and saturation business plan.

     The Oxxo chain brought the total number of stores up to 2,216 by year-end
2002. As the chain grows, we have discovered new market opportunities in urban
centers with high pedestrian traffic, such as hospitals and convention centers,
and are increasingly exploiting the convenience store/gasoline station format.
Same-store sales increased by 2.5% with respect to 2001. Same-store sales in our
northwestern markets--which have the highest border town
concentration--performed weakly in 2002. In contrast, the central and southern
regions of the country have experienced significant same-stores sales growth
during 2002. Growth in the northwest was affected by:


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-    economic sluggishness characterized by high rates of unemployment;

-    the strength of the peso during the first semester of 2002 which induced
     consumers to purchase sundries across the border in U.S. territory; and

-    high differentials in the price of gasoline between Mexico and the U.S.
     that caused Mexicans to buy gasoline and therefore convenience store
     products in the U.S. (Mexico being materially more expensive until
     corrective measures were taken in major border towns in December 2002).

     Average monthly traffic per store (within the same-store sample)
increased by 2.1% and the average sale per customer increased by 0.3% during the
full year 2002. We believe that these increases are mainly attributable to:

-    FEMSA Comercio's strategy of competitively pricing traffic-generating
     products;

-    improvement in the value proposition to Oxxo's customers, including cross
     promotions, product introductions, and store enhancements; and

-    Oxxo becoming a reliable payment center where our customers can pay most
     home utilities in one stop.

     Gross Profit

     FEMSA Comercio recorded gross profit of Ps. 3.373 billion for the full year
2002, a 22.4% gain over the Ps. 2.756 billion recorded in 2001. Gross margin
improved 80 basis points to 26.5% of net sales, as compared to 25.7% for 2001,
as the additional scale has also allowed us to establish strategic alliances
with some of our suppliers and thereby reduce costs. In addition, our successful
category management execution and our growing ability to work jointly with our
supplier partners to design differentiated assortment, pricing and promotions
have contributed to gross margin expansion.

     Income from Operations

     Operating expenses increased by 18.7% to Ps. 2.791 billion in 2002 from Ps.
2.352 billion in 2001 and remained flat as a percentage of total revenues at
21.9% in both 2002 and 2001. Administrative expenses increased by only 5.4% to
Ps. 244 million, as the increased costs associated with expansion were mitigated
by higher absorption of fixed administrative costs as more stores were opened in
cities where there is already an Oxxo administrative infrastructure. Selling
expenses increased 20.1% to Ps. 2.546 billion, slightly above total revenue
growth, reflecting higher expenditures associated with the infrastructure
required to manage the expansion of the chain. FEMSA Comercio recorded income
from operations, before deduction of management fees, of Ps. 583 million in
2002, an increase of 44.3% from the Ps. 404 million recorded in 2001. FEMSA
Comercio's operating margin before management fees grew 80 basis points to 4.6%
of total revenues in 2002 from 3.8% in 2001. In 2002, management fees amounted
to Ps. 95.7 million or 0.8% of total revenues compared to Ps. 106.3 million or
1.0% of total revenues in 2001. FEMSA Comercio's operating margin after
deduction of management fees increased by 100 basis points to 3.8% of total
revenues in 2002.

FEMSA Empaques

     Total Revenues

     FEMSA Empaques' total revenues increased 0.3% to Ps. 6.599 billion in 2002
from Ps. 6.577 billion in 2001, which was mainly attributable to a surge in
demand in beverage cans and glass bottles coupled with the favorable effect of
the weaker Peso on our U.S. Dollar revenues in the second half of the year.
These increases offset slower demand for our packaging products in the first six
months of 2002. For the full year, average capacity utilization was close to
full in all of our main product lines.

     Beverage can volumes reversed the weakness observed during 2001 by posting
a growth of 6.8% in sales volume to 3.000 billion can units in 2002. In the
second half of the year, the beverage can unit experienced increased demand from
its main commercial partners domestically and abroad: FEMSA Cerveza, Coca-Cola
FEMSA and Ball. We met this demand by reducing our sales to smaller domestic
third party clients. Average real prices for beverage cans, which are quoted in
U.S. Dollars, decreased by approximately 0.6%, following a multi-year trend of
convergence with international prices for these products.


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     Glass bottle volumes grew a solid 8.4% to 1.053 billion bottle units in
2002, while peso-denominated prices decreased 1.4%. FEMSA Empaques has
encountered very high demand for its glass products domestically, since there is
currently almost no excess capacity in the industry. Coca-Cola FEMSA purchased a
larger number of 8 oz non-returnable glass Coca-Cola contour bottles. Supply of
internal clients rose from 68.4% in 2001 to 89.2% in 2002. FEMSA Empaques
commenced an inventory buildup during the fourth quarter of 2002 in preparation
for the scheduled replacement of one of its glass furnaces in the first quarter
of 2003, which involved approximately 85 days of inactivity.

     Sales volumes for crown caps increased 1.8% in 2002 despite the decline in
demand for crown caps in the domestic market, reflecting FEMSA Empaques' success
in the export markets, particularly in the North American market, where FEMSA
Empaques is a major crown cap supplier for Labatt, Miller Brewing Company and
Coors Brewing Company. FEMSA Empaques increased its crown cap export ratio from
51% in 2001 to a record 55% in 2002.

     Export revenues increased by 12.2% to Ps. 720 million and represented 10.9%
of net sales in 2002. In U.S. Dollar terms, export revenues increased by 12.4%
to US$71.7 million. Intercompany sales accounted for 58.3% of FEMSA Empaques'
total revenues in 2002, compared to 56.4% for the same period last year. These
intercompany sales are eliminated in our consolidated income statement.

     Gross Profit

     FEMSA Empaques' cost of sales decreased by 1.2% to Ps. 4.994 billion in
2002 from Ps. 5.057 billion in 2001, mainly due to the following factors:

-    efficiencies achieved in the manufacturing lines that resulted in less
     spoilage and lower headcount;

-    consistency in the average contracted price of steel sheets; and

-    slight declines in the average price for bulk aluminum and ancillary raw
     materials.

     Gross profit increased by 5.6% to Ps. 1.605 billion in 2002 from Ps. 1.520
billion in 2001, resulting in a gross margin expansion of 130 basis points to
24.4% of net sales in 2002, as compared to 23.1% in 2001. Improvement in gross
profit is closely related to exchange rate fluctuations: as the peso depreciated
against the dollar towards the end of the year, dollar denominated income for
metallic products increased at a faster rate than costs, which have significant
peso-denominated components. FEMSA Empaques is gradually recovering its
long-term gross margin level, which has reached as high as 24.4% in the last
five years, by means of implementing high productivity measures in the
manufacturing plants such as the elimination of line personnel and middle
management and application of ERP systems.

     Income from Operations

     Operating expenses increased by 6.5% to Ps. 600 million in 2002 from Ps.
564 million in 2001 and increased only 50 basis points as a percentage of total
revenues to 9.1% in 2002. For the full year 2002, FEMSA Empaques recorded
parallel increases in selling expenses and administrative expenses of 7.0% and
5.5% respectively. The increase in selling expenses is mainly attributable to
higher shipment costs. The increase in administrative expenses is mainly
attributable to the one-time implementation costs of ERP modules in Famosa.

     Income from operations before deduction of management fees increased by
5.0% to Ps. 1.005 billion in 2002 from Ps. 957 million for 2001, primarily
reflecting the growth in gross profit. FEMSA Empaques recorded an operating
margin before deduction of management fees of 15.2% in 2002, compared to a 14.5%
margin recorded in 2001. In 2002, management fees amounted to Ps. 99 million, or
1.5% of total revenues, compared to Ps. 101 million recorded in 2001, also 1.5%
of total revenues. FEMSA Empaques' operating margin after deduction of
management fees was 13.7% in 2002 compared to 13.0% in 2001. Operating margin
was significantly affected in the first quarter of 2002, under a considerably
strong peso scenario, but rebounded to record levels in the second and third
quarters, as the peso depreciated.


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Logistica

     For the year ended December 31, 2002, Logistica recorded total revenues of
Ps. 1.458 billion, a decline of 5.4% compared to Ps. 1.540 billion recorded in
2001, and generated Ps. 209 million in gross profit and Ps. 119 million in
operating profit (which excludes operating expenses in connection with
e-commerce projects). As of December 31, 2002 Logistica mainly provided services
to affiliates, as a result of which approximately 83% of Logistica's revenues
were eliminated in our consolidated financial statements. FEMSA Cerveza,
Coca-Cola FEMSA and FEMSA Empaques accounted for approximately 56%, 15% and 12%
of Logistica's revenues, respectively, in 2002.

     As of January 1, 2003, FEMSA's 70%-owned subsidiary Logistica CCM, which
had been consolidated in the results of Logistica, was merged into FEMSA
Cerveza. See "Item 4. Information on the Company--Logistica."

FEMSA Consolidated--Net Income

     Our consolidated net income decreased by 7.4% to Ps. 4.613 billion in 2002,
from Ps. 4.980 billion recorded in 2001. The decrease in net income recorded for
the full year 2002 resulted from the net effect of:

-    an 11.2% increase in consolidated income from operations;

-    the write off of a portion of our goodwill related to the acquisition of
     Coca-Cola FEMSA Buenos Aires;

-    a significant increase in the consolidated integral result of financing
     loss, primarily in connection with the devaluation of the peso against the
     dollar in the second half of the year; and

-    a larger tax provision.

     Goodwill

     In view of the continued deterioration and uncertainty in the Argentine
economic conditions, we decided to take a more conservative approach in the
valuation of the goodwill related to our investments in that country. Therefore,
in the third quarter we wrote down Aps.139 million (US$ 37 million) related to
the acquisition of the territories of Coca-Cola FEMSA Buenos Aires. In view of
the prevailing volatility of the Argentine currency, we also decided to take a
conservative approach and stop considering our investment in Coca-Cola FEMSA
Buenos Aires as a hedge for the dollar-denominated liabilities incurred in
connection to this acquisition, thereby affecting the integral cost of financing
for 2002 in the foreign exchange and monetary position calculations. These
adjustments were non-cash.

     Integral Cost of Financing

     In the twelve months ended December 31, 2002, we recorded a consolidated
integral cost of financing of Ps. 396 million, compared to a consolidated
integral cost of financing of Ps. 282 million for the comparable period in 2001.
In 2002, consolidated net financial expense decreased by 2.5% to Ps. 460 million
as compared to Ps. 472 million in 2001. Consolidated interest expense decreased
by 4.4% to Ps. 906 million compared to 2001, mainly attributable to lower
average real rates for our liabilities, although our average gross liabilities
increased by 3.4% in 2002 and the dollar portion was subsequently affected by
the devaluation of the peso against the dollar that occurred in the second half
of the year. This was partially compensated by the reduction in consolidated
interest income, which decreased by 6.3% to Ps. 446 million reflecting the net
effect of lower interest rates earned on our investments relative to the year
2001 and a larger average cash position in pesos. As of December 31, 2002, our
weighted average cost of debt was 6.9%, approximately 90 basis points lower than
the weighted average cost of debt as of December 31, 2001.

     For the year 2002, we recorded a consolidated foreign exchange loss of Ps.
325 million compared to a foreign exchange gain of Ps. 230 million for the year
2001, primarily reflecting:

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<PAGE>

-    the effect of the depreciation of the Peso against the U.S. dollar, which
     totaled Ps. 1.28 per dollar in the year, on our net dollar liabilities in
     Mexico, compared to an appreciation of Ps. 43 cents on higher net dollar
     liabilities observed in 2001; and

-    the depreciation of the Argentine peso against the U.S. dollar on our net
     dollar assets in Argentina, which had a positive effect on the foreign
     exchange variation during 2002.

     The gain on monetary position for the year 2002 amounted to Ps. 389
million, compared to a loss of Ps. 40 million in 2001. This gain was mainly
generated as a result of the inflation rate for the twelve months in Argentina
over the debt incurred in connection with the acquisition of Coca-Cola FEMSA
Buenos Aires. The Argentine inflation rate for 2002 was 41.2%. It should be
noted that the Argentine goodwill impairment, as explained above, had an impact
on the foreign exchange variation and monetary position lines.

     Other Expenses (Income)

     Our consolidated other expenses for the year 2002 amounted to Ps. 858
million, consisting mainly of the aforementioned impairment of a portion of the
goodwill on our investments in Argentina charged in the third quarter, plus
severance payments and asset write-offs.

     Income Tax, Tax on Assets, and Employee Profit Sharing

     Our consolidated income before income tax, tax on assets and employee
profit sharing increased by 3.6% to Ps. 8.237 billion in 2002 from Ps. 7.954
billion in 2001, primarily reflecting a larger consolidated integral result of
financing loss. We recognized consolidated income tax, tax on assets and
employee profit sharing of Ps. 3.624 billion in 2002, an increase of 23.1% over
the Ps. 2.945 billion in 2001. This increase was primarily a consequence of an
increase of 19.6% in our income tax, largely resulting from a deferred tax
benefit realized in 2001 as a result of a reduction in the Mexican statutory
income tax rate, the increase in non-deductible expenses generated in the course
of business and the impairment to the goodwill generated by the acquisition of
Coca-Cola FEMSA Buenos Aires. The combined effective tax rate for 2002 was
44.0%.

     Net Income

     Our consolidated net income decreased by 7.4% amounting to Ps. 4.613
billion for 2002 compared with Ps. 4.980 billion recorded in 2001, combining the
improvement in consolidated income from operations, the goodwill write-off, an
increase in the consolidated integral result of financing loss, and a larger tax
provision. Consolidated net majority income amounted to Ps. 2.837 billion for
2001, a reduction of 16.4% as compared with Ps. 3.393 billion recorded in 2001.
Net majority income per FEMSA Unit amounted to Ps. 2.678 in 2002, compared with
Ps. 3.203 for last year.




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           Results of Operations for the Year Ended December 31, 2001
                  Compared to the Year Ended December 31, 2000

FEMSA Consolidated

     Total Revenues/Net Sales

     Our consolidated total revenues increased by 6.1% to Ps. 50.097 billion for
the year ended December 31, 2001, from Ps. 47.232 billion for the year ended
December 31, 2000. Consolidated net sales increased by 5.9% to Ps. 49.952
billion in 2001 from Ps. 47.169 billion in 2000 and represented 99.7% of total
revenues in 2001, down from 99.9% in 2000. Net sales growth in 2001 was driven
primarily by volume growth and improved pricing experienced by FEMSA Cerveza and
Coca-Cola FEMSA's Mexican operations, whose total revenues both increased by
4.3%, and by the addition of 297 new Oxxo stores in the case of FEMSA Comercio,
whose net sales increased by 19.8%. FEMSA Cerveza contributed to our revenue
growth with domestic volume growth of 0.7%, export volume growth of 6.6%, and an
increase in domestic revenue per hectoliter of 3.9%. Coca-Cola FEMSA recorded
net sales growth of 4.0%, resulting from increases in volume and pricing of 3.6%
and 1.1%, respectively, in its Mexican operations, and an increase in volume of
6.9% in the Buenos Aires franchise that partially compensated for the
deterioration of the average unit price per case in that market. FEMSA Empaques'
net sales and total revenues declined by 5.1% in 2001, reflecting an on going
competitive and difficult operating environment particularly for the aluminum
beverage can business.

     Gross Profit

     Our consolidated gross profit increased by 7.3% to Ps. 25.226 billion in
2001 from Ps. 23.504 billion in 2000, representing a consolidated gross margin
of 50.5%, stable compared to 2000. The stability in the consolidated gross
margin reflects:

-    relatively healthy consolidated revenue growth in our beverage businesses
     in Mexico;

-    the prevalence of a very favorable cost environment for our beverage
     operations enhanced by management's efforts to raise productivity and
     improve efficiencies to adapt to a period of economic slowdown; and

-    a decline in the variable U.S. Dollar-denominated costs of production for
     FEMSA Cerveza and Coca-Cola FEMSA as a result of the appreciation of the
     Peso against the U.S. Dollar.

     Income from Operations

     Our consolidated operating expenses (including goodwill amortization and
management fees paid to Labatt) increased by 5.3% to Ps. 16.726 billion in 2001
from Ps. 15.878 billion in 2000. As a percentage of total revenues, our
consolidated operating expenses decreased by 20 basis points to 33.4% in 2001.
This result reflects efforts by Coca-Cola FEMSA and FEMSA Empaques to reduce
operating expenses, which effectively offset the increase in operating expenses
recorded by FEMSA Cerveza and FEMSA Comercio during 2001. Consolidated
administrative expenses increased by 4.2% to Ps. 4.608 billion in 2001 from Ps.
4.424 billion in 2000, primarily reflecting an increase in efficiency in terms
of administrative expense with respect to total revenues. Consolidated selling
expenses grew by 5.8% to Ps. 12.118 billion from Ps. 11.454 billion, reflecting
higher store setup costs related to FEMSA Comercio's aggressive expansion and
costs associated with FEMSA Cerveza's new business model.

     Some of our subsidiaries pay management fees to Emprex in consideration for
corporate services provided to such subsidiaries. Our subsidiaries' payment of
management fees are eliminated in consolidation and thus have no effect on our
consolidated operating expenses, with the exception of the management fee paid
by FEMSA Cerveza to Labatt, which amounted to Ps. 124 million in 2001 and Ps.
117 million in 2000. Our consolidated income from operations (after
participation in the results of affiliated companies) increased by 11.4% to Ps.
8.533 billion from Ps. 7.663 billion in 2000, driven primarily by a significant
increase in profitability in Coca-Cola FEMSA, coupled with operating income
growth in FEMSA Cerveza and FEMSA Comercio. Our consolidated operating margin
increased by 80 basis points to 17.0% of consolidated total revenues, from 16.2%
in 2000.


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<PAGE>

FEMSA Cerveza

     Total Revenues/Net Sales

     FEMSA Cerveza's net sales increased by 4.3% to Ps. 20.551 billion in 2001
from Ps. 19.709 billion in 2000. FEMSA Cerveza's total revenues increased by
4.3% to Ps. 20.703 billion in 2001 from Ps. 19.841 billion in 2000, mainly
reflecting:

-    increase in total sales volume of 1.1% to 23.861 million hectoliters; and

-    increase in domestic revenue per hectoliter of 3.9% to Ps. 877.5,
     reflecting the increase in the domestic price of beer, which in nominal
     terms averaged 9.0% and was implemented during the first four months of
     2001. The net acquisition of third-party distributors during 2001 resulted
     in a reduction in wholesale margins (margins granted to distributors),
     which also contributed to the improvement in revenue per hectoliter.

     FEMSA Cerveza's domestic sales volume increased by 0.7% to 22.018 million
hectoliters in 2001 from 21.867 million hectoliters in 2000, reflecting the
combination of 12.7% volume growth in the first quarter, a decline of 4.3% and
3.1% in the second and third quarters respectively, and an increase of 0.5% in
the fourth quarter of 2001, all relative to the comparable quarters of 2000.

     For the twelve months ended December 31, 2001, FEMSA Cerveza recorded 1.0%
sales volume growth in the northern regions, where the company sustained the
highest pricing levels nationwide. FEMSA Cerveza's sales volume increased by
only 0.3% in the central and the southern regions on average, reflecting
competitive pressures generated from lower prices from competitors and slower
economic growth in the central and southern regions of the country during the
second half of the year. It is worth noting that the growth in beer sales in
northern Mexico for FEMSA Cerveza in 2001 was led by the northeast region, as
the northwest was more affected by the sharp increase in unemployment from the
many maquiladoras (manufacturing operations along the Mexico-U.S. border) that
ceased operations early in 2001. Furthermore, the economic activity in northwest
border cities was particularly affected by the sluggish U.S. economy as well as
the strength of the Peso against the U.S. Dollar. We estimate that average
per-capita consumption of beer in Mexico was 51.2 liters in 2001, which
represents virtually no change relative to 2000.

     Both the can and the non-returnable glass presentations continued to
increase as a percentage of domestic sales volume primarily at the expense of
the one-liter returnable glass bottle presentations. In the twelve months of
2001, returnable presentations in the domestic markets accounted for 77.4% of
the mix, compared to 78.8% in 2000. We attribute the increase in the proportion
of non-returnable presentations to:

-    decline in the relative prices of such presentations compared to returnable
     presentations; and

-    decline in consumption of beer in returnable packages by the lower
     socioeconomic levels of the population, reflecting adverse economic
     conditions.

     Export sales volume grew by 6.6% to 1.84 million hectoliters for the twelve
months of 2001. Sales volume to North America increased by 6.5% and accounted
for 90.3% of FEMSA Cerveza's export sales volume. Prices for Tecate in the
United States were increased in excess of the average price increase implemented
in the imported beer category. Sales volume to Asia represented 4.0% of export
sales volume in 2001, and grew at a pace of 20.1% as compared to 2000.
Furthermore, FEMSA Cerveza made significant advancements in reducing the
administrative and market-related expenses in connection with its international
operations outside the Unites States. Export revenues decreased by 1.1% to Ps.
1.230 billion in 2001, and in U.S. Dollar terms, export revenues increased by
7.3% to US$123 million.

     In compliance with EITF No. 01-9 issued by the FASB, as described above in
"--Results of Operations for the Year Ended December 31, 2002 Compared to the
Year Ended December 31, 2001", we reclassified Ps. 851 million of operating
expenses as a reduction in net sales for the year 2001 and Ps. 636 million of
operating expenses as a reduction in net sales for the year 2000.

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<PAGE>

     Gross Profit

     FEMSA Cerveza's cost of sales increased by only 1.0% to Ps. 8.927 billion
in the twelve months of 2001 from Ps. 8.838 billion in 2000. FEMSA Cerveza
recorded gross profit growth of 7.0% to Ps. 11.776 billion in 2001 from Ps.
11.003 billion in 2000. Consequently, gross margin improved by 150 basis points
to 57.3% of net sales. Gross margin expansion at FEMSA Cerveza has shown four
consecutive years of healthy growth, from 47.6% for the twelve months of 1997 to
57.3% in 2001. In 2001, the improvement in gross margin resulted from strong
domestic pricing and a reduction of fixed and variable costs from:

-    lower prices of raw materials and packaging costs resulting from a more
     competitive environment in the domestic market and the effect of the real
     appreciation of the Peso against the U.S. Dollar in U.S. Dollar-denominated
     prices of raw and packaging materials; and

-    productivity enhancements and on-going cost reduction programs, such as
     headcount adjustments, designed to operate more efficiently under adverse
     economic conditions.

     Income from Operations

     FEMSA Cerveza's operating expenses increased by 7.5% to Ps. 8.069 billion
for the twelve months ended December 31, 2001 from Ps. 7.510 billion in 2000,
representing 39.0% of total revenues, compared to 37.8% of total revenue for the
same period last year.

     Administrative expenses increased by 11.4% to Ps. 2.190 billion in 2001
from Ps. 1.966 billion in 2000. The rate of increase in administrative expenses
did, however, decrease as the year progressed and expense containment and
rationalization measures were implemented. Selling expenses increased by 6.1% to
Ps. 5.879 billion in 2001 from Ps. 5.544 billion in 2000. The increase in
operating expenses is attributable to the following factors:

-    higher demand and channel-related expenses in connection with FEMSA
     Cerveza's strategic targeting of its consumers;

-    incremental costs in connection with the roll-out of FEMSA Cerveza's new
     business model; and

-    incremental expenses associated with the purchase of third-party
     distributors.

     FEMSA Cerveza's income from operations, after participation in the results
of Labatt USA and before deduction of management fees paid to us and to Labatt,
increased by 5.9% to Ps. 3.740 billion in 2001. FEMSA Cerveza's operating margin
before management fees increased slightly by 30 basis points to 18.1% compared
to 2000. Management fees paid to us and to Labatt grew by 6.0% and amounted to
Ps. 413 million, representing 2.0% of total revenues in 2001 compared to Ps. 390
million recorded in 2000. FEMSA Cerveza's income from operations after deduction
of management fees amounted to Ps. 3.326 billion, an increase of 5.9% compared
to 2000.

Coca-Cola FEMSA

     Total Revenues/Net Sales

     Coca-Cola FEMSA recorded net sales of Ps. 16.612 billion in 2001, a 4.0%
increase over net sales of Ps. 15.968 billion in 2000, and total revenues
increased by 4.3% to Ps. 16.730 billion in 2001 from Ps. 16.035 billion in 2000.
Net sales growth is primarily attributable to stable volume growth and pricing
in the Mexican Territories and a significant improvement in the sales volume
performance in the Buenos Aires Territory. Other revenues increased by 74.9% in
the year and amounted to Ps. 117 million. This increase reflects a toll
operations agreement with a neighboring Coca-Cola bottler in Argentina, signed
in February whereby Coca-Cola FEMSA has been producing Coca-Cola brand beverages
for sale in its territories. Coca-Cola FEMSA recorded volume growth of 3.6% in
the combined Mexican Territories and an improvement in the average revenue per
unit case of 1.1% during 2001, attributable mainly to successful revenue
management practices and to a shift in the presentation mix; prices were not
nominally increased in 2001. These improvements resulted in net sales growth of
4.8% in the combined Mexican Territories for 2001. We believe that the principal
volume drivers in the Mexican Territories in 2001 were:


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<PAGE>

-    the introduction of new products that met very favorable demand, such as
     "Senzao," a guarana-flavored carbonated beverage, and Ciel sparkling
     mineral water;

-    the introduction of new packaging presentations that addressed specific
     market niches, such as the 250-ml PET non-returnable for flavored soft
     drinks, the 2-liter returnable PET for lower income areas, and the classic
     8 oz non-returnable contour Coca-Cola bottle, for bars and restaurants; and

-    continued emphasis on targeting consumers via sales promotions, events and
     sponsorships.

     Notwithstanding the difficult economic environment in Argentina, sales
volume in the Buenos Aires Territory increased by 6.9% in 2001, despite a volume
decline of 2.8% during the fourth quarter of 2001. Sales volume in this region
declined by 1.5% in colas and increased by 34.4% for flavored soft drinks. The
sales volume increase in Buenos Aires was attributable to the following factors:

-    the volume growth of premium brands such as Coca-Cola light, Sprite light
     and Schweppes, which grew by 15.7% during 2001 as compared to the same
     period in 2000; and

-    the strong performance of value protection brands such as Tai and Crush,
     which accounted for 11.8% of our total product mix in 2001.

     Average real price per unit case in Argentine pesos decreased by 9.3%
during 2001 as a result of the growth of the value protection brands, a shift in
product mix toward larger packaging presentations, and the decline in the
Argentine economic environment. Total revenues in the Buenos Aires Territory
decreased by only 0.5% for the full-year 2001, highlighting Coca-Cola FEMSA's
success at extracting revenue from an economically depressed marketplace through
sophisticated segmentation strategies, targeted promotions, and tolling
production to other bottlers to improve plant utilization and efficiency.

     Gross Profit

     Coca-Cola FEMSA's cost of sales decreased by 0.5% to Ps. 7.738 billion in
the year ended December 31, 2001 from Ps. 7.773 billion in 2000, and gross
profit increased by 8.8% to Ps. 8.992 billion from Ps. 8.262 billion in 2000.
Gross margin expanded by 240 basis points to 54.1% of net sales in 2001 from
51.7% of net sales in 2000. Coca-Cola FEMSA's Mexican operations experienced a
gross margin expansion of 220 basis points for the full year 2001. This
expansion in gross margin resulted mainly from strong top line growth over a
decreasing cost base. The increase in cost efficiency reflects:

-    higher fixed-cost absorption driven by sales volume growth;

-    lower unit price of certain raw materials due to the appreciation of the
     Peso against the U.S. Dollar; and

-    fixed-cost reductions resulting from the closing of one plant and two
     distribution facilities in the Valley of Mexico during 2001 and two plants
     in the Southeast of Mexico during 2000.

     In Buenos Aires, cost of sales as a percentage of net sales decreased by 40
basis points in 2001, mainly due to fixed-cost reductions resulting from
productivity and efficiency initiatives and the closing of the San Justo plant
in 2000 and the Roca distribution center in 2001.

     Income from Operations

     For the year ended December 31, 2001, operating expenses decreased by 1.1%
to Ps. 5.018 billion from Ps. 5.074 billion in 2000. As a percentage of total
revenues, operating expenses dropped 160 basis points to 30.0% in 2001 compared
to 31.6% in 2000. The decrease in operating expenses resulted from a decline of
1.3% in administrative expenses (excluding goodwill amortization) to Ps. 1.287
billion in 2001, and of 1.0% in selling expenses to Ps. 3.731 billion in 2001.
The reduction in Coca-Cola FEMSA's administrative expenses was primarily due to
lower administrative expenses in both Mexico and Buenos Aires, reflecting
significant savings achieved in Buenos Aires from headcount optimization across
Coca-Cola FEMSA and the implementation of a seasonal labor program.

     Selling expenses for Coca-Cola FEMSA in Mexico decreased by 1.8%, as a
percentage of total revenues, representing a decline of 150 basis points, which
in turn reflects a combination of the following factors:


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<PAGE>

-    increase in sales volume;

-    decrease in distribution costs; and

-    lower bottle breakage and case replacement costs due to a higher
     non-returnable volume mix.

     In contrast, selling expenses increased 5.1% in the Buenos Aires
Territories in 2001, which represented an increase of 170 basis points as a
ratio to total revenues, resulting from higher marketing costs.

     Coca-Cola FEMSA's income from operations after goodwill amortization
increased by 25.7% to Ps. 3.873 billion in 2001 from Ps. 3.080 billion in 2000,
reflecting the combined effect of the following:

-    an increase of 25.4% in income from operations of Coca-Cola FEMSA's Mexican
     operations; and

-    an increase of 8.1% in income from operations of Coca-Cola FEMSA's
     Argentine operations.

Coca-Cola FEMSA recorded goodwill amortization of Ps. 101 million in 2001, a
decrease of 7.0% as compared to 2000. Coca-Cola FEMSA's operating margin
increased by 400 basis points to 23.2% of total revenues in 2001 from 19.2% of
total revenue in 2000.

FEMSA Comercio

     Total Revenues/Net Sales

     FEMSA Comercio's net sales increased by 19.8% for the twelve months ended
December 31, 2001 to Ps. 10.731 billion from Ps. 8.956 billion in 2000,
surpassing the one-billion-dollar annual sales milestone. Total revenues also
increased by 19.8% to Ps. 10.732 billion in 2001 from Ps. 8.957 billion in 2000.
The increase in net sales is mainly a result of the aggressive growth in selling
space of the Oxxo convenience store chain during 2001, which added a net of 297
new stores to reach a total of 1,779 stores, representing a growth of average
selling space of 20.0% as compared to 2000. The expansion process was marked by
further penetration into border cities in the north and large cities in the
southeast, and by accelerated saturation in the hub cities of Monterrey, Mexico
City and Guadalajara.

     Oxxo's average same-store sales increased by 4.5% in 2001, a significant
reduction in the pace of growth displayed during the three previous years, which
underlines the challenges encountered in the northern markets and a weak economy
in general.

     Average monthly traffic per store increased by 2.6%, and the average sale
per customer increased by 1.9% during the full year 2001, which was achieved in
spite of the difficult economic and competitive conditions in the northern
border markets, compounded by a strong Peso-Dollar exchange rate, which
increasingly induce shoppers to buy relatively cheaper groceries in the United
States.

     Oxxo increased its same-store revenues by applying carefully tailored
promotions that enhance the value offered to its shoppers. In addition, Oxxo has
developed a program to continuously roll-out high impact cross promotions both
on national and local scales, many of which feature FEMSA Cerveza's products or
support their marketing campaigns. Examples of these include the launch of the
Tecate 16 oz can presentation and special contests related to the CART Series
Tecate Grand Prix in 2001.

     Gross Profit

     FEMSA Comercio recorded gross profit of Ps. 2.755 billion for the twelve
months ended December 31, 2001, a 19.7% gain over the Ps. 2.302 billion recorded
for the twelve months ended December 31, 2000. The gross margin remained
constant at 25.7% of net sales, reflecting Oxxo's ability to maintain a stable
cost structure in an environment of rapid selling space growth.



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<PAGE>

     Income from Operations

     Operating expenses increased by 21.8% to Ps. 2.352 billion for the twelve
months ended December 31, 2001 from Ps. 1.931 billion in 2000 and increased by
30 basis points as a ratio to total revenues to 21.9% in 2001 from 21.6% in
2000. The increase in operating expenses is primarily attributable to:

-    an accelerated increase in the number of stores;

-    investments in central office infrastructure, distribution centers and
     personnel necessary to support the rapid expansion of the Oxxo chain;

-    investments in an integrated ERP system platform that reengineers the
     logistics of merchandise supply across the whole store chain;

-    investments in more flexible in-store management software, which features
     improved connectivity with central headquarters;

-    investments in the development of the Bara discount store chain; and

-    expenses related to the setup of FEMSA Comercio's e-commerce initiatives.

     FEMSA Comercio recorded income from operations, before deduction of
management fees, of Ps. 404 million in 2001, an increase of 8.9% from the Ps.
371 million recorded in 2000. However, FEMSA Comercio's income from operations,
excluding the operating loss recorded by the Bara Discount stores and the
expenses in connection with the infrastructure for e-commerce and technological
projects, improved by 33.9% from 2000 to 2001. FEMSA Comercio's operating margin
before management fees decreased by 30 basis points to 3.8% of total revenues in
2001 from 4.1% in 2000. In 2001, management fees amounted to Ps. 106 million or
1.0% of total revenues compared to Ps. 66 million or 0.7% of total revenues in
2000. FEMSA Comercio's operating margin after deduction of management fees
decreased by 60 basis points to 2.8% of total revenues in 2001 from 3.4% of
total revenues in 2000.

FEMSA Empaques

     Total Revenues/Net Sales

     FEMSA Empaques experienced a 5.1% decline in net sales to Ps. 6.569 billion
for the twelve months ended December 31, 2001 from Ps. 6.919 billion for the
twelve months ended December 31, 2000. Total revenues also decreased by 5.1% to
Ps. 6.577 billion in 2001 from Ps. 6.929 billion in 2000, which was mainly
attributable to:

-    decrease in the volumes of FEMSA Empaques' main product lines, including
     beverage cans and glass bottles, which together represent 52.9% of FEMSA
     Empaques' net sales;

-    lower prices for finished beverage cans as a result of the extremely
     competitive environment; and

-    the negative effect of the real appreciation of the Peso against the U.S.
     Dollar on the Peso revenues of U.S. Dollar-denominated packaging products,
     namely beverage cans and crown caps.

     The volume of glass bottles, crown caps, and refrigerators increased by
23.0%, 4.7% and 4.1%, respectively, in 2001 over 2000, while the volume of
beverage cans decreased by 6.4% in 2001 over 2000.

     Sales volumes for crown caps continue to increase despite the decline in
demand for crown caps in the domestic market, reflecting FEMSA Empaques' success
in the export markets, particularly to North America. As of December 31, 2001
FEMSA Empaques supplied crown caps for one hundred percent of Coors' and
Labatt's crown caps supply. Average pricing for crown caps decreased by
approximately 5% in 2001.

     Volumes of commercial refrigerators increased significantly in 2001 as
FEMSA Empaques supplied all the sub-zero capable refrigerators required by the
rollout of FEMSA Cerveza's cooler placement program. Additionally, FEMSA
Empaques was a major supplier for Coca-Cola FEMSA in its cooler placement
program.


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<PAGE>

     Volumes of glass bottles increased significantly as a result of the
following factors:

-    the purchase of non-returnable 8 oz glass bottles by Coca-Cola FEMSA for
     its new Coca-Cola presentation;

-    the purchase of returnable glass bottles by FEMSA Cerveza for its bottle
     replacement program since most of FEMSA Cerveza volumes are sold in a glass
     bottle returnable presentation;

-    increase in sales to third party clients; and

-    decrease in real prices of glass bottles by approximately 13% in 2001.


     The beverage can business was affected in 2001 by a combination of the
following factors:

-    reduction in the real price of beverage cans of approximately 6%, which is
     quoted in U.S. Dollars;

-    decline in volume sold to Coca-Cola FEMSA and IEQSA, as a result of lower
     demand for canned soft drinks; and

-    reduction in exports of beverage cans.

     FEMSA Cerveza increased its purchases of beverage cans in 2001 principally
as a result of its promotion of the 16 oz Tecate can.

     Export revenues decreased by 11.0% to Ps. 642 million and represented 9.8%
of net sales in 2001, compared to Ps. 722 million, which represented 10.5% of
net sales in 2000. In U.S. Dollar terms, export revenues decreased by 4.1% to
US$64 million.

     Intercompany sales accounted for 56.4% of FEMSA Empaques' total revenues
for the twelve months ended December 31, 2001, compared to 53.4% for the same
period last year. These intercompany sales are eliminated in our consolidated
financial statements.

     Gross Profit

     FEMSA Empaques' cost of sales decreased by 3.2% to Ps. 5.057 billion for
the twelve months ended December 31, 2001 from Ps. 5.221 billion in 2000. Gross
profit decreased by 11.0% to Ps. 1.520 billion in 2001 from Ps. 1.708 billion in
2000, and gross profit margin decreased by 160 basis points to 23.1% of net
sales in 2001, as compared to 24.7% in 2000, reflecting:

-    reduction in net sales;

-    reduction in the gross margin of the beverage can and crown cap operations
     as a result of the real appreciation of the Peso against the U.S. Dollar;
     and

-    depressed pricing environment for packaging products in the domestic market
     as a result of increased competition.

     Income from Operations

     Operating expenses decreased by 5.4% to Ps. 564 million for the twelve
months ended December 31, 2001 from Ps. 596 million in 2000 and remained
constant as a percentage of total revenues at 8.6%. For the full year 2001,
FEMSA Empaques recorded declines in both selling and administrative expenses as
a result of lower volumes and headcount reductions.

     Income from operations before deduction of management fees decreased by
14.0% to Ps. 957 million in 2001 from Ps. 1.112 billion for 2000, which
primarily reflects the decline in net sales and in gross profit. FEMSA Empaques
recorded an operating margin before deduction of management fees of 14.5% in
2001, compared to a 16.0% margin recorded in 2000, a reduction of 150 basis
points. In 2001, management fees amounted to Ps. 101 million, or 1.5% of total
revenues, compared to Ps. 103 million recorded in 2000, also 1.5% of total
revenues. FEMSA Empaques' operating margin after deduction of management fees
was 13.0% in 2001 compared to 14.6% in 2000, a reduction of 160 basis points.
The contraction in operating margin reflects the fact that businesses like FEMSA
Empaques, which have certain Peso-denominated operating costs (such as wages and
salaries, distribution and selling expenses and administrative overhead) and
record revenues denominated in U.S. Dollars, typically experience contracting
operating margins in periods of Peso appreciation.


                                       94
<PAGE>

Logistica

     For the year ended December 31, 2001, Logistica recorded net sales of Ps.
1.532 billion, a decrease of 1.1% compared to the Ps. 1.549 billion recorded in
2000. Total revenues decreased by 0.5% to Ps. 1.540 billion in 2001 from Ps.
1.549 billion in 2000. Logistica generated Ps. 211 million in gross profit and
Ps. 99 million in operating profit (which excludes operating expense in
connection with e-commerce projects). As of December 31, 2001 Logistica mainly
provided services to affiliates, and thus as a result approximately 90% of
Logistica's revenues are not reflected in our consolidated financial statements.
FEMSA Cerveza, Coca-Cola FEMSA and FEMSA Empaques accounted for approximately
66%, 14% and 10% of Logistica's revenues, respectively, in 2001.

FEMSA Consolidated--Net Income

     FEMSA's consolidated net income increased by 30.1% from Ps. 3.827 billion
recorded in 2000 to Ps. 4.980 billion for the twelve months ended December 31,
2001. The increase in net income is the result of:

-    an 11.4% increase in consolidated income from operations; and

-    a decline of 82.0% in the consolidated integral result of financing.

         The term "integral result of financing" refers to the combined
financial effects of:

-    net interest expense or interest income;

-    net foreign exchange gain or loss; and

-    net gain or loss on monetary position.

     Please refer to Note 4(n) of our consolidated financial statements for a
description of the integral result of financing components.

     In the twelve months ended December 31, 2001, we recorded a consolidated
integral result of financing expense of Ps. 282 million, significantly lower
than the consolidated integral result of financing expense of Ps. 1.571 billion
recorded for 2000. In the twelve months of 2001, consolidated net interest
expense decreased by 34.4% to Ps. 472 million compared to Ps. 719 million in the
comparable period of 2000. The decline in net interest expense is primarily
attributable to a decline of 18.3% in our interest expense from Ps. 1.160
billion in 2000 to Ps. 948 million in 2001, which in turn reflects:

-    a 100 basis point reduction in the weighted average cost of debt reflecting
     lower base rates for our variable-rate debt;

-    a slight decline in our average indebtedness; and

-    the appreciation of the Peso against the U.S. Dollar of 4.5% when comparing
     the year-end exchange rate of 9.18 in December 31, 2001 to the year-end
     exchange rate of 9.61 in December 31, 2000, in terms of its impact on our
     U.S. Dollar-denominated debt.

     In addition, consolidated interest income increased by 7.9%, from Ps. 441
million in 2000 to Ps. 476 million in 2001 reflecting higher cash balances
despite lower interest rates earned on Peso investments as compared to 2000. As
of December 31, 2001, our weighted average cost of debt was 7.8%, 100 basis
points lower than the weighted average cost of debt as of December 31, 2000.

     We recorded a consolidated foreign exchange gain of Ps. 230 million
compared to a foreign exchange loss of Ps. 1.121 billion recorded in 2000,
primarily reflecting the effect of the appreciation of the Peso against the U.S.
Dollar on our U.S. Dollar denominated indebtedness during 2001 and a foreign
exchange gain of Ps. 69 million recorded by Coca-Cola FEMSA Buenos Aires during
the fourth quarter of 2001 from holding U.S. Dollar-denominated assets. The
foreign exchange loss we recorded in 2000 was mostly related to the loss
recorded from foreign exchange forward contracts entered into during 2000.




                                       95
<PAGE>

     The loss in consolidated monetary position amounted to Ps. 40 million
reflecting the increase in our Mexican operations' net monetary asset position
as well as declining Mexican inflation.

     Other Expenses (Income)

     Consolidated other expenses for 2001 amounted to Ps. 297 million, compared
to consolidated other income of Ps. 243 million recorded for 2000. The expenses
recorded in 2001 were in connection with asset impairments, write-offs and
severance related costs.

     Income Tax, Tax on Assets, and Employee Profit Sharing

     Our consolidated income before income tax, tax on assets and employee
profit sharing increased by 25.6% to Ps. 7.954 billion in 2001 from Ps. 6.335
billion in 2000, primarily reflecting the increase in the consolidated net
integral cost of financing. Our taxes are computed on a consolidated basis, and
we are the consolidating entity for tax purposes. Our consolidated income tax,
tax on assets and employee profit sharing amounted to Ps. 2.945 billion in 2001,
an increase of 17.4% relative to the 2.508 billion recorded for 2000. Of the Ps.
2.945 billion, Ps. 2.765 billion is current income tax expense, Ps. 292 is
employee profit sharing expense, and Ps. 112 million is deferred income tax
gain. Our combined effective rate for the full year 2001 was 37.0%, lower than
the 39.6% combined effective rate for the full year 2000 as a result of a
reduction in the Mexican statutory income tax rate.

     Net Income

     Our consolidated net income increased by 30.1% amounting to Ps. 4.980
billion for 2001 compared with Ps. 3.827 billion recorded in 2000, primarily
reflecting the improvement in consolidated income from operations and a
reduction in the consolidated integral results of financing. Consolidated net
majority income amounted to Ps. 3.393 billion for 2001, an increase of 23.5% as
compared with Ps. 2.748 billion recorded for 2000. Net majority income per FEMSA
Unit amounted to Ps. 3.203, compared with Ps. 2.589 for last year, an increase
of 23.7%. See "Item 9. The Offer and Listing--Description of Securities."


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<PAGE>



                         Liquidity and Capital Resources

Liquidity

     Currently, each of our subholding companies finance their business and
capital requirements. Although we have historically followed centralized
financing strategies, whereby Emprex was responsible for the majority of our
financing transactions and funds were lent to our operating subsidiaries, as of
December 31, 2002, 88.5% of our outstanding consolidated indebtedness was
incurred at the level of the subholding companies. This strategy is
attributable, in part, to the inclusion of third parties in the capital
structure of both FEMSA Cerveza and Coca-Cola FEMSA. In 1996, however, this
policy was also implemented with respect to FEMSA Empaques and FEMSA Comercio.
We believe that we have been able to improve our overall financing profile and
that of each of our subholding companies through this policy. We expect to
continue to finance our operations primarily at the level of the subholding
companies.

     The principal source of liquidity of each subholding company has generally
been generated from operations. We have traditionally been able to rely on cash
generated from operations because a significant majority of the sales of FEMSA
Cerveza, Coca-Cola FEMSA and FEMSA Comercio are on a cash or short-term credit
basis, and FEMSA Comercio's Oxxo stores are able to finance a significant
proportion of their initial and ongoing inventories with supplier credit. Our
principal use of cash has generally been for capital expenditure programs, debt
repayments and dividend payments.
<TABLE>
<CAPTION>

                             Principal Uses of Cash

                                                                         For the Year Ended December 31,
                                                                          (Millions of Constant Pesos)
                                                                    2002                2001                2000
                                                                    ----                ----                ----
<S>                                                                <C>             <C>                    <C>
Net resources generated by operations....................        Ps. 9,182        Ps.    9,390       Ps.    7,984
Capital expenditures(1)..................................           (5,540)             (5,314)            (4,571)
Bank loans, notes and interest payable...................            5,482                (508)              (620)
Dividends declared and paid..............................           (1,140)               (632)              (720)
</TABLE>

(1) Includes Property, Plant and Equipment plus Deferred Charges.

     Our subholding companies generally incur short-term indebtedness, in the
event that they are temporarily unable to finance operations or meet any capital
requirements with cash from operations. A significant decline in the business of
any of our subholding companies may affect such subholding company's ability to
fund its capital requirements. A significant and prolonged deterioration in the
Mexican economy or in our business may affect our ability to obtain short-term
and long-term credit on terms satisfactory to us.

     We have traditionally financed significant acquisitions, principally
Coca-Cola FEMSA's acquisition of Coca-Cola Buenos Aires in 1994 and more
recently our acquisition of Panamco in May 2003, capital expenditures and other
capital requirements that could not be financed with cash from operations by
incurring long-term indebtedness.

     Servicing the substantial indebtedness incurred by Coca-Cola FEMSA in
connection with the acquisition of Panamco will require a significant amount of
Coca-Cola FEMSA's future net resources from operations and may decrease the
amount available to it to invest in its business, meet its other obligations or
obtain other financing on satisfactory terms. In addition, the terms of the
indebtedness may restrict Coca-Cola FEMSA's ability to incur additional
indebtedness. See "--Acquisition of Panamco."

     We believe that our sources of liquidity as of December 31, 2002 were
adequate for the conduct of our subholding companies' businesses and that we
will have sufficient funds available to meet our expenditure demands and
financing needs in 2003.


                                       97
<PAGE>

Contractual Obligations

     The table below sets forth our significant long-term contractual
obligations as of December 31, 2002:
<TABLE>
<CAPTION>

                             Contractual Obligations
                             As of December 31, 2002
                                   In Millions


                                                          Operating Leasing                    Other
                                 Long-Term Debt             Commitments                Contractual Obligations
                                Pesos     Dollars       Pesos          Dollars          Pesos         Dollars
<S>                               <C>        <C>         <C>            <C>              <C>           <C>
2003.......................   Ps.  180   $    859      Ps.  236         $   26            --           $ 16(1)
2004.......................        180      3,527           213             22            --               1
2005.......................        680      1,297           200             16            --               1
2006.......................        910      3,428           187              8            --               1
2007.......................      1,250      1,200           173              4            --              --
2008.......................         --         19           159             --            --              --
2009 and thereafter........         --         43           968             --            --              --
</TABLE>

(1)  Refers to the contract with Pemex described in "Item 11. Quantitative and
     Qualitative Disclosure About Market Risk--Commodity Price Risk and a
     capital lease."

     As of December 31, 2002, we had total consolidated indebtedness of
approximately Ps. 13,806 million, of which Ps. 4,003 million was due within one
year and Ps. 10,679 million was long-term debt. As of December 31, 2002, our
consolidated average cost of borrowing was approximately 6.9%, compared to an
average cost of borrowing of 7.8% in 2001. The decrease in our average cost of
borrowing mainly reflects a decrease in the London interbank offered rate, or
LIBOR, a benchmark rate used for Eurodollar loans. As of December 31, 2002,
69.6% of our consolidated indebtedness was denominated and payable in U.S.
Dollars.


                                       98
<PAGE>



         The following table shows the allocations of debt among the companies:
<TABLE>
<CAPTION>


                                                           Debt Profile of the Companies
                                                              As of December 31, 2002

                                Short-term      Long-term
Obligor                          Debt(1)        Debt(2)        Total Debt            Average Cost
                                             (in Millions of Constant Pesos)       Pesos        Dollars
<S>                               <C>              <C>            <C>               <C>          <C>
FEMSA Holding
(Peso denominated debt)           959               --             959              9.4%
FEMSA Holding
(Dollar denominated debt)         628               --             628                            2.2%
FEMSA Cerveza
(Peso Denominated debt)            41            3,200           3,241              8.5%
FEMSA Cerveza
(Dollar denominated debt)          --            2,684           2,684                            7.5%
Coca-Cola FEMSA(3)                 --            3,179           3,179                --          9.1%
FEMSA Comercio(4)                 471              837           1,308                --          2.7%
FEMSA Empaques(4)               1,028              703           1,731                --          2.9%
FEMSA Logistica                    --               76              76                --          4.6%
  Total                    Ps.  3,127      Ps.  10,679       Ps. 13,806              8.7%         6.2%
                           ==========     ============       ==========           ========      =======
</TABLE>

(1)  Excludes letters of credit, bank drafts and notes payable.
(2)  Includes the Ps. 876 million current portion of long-term debt.
(3)  Coca-Cola FEMSA incurred significant indebtedness in connection with the
     acquisition of Panamco in May 2003 "--Indebtedness Incurred in Connection
     with the Acquisition of Panamco."
(4)  Excludes subordinated intercompany debt.

     Generally, the covenants contained in the credit facilities entered into by
our subholding companies include limitations on the incurrence of any additional
debt based on debt service coverage ratios or leverage tests. The credit
agreements entered into by our subholding companies or their subsidiaries also
generally include restrictive covenants applicable to our subholding companies
and their subsidiaries. There are no cross-guarantees between subholding
companies, and neither Emprex nor we have provided guarantees with respect to
any of the debt obligations of our subholding companies.

     The following is a summary of our indebtedness by subholding company:

-    FEMSA Cerveza. As of December 31, 2002, FEMSA Cerveza's total outstanding
     debt was Ps. 5,925 million, which included Ps. 41 million of outstanding
     short-term trade and working capital loans under three different
     facilities. As of December 31, 2002, FEMSA Cerveza had approximately Ps.
     5,884 million of long-term debt outstanding that included a Ps. 272 million
     medium-term revolving loan, Ps. 3,625 million of equipment financing loans,
     and Ps. 1,987 million private placement secured notes, of which Ps. 418
     million was paid in February 2003 and Ps. 1,569 million is payable in
     October 2004. As of December 31, 2002, FEMSA Cerveza had U.S.
     Dollar-denominated approved, uncommitted lines of credit totaling
     approximately Ps. 2,876 million, of which Ps. 2,835 million was available
     as of such date. FEMSA Cerveza's average cost of debt as of December 31,
     2002 was 8.5% in Pesos and 7.5% in U.S. Dollars mainly due to the relative
     weight of a new peso-denominated loan whose interest rate is 8.8%, and to
     the increase in the Cetes rate.


                                       99
<PAGE>


-    Coca-Cola FEMSA. Coca-Cola FEMSA's current financing policy is to rely
     primarily on internally generated resources to fund existing operations and
     capital expenditures relating to these operations while relying on external
     resources to finance the acquisition of new bottling territories. Coca Cola
     FEMSA incurred significant new indebtedness in May 2003 in connection with
     the acquisition of Panamco. See "--Indebtedness Incurred in Connection with
     the Acquisition of Panamco." As of December 31, 2002, Coca-Cola FEMSA's
     total indebtedness amounted to Ps. 3,179 million of long-term debt.
     Coca-Cola FEMSA's long-term indebtedness as of December 31, 2002 is related
     to:

     -    the acquisition of a 51% interest in the Buenos Aires Territory from
          The Coca-Cola Company, for which Coca-Cola FEMSA borrowed
          approximately Ps. 1,046 million under a 10-year private placement that
          matures in 2004; and

     -    a Ps. 2,092 million 10-year Yankee bond issued in October 1996, the
          proceeds of which were primarily used to repay short-term indebtedness
          incurred to increase Coca-Cola FEMSA's interest in Coca-Cola FEMSA
          Buenos Aires to 75% and to fund the purchase of certain corporate
          assets of an Argentine Coca-Cola bottler, SIRSA, including inventory
          and the assignment of certain commercial contracts.

         As of December 31, 2002, Coca-Cola FEMSA had U.S. Dollar-denominated,
         uncommitted approved lines of credit totaling approximately Ps. 3,220
         million, all of which was available as of such date. Coca-Cola FEMSA's
         average cost of debt was 9.1% in U.S. Dollars as of December 31, 2002
         and 2001.

-    FEMSA Comercio. As of December 31, 2002, FEMSA Comercio's total outstanding
     debt was Ps. 1,308 million which consisted of a Ps. 837 long-term
     syndicated loan denominated in U.S. Dollars that matures in August 2006,
     and Ps. 471 million of U.S. Dollar-denominated short-term debt maturing
     during 2003. As of December 31, 2002, FEMSA Comercio had U.S.
     Dollar-denominated approved, uncommitted lines of credit totaling Ps. 601
     million of which Ps. 131 million was available as of such date. FEMSA
     Comercio's average cost of debt was 2.7% in U.S. Dollars as of December 31,
     2002 compared to 4.8% as of December 31, 2001.

-    FEMSA Empaques. As of December 31, 2002, FEMSA Empaques' total outstanding
     debt was Ps. 1,731 million, Ps. 1,028 million of which consisted of
     short-term trade and working capital loans and the remaining Ps. 703
     million of long-term indebtedness. As of December 31, 2002, FEMSA Empaques'
     long-term debt obligations amounted to Ps. 75 million under long-term
     credit agreements incurred in connection with equipment financing
     transactions and/or government sponsored export-financing programs of the
     countries of origin of such equipment and Ps. 628 million of a long term
     syndicated loan maturing in December 2005. As of December 31, 2002, FEMSA
     Empaques had U.S. Dollar-denominated approved, uncommitted lines of credit
     totaling Ps. 1,349 million, of which Ps. 324 million was available as of
     such date. FEMSA Empaques' average cost of debt was 2.9% as of December 31,
     2002 compared to 5.7% as of December 31, 2001; and

-    FEMSA Logistica. As of December 31, 2002, FEMSA Logistica had total
     obligations of Ps. 76 million in the form of a mortgage loan that matures
     in May 2006 and November 2007. FEMSA Logistica's cost of debt was 4.6% as
     of December 31, 2002 compared to 6.8% as of December 31, 2001.

Indebtedness Incurred in Connection with the Acquisition of Panamco

         Coca-Cola FEMSA has incurred the following new indebtedness in 2003,
totaling US$1,978 million, in connection with the acquisition of Panamco:

-    Bridge Loans in the amount of Ps. 1,006.2 million and US$739 million, each
     of which matures April 28, 2004;

-    Term Loans in the amount of Ps. 2,741.3 million (maturing in five years,
     with semi-annual installments beginning in 30 months), US$286.5 million
     (maturing in three years) and US$208.5 million (maturing in five years,
     with semi-annual installments beginning in 30 months); and

-    Mexican Certificados Bursatiles in the amount of Ps. 2,000 million
     (maturing in four years), Ps. 1,250 million (maturing in five years) and
     Ps. 1,000 million (maturing in seven years).


                                      100
<PAGE>

     Coca-Cola FEMSA has also acquired approximately US$512.1 million of
existing indebtedness of Panamco, which is denominated in U.S. Dollars, Mexican
Pesos and Colombian Pesos. The Bridge Loans and, to the lesser extent the Term
Loans and Certificados Bursatiles contain restrictions on the conduct of the
business of Coca-Cola FEMSA. Specifically, the Bridge Loans significantly
restrict the ability of Coca-Cola FEMSA and its subsidiaries to incur additional
indebtedness, to make investments or acquisitions, to dispose of assets or to
engage in certain other fundamental transactions and require Coca-Cola FEMSA to
maintain certain financial ratios. Although in connection with the acquisition,
Coca-Cola FEMSA paid off a significant portion of the debt of Panamco and its
subsidiaries. Panamco and its subsidiaries continue to have other indebtedness.

Capital Expenditures

     For the past four years, we have had significant capital expenditure
programs, which for the most part were financed with cash from operations.
Principal components of our capital expenditures have been for equipment,
market-related investments, and production capacity and distribution network
expansion at FEMSA Cerveza and at Coca-Cola FEMSA; the construction of new Oxxo
stores at FEMSA Comercio; and plant improvements at FEMSA Empaques.

Expected Capital Expenditures for 2003

     Our capital expenditure budget for 2003 is expected to be approximately Ps.
11.1 billion. The following discussion is based on each of our subholding
companies' internal 2003 budgets. The capital expenditure plan for 2003 is
subject to change based on market and other conditions and the subsidiaries'
results of operations and financial resources.

     FEMSA Cerveza's capital expenditure budget for 2003 is expected to be
approximately Ps. 4.9 billion. FEMSA Cerveza expects to allocate part of this
budget for investments in its manufacturing facilities, predominantly related to
marginal capacity expansions of its breweries and equipment modernization. FEMSA
Cerveza also expects to apply a portion of this budget towards the improvement
of its distribution assets, including new and replacement vehicles, towards the
maintenance of a secondary distribution fleet and towards its ERP and
information technology systems. In addition, FEMSA Cerveza plans to invest in
commercial and market-related activities such as the enhancement of its retail
coverage, to acquire third-party distributors, to develop long-term sponsorships
and to place refrigeration equipment nationwide.

     Coca-Cola FEMSA's capital expenditure budget for 2003 is expected to be
approximately Ps. 3.7 billion. Coca-Cola FEMSA plans to allocate a portion of
this budget towards facilitating the integration of operations within the
facilities acquired as a result of the Panamco acquisition. This integration
includes standardizing its information systems and overhauling plant facilities
and distribution centers. In addition, portions of its budget are expected to be
allocated towards investments in returnable bottles and cases and market-related
investments, primarily for the placement of refrigeration equipment

     Coca-Cola FEMSA estimates that approximately 80% of its capital expenditure
budget for 2003 will be spent in its Mexican Territories. Coca-Cola FEMSA
believes that internally generated funds and borrowing from third-party sources,
if needed, will be sufficient to meet its capital expenditure and working
capital requirements for 2003. Coca-Cola FEMSA's capital expenditure budget for
2003 is subject to change based on market and other conditions and its results
of operations and financial resources. Coca-Cola FEMSA's ability to incur new
indebtedness is limited.

     FEMSA Comercio's capital expenditure budget in 2003 is expected to total
approximately Ps. 1.9 billion. The year 2003's budget will be allocated to the
addition of new Oxxo stores and to a lesser extent to the opening of Bara stores
and the refurbishing of the existing Oxxo stores. In addition, investments are
planned in FEMSA Comercio's information technology and ERP software systems.

     FEMSA Empaques' capital expenditure budget for 2003 is expected to be
approximately Ps. 650 million to be allocated among its various product lines
and facilities.


                                      101
<PAGE>

Hedging Activities

     Our business activities require the holding or issuing of derivative
instruments to hedge our exposure to market risks related to changes in interest
rates, foreign currency exchange rates, equity risk and commodity price risk.
See "Item 11. Quantitative and Qualitative Disclosures about Market Risk."

     In connection with our trading activities we have entered into commodity
contracts to hedge against price fluctuations and other market risks. FEMSA
Cerveza has entered into derivative contracts to hedge interest rates and the
prices of natural gas. See "Item 11. Quantitative and Qualitative Disclosures
about Market Risk--Commodity Price Risk."

     The following table provides a summary of the fair value of derivative
instruments as of December 31, 2002. The fair market value is obtained mainly
from external sources, which are our counterparties to the contracts.
<TABLE>
<CAPTION>

                                                                                Fair Value
                                                                           At December 31, 2002
                                                                       (Millions of Constant Pesos)

                                                       Maturity      Maturity                   Maturity in    Total
                                                     less than 1       1 - 3        Maturity    excess of 5     fair
                                                         year          years      4 - 5 years      years       value
<S>                                                       <C>          <C>           <C>           <C>         <C>
Prices quoted by external sources................          19             1           --            --           20
</TABLE>


                  Plan for the Disposal of Certain Fixed Assets

     We have identified certain fixed assets consisting of land, buildings and
equipment for disposal, and we have an approved program for disposal of these
fixed assets. These assets are not in use and have been valued at their
estimated realizable value, according to independent appraisals. These assets
are allocated as follows:
<TABLE>
<CAPTION>
                                                                                        December 31,
In Millions of Pesos                                                                2002            2001
<S>                                                                                <C>               <C>
FEMSA Cerveza...............................................................       Ps. 393         Ps. 303
Coca-Cola FEMSA.............................................................           --              26
FEMSA Empaques..............................................................           39              33
FEMSA.......................................................................          328             352
                                                                                      ---             ---
    Total...................................................................      Ps. 760         Ps. 714
</TABLE>

     Fixed assets recorded at their estimated realizable value are considered
monetary assets on which a loss on monetary position is computed and recorded in
the results of operation.

                            U.S. GAAP Reconciliation

     The principal differences between Mexican GAAP and U.S. GAAP that affect
our net majority income and majority shareholders' equity relate to the
accounting treatment of the following items:

-    deferred income taxes and deferred employee profit sharing;
-    goodwill amortization;
-    capitalization of interest expense; and
-    restatement of imported machinery and equipment.


                                      102
<PAGE>

For a more detailed description of the differences between Mexican GAAP and U.S.
GAAP as they relate to us and a reconciliation of net majority income and
majority shareholders' equity under Mexican GAAP to net income and shareholders'
equity under U.S. GAAP, see Notes 24 and 25 to our consolidated financial
statements.

     Pursuant to Mexican GAAP, our consolidated financial statements recognize
certain effects of inflation in accordance with Bulletin B-10 and B-12. These
effects were not reversed in the reconciliation to U.S. GAAP.

     Under U.S. GAAP, we had net income of Ps. 3,083 million and Ps. 3,178
million in 2002 and 2001, respectively. Under Mexican GAAP, we had net majority
income of Ps. 2,837 million and Ps. 3,393 million in 2002 and 2001,
respectively. In 2002, net income under U.S. GAAP was higher than net majority
income under Mexican GAAP, mainly as a result of the effect of deferred income
taxes and deferred employee profit sharing. In 2001, approximate net income
under U.S. GAAP was lower than net majority income under Mexican GAAP, mainly as
a result of the amortization of the goodwill, generated in the acquisition of
the minority interest of Emprex through the 1998 exchange offer. (See Notes 4(m)
and 24(i) and (l) to our consolidated financial statements.)

     Shareholders' equity under U.S. GAAP as of December 31, 2002 and 2001 was
Ps. 36,767 million and Ps. 35,196 million, respectively. Under Mexican GAAP,
majority shareholders' equity as of December 31, 2002 and 2001 was Ps. 23,015
million and Ps. 21,173 million, respectively. The principal reasons for the
difference between majority shareholders' equity under U.S. GAAP and Mexican
GAAP were the effect of the goodwill generated by the minority interest
acquisition and the restatement of imported machinery and equipment, partially
offset by effects of deferred income taxes and deferred employee profit sharing.



                                      103
<PAGE>



ITEM 6.  DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

                                    Directors

     Management of our business is vested in the board of directors (the "Board
of Directors"). Our bylaws provide that the Board of Directors consists of the
number of Directors and Designated Alternate Directors elected by our
shareholders at the annual ordinary general shareholders meeting. Directors are
elected for a term of one year, although they remain in office until successors
are appointed. Alternate Directors are authorized to serve on the Board of
Directors in place of Directors who are unable to attend meetings and may
participate in the activities of the Board of Directors. Since May 11, 1998, our
Board of Directors has consisted of eighteen members. Our bylaws provide that
the holders of the Series B Shares elect at least eleven Directors and that the
holders of the Series D Shares elect five Directors. The shareholders may
designate Alternate Directors to cover the absences of a specific Director. Upon
the issuance of Series L Shares or upon the conversion of the Series D-L Shares,
the holders of the Series L Shares will be entitled to elect two Directors. See
"Item 10. Additional Information--Bylaws."

     The names and positions of the current members of the Board of Directors,
their dates of birth and information on their principal business activities
outside our company are outlined in the following table. In each case, the date
presented as "First elected" corresponds to the earliest appointment to the
Board of Directors of either FEMSA, Emprex or FEMSA's predecessor Valores
Industriales, S.A. See "Item 4. Information on the Company--The Reorganization."
<TABLE>
<CAPTION>

                           Board of Directors of FEMSA
<S>                                         <C>                      <C>
Series "B" Directors
Eugenio Garza Laguera                        Born:                      December 1923
     Director and Honorary                   First elected:             1960
     Life Chairman                           Term expires:              2004
                                             Other directorships:       Honorary Life Chairman of Coca-Cola FEMSA,
                                                                        Instituto Tecnologico de Estudios Superiores
                                                                        de Monterrey ("ITESM") and BBVA Bancomer.
                                             Business experience:       Joined FEMSA in 1946 in the research
                                                                        department of Cerveceria Cuauhtemoc.
                                             Other experience:          Holds degrees in chemical engineering from the
                                                                        University of  Texas and in business administration from
                                                                        ITESM.
                                             Alternate director:        Mariana Garza de Trevino(3)(9)

Jose Antonio Fernandez(1)                    Born:                      February 1954
Director and Chairman of the Board           First elected (Chairman):  2001
                                             First elected (Director):  1984
                                             Term expires:              2004
                                             Principal occupation:      Chief Executive Officer of FEMSA
                                             Other directorships:       Chairman of the Board of Coca-Cola FEMSA,
                                                                        Vice-Chairman of the Board of ITESM and
                                                                        Member of the Boards of BBVA Bancomer, Grupo
                                                                        Industrial Saltillo, S.A. de C.V., Industrias
                                                                        Penoles, S.A. de C.V. and Grupo Industrial
                                                                        Bimbo, S.A. de C.V. ("Grupo Bimbo").
</TABLE>


                                      104
<PAGE>
<TABLE>
<CAPTION>
<S>                                         <C>                          <C>
                                             Business experience:       Joined FEMSA's strategic planning department
                                                                        in 1987.  Held managerial positions at FEMSA
                                                                        Cerveza's Commercial Division and Oxxo.
                                                                        Appointed our Chief Executive Officer in
                                                                        1995.
                                             Other experience:          Holds a degree in industrial engineering and
                                                                        an MBA from ITESM.
                                             Alternate director:        Federico Reyes

Juan Carlos Braniff Hierro (1)               Born:                      April 1957
     Director                                First elected:             1987
                                             Term expires:              2004
                                             Principal occupation:      Vice Chairman of the Board of BBVA Bancomer
                                             Other directorships:       Member of the Boards of El Paso Energy Corp.,  Maizoro,
                                                                        S.A. de C.V. and
                                             Business experience:       Has experience in the financial services industry,
                                                                        specifically in capital and patrimonial investments,
                                                                        mortgage banking, commercial banking, international banking
                                                                        and e-banking.
                                             Other                      experience: Holds a degree in industrial design from the
                                                                        Universidad Autonoma de Mexico, Atzcapotzalco.
                                             Alternate director:        Paulina Garza de Marroquin(3)(9)

Jose Calderon                                Born:                      September 1931
     Director                                First elected:             1955
                                             Term expires:              2004
                                             Principal occupation:      Chairman of Inversiones Franca, S.A. de C.V.
                                             Other directorships:
                                             Member of the Boards of
                                             BBVA Bancomer and Grupo
                                             Industrial Alfa, S.A. de
                                             C.V. ("Grupo Alfa") and
                                             Vice Chairman of the Board
                                             of the Mexican Red Cross.
                                             Other experience:          Holds a degree in business administration
                                                                        from ITESM.
                                             Alternate director:        Francisco J. Calderon(4)

Consuelo Garza de Garza(2)                   Born:                      October 1930
     Director                                First elected:             1995
                                             Term expires:              2004
                                             Business experience:       Founder and Former President of Asociacion
                                                                        Nacional Pro-Superacion Personal (a
                                                                        non-profit organization)
                                             Alternate director:        Alfonso Garza Garza(6)

Max Michel Suberville                        Born:                      July 1932
     Director                                First elected:             1985
                                             Term expires:              2004
                                             Principal occupation:      Chairman of the Board of El Puerto de
                                                                        Liverpool, S.A. de C.V.
                                             Other directorships:       Member of the Boards of Grupo Lamosa, S.A. de
                                                                        C.V., Industrias Penoles, S.A. de C.V., BBVA
                                                                        Bancomer and Grupo Nacional Provincial, S.A.
                                             Other                      experience: Holds a graduate degree from The Massachusetts
                                                                        Institute of Technology and completed post-graduate studies
                                                                        at Harvard University.
                                             Alternate director:        Max Michel Gonzalez(7)

</TABLE>


                                      105
<PAGE>
<TABLE>
<CAPTION>
<S>                                         <C>                          <C>
Alberto Bailleres                            Born:                      August 1931
     Director                                First elected:             1995
                                             Term expires:              2004
                                             Principal occupation:      Executive President of Industrias Penoles,
                                                                        S.A. de C.V., Grupo Nacional Provincial,
                                                                        S.A., and Grupo BAL, S.A. de C.V.
                                             Other directorships:       Chairman of the Board of Industrias Penoles, S.A. de C.V.,
                                                                        Grupo Nacional Provincial, S.A. and Grupo Palacio de Hierro
                                                                        S.A. de C.V. Member of the Boards of BBVA Bancomer and
                                                                        Valores Mexicanos Casa de Bolsa,
                                             Other experience:          Holds an economics degree from Instituto Tecnologico
                                             Alternate director:

Eduardo A. Elizondo                          Born:                      December 1922
     Director                                First elected:             1995
                                             Term expires:              2004
                                             Principal occupation:      Attorney at law
                                             Other directorships:       Member of the Board of BBVA Bancomer,
                                                                        Chairman of the Regional Board of Advisors of
                                                                        Bancomer, S.A., and Grupo Industrial Ramirez,
                                                                        S.A.
                                             Business experience:       Served as Treasurer General from 1961 to 1967
                                                                        and Constitutional Governor from 1967 to 1971
                                                                        for the State of Nuevo Leon.  Acted as
                                                                        Chairman of the Board of Valores of
                                                                        Monterrey, S.A. de C.V.
                                             Other experience:          Mr. Elizondo holds a law degree from the
                                                                        Universidad Autonoma de Nuevo Leon ("UANL").
                                             Alternate director:        Juan Guichard Michel(10)

Ricardo Guajardo Touche                      Born:                      May 1948
     Director                                First elected:             1988
                                             Term expires:              2004
                                             Principal occupation:      Chairman of the Board of BBVA Bancomer
                                             Other directorships:       Member of the Board of El Puerto de Liverpool, S.A. de C.V.,
                                                                        Grupo Alfa, BBVA Bancomer, Grupo Aeroportuario del Sureste,
                                             Business experience:       Has held senior executive positions in our company, Grupo
                                                                        AXA, S.A. de C.V. and Valores de Monterrey, S.A. de C.V.
                                             Other experience:          Holds degrees in electrical engineering from ITESM and the
                                                                        University of Wisconsin and a Masters degree from the
                                                                        University of California at Berkeley.

                                             Alternate director:        Eva Garza de Fernandez(3)(9)
</TABLE>

                                      106
<PAGE>

<TABLE>
<CAPTION>

<S>                                         <C>                         <C>
Alfredo Livas                                Born:                      July 1951
     Director and Secretary                  First elected:             1995
                                             Term expires:              2004
                                             Principal occupation:      President of Praxis Financiera, S.C.
                                             Other directorships:       Member of the Boards of Grupo Jomar, S.A. de
                                                                        C.V. and British American Tobacco (Mexican Board).
                                             Business experience:       Joined FEMSA in 1978 and held several positions in the areas
                                                                        of financial planning and treasury and served as Chief
                                                                        Financial Officer from 1989 to 1999.
                                             Other experience:          Holds an economics degree from the UANL and an MBA and
                                                                        Masters degree in economics from the University of Texas.
                                             Alternate Director:        Jose Gonzalez Ornelas

Roberto Servitje                             Born:                      January 1928
     Director                                First elected:             1995
                                             Term expires:              2004
                                             Principal occupation:      Chairman of the Board of Grupo Bimbo
                                             Other directorships:       Member of the Board of DaimlerChrysler de
                                                                        Mexico, S.A.
                                             Business experience:       Founding Member and active Chairman of Grupo
                                                                        Bimbo.
                                             Other experience:          Holds a PMD degree from Harvard University
                                             Alternate director         Alfredo Martinez Urdal

Carlos Salguero                              Born:                      October 1929
     Director                                First elected:             1995
                                             Term expires:              2004
                                             Business experience:       Former Executive Vice President of Phillip
                                                                        Morris International.
                                             Other directorships:       Former Member of the Boards of Tabacalera
                                                                        Mexicana, S.A. de C.V., Tabacalera
                                                                        Costarricense, S.A., Tabacalera
                                                                        Centroamericana, S.A. and other Latin
                                                                        American companies.
                                             Other experience:          Holds a business degree from the Colombian
                                                                        Faculty of Economic Sciences, postgraduate
                                                                        studies in economics and management from
                                                                        Albany Business College and University
                                                                        College (Syracuse).  Received an Honor for
                                                                        Civil Merit by H.M. the King of Spain in 1995.
                                             Alternate director:        Eduardo Padilla Silva
</TABLE>

                                      107
<PAGE>

<TABLE>
<CAPTION>

<S>                                        <C>                         <C>
Jose Manuel Canal Hernando                   Born:                      February 1940
     Director                                First elected:             2003
                                             Term expires:              2004
                                             Principal occupation:      Private consultant
                                             Other directorships:       Member of the Board of Coca-Cola FEMSA.
                                             Business experience:       Former managing partner at Ruiz, Urquiza y Cia, S.C., from
                                                                        1981 to 1999. Acted as statutory auditor of the Company from
                                                                        1984 to 2002. Presided in the Committee of Surveillance of
                                                                        the Mexican Institute of Finance Executives and has
                                                                        participated in several commissions at the Mexican
                                                                        Association of Public Accountants. Has extensive experience
                                                                        in financial auditing for holding companies, banks and
                                                                        financial brokers.
                                             Other experience:          Holds a CPA degree from the Universidad
                                                                        Autonoma de Mexico.
                                             Alternate director:        Othon Paez Garza(5)

Barbara Garza Gonda de Braniff(3)(11)        Born:                      December 1959
     Director                                First elected:             2002
                                             Term expires:              2004
                                             Principal occupation:      Vice President of Fundacion Cultural Bancomer
                                             Other directorships:       Alternate Director of Coca-Cola FEMSA.
                                             Business experience:       Has worked in Bancomer, Citibank and Banca
                                                                        Serfin.
                                             Other experience:          Holds a degree in business administration and
                                                                        an MBA from ITESM.
                                             Alternate director:        Carlos Salazar Lomelin

Series "D" Directors
Alexis E. Rovzar                             Born:                      July 1951
     Director                                First elected:             1989
                                             Term expires:              2004
                                             Principal occupation:      Executive Partner at White & Case S.C. law
                                                                        firm
                                             Other directorships:       Member of the Boards of Coca-Cola FEMSA,
                                                                        Grupo Bimbo, Deutsche Bank (Mexico), Grupo
                                                                        ACIR, S.A. de C.V. and COMEX, S.A. de C.V.
                                             Business experience:       Has expertise in private and public mergers and acquisitions
                                                                        as well as other aspects of financial law and has been
                                                                        advisor to many companies on international business and
                                                                        joint venture transactions.
                                             Other experience:          Holds a law degree from the Universidad Nacional Autonoma
                                                                        de Mexico.
                                             Alternate director:        Lorenzo Garza Hinojosa
</TABLE>

                                      108
<PAGE>
<TABLE>
<CAPTION>

<S>                                         <C>                           <C>
Luis Tellez                                  Born:                      October 1958
     Director                                First elected:             2001
                                             Term expires:              2004
                                             Principal Occupation:      Executive Vice President, Grupo Desc, S.A. de
                                                                        C.V.
                                             Other directorships:       Member of the Boards of Grupo Mexico, S.A. de
                                                                        C.V. and Casa de Cambio Monex, S.A. de C.V.
                                                                        and Member of the Board of Review for
                                                                        Kissinger-McCarty Associates.
                                             Business experience:       Served as Secretary of Energy of Mexico from 1997 to 2000
                                                                        and Chief of Staff of the President of Mexico from 1996 to
                                                                        1997.
                                             Other experience:          Holds an economics degree from Instituto
                                                                        Tecnologico Autonomo de Mexico and a Ph.D. in
                                                                        Economics from The Massachusetts Institute of
                                                                        Technology.
                                             Alternate director:        Armando Garza Sada

Helmut Paul                                  Born:                      March 1940
     Director                                First elected:             1988
                                             Term expires:              2004
                                             Principal occupation:      Owner of H. Paul & Company LLC, a corporate finance advisory
                                                                        firm and Senior Consultant of International Finance
                                             Other directorships:       Member of the Boards of Scudder Fund for Independent Power
                                                                        Generation (management committee), HSBC Private Equity Fund
                                                                        (Argentina/Brazil) and Zurich Emerging Markets Solutions.
                                             Business experience:       Has held several managing positions in the International
                                                                        Finance Corporation, mainly responsible for Latin American
                                                                        and Caribbean investments.
                                             Other experience:          Holds an MBA from the University of Hamburg.
                                             Alternate director:        Antonio Elosua Muguerza

Lorenzo H. Zambrano                          Born:                      March 1944
     Director                                First elected:             1995
                                             Term expires:              2004
                                             Principal occupation:      Chairman and Chief Executive Officer of
                                                                        Cemex, S.A. de C.V.
                                             Other directorships:       Member of the Boards of Alfa, S.A. de C.V.
                                                                        (Human Resources Committee), Vitro (Chairman
                                                                        of the Compensations Committee), Televisa,
                                                                        S.A. de C.V., Member of Citigroup's
                                                                        International Advisory Board and Member of
                                                                        the Advisory Committee of Capital
                                                                        International, Inc.
                                             Other experience:          Holds a degree in mechanical engineering and administration
                                                                        from ITESM and an MBA from Stanford University.
                                             Alternate director:        Francisco Garza Zambrano

Robert E. Denham                             Born:                      August 1945
     Director                                First elected:             2001
                                             Term expires:              2004
                                             Principal occupation:      Partner of Munger, Tolles & Olson LLP law firm
                                             Other directorships:       Member of the Boards of Wesco Financial
                                                                        Corporation, US Trust Company, and Lucent
                                                                        Technologies, Inc.
                                             Business experience:       Former Chief Executive Officer of Salomon
                                                                        Inc., Representative to the APEC Business
                                                                        Advisory Council, Member of the OECD Business
                                                                        Sector Advisory Group on Corporate
                                                                        Governance.
                                             Other experience:          Magna cum laude graduate from the University of Texas,
                                                                        holds a JD from Harvard Law School and a masters degree in
                                                                        Government from Harvard University.
                                             Alternate director:        Sergio Deschamps Ebergenyi
</TABLE>

(1)   Son-in-law of Eugenio Garza Laguera.
(2)   Sister of Eugenio Garza Laguera.
(3)   Daughter of Eugenio Garza Laguera.
(4)   Son of Jose Calderon Sr.
(5)   Cousin of Eugenio Garza Laguera.
(6)   Husband of Consuelo Garza de Garza.
(7)   Son of Max Michel Suberville.
(8)   Wife of Jose Antonio Fernandez.
(9)   Sister-in-law of Jose Antonio Fernandez and Juan Carlos Braniff Hierro
(10)  Nephew of Max Michel Suberville
(11)  Wife of Juan Carlos Braniff Examiner

         Under Mexican law, an examiner (the "examiner") must be elected by the
shareholders at the annual ordinary general shareholders' meeting for a term of
one year. At our subsequent annual ordinary general shareholders' meeting, the
examiner is required to review the affairs of the company and report as to the
accuracy of the financial information presented to shareholders by the Board of
Directors. The examiner is also authorized:

-    to call ordinary or extraordinary general shareholders' meetings;

-    to place items on the agenda for general shareholders' meetings and
     meetings of the Board of Directors; and

-    to attend general shareholders' meetings and meetings of the Board of
     Directors (without the right to vote).


                                      109
<PAGE>

     The examiner also receives periodic reports from the Board of Directors
regarding material aspects of our affairs and financial condition. Our current
examiner is Ernesto Gonzalez Davila, who was appointed in 2003. The current
alternate examiner is Ernesto Cruz Velazquez de Leon.

     Senior Management

     The names and positions of our current senior management and that of our
principal subholding companies, their dates of birth and information on their
principal business activities outside of FEMSA are as follows:

                               Executive Officers
<TABLE>
<CAPTION>
<S>                                 <C>                                  <C>
FEMSA
Jose Antonio Fernandez
     Chief Executive Officer           See "--Board of Directors of FEMSA."
                                       Joined FEMSA:                     1987
                                       Appointed to current position:    1994
Federico Reyes                         Born:                             September 1945
     Executive Vice President of       Joined FEMSA:                     1999
     Planning and Finance              Appointed to current position:    2000
                                       Directorships:                    Vice Chairman of the Board of Seguros
                                                                         Monterrey New York Life, S.A., Chairman of
                                                                         the Board of Review of Fianzas Monterrey,
                                                                         S.A. and Member of the Board of the UDEM.
                                       Business experience within
                                       FEMSA:                            Director of Corporate Development, 1992
                                       Other business experience:        Holds a degree in business and finance from ITESM. Has
                                                                         worked as Director of Corporate Staff at Grupo AXA and has
                                                                         extensive experience in the insurance sector, working eight
                                                                         years in Valores de Monterrey, S.A. de C.V., six of them as
                                                                         Chief Executive Officer.
Jose Gonzalez Ornelas                  Born:                             April 1951
     Executive Vice President of       Joined FEMSA:                     1973
     Internal Auditing                 Appointed to current position:    2001
                                       Business experience within FEMSA: Has held several managerial positions in FEMSA including
                                                                         Chief Financial Officer of FEMSA Cerveza, Director of
                                                                         Planning and Corporate Development of FEMSA and Chief
                                                                         Executive Officer of FEMSA Logistica.
                                       Other                             experience: Holds a CPA degree from the UANL and has
                                                                         post-graduate studies in business administration from IPA
Ricardo Gonzalez                       Born:                             August 1955
     Executive Vice President of       Joined FEMSA:                     2000
     Human Resources                   Appointed to current position:    2000
                                       Business experience within FEMSA: Vice President of Strategic Planning. Held managerial
                                                                         positions in the human resources department of FEMSA from
                                                                         1977 to 1978.

                                       Other business experience:         Holds a degree in industrial and systems engineering from
                                                                          ITESM and an MBA from IESE, Barcelona. Had a 20-year caree
                                                                          in Grupo Vitro, three of them as Chairman and Chief
                                                                          Executive Officer of Vidrio Plano, S.A. de C.V.
</TABLE>


                                      110
<PAGE>
<TABLE>
<CAPTION>

<S>                                   <C>                              <C>
Carlos Aldrete                         Born:                            August 1956
     General Counsel                   Joined FEMSA:                    1979
                                       Appointed to current position:   1996
                                       Directorships:                   Alternate Secretary of the Board of Directors
                                                                        of FEMSA and Secretary of the Board of
                                                                        Directors of all of the subholding companies.
                                   Business experience within FEMSA:    Extensive experience in international business and financial
                                                                        transactions, debt issuances and corporate restructurings.
                                                                        Expertise in securities and private mergers and acquisition
                                                                        law.
                                      Other                             experience: Holds a law degree from the UANL and a masters
                                                                        degree in Comparative Law from the College of Law of the
                                                                        University of Illinois.

Rosa Maria Hinojosa                   Born:                             February 1962
     Chief Accounting Officer         Joined FEMSA:                     1983
                                      Appointed to current position:    1996
                                      Business experience within FEMSA: Has held several positions in FEMSA in financial information
                                                                        and administrative areas and has participated in several
                                                                        financial transactions, debt issuances and corporate
                                                                        restructuring.
                                       Other experience:                Holds a CPA degree from ITESM, completed post-graduate
                                                                        studies at IPADE and has participated in several
                                                                        post-graduate programs in business administration.

Alfredo Martinez Urdal                 Born:                            September 1931
     Chief Executive Officer           Joined FEMSA:                    1993
                                       Appointed to current position:   2000
                                       Directorships:                   Member of the Board of Coca-Cola FEMSA
                                       Business experience within FEMSA:Former Chief Executive Officer of Coca-Cola
                                                                        FEMSA.
                                       Other business experience:       Holds an economics degree from the Western
                                                                        Reserve University, a law degree from the
                                                                        Universidad Nacional Autonoma de Mexico and a
                                                                        post-graduate degree from Harvard Business
                                                                        School.  Has served as Chief Executive
                                                                        Officer of many prominent Mexican companies
                                                                        and banks, including Ponderosa Industrial
                                                                        Accel, Grupo Chihuahua, Multibanco Comermex,
                                                                        Celulosa de Chihuahua and Banco Comercial
                                                                        Mexicano.

Sergio Saenz                           Born:                            September 1950
     Chief Financial Officer           Joined FEMSA:                    1999
                                       Appointed to current position:   1999
                                       Business experience within FEMSA: Held a managerial position in the strategic planning
                                                                         department in 1984.
                                       Other business experience:       Had a 13-year career in Cuprum, S.A. de C.V.,
                                                                        culminating as Chief Executive Officer.
                                                                        Holds a chemical engineering degree from the
                                                                        UANL and an MBA from the University of Texas
                                                                        at Austin.
</TABLE>

                                      111
<PAGE>
<TABLE>
<CAPTION>

<S>                                   <C>                               <C>
Coca-Cola FEMSA
Carlos Salazar                         Born:                            April 1951
     Chief Executive Officer           Joined FEMSA:                    1973
                                       Appointed to current position:   2000
                                       Directorships:                   Member of the Boards of Review of BBVA
                                                                        Bancomer, Operadora Merco, S.A. de C.V. and
                                                                        Cintermex & Apex.
                                       Business experience              Has held managerial positions in several subsidiaries of
                                       within FEMSA:                    FEMSA, including Grafo Regia and PTM. Served as Chief
                                                                        Executive Officer of FEMSA Cerveza where he also held
                                                                        various management positions in the Commercial Planning and
                                                                        Export divisions.
                                       Other experience:                Has a Bachelor's degree in economics from ITESM,
                                                                        postgraduate studies in business administration and in
                                                                        economic development in Italy.

Hector Trevino                         Born:                            August 1956
     Chief Financial Officer           Joined FEMSA:                    1981
                                       Appointed to current position:   1993
                                       Business experience within
                                       FEMSA:                           Has held managerial positions in the
                                                                        international financing, financial planning,
                                                                        strategic planning and corporate development
                                                                        areas of FEMSA.
                                       Other experience:                Holds a degree in chemical engineering from ITESM and an MBA
                                                                        from the Wharton Business School.

Eduardo Padilla                        Born:                            January 1955
     Chief Executive Officer--         Joined FEMSA:                    1997
     Strategic Business Division       Appointed to current position:   2000
                                       Business experience within
                                       FEMSA:                           Director of Planning and Control of FEMSA.
                                       Other business experience:       Had a 20-year career in Grupo Alfa,
                                                                        culminating with a ten-year tenure as Chief
                                                                        Executive Officer of Terza, S.A. de C.V.  His
                                                                        major areas of expertise are operational
                                                                        control, strategic planning and financial
                                                                        restructuring.
                                       Other experience:                 Holds a degree in mechanical engineering from ITESM and an
                                                                         MBA from Cornell University.

</TABLE>

                                      112
<PAGE>
<TABLE>
<CAPTION>

<S>                                   <C>                              <C>
Arturo Guerrero                        Born:                            March 1949
     Chief Financial Officer--         Joined FEMSA:                    1979
     FEMSA Empaques                    Appointed to current position:   1991
                                       Business experience within
                                       FEMSA:                           Has held managerial positions in the areas of
                                                                        finance, auditing, fiscal and general
                                                                        management, all within the packaging division
                                                                        of FEMSA.
                                       Other experience:                Holds a CPA degree from the UANL and a masters degree in
                                                                        business administration from the Universidad Regiomontana.
</TABLE>



                 Compensation of Directors and Senior Management

     For the year ended December 31, 2002, the aggregate compensation paid to
our Directors was approximately Ps. 5.4 million.

     For the year ended December 31, 2002, the aggregate compensation paid to
executive officers and senior management of FEMSA and its subsidiaries was
approximately Ps. 614 million. Aggregate compensation includes bonuses we paid
to certain members of senior management and payments in connection with the
Stock Incentive Plan, described below.

                           Executive Incentive Program

     In 1997, certain of our subsidiaries commenced an executive incentive
program through which a one-time cash-settled option was granted to certain of
their executive officers (the "Executive Incentive Program"). Under the terms of
the Executive Incentive Program, the participant executive officers will be
entitled on the fifth anniversary of the program, to a cash payment, of a
special bonus based on the amount of increase in real terms during the preceding
five years in the market value of the BD Units or, in the case of officers of
Coca-Cola FEMSA, in equal parts in the market value of BD Units and Series L
Shares of Coca-Cola FEMSA, provided that no payments will be made unless the
market value has at least doubled in real terms. The Executive Incentive Program
is administered by a trust for the benefit of the participant executive
officers. In March of 2002, we amended some of the terms of the Executive
Incentive Plan. The main amendment was to extend the term of the program for
another year; as a result, the five-year term to determine if the cash payment
should be distributed to the participant executive officers ran from March 1998
through March 2003. We hedged our obligations under the Executive Incentive
Program until the end of October 2002 by investing with Morgan Guaranty Trust
Company of New York in cash-settled options relating to BD Units. The conditions
for the payment of the special bonus were not met, so this incentive program was
terminated as of March 2003.

                                      113
<PAGE>

                              Stock Incentive Plan

     In 1998, we, along with our subsidiaries, commenced a five-year stock
incentive plan for the benefit of our executive officers (the "Stock Incentive
Plan"). Under the terms of the Stock Incentive Plan, during the years 1999
through 2003, the executive officers may be selected to receive a special cash
bonus (a "Special Bonus") which will be used to obtain a "Stock Grant" (as
defined below) or an "Option Right" (as defined below). Each year, our Chief
Executive Officer, together with the Chief Executive Officer of the respective
subsidiary, select the executive officers who may participate in the Stock
Incentive Plan and determine the amount of the Special Bonus, based on each
executive officer's level of responsibility and corporate achievements during
the prior year.

     The Stock Grants and the Option Rights are administrated by certain trusts
for the benefit of the selected executive officers. Every year a new
administrative trust is formed to manage the Stock Grants and the Option Rights
acquired in that particular year. Under the terms of the Stock Incentive Plan,
each time a Special Bonus is assigned to an executive officer, the executive
officer contributes the Special Bonus received to the administrative trust in
exchange for a Stock Grant or Option Right, as determined annually by us. Each
administrative trust is managed by a technical committee formed by executives of
our company and is governed by Mexican law.

     A Stock Grant entitles an executive officer to receive BD Units or, in the
case of officers of Coca-Cola FEMSA, a specified proportion of BD Units and
Series L Shares of Coca-Cola FEMSA, which will be acquired by the respective
administrative trust in the open market, using the Special Bonus contributed by
each executive officer. Under the terms of the Stock Incentive Plan, the
ownership of the BD Units and, in its case, the Series L Shares of Coca-Cola
FEMSA, will vest upon the executive officer holding a Stock Grant each 28th of
February over the next five years following the date of receipt of the Stock
Grant, at a rate per year equivalent to the number of BD Units and, as
applicable, Coca-Cola FEMSA Series L Shares, which can be acquired with 20% of
such Stock Grant.

     An Option Right is an option acquired by the respective administrative
trust in the open market, using the Special Bonus contributed by each executive
officer, which shall entitle a participating executive officer to elect to (a)
acquire a certain number of BD Units or, in the case of officers of Coca-Cola
FEMSA, a certain number of BD Units and Series L Shares of Coca-Cola FEMSA, at
the exercise price specified in the option, or (b) receive a cash payment
equivalent to the amount of increase in the market value of such number of BD
Units and, in its case, Series L Shares of Coca-Cola FEMSA, as compared to the
exercise price specified in the option. Under the terms of the Stock Incentive
Plan, the Option Rights shall be exercisable each 28th of February and 31st of
August over the next five years following the date on which they were granted,
at a yearly rate equivalent to up to 20% of the total number of BD Units and
Series L Shares of Coca-Cola FEMSA covered by each Option Right. If an Option
Right is not exercised in full during a certain year, any remaining unexercised
part shall be exercisable over the next year, at the specified dates. If at the
time of expiration of an Option Right there are any remaining BD Units or Series
L Shares of Coca-Cola FEMSA over which no option has been exercised, the
remaining part of the option will be automatically exercised as specified in (b)
above and a cash payment will be made to the executive officer.

     As of the date of this Annual Report, five administrative trusts, which
administer the Stock Incentive Plan, hold a total of 6,185,646 BD Units and
1,737,351 Series L Shares of Coca-Cola FEMSA, each representing 0.584% and
0.094% of the total number of shares outstanding of FEMSA and of Coca-Cola
FEMSA, respectively.

                                 Share Ownership

     Several of our directors are participants in the Voting Trust. Each of the
trust participants of the Voting Trust is deemed to have beneficial ownership
with shared voting power over the shares deposited in the Voting Trust, which
consist of 1,473,334,215 Series B Shares representing 53.8% of the Series B
Shares outstanding. See "Item 7. Major Shareholders and Related Party
Transactions."




                                      114
<PAGE>

     The following table shows the Series B Shares, Series D-B Shares and Series
D-L Shares as of June 13, 2003 beneficially owned by our directors who are trust
participants of the Voting Trust, other than the shares deposited in the Voting
Trust:
<TABLE>
<CAPTION>

                                       Series B                   Series D-B                   Series D-L
                                              Percent of                   Percent of                  Percent of
      Beneficial Owner            Shares         Class        Shares         Class         Shares        Class
<S>                              <C>             <C>             <C>           <C>          <C>           <C>
Eugenio Garza Laguera           38,956,978       1.42        8,881,736        0.69        8,881,736       0.69
Jose Calderon Ayala             42,989,332       1.57        4,553,034        0.36        4,553,034       0.36
Consuelo Garza de Garza         11,011,980       0.40        4,031,160        0.31        4,031,160       0.31
Max Michel Suberville           55,270,870       2.02                0        0.00                0       0.00
Alberto Bailleres                6,192,375       0.23          667,780        0.05          667,780       0.05
Barbara Garza Gonda de           9,241,015       0.34                0        0.00                0       0.00
     Braniff
</TABLE>

     To our knowledge, no other director or officer is the beneficial owner of
more than 1% of any class of FEMSA's capital stock.

                                 Board Practices

     Our bylaws state that the Board of Directors will meet at least once every
three months following the end of each quarter to discuss our operating results
and advancement in the achievement of strategic objectives. Our Board of
Directors can also hold extraordinary meetings. See "Item 10. Additional
Information--Bylaws."

     Under our bylaws, Directors serve one-year terms although they continue in
office if and until successors are appointed. None of our Directors or senior
managers of our subsidiaries has service contracts providing for benefits upon
termination of employment.

     Our Board of Directors is supported by committees, which are working groups
that analyze issues and provide recommendations to the Board of Directors
regarding their respective areas of focus. The executive officers interact
periodically with the committees to address management issues. The following are
the three committees of the Board of Directors:

-    The Evaluation and Compensation (Human Resources) Committee.
     Responsibilities include (i) recommending procedures for the election of
     the Chief Executive Officer and other senior executives; (ii) proposing to
     the Board of Directors the criteria for the evaluation of the Chief
     Executive Officer and the senior executives; and (iii) analyzing and
     presenting to the Board of Directors the proposal prepared by the Chief
     Executive Officer regarding the structure and amount of compensation for
     FEMSA's key executives. The current Evaluation and Compensation Committee
     members are: Roberto Servitje (chairman of the committee), Max Michel
     Suberville, Arturo Fernandez Perez, Carlos Salguero and Lorenzo H.
     Zambrano. Ricardo Gonzalez is the appointed secretary of this committee.

-    The Audit Committee. Responsibilities include (i) recommending to the Board
     of Directors the candidates for external auditors of FEMSA; (ii) ensuring
     the independence and objectivity of the latter; and (iii) recommending to
     the Board of Directors procedures for the preparation of financial
     information. The current Audit Committee members are: Alexis Rovzar
     (chairman of the committee), Jose Manuel Canal Hernando, Eduardo A.
     Elizondo and Helmut Paul. Jose Gonzalez Ornelas is the appointed secretary
     of the Audit Committee.

-    The Finance and Planning Committee. Responsibilities include (i) evaluating
     the investment and financing policies proposed by the Chief Executive
     Officer; (ii) furnishing an opinion on the soundness of the annual budget
     and ensuring the implementation of the budget and any proposed strategic
     plan; and (iii) identifying risk factors to which the corporation is
     exposed, as well as evaluating its management policies. The current Finance
     and Planning Committee members are: Juan Carlos Braniff Hierro (chairman of
     the committee), Alfredo Livas, Ricardo Guajardo Touche, Luis Tellez and
     Robert Denham. Federico Reyes is the appointed secretary of this committee.

                                      115
<PAGE>
<TABLE>
<CAPTION>

                                    Employees

         The table below sets forth the number of our employees for the years ended December 31, 2002, 2001 and 2000:

                                                   Employees of FEMSA for the Years Ended December 31,
                                            2002(1)                              2001                         2000
                            Non-Union    Union         Total          Non-Union       Union         Non-Union     Union
                            Employees    Employees     Employees      Employees       Employees     Employees     Employees
<S>                          <C>           <C>            <C>           <C>            <C>          <C>           <C>
Employer
FEMSA Cerveza..........     9,106         6,505          15,611        8,869          7,107         8,943         8,270
Coca-Cola FEMSA........     5,491         8,966          14,457        5,504          9,038         5,914         9,140
FEMSA Comercio(2)......     2,334         2,791          5,125         2,073          2,247         1,829         2,308
FEMSA Empaques.........     1,235         2,853          4,088         1,335          2,891         1,501         2,948
FEMSA Franquicias           26            4              30            28             9            --                --
Logistica CCM..........     269           828            1,097         282            863           292             859
FEMSA Logistica........     197           509            706           223            467           194             392
FEMSA Servicios........     275          --              275           277            --            307              --
Other(3)...............     297          --              297           287            --            304              --
     Total.............     19,230        22,456         41,686        18,878         22,622        19,284        23,917
                            ======       =======         =======       ======        =======       ========      =======
</TABLE>


(1)  As of December 31, 2002, we had a total of 550 temporary employees.
(2)  Numbers for FEMSA Comercio do not include non-management store employees,
     who are employed directly by each individual store.
(3)  Includes staff at ancillary facilities, such as Sociedad Cuauhtemoc y
     Famosa, A.C. (Cuauhtemoc and Famosa Society), a non-profit organization
     sponsored by FEMSA, and corporate areas.


As of December 31, 2002, our subsidiaries had entered into 277 collective
bargaining or similar agreements with personnel employed at our operations. The
agreements applicable to our Mexican operations generally have an indefinite
term and provide for an annual salary review and for review of other terms and
conditions, such as fringe benefits, every two years. In Buenos Aires, the
collective bargaining agreement is negotiated between the Camara Argentina de la
Industria de Bebidas Sin Alcohol (the Argentine chamber of the Non-Alcoholic
Beverages Industry) on behalf of the beverage producers, and the Federacion
Argentina de Trabajadores de Aguas Gaseosas (the Argentine Federation of Soft
Drink Workers), on behalf of the soft drink industry workers. The Argentine
government is not involved in these negotiations.


                                      116
<PAGE>


     The table below sets forth the number of collective bargaining agreements
and unions for FEMSA's employees:

                 Collective Bargaining Labor Agreements Between
                         Subholding Companies and Unions
                             As of December 31, 2002
<TABLE>
<CAPTION>

                                                                                  Collective
Subholding Company                                                                Bargaining      Labor
                                                                                  Agreements      Unions
                                                                                ---------------  -------------
<S>                                                                                    <C>            <C>
FEMSA Cerveza................................................................          125              9
Coca-Cola FEMSA(1)...........................................................           40              7
FEMSA Comercio(2)............................................................           64             12
FEMSA Empaques...............................................................           20              4
Logistica....................................................................           28              2
                                                                                ---------------  -------------
     Total...................................................................          277             34
                                                                                ===============  =============

</TABLE>

(1)  Includes Coca-Cola FEMSA Buenos Aires' collective bargaining agreement with
     an Argentine labor union.

(2)  Includes union employees of Amoxxo. Numbers for FEMSA Comercio do not
     include non-management store employees, who are employed directly by each
     individual store.

     Each of the labor unions in Mexico is associated with one of 10 different
national Mexican labor organizations. Our management believes that we have good
relations with our employees and the various labor unions.

                               Insurance Policies

     We maintain life insurance policies for all of our employees. These
policies mitigate the risk of having to pay death benefits in the event of an
industrial accident. We maintain a Directors' and Officers' Insurance Policy
covering all Directors and certain key executive officers for liabilities
incurred in their capacities as Directors and officers.



                                      117
<PAGE>


ITEM 7.  MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

                               Major Shareholders

     The following table identifies each owner of more than 5% of any class of
our shares as of June 13, 2003. Except as described below, we are not aware of
any holder of more than 5% of any class of our shares. Only the Series B Shares
have full voting rights under our bylaws.
<TABLE>
<CAPTION>

                           Ownership of Capital Stock
                               as of June 13, 2003


                                    Series B Shares(1)         Series D-B Shares(2)      Series D-L Shares(3)     Total
                                  ------------------------   -----------------------   -----------------------    Shares
                                                                                                                  of FEMSA
                                                  Percent                   Percent                    Percent    Common
                                  Shares Owned    of Class   Shares Owned   of Class   Shares Owned    of Class   Stock
                                  ------------   ---------   ------------   --------   ------------    --------   ----------
<S>                                 <C>            <C>          <C>             <C>         <C>       <C>           <C>
Shareholder
Technical Committee and Trust
Participants under the Voting      1,473,334,215    53.8%               0       0.0%              0       0.0%         27.8%
Trust(4).......................
Capital International Inc.(5).        94,582,020     3.5%     189,164,040      14.8%    189,164,040      14.8%          8.9%

</TABLE>

(1)  As of June 13, 2003, there were 2,737,740,090 Series B Shares outstanding.
(2)  As of June 13, 2003, there were 1,279,785,180 Series D-B Shares
     outstanding.
(3)  As of June 13, 2003, there were 1,279,785,180 Series D-L Shares
     outstanding.
(4)  As a consequence of the Technical Committee's internal procedures, the
     Technical Committee, as a whole, is deemed to have the beneficial ownership
     with sole voting power of all the shares deposited in the Voting Trust and
     the Trust Participants (as defined below), as Technical Committee members,
     are deemed to have beneficial ownership with shared voting power over those
     same deposited shares. As of June 13, 2003, the trust participants under
     the Voting Trust (Irrevocable Trust No. F/29487-6 established at Bancomer,
     S.A., as Trustee), included: Max Michel Suberville, Eugenio Garza Laguera,
     Paulina Garza Gonda de Marroquin, Barbara Garza Gonda de Braniff, Mariana
     Garza Gonda de Trevino Bryan, Eva Gonda de Garza, Eva Garza Gonda de
     Fernandez, Consuelo Garza Laguera de Garza, Alfonso Garza Garza, Patricio
     Garza Garza, Juan Carlos Garza Garza, Eduardo Garza Garza, Eugenio Garza
     Garza, Alberto Bailleres, Maria Teresa G. de Bailleres, Inversiones
     Bursatiles Industriales, S.A. de C.V., Corbal, S.A. de C.V., Magdalena M.
     de David, Alepage, S.A., Bancomer, S.A. as Trustee under Trust No.
     F/29013-0, Max David Michel, Juan David Michel, Monique David de VanLathem,
     Renee Michel de Guichard, Magdalena Guichard Michel, Rene Guichard Michel,
     Miguel Guichard Michel, Graciano Guichard Michel, Juan Guichard Michel,
     Inversiones Franca, S.A. de C.V. and Bancomer, S.A., as Trustee under Trust
     No. F/29490-0 (together, the "Trust Participants").
(5)  Derived from a report of beneficial ownership of our shares filed with the
     SEC on May 14, 2003.


     Because of their ownership of a majority of the Series B Shares, the
Technical Committee and Trust Participants may be deemed to control our company.

     To the best of our knowledge, on June 13, 2003, 66.2% of BD units were held
as ADRs through the ADR Depositary. According to the estimates provided by U.S.
brokers to the ADR Depositary, on February 13, 2003 we had 2,750 stockholders
registered as ADR holders.

                           Related-Party Transactions

     Voting Trust

     The Trust Participants, who are our principal shareholders, agreed in April
1998 to deposit a majority of their shares (the "Trust Assets") of FEMSA into
the Voting Trust. The primary purpose of the Voting Trust is to permit the Trust
Assets to be voted as a block, in accordance with the instructions of the
Technical Committee. The Technical Committee is comprised of all of the Trust
Participants. The number of B Units deposited by each Trust Participant (the
proportional share of the Trust Assets of such participant) determines the
number of votes that such Trust Participant has on the Technical Committee. Most
matters are decided by a simple majority of the Trust Assets.


                                      118
<PAGE>

     The Trust Participants agreed to certain transfer restrictions with respect
to the Trust Assets. During the ten-year term of the Voting Trust, Trust Assets
may be transferred by Trust Participants to spouses and immediate family members
and, subject to certain conditions, to companies that are 100% owned by Trust
Participants ("Permitted Transferees"), provided in all cases that the
transferee agrees to be bound by the terms of the Voting Trust. In the event
that a Trust Participant wishes to sell part of its Trust Assets to someone
other than a Permitted Transferee, the other Trust Participants have the right
of first refusal to purchase the Trust Assets that such Trust Participant wishes
to sell. If none of the Trust Participants elects to acquire the Trust Assets
from the selling Trust Participant, the Technical Committee will have the right
to nominate (subject to the approval of Technical Committee members representing
75% of the Trust Assets, excluding Trust Assets that are the subject of the
sale) a purchaser for such Trust Assets. In the event that none of the Trust
Participants or a nominated purchaser elects to acquire such Trust Assets, the
selling Trust Participant will have the right to sell such Trust Assets to a
third party on the same terms and conditions that were offered to the Trust
Participants. Acquirors of Trust Assets will only be permitted to become parties
to the Voting Trust upon the affirmative vote of Technical Committee members. In
the event that a Trust Participant holding a majority of the Trust Assets elects
to sell its Trust Assets, the other Trust Participants have "tag along" rights
that will enable them to sell their Trust Assets to the acquiror of the selling
Trust Participant's Trust Assets.

     Interest of Management in Certain Transactions

     We, along with certain of our subsidiaries, engage in financial and
insurance coverage transactions, including the receipt of loans and credit line
facilities, with subsidiaries of BBVA Bancomer, a financial services holding
company of which Ricardo Guajardo Touche is the Chairman of the Board of
Directors and Juan Carlos Braniff Hierro is Vice Chairman of the Board of
Directors (both Messrs. Guajardo and Braniff are Directors of FEMSA). BBVA
Bancomer is the administrative agent and is one of the lenders in a Ps. 837
million credit agreement entered by FEMSA Comercio. In addition, BBVA Bancomer
is the lender of a Ps. 628 million credit agreement entered by FEMSA Empaques.
BBVA Bancomer and its affiliates are also a lender under the Bridge Loan and one
of the Term Loans and a purchaser of Mexican Certificados Bursatiles maturing in
2007, each of which was incurred in connection with the acquisition of Panamco.
These loans were made in the ordinary course of business and on the same terms,
including interest rates and collateral, as those prevailing at the time for
comparable transactions with other parties and did not involve more than the
normal risk of collectibility or present other unfavorable features.

     We maintain an insurance policy covering auto insurance and medical
expenses for executives issued by Grupo Nacional Provincial, S.A., an insurance
company of which the Chairman of the Board and Chief Executive Officer is
Alberto Bailleres, one of our Directors. The aggregate amount of premiums paid
under these policies in nominal Pesos was approximately Ps. 71.5 million in
2002.

     We maintained insurance covering life and medical expenses for executives
issued by Seguros Monterrey New York Life, S.A., an insurance company of which
the vice-chairman of the board is Federico Reyes, our Executive Vice President
of Planning and Finance. The aggregate amount of premiums paid under these
policies was approximately Ps. 53.7 million. In addition, we paid during 2002
premiums of approximately Ps. 28.7 million for fidelity bonds issued by Fianzas
Monterrey New York Life, S.A., a company for which Federico Reyes is the
chairman of its review board.

     In 2002, FEMSA Comercio purchased Ps. 460 million in products for their
stores from GIBSERSA, S.A. de C.V. (Bimbo), of which the Chief Executive Officer
is Roberto Servitje, a Director of FEMSA.

     Jose Antonio Fernandez, Eva Garza de Fernandez, Ricardo Guajardo Touche and
Lorenzo H. Zambrano, who are Directors of FEMSA, are also members of the Board
of Directors of ITESM, which is a prestigious university that routinely receives
donations from FEMSA and its subsidiaries.

     Beer Sales to Labatt USA

     FEMSA Cerveza's affiliate, Labatt USA, is the importer of FEMSA Cerveza's
brands in the United States. In 2002, exports through Labatt USA to the United
States were approximately US$84 million. See "Item 4. Information on the
Company--FEMSA Cerveza--FEMSA Cerveza Export Summary."


                                      119
<PAGE>

     Business Transactions between Coca-Cola FEMSA and The Coca-Cola Company

     Coca-Cola FEMSA regularly engages in transactions with The Coca-Cola
Company and its affiliates. In 2002, Coca-Cola FEMSA Buenos Aires purchased all
of its can presentations from CICAN, a joint venture between Coca-Cola FEMSA
Buenos Aires and the Coca-Cola bottlers in Argentina, Uruguay and Paraguay. In
addition, Coca-Cola FEMSA Buenos Aires also purchased a portion of its plastic
ingot requirements for producing plastic bottles and all of its returnable
bottle requirements from CIPET. CIPET is a local subsidiary of Embotelladora
Andina, S.A., a Coca-Cola bottler with operations in Argentina, in which The
Coca-Cola Company has a substantial interest. Management believes that Coca-Cola
FEMSA's purchasing practices result in prices comparable to those that would be
obtained in arm's length negotiations with unaffiliated parties.

     Coca-Cola FEMSA and The Coca-Cola Company pay and reimburse each other for
marketing expenditures under a cooperative marketing arrangement. In addition,
The Coca-Cola Company has made payments to Coca-Cola FEMSA in connection with
cold-drink equipment investments and other volume-driving investment programs.
Coca-Cola FEMSA purchases all of its concentrate requirements for Coca-Cola
trademark beverages from The Coca-Cola Company. Total payments by Coca-Cola
FEMSA to The Coca-Cola Company for concentrates were approximately Ps. 2,558
million, Ps. 2,643 million and Ps. 2,586 million in 2002, 2001 and 2000,
respectively. In each of 2002 and 2001, The Coca-Cola Company contributed
approximately 42% of Coca-Cola FEMSA's advertising and marketing budget, which
totaled approximately Ps. 714.8 million and Ps. 692.6 million. In each of 2002
and 2001, The Coca-Cola Company in addition contributed to Coca-Cola FEMSA's
refrigerator equipment investment program.

     The subsidiaries of The Coca-Cola Company that held Panamco shares made
specified undertakings to support and facilitate the Panamco acquisition for the
benefit of Coca-Cola FEMSA. In consideration for these undertakings, Coca-Cola
FEMSA made certain undertakings for the benefit of The Coca-Cola Company and its
subsidiaries, including indemnity obligations with respect to specified matters
relating to the accuracy of disclosure and the compliance with applicable law by
Coca-Cola FEMSA's Board of Directors and the board of directors of Panamco and
undertakings to take specified actions and refrain from specified others to
facilitate the ability of The Coca-Cola Company to receive favorable tax
treatment in connection with its participation in the acquisition. In connection
with the execution of the acquisition agreement for Panamco, The Coca-Cola
Company and FEMSA memorialized the understandings relating to specified
operational and business issues that may affect Coca-Cola FEMSA following
completion of the acquisition. A summary of these understandings is set forth
under "Item 4. Information on the Company--Coca-Cola FEMSA--The Panamco
Acquisition."



                                      120
<PAGE>



ITEM 8.  FINANCIAL INFORMATION

                     Consolidated Financial Statements

         See pages F-1 through F-48, incorporated herein by reference.

                                 Dividend Policy

     For a discussion of our dividend policy, see "Item 3. Key
Information-Dividends" and "Item 10. Additional Information-Dividend Rights."

                                Legal Proceedings

     We are party to various legal proceedings in the ordinary course of
business. Other than as disclosed in this Annual Report, we are not currently
involved in any litigation or arbitration proceeding, including any proceeding
that is pending or threatened of which we are aware, which we believe will have,
or have had, a material adverse effect on our company.

     Tax Proceedings

     We obtained a favorable resolution from the Mexican federal tax court in a
lawsuit against the Mexican Ministry of Finance in an amount equal to Ps. 320
million with respect to income tax paid in prior years. Based on this ruling, we
filed a request for reimbursement before the Mexican Ministry of Finance, and
received from the Mexican tax authorities as of December 18, 2001 an amount
equal to Ps. 215 million. The Mexican authorities contested the balance owed. We
sought the full reimbursement of the amount owed to us, which together with
interest and surcharges, is approximately Ps. 215 million. As of the date of
this Annual Report, we have obtained a favorable ruling from the authorities and
have requested reimbursement from the Ministry of Finance.

     In addition, due to adjustments to consolidated asset taxes derived from
increased shareholdings in subsidiaries during 1998 and 1999, we calculated the
asset tax receivable and filed for a refund. The tax authorities rejected the
refund request. The company obtained a favorable decision during amparo
proceedings. At December 31, 2002, the receivable amount was approximately Ps.
218 million.

     During the year 2002, and up to the date of this Annual Report, we and our
subsidiaries participated in 12 tax nullity proceedings in connection with
rulings of the Mexican tax authorities, involving either assessments against us
or the refusal to reimburse tax balances in our favor. With respect to the
assessments, the Mexican federal tax courts issued assessments against us in the
amount of Ps. 2.6 million. With respect to the balances, which equal Ps. 32.1
million, as of December 31, 2002 we have obtained favorable rulings in the
amount of Ps. 26.2 million. Other proceedings are pending in the Mexican tax
courts related to exports to countries considered to be tax havens under Mexican
law in the amount of Ps. 67.6 million. We believe that the resolution of these
claims will not have a material adverse effect on our company.

     During 2002, Coca-Cola FEMSA initiated an appeal related to the payment of
Impuesto Especial Sobre Productos y Servicios ("Special Tax on Products and
Services") paid in the amount of approximately Ps. 94 million applicable to
inventories produced with HFCS. As of the date of this Annual Report, Coca-Cola
FEMSA obtained a favorable decision from the applicable court, and the Mexican
authorities have appealed the decision.

     Antitrust Proceedings

     On January 24, 2000, the Comision Federal de Competencia (the Federal
Antitrust Commissions, or the "Mexican Antitrust Commission") notified FEMSA
Cerveza that it was reviewing the pricing practices of the Mexican beer industry
and requested information as a part of that review. On April 11, 2002, the
Mexican Antitrust Commission issued a final decision recognizing that FEMSA
Cerveza had not engaged in any illegal behavior. FEMSA Cerveza has agreed to
inform the Mexican Antitrust Commission regarding its pricing practices for the
next three years.


                                      121
<PAGE>

     In May 2000, the Mexican Antitrust Commission notified Coca-Cola FEMSA that
it was investigating The Coca-Cola Company and the bottlers of Coca-Cola
trademark beverages in Mexico, including Coca-Cola FEMSA. This investigation
focuses on monopolistic practices within the soft drink industry in Mexico. On
February 28, 2002, the Mexican Antitrust Commission notified Coca-Cola FEMSA of
its decision, in which it found that monopolistic practices were committed by
the bottlers of Coca-Cola trademark beverages, including Coca-Cola FEMSA, with
respect to exclusivity arrangements with retailers. Coca-Cola FEMSA appealed the
ruling before the Mexican Antitrust Commission, which confirmed its findings as
of July 11, 2002. As of August 21, 2002, Coca-Cola FEMSA began amparo
proceedings before Mexican federal courts to challenge the ruling. Coca-Cola
FEMSA believes that in the event that the ruling of the Mexican Antitrust
Commission becomes final, such decision will not have a material adverse effect
on its financial condition, since no fines were imposed against Coca-Cola FEMSA
and such contracts with retailers are immaterial as a percentage of Coca-Cola
FEMSA's total sales. However, we cannot give any assurances that such legal
actions will not negatively affect us in the future.

     Rider 122

     On June 17, 2003, the Mexican Antitrust Commission announced that it was
launching a separate investigation into the soft drink industry practice with
respect to exclusivity arrangements in general. As of the date of this annual
report, Coca-Cola FEMSA has not received any requests for information from the
Mexican Antitrust Commission. We cannot give any assurances that any action
taken as a result of this investigation will not negatively affect us in the
future.

     On June 18, 2003, the Mexican Antitrust Commission announced that it was
launching a separate investigation into the beer industry practice of
tied-customer arrangements. As of the date of this Annual Report, FEMSA Cerveza
has not received any requests for information from the Mexican Antitrust
Commission. We cannot give any assurances that any action taken as a result of
this investigation will not negatively affect us in the future.

     Labatt USA Litigation

     On April 29, 2002, a subsidiary of FEMSA Cerveza in the United States,
commenced litigation in the United States District Court for the Southern
District of New York, in Manhattan, against Labatt, Labatt Holdings, Inc.,
Labatt USA, LF Holdings I, L.L.C., and Interbrew (which we refer to collectively
as the "defendants") to prevent the integration of Beck's into the Labatt USA
portfolio. FEMSA Cerveza believes that the proposed integration without its
consent would violate its rights as indirect minority shareholder in Labatt USA.

     FEMSA Cerveza's subsidiary alleges that, pursuant to the terms of the
Amended and Restated Limited Liability Company Agreement of LF Holdings I,
L.L.C., one of the holding companies for Labatt USA, the integration cannot
proceed without this subsidiary's prior approval (either by having at least one
of its two directors on the board of LF Holdings I, L.L.C. vote in favor of the
integration, or through an affirmative vote of its membership interests). At a
meeting of the board of directors of LF Holdings I, L.L.C. on April 25, 2002,
the proposed inclusion of Beck's was put to a vote of the board of directors,
and the subsidiary's two directors voted against the proposed Beck's
integration. Notwithstanding this vote, the defendants in the lawsuit indicated
their intent to implement the board resolution against which FEMSA Cerveza's
directors had voted.

     On April 29, 2002, FEMSA Cerveza's subsidiary moved the United States
District Court for the Southern District of New York for a preliminary
injunction, alleging that the subsidiary faced imminent irreparable harm as a
result of the actions by the defendants to proceed with the inclusion of Beck's
without their required approval. On May 23, 2002, the District Court entered a
preliminary injunction order providing that the defendants in the litigation
"are hereby enjoined during the pendency of these proceedings and from this date
and time from taking any further actions in furtherance of the integration of
Beck's into Labatt USA L.L.C." The court also ordered FEMSA Cerveza's subsidiary
to "file a bond in the amount of $5,000,000 to indemnify the [d]efendants from
any damage they may suffer should it be determined that this injunction should
not have issued." The subsidiary filed the requisite bond on May 29, 2002, a
date approved by the court.

On May 24, 2002, the defendants filed a notice of appeal from the preliminary
injunction order entered by the District Court on May 23, 2002. On May 28, 2002,
the defendants filed with the United States Court of Appeals for the Second
Circuit a motion for an expedited appeal schedule, which FEMSA Cerveza's
subsidiary did not oppose. On May 31, 2002, the United States Court of Appeals
set a schedule for an expedited appeal. The argument of the appeal took place on
August 7, 2002. The Second Circuit has not yet issued a ruling on the
defendants' appeal.

     Litigations related to Panamco

     At the time of the acquisition, Panamco and its subsidiaries were, and are
still, subject to a number of significant and on-going legal proceedings,
including antitrust, tax, labor, human rights and other claims. A description of
the litigation is included in Panamco's Annual Report on Form 10-K filed with
the Securities and Exchange Commission on March 28, 2003 and in Panamco's
quarterly report on Form 10-Q filed with the Securities and Exchange Commission
on May 6, 2003. Such reports do not constitute part of this Annual Report and
are not incorporated by reference into this Annual Report. We are still in the
process of conducting our own review of litigation pending against Panamco.
Although no assurances can be given, we believe, based on the information
available to us to date, that claims pending against Panamco are either without
merit or will not result in a material adverse effect on our consolidated
financial condition or consolidated results.



                                      122
<PAGE>



ITEM 9.  THE OFFER AND LISTING

                            Description of Securities

     Our capital stock consists of Series B Shares with full voting rights and
of Series D-B and D-L Shares with limited voting rights. Prior to May 11, 2008,
the shares of our company are not separable and may be transferred only in the
following forms:

-    B Units, consisting of five Series B Shares; and
-    BD Units, consisting of one Series B Share, two Series D-B Shares and two
     Series D-L Shares.

     On May 11, 2008, each Series D-B Share will automatically convert into one
Series B Share with full voting rights, and each Series D-L Share will
automatically convert into one Series L Share with limited voting rights. At
that time, the BD Units and the B Units will cease to exist and the underlying
Series B Shares and Series L Shares will be separated.

     The following table sets forth information regarding our capital stock as
of June 13, 2003:
<TABLE>
<CAPTION>

                                                                     Percentage         Percentage of
Class                                                Number          of Capital         Voting(1)
-----                                                ------          ----------         --------------
<S>                                              <C>                    <C>               <C>
Series B Shares (no par value)...........         2,737,740,090          51.68%           100.0%
Series D-B Shares (no par value).........         1,279,785,180          24.16              0.0
Series D-L Shares (no par value).........         1,279,785,180          24.16              0.0
        Total Shares.....................         5,297,310,450         100.0%            100.0%
                                                  =============         =======          =======

Units
BD Units.................................           639,892,590          60.40%            23.37%
B Units..................................           419,569,500          39.60             76.63
        Total Units......................         1,059,462,090         100.0%            100.0%
                                                  =============         =======          =======
</TABLE>

(1)   Series D-B and Series D-L Shares have limited voting rights.

                                 Trading Markets

     Prior to May 11, 1998, there was no market for the BD Units, the B Units or
any of our shares. Since May 11, 1998, ADRs representing BD Units have been
listed on the New York Stock Exchange, and the BD Units and the B Units have
been listed on the Mexican Stock Exchange. Each ADR represents ten BD Units
deposited under the ADR Deposit Agreement with the ADR Depositary.

     The New York Stock Exchange trading symbol for the ADRs is "FMX" and the
Mexican Stock Exchange trading symbols are "FEMSA UBD" for the BD Units and
"FEMSA UB" for the B Units.

     Fluctuations in the exchange rate between the Peso and the U.S. Dollar have
affected the U.S. Dollar equivalent of the Peso price of our shares on the
Mexican Stock Exchange and, consequently, have also affected the market price of
our ADRs. See "Item 3. Selected Financial Information--Exchange Rate
Information".

                      Trading on the Mexican Stock Exchange

     The Mexican Stock Exchange, located in Mexico City, is the only stock
exchange in Mexico. Founded in 1907, it is organized as a corporation whose
shares are held by 30 brokerage firms, which are exclusively authorized to trade
on the exchange. Trading on the Mexican Stock Exchange takes place principally
through automated systems and is open between the hours of 8:30 a.m. and 3:00
p.m. Mexico City time, each business day. Trades in securities listed on the
Mexican Stock Exchange can also be effected off the exchange. The Mexican Stock
Exchange operates a system of automatic suspension of trading in shares of a
particular issuer as a means of controlling excessive price volatility, but
under current regulations this system does not apply to securities such as the
BD Units that are directly or indirectly (for example, through ADRs) quoted on a
stock exchange (including for these purposes the New York Stock Exchange)
outside Mexico.


                                      123
<PAGE>

     Settlement is effected two business days after a share transaction on the
Mexican Stock Exchange. Deferred settlement, even by mutual agreement, is not
permitted without the approval of the Comision Nacional Bancaria y de Valores
(the "Mexican National Banking and Securities Commission"). Most securities
traded on the Mexican Stock Exchange, including ours, are on deposit with
Institucion para el Deposito de Valores, S.A. de C.V., a privately owned
securities depositary that acts as a clearinghouse for Mexican Stock Exchange
transactions.

                                  Price History

     The table below sets forth, for the periods indicated, the reported high
and low sale prices for the BD Units and B Units on the Mexican Stock Exchange
and the reported high and low sale prices for the ADRs on the New York Stock
Exchange. Prices for the BD Units have been presented based on data provided by
the Mexican Stock Exchange, which gives effect to the bundling of the BD Unit
that resulted from the Reorganization as of May 11, 1998 and to the ten-for-one
split of the shares as of June 30, 1998, for prices prior to such dates. Prices
for the B Units and the ADRs have not been provided for dates prior to May 11,
1998 because, prior to the Reorganization, there were no shares of FEMSA listed
on the Mexican Stock Exchange comparable to the B Units, and we had no ADRs
listed on the New York Stock Exchange. Prices for the B Units and the ADRs from
May 11, 1998 to June 30, 1998 have been presented based on information from the
Mexican Stock Exchange and the New York Stock Exchange, which gives effect to
the ten-for-one split of the shares as of June 30, 1998. See "Item 4.
Information on the Company--Corporate Background" and "--The Reorganization."



                                      124
<PAGE>
<TABLE>
<CAPTION>



                                                                        BD Units
                                          ---------------------------------------------------------------------------
                                                                                                       Average Daily
                                                     Nominal Pesos                                     Trading Volume
                                          -------------------------------------                        (Units)
                                           High            Low           Close          Close US$(1)
                                          ------          -----         -------         -----------    ---------------
<S>                                        <C>             <C>            <C>             <C>           <C>
1997(2).........................           35.85          13.15          32.45            4.02          3,622,621
1998(2).........................           35.35          15.70          27.00            2.73          2,386,942
1999............................           42.60          19.00          42.30            4.46          1,791,831
2000
    First Quarter...............           50.50          37.40          42.05            4.53          1,479,843
    Second Quarter..............           45.00          29.50          42.25            4.29          1,586,508
    Third Quarter...............           45.15          36.00          36.50            3.87          1,129,292
    Fourth Quarter..............           37.80          24.60          28.60            2.97          1,044,383
2001
    First Quarter...............           34.58          27.80          33.69            3.55          1,322,253
    Second Quarter..............           41.60          32.65          38.50            4.25          1,040,000
    Third Quarter...............           40.20          24.40          26.91            2.83            931,866
    Fourth Quarter..............           33.76          26.68          31.02            3.39          1,288,041
2002
    First Quarter...............           42.50          32.90          41.95            4.66          1,332,724
    Second Quarter..............           46.50          36.95          39.05            3.91          1,001,819
    Third Quarter...............           41.34          33.50          34.56            3.38            755,405
    Fourth Quarter..............           39.50          34.35          37.93            3.64            733,989
    December....................           39.50          36.90          37.93            3.64            392,730
2003
    January.....................           38.45          35.90          36.65            3.36            486,768
    February....................           37.00          33.30          35.76            3.24            706,947
    March.......................           37.01          33.70          35.86            3.33            637,830
    April.......................           39.24          34.80          38.90            3.77            628,435
    May.........................           42.50          38.08          41.08            3.97            805,100
</TABLE>

(1) Based on the noon buying rate for the purchase of U.S. Dollars, as reported
    by the Federal Reserve Bank of New York at the close of each period.

(2) Prices prior to June 30, 1998 have been adjusted to give effect to the
    ten-for-one split of our shares, and prices prior to May 11, 1998 have also
    been adjusted to give effect to the bundling of the BD Unit that resulted
    from the Reorganization.


                                      125
<PAGE>
<TABLE>
<CAPTION>

                                             B Units
                                      --------------------------------------------- -------------- -----------------
                                                                                                    Average Daily
                                                                                                    Trading Volume
                                                     Nominal Pesos                                     (Units)
                                      -----------------------------------------
                                           High           Low           Close         Close US$(1)
                                          -----          ---           -----         ------------  ----------------
<S>                                         <C>          <C>              <C>            <C>               <C>
1997............................              --             --             --              --                 --
1998(2).........................           33.00          28.00          33.00            3.33            142,470
1999............................           37.00          27.50          37.00            3.90          1,573,512
2000
    First Quarter...............           44.90          38.00          42.00            4.52            140,923
    Second Quarter..............           45.00          31.30          45.00            4.57          1,118,800
    Third Quarter...............           45.00          38.50          45.00            4.77            192,143
    Fourth Quarter..............           45.00          38.70          45.00            4.68              1,800
2001
    First Quarter...............           44.96          40.40          43.50            4.59              2,750
    Second Quarter..............           43.50          35.00          37.50            4.14             43,235
    Third Quarter...............           39.98          36.50          38.30            4.02              4,914
    Fourth Quarter..............           38.50          27.92          36.10            3.94            248,409
2002
    First Quarter...............           39.00          34.00          39.00            4.33             14,245
    Second Quarter..............           40.00          39.00          39.44            3.95              2,243
    Third Quarter...............           39.44          38.00          38.00            3.72                400
    Fourth Quarter..............           37.50          34.60          37.00            3.55              3,013
    December....................           37.00          35.00          37.00            3.55              3,425
2003
    January.....................           36.70          35.00          36.70            3.37              2,000
    February....................           35.99          33.70          35.40            3.21              1,120
    March.......................           36.90          33.83          36.30            3.37              1,716
    April.......................           39.10          37.00          39.10            3.79                100
    May                                    39.10          39.10          39.10            3.78                200
</TABLE>

(1) Based on the noon buying rate for the purchase of U.S. Dollars, as reported
    by the Federal Reserve Bank of New York at the close of each period.
(2) Prices for the B Units for 1998 have been calculated from May 11, 1998 to
    December 31, 1998. Prices from May 11, 1998 to June 30, 1998 have been
    adjusted to give effect to the ten-for-one split of our shares effected as
    of June 30, 1998.



                                      126
<PAGE>


<TABLE>
<CAPTION>

                                                                 ADRs(1)
                                      ---------------------------------------------------------- --------------------
                                                                                                    Average Daily
                                                            U.S. Dollars                           Trading Volume
                                      ----------------------------------------------------------
                                            High                Low                Close               (ADRs)
                                      ------------------ ------------------- ------------------- --------------------
<S>                                          <C>               <C>                 <C>                       <C>
1997............................             --                 --                  --                         --
1998(2).........................             36.56              14.75               26.63                 143,355
1999............................             44.88              22.25               44.50                 199,115
2000
    First Quarter...............             54.63              39.31               45.00                 243,894
    Second Quarter..............             48.38              31.00               43.06                 202,146
    Third Quarter...............             46.75              38.81               39.00                 205,026
    Fourth Quarter..............             40.00              25.75               29.88                 208,895
2001
    First Quarter...............             35.97              28.56               35.51                 264,263
    Second Quarter..............             45.49              34.70               42.81                 230,531
    Third Quarter...............             44.17              26.31               28.47                 206,914
    Fourth Quarter..............             36.69              28.50               34.55                 176,198
2002
    First Quarter...............             47.30              34.10               47.15                 244,121
    Second Quarter..............             49.79              36.78               39.22                 243,161
    Third Quarter...............             42.23              33.25               33.80                 247,942
    Fourth Quarter..............             39.69              33.50               36.42                 181,301
    December....................             38.95              35.91               36.42                 143,690
2003
    January.....................             36.93              32.95               33.50                 182,880
    February....................             34.00              30.60               32.25                 258,842
    March.......................             34.60              30.50               33.27                 190,924
    April.......................             38.21              32.82               37.96                 194,633
    May.........................             40.34              37.19               39.90                 238,048
</TABLE>

(1)  Each ADR is comprised of ten BD Units.

(2)  Prices for the ADRs for 1998 have been calculated from May 11, 1998 to
     December 31, 1998. Prices from May 11, 1998 to June 30, 1998 have been
     adjusted to give effect to the ten-for-one split of our shares effected as
     of June 30, 1998.


                                      127
<PAGE>



ITEM 10. ADDITIONAL INFORMATION

                                     Bylaws

     Below is a brief summary of certain significant provisions of our bylaws
and applicable Mexican law. This description does not purport to be complete and
is qualified in its entirety by reference to the bylaws and the provisions of
applicable Mexican law. For a description of the provisions of our bylaws
relating to the Board of Directors, Executive Committee and Examiners. See "Item
6. Directors, Senior Management and Employees."

                            Organization and Register

     We are a sociedad anonima de capital variable organized in Mexico under the
Ley General de Sociedades Mercantiles (the "Mexican General Corporations Law").
We were incorporated in 1936 under the name Valores Industriales, S.A., as a
sociedad anonima. We were registered in the Public Registry of Commerce of
Monterrey, N.L. on May 30, 1936 under Number 16, Page 168, Volume 79, Book 3,
Second Auxiliary.

                    Voting Rights and Certain Minority Rights

     Each Series B Share entitles its holder to one vote at any of our ordinary
or extraordinary general shareholders meetings. Holders of Series B Shares are
entitled to elect at least eleven members of our Board of Directors, which shall
constitute the majority of such Board at all times. Holders of Series D-B and
D-L Shares are entitled to elect five members of our Board of Directors and,
upon conversion of the Series D-L Shares to Series L Shares or upon issuance of
Series L Shares, the holders of Series L Shares will be entitled to elect two
members of the Board of Directors. Under Mexican law, a minority shareholder or
group of shareholders voting in concert has the right to elect one Director and,
if generally elected, one Alternate Director for each 10% of the capital stock
of the company owned by such minority holder or group. None of our shares have
cumulative voting rights.

     Under our bylaws, the holders of Series D-B Shares, Series D-L Shares and
Series L Shares are entitled to vote only on the following limited matters: (i)
changes in our corporate form; (ii) any merger in which we are not the surviving
entity or any merger with an entity whose principal corporate purposes are
different from those of our company or our subsidiaries; (iii) change of
nationality; (iv) dissolution and liquidation; and (v) the cancellation of the
registration of our shares with the Special Section of the Registry or the
removal of the listing of our shares from the Mexican Stock Exchange or any
foreign exchange.

     Under Mexican law, holders of shares of any series are entitled to vote as
a class in a special meeting governed by the same rules that apply to
extraordinary meetings on any action that would impair the rights of holders of
shares of such series, and a holder of shares of such series would be entitled
to judicial relief against any action taken without such a vote. In certain
cases, the Board of Directors, the examiner or a Mexican court could call a
special meeting. A negative determination would be subject to judicial challenge
by an affected shareholder, and the necessity of a class vote would ultimately
be determined by a court. There are no procedures for determining whether a
particular proposed shareholder action requires a class vote, and Mexican law
does not provide extensive guidance on the criteria to be applied in making such
a determination.

     Subject to the terms of the ADR Deposit Agreement, holders of ADRs may
instruct the ADR Depositary with respect to voting the FEMSA shares comprising
the BD Units underlying their ADRs.

                              Shareholder Meetings

     General shareholders meetings may be ordinary meetings or extraordinary
meetings. Extraordinary meetings are those called to consider certain matters
specified in Article 182 of the Mexican Corporations Law and our bylaws. Such
matters include: amendments to the bylaws, liquidation, dissolution, merger and
transformation from one form of company to another, issuance of convertible
debentures and increases and reductions of the fixed portion of the capital.
General meetings called to consider all other matters are ordinary meetings. An
ordinary meeting must be held at least once each year within the first four
months following the end of the preceding fiscal year to (i) consider the
approval of the financial statements of FEMSA and certain of our subsidiaries
for the preceding fiscal year; (ii) to elect Directors and Examiners; and (iii)
to determine their compensation and to determine the allocation of profits and
losses of the preceding year. Generally, as a matter of Mexican law, holders of
securities of limited voting rights are not entitled to attend shareholders
meetings at which they are not entitled to vote. Holders of BD Units or B Units
are entitled to attend all shareholders meetings (by virtue of the Series B
Shares and Series D Shares included in such BD Units or B Units) and vote on
matters that are subject to the vote of holders of the underlying shares.


                                      128
<PAGE>

     The quorum for an ordinary meeting of the Series B Shares on first call is
more than 50% of the Series B Shares, and action may be taken by a majority of
the Series B Shares represented at such meeting. If a quorum is not available, a
second or subsequent meeting may be called at which action may be taken by a
majority of the Series B Shares present.

     The quorum for an extraordinary meeting is at least 75% of the shares
entitled to vote at that meeting, and action may be taken by a vote of the
majority of the outstanding shares that are entitled to vote. If a quorum is not
available, a second meeting may be called, at which the quorum will be the
majority of the outstanding capital stock entitled to vote, and actions will be
taken by holders of the majority of the outstanding capital stock entitled to
vote.

     Under Mexican law, holders of 20% of our outstanding shares entitled to
vote on a particular item may judicially oppose resolutions adopted at a general
meeting if the following conditions are met: (i) such holders file a complaint
with a Mexican court within 15 days after the adjournment of the meeting at
which such action was taken; (ii) such holders' complaint details the provisions
of the Mexican law or the bylaws that are violated, and the reason for their
claim; and (iii) such holders were not represented at the meeting when the
action was taken or, if represented, voted against such action.

     Shareholders meetings may be called by the Board of Directors, the examiner
and, under certain circumstances, a Mexican court. In addition, an ordinary
meeting may be called by any holder of Series B Shares if an ordinary
shareholders meeting has not been held within the preceding two fiscal years or
if any action required under Mexican law to be taken at any ordinary
shareholders meeting is not taken. The Board of Directors or the examiner may be
required to call a shareholders meeting at the written request of the holders of
10% of the outstanding shares. In the event such meeting is not called within 15
days following the date of such request, a Mexican court may require such
meeting to be called. A notice of meeting and an agenda must be published in the
Periodico Oficial del Estado de Nuevo Leon (the "Official State Gazette") or a
newspaper of general circulation in Monterrey, N.L., Mexico at least 15 days
prior to the date set for the meeting. To attend a meeting, shareholders must
deposit their shares with the company or with an institution for the deposit of
securities prior to such meeting as indicated in the notice. If entitled to
attend a meeting, a shareholder may be represented by an attorney-in-fact.

                                 Dividend Rights

     At the annual ordinary general shareholders meeting, the Board of Directors
submits the financial statements of the company for the previous fiscal year,
together with a report thereon by the Board of Directors and the report of the
examiner. Once the holders of Series B Shares have approved the financial
statements, they determine the allocation of our net profits for the preceding
year. Mexican law requires the allocation of at least 5% of such net profits to
a legal reserve, which is not subsequently available for distribution, until the
amount of the legal reserve equals 20% of our capital stock. Thereafter, the
holders of Series B Shares may determine and allocate a certain percentage of
net profits to any general or special reserve, including a reserve for
open-market purchases of our shares. The remainder of net profits is available
for distribution in the form of dividends to the shareholders.

     Amounts allocated as dividends will be paid to the holders of capital stock
of FEMSA in the following manner. Pursuant to the Reorganization, the bylaws
provide that, before May 11, 2008, dividends will be allocated among the shares
outstanding and fully paid at the time a dividend is declared in such manner
that each Series D-B Share and Series D-L Share receives 125% of the dividend
distributed in respect of each Series B Share. Holders of Series D-B Shares and
Series D-L Shares are entitled to this dividend premium in connection with all
dividends paid by us other than payments in connection with the liquidation of
our company. On May 11, 2008, the Series D-B Shares will automatically convert
into Series B Shares and Series D-L Shares will automatically convert into
Series L Shares, which will not be entitled to a dividend premium. From and
after May 11, 2008, the Series L Shares and Series B Shares that are outstanding
and fully paid at the time a dividend is declared will be entitled to share
equally in such dividend.


                                      129
<PAGE>

                     Change in Capital and Withdrawal Rights

     Our outstanding capital stock consists of both a fixed and a variable
portion. The fixed portion of our capital stock may be increased or decreased
only by an amendment of the bylaws adopted by a resolution of the holders of the
Series B Shares at an extraordinary shareholders meeting or, in the case of a
reduction of capital represented by the Series D-B, Series D-L or Series L
Shares, a resolution of the holders of Series D-B, Series D-L or Series L
Shares, as the case may be, at a special meeting of the holders of Series D-B,
Series D-L or Series L Shares, as the case may be. The variable portion of our
capital stock may be increased or decreased by resolution of an ordinary
shareholders meeting. Capital increases and decreases must be recorded in our
stock registry book and book of capital variations, if applicable.

     A capital stock increase may be effected through the issuance of new shares
for payment in cash or in kind, or by capitalization of indebtedness or of
certain items of shareholders' equity.

     Under our bylaws and the Mexican National Banking and Securities Commission
regulations, variable capital may not be greater than ten times the minimum
fixed portion of the capital stock specified in our bylaws. The fixed portion of
our capital stock cannot be withdrawn.

     The outstanding variable portion of our capital stock may be fully or
partially withdrawn by the shareholders. Shareholders wishing to effect a total
or partial withdrawal of the variable portion of their shares must notify us
through an authenticated written notice to that effect. If the notice of
withdrawal is received prior to the last quarter of the fiscal year, the
withdrawal becomes effective at the end of the fiscal year in which the notice
is given. Otherwise, the withdrawal becomes effective at the end of the
following fiscal year. Upon an election by shareholders to withdraw their
variable capital as described above, our share capital will be reduced.

     Reimbursement of withdrawn shares is made at the lower of: (i) 95% of the
average price per share quoted on the Mexican Stock Exchange during the 30
business days prior to the date on which the withdrawal becomes effective, and
(ii) the book value per share as calculated from the company's financial
statements (as approved at the annual ordinary general shareholders meeting) for
the fiscal year at the end of which the withdrawal becomes effective.
Shareholders exercising their withdrawal rights can request reimbursement by us
on the day following the ordinary shareholders meeting at which the financial
statements referred to above are approved.

     Because the fixed capital cannot be withdrawn, requests for withdrawals are
satisfied only to the extent of the available variable capital and in the order
in which they are received; requests that are received simultaneously are
fulfilled pro rata to the extent of the available variable capital.

     Any increase or decrease in our capital stock or any redemption or
repurchase (described below) will be subject to the following limitations: (i)
the Series B Shares will always represent at least 51% of the outstanding shares
of capital stock and the Series D-L Shares and Series L Shares will never
represent more than 25% of the outstanding shares of capital stock; (ii) before
May 11, 2008, the Series D-B, Series D-L and Series L Shares will not exceed in
the aggregate 49% of our capital stock; and (iii) from and after May 11, 2008,
no Series D Shares will be outstanding, the Series L Shares will represent up to
25% of the capital stock and the Series B Shares will represent at least 75% of
the capital stock.

                                Preemptive Rights

     Except in limited circumstances under Mexican law, in the event of a
capital increase, a holder of existing shares of a given series generally has a
preferential right to subscribe to shares of the same series sufficient to
maintain the holder's existing proportionate holding of shares of that series.
Preemptive rights must be exercised during a term fixed by the shareholders at
the meeting declaring the capital increase, which term must last at least 15
days following the publication of notice of the capital increase in the Official
State Gazette. As a result of applicable United States securities laws, holders
of ADRs may be restricted in their ability to participate in the exercise of
preemptive rights under the terms of the ADR Deposit Agreement. Shares
designated for issuance pursuant to a preemptive rights offering, with respect
to which preemptive rights have not been exercised, may be sold by us to third
parties on the same terms and conditions previously approved by the shareholders
or the Board of Directors.


                                      130
<PAGE>

     Article 81 of the Ley de Mercado de Valores (the "Mexican Securities Market
Law") permits the issuance and sale of shares through a public offering without
granting shareholders preemptive rights, if permitted by the bylaws and upon,
among other things, express authorization of the Mexican National Banking and
Securities Commission and the approval of the extraordinary shareholders meeting
called for such purpose. Our bylaws permit the issuance and sale of shares in a
public offering in accordance with Article 81 of the Mexican Securities Market
Law. Such offer may not take place if shareholders representing 25% or more of
the Series B Shares vote against such issuance. Any shareholder that votes
against such issuance has the right to demand that we sell such shareholder's
shares to the public at the same price at which the newly issued shares are to
be sold.

                         Limitations on Share Ownership

     Ownership by non-Mexican nationals of shares of Mexican enterprises is
regulated by the 1993 Ley de Inversion Extranjera (the "Foreign Investment Law")
and the regulations applicable thereto (the "Regulations"). The Comision
Nacional de Inversion Extranjera (the National Commission on Foreign Investment
or the "Foreign Investment Commission") is responsible for the administration of
the Foreign Investment Law and the Regulations.

     As a general rule, the Foreign Investment Law allows foreign holdings of up
to 100% of the capital stock of Mexican companies except for those engaged in
certain specified restricted industries. The Foreign Investment Law and the
Regulations require that Mexican shareholders retain the power to determine the
administrative control and the management of corporations in industries in which
special restrictions on foreign holdings are applicable. Foreign investment in
our shares is not limited under either the Foreign Investment Law or the
Regulations.

                                Other Provisions

     Redemption. We may redeem part of our shares for cancellation with retained
earnings pursuant to a decision of an extraordinary shareholders meeting. Only
shares subscribed and fully paid for may be redeemed. Any shares intended to be
redeemed shall be purchased on the Mexican Stock Exchange in accordance with the
Mexican Corporations Law and the Mexican Securities Market Law. No shares will
be redeemed, if as a consequence of such redemption, the Series D-B, Series D-L
and Series L Shares in the aggregate exceed the percentages permitted by the
bylaws or if any such redemption will reduce fixed capital below its minimum.

     Repurchase of shares. We may repurchase shares of our capital stock on the
Mexican Stock Exchange at prevailing market prices. Any such repurchase must be
approved by the Board of Directors. The repurchased shares must be paid for with
the proceeds of a special reserve account created for the repurchase of shares.
Our capital stock would be reduced automatically in an amount equal to the value
of each repurchased share; in the event that the purchase price of such shares
exceeded the par value, the difference would be paid for with amounts allocated
from the special reserve mentioned above. An ordinary shareholders meeting must
approve the maximum amount of paid-in capital that may be affected as a result
of the repurchase. We will hold any repurchased shares as treasury stock pending
future sales thereof; any such sale could only be effected on the Mexican Stock
Exchange. Our capital stock will be automatically increased upon the resale of
such shares in an amount equal to their par value; any excess amounts will be
allocated to the special reserve referred to above. The economic and voting
rights corresponding to repurchased shares may not be exercised and such shares
will not be deemed outstanding for purposes of calculating any quorum or vote at
any shareholders meeting while such shares constitute treasury stock.

     Pursuant to judicial adjudication, we may acquire the shares of a
shareholder in satisfaction of a debt owed by such shareholder to us; we must
resell any shares so acquired within three months or our capital stock will be
reduced and such shares canceled.

     Forfeiture of shares. As required by Mexican law, the bylaws provide that
non-Mexican holders of FEMSA shares, BD Units and B Units (i) are considered as
Mexican with respect to such shares that they acquire or hold and (ii) may not
invoke the protection of their own governments in respect of the investment
represented by those shares. Failure to comply with the bylaws may result in a
penalty of forfeiture of a shareholder's capital interests in favor of the
Mexican state. In the opinion of Lic. Carlos Aldrete, General Counsel of FEMSA,
under this provision, a non-Mexican shareholder (including a non-Mexican holder
of ADRs) is deemed to have agreed not to invoke the protection of its own
government by asking such government to interpose a diplomatic claim against the
Mexican state with respect to its rights as a shareholder, but is not deemed to
have waived any other rights it may have, including any rights under the United
States securities laws, with respect to its investment in our company. If a
shareholder should invoke governmental protection in violation of this
agreement, its shares could be forfeited to the Mexican state.


                                      131
<PAGE>

     Duration. The bylaws provide that the duration of our company is 99 years,
commencing on May 30, 1936.

     Conflict of interest. Any shareholder that has a conflict of interest with
respect to a transaction of our company is required to abstain from voting with
respect to such transaction at the relevant shareholders meeting. A shareholder
that votes on a business transaction in which its interests conflict with those
of our company may be liable for damages, but only if the transaction would not
have been approved without its vote.

     Under Mexican law, any Director who has a conflict of interest with FEMSA
in any transaction must disclose such fact to the other Directors and abstain
from voting. Any Director who violates such provisions will be liable for
damages. Additionally, our Directors and statutory auditors may not represent
shareholders in the shareholder meetings.

     Appraisal rights. Whenever the shareholders approve a change of corporate
purpose, change of nationality or transformation from one corporate form to
another of FEMSA, any shareholder entitled to vote on such change that has voted
against it, may withdraw from FEMSA and redeem its shares receiving the amount
calculated as specified under Mexican law attributable to its shares, provided
that it exercises its right within 15 days following the adjournment of the
meeting at which the change was approved. Under Mexican law, the amount which a
withdrawing shareholder is entitled to receive is equal to its proportionate
interest in our capital stock according to our most recent balance sheet
approved by an ordinary general shareholders meeting.

     Obligation of Majority Shareholders. In accordance with the Mexican
Securities Market Law, persons deemed to control us, including our principal
shareholders, will be required to make a public offer to repurchase any shares
held by public minority shareholders in the event either we or the Mexican
National Banking and Securities Commission cancels the listing of such shares
with the Mexican Stock Exchange. Mexican law provides that any such repurchase
will be made at the higher of the (i) average market price during the preceding
30 days or (ii) book value, as reflected in the last quarterly report filed with
the Mexican National Banking and Securities Commission.

     Liquidation. Upon dissolution of FEMSA, one or more liquidators must be
appointed by an extraordinary general meeting of the shareholders to wind up its
affairs. All fully paid and outstanding shares of capital stock will be entitled
to participate equally in any distribution upon liquidation.

     Actions Against Directors. Action for civil liabilities against Directors
may be initiated by resolution of an ordinary shareholders meeting. In the event
the ordinary shareholders meeting decides to bring such action, the Directors
against whom such action is to be brought will immediately cease to be
Directors. Additionally, shareholders representing not less than 15% of the
outstanding shares may directly exercise such action against the Directors,
provided that (i) such shareholders shall not have voted against taking such
action at the relevant shareholders meeting, and (ii) the claim covers all the
damages alleged to have been caused to FEMSA and not only the portion
corresponding to such shareholders. Any recovery of damages with respect to such
action will be for the benefit of FEMSA.

     Limited Liability. Shareholders' liability for FEMSA's losses are limited
to their shareholdings in our company.

                                    Taxation

     The following summary contains a description of certain U.S. federal income
and Mexican federal tax consequences of the purchase, ownership and disposition
of the ADRs by a holder that is a citizen or resident of the United States, a
U.S. domestic corporation or a person or entity that otherwise will be subject
to U.S. federal income tax on a net income basis in respect of the ADRs (a "U.S.
holder"), but it does not purport to be a description of all of the possible tax
considerations that may be relevant to a decision to purchase ADRs. In
particular, this discussion does not address all Mexican or U.S. federal income
tax considerations that may be relevant to a particular investor, nor does it
address the special tax rules applicable to certain categories of investors,
such as banks, dealers, traders who elect to mark to market, tax-exempt
entities, insurance companies, investors who hold the ADRs as part of a hedge,
straddle, conversion or integrated transaction or investors who have a
"functional currency" other than the U.S. Dollar. This summary deals only with
U.S. holders that will hold the ADRs as capital assets, but does not address the
tax treatment of a U.S. holder that owns or is treated as owning 10% or more of
the voting shares (including ADR's) of the company.


                                      132
<PAGE>

     This summary is based upon tax laws of the United States and Mexico as in
effect on the date of this Annual Report, including the provisions of the income
tax treaty between the United States and Mexico (the "Tax Treaty"), which are
subject to change. The summary does not address any tax consequences under the
laws of any state or locality of Mexico or the United States or the laws of any
taxing jurisdiction other than the federal laws of Mexico and the United States.
Holders of the ADRs should consult their tax advisers as to the U.S., Mexican or
other tax consequences of the purchase, ownership and disposition of ADRs,
including, in particular, the effect of any foreign, state or local tax laws.

     Mexican Taxation

     For purposes of this summary, the term "non-resident holder" means a holder
that is not a resident of Mexico and that does not hold the ADRs in connection
with the conduct of a trade or business through a permanent establishment or
fixed base in Mexico. For purposes of Mexican taxation, an individual is a
resident of Mexico if he or she has established his or her home in Mexico,
unless he or she has resided in another country for more than 183 days (whether
consecutive or not) during a calendar year, and can demonstrate that he or she
has become a resident of that country for tax purposes. A legal entity is a
resident of Mexico either if it is organized under the laws of Mexico or if it
has its principal place of business or its place of effective management in
Mexico. A Mexican citizen is presumed to be a resident of Mexico unless such a
person can demonstrate that the contrary is true. If a legal entity or an
individual is deemed to have a permanent establishment in Mexico for tax
purposes, all income attributable to such a permanent establishment will be
subject to Mexican taxes, in accordance with applicable tax laws.

Taxation of Dividends

     Under Mexican income tax law, dividends, either in cash or in kind, paid
with respect to the company's shares represented by ADRs are not subject to
Mexican withholding tax.

Taxation of Dispositions of ADRs

     Gains from the sale or disposition of ADRs by non-resident holders will not
be subject to Mexican withholding tax.

     Gains on the sale or other disposition of ADRs made in other circumstances
generally would be subject to Mexican tax, regardless of the nationality or
residence of the transferor. However, under the Tax Treaty, a holder that is
eligible to claim the benefits of the Tax Treaty will be exempt from Mexican tax
on gains realized on a sale or other disposition of ADRs in a transaction that
is not carried out through the Mexican Stock Exchange or other approved
securities markets, so long as the holder did not own, directly or indirectly,
25% or more of our total capital stock (including shares represented by ADRs)
within the 12-month period preceding such sale or other disposition. Deposits of
shares in exchange for ADRs and withdrawals of shares in exchange for ADRs will
not give rise to Mexican tax.

     The Mexican tax rules governing the taxation of gains of nonresident
holders on dispositions of their ADRs were amended during 2002. Nonresident
holders who disposed of their ADRs during 2002 should consult their own Mexican
tax advisors for the Mexican tax treatment of such dispositions.


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Other Mexican Taxes

     There are no Mexican inheritance, gift, succession or value added taxes
applicable to the ownership, transfer, exchange or disposition of ADRs. There
are no Mexican stamp, issue, registration or similar taxes or duties payable by
holders of the ADRs.

         United States Taxation

Taxation of Dividends

     The gross amount of any dividends paid with respect to our shares
represented by ADRs generally will be included in the gross income of a U.S.
holder as ordinary income on the day on which the dividends are received by the
ADR Depositary and will not be eligible for the dividends received deduction
allowed to corporations under the Internal Revenue Code of 1986, as amended.
Dividends, which will be paid in Pesos, will be includible in the income of a
U.S. holder in a U.S. Dollar amount calculated, in general, by reference to the
exchange rate in effect on the date that they are received by the ADR Depositary
(regardless of whether such Pesos are in fact converted into U.S. Dollars on
such date). If such dividends are converted into U.S. Dollars on the date of
receipt, a U.S. holder generally should not be required to recognize foreign
currency gain or loss in respect of the dividends. Subject to certain exceptions
for short-term and hedged positions, the U.S. Dollar amount of dividends
received by an individual U.S. holder in respect of the ADRs after December 31,
2002 and before January 1, 2009 is subject to taxation at a maximum rate of 15%.
U.S. holders should consult their own tax advisors regarding the availability of
the reduced dividends tax rate in light of their own particular circumstances.
U.S. holders should consult their tax advisors regarding the treatment of the
foreign currency gain or loss, if any, on any Pesos received that are converted
into U.S. Dollars on a date subsequent to the date of receipt. Dividends
generally will constitute foreign source "passive income" or, in the case of
certain U.S. holders, "financial services income" for U.S. foreign tax credit
purposes.

     Distributions to holders of additional shares with respect to their ADRs
that are made as part of a pro rata distribution to all of our shareholders
generally will not be subject to U.S. federal income tax.

     A holder of ADRs that is, with respect to the United States, a foreign
corporation or Non-U.S. holder generally will not be subject to U.S. federal
income or withholding tax on dividends received on ADRs, unless such income is
effectively connected with the conduct by the Non-U.S. holder of a trade or
business in the United States.

Taxation of Capital Gains

     A gain or loss realized by a U.S. holder on the sale or other disposition
of ADRs will be subject to U.S. federal income taxation as capital gain or loss
in an amount equal to the difference between the amount realized on the
disposition and such U.S. holder's tax basis in the ADRs. Any such gain or loss
will be a long-term capital gain or loss if the ADRs were held for more than one
year on the date of such sale. Long-term capital gain recognized by a U.S.
holder that is an individual is subject to lower rates of federal income
taxation than ordinary income or short-term capital gain. The deduction of
capital loss is subject to limitations for U.S. federal income tax purposes.
Deposits and withdrawals of shares by U.S. holders in exchange for ADRs will not
result in the realization of gain or loss for U.S. federal income tax purposes.

     Gain, if any, realized by a U.S. holder on the sale or other disposition of
ADRs will be treated as U.S. source income for U.S. foreign tax credit purposes.

     A Non-U.S. holder of ADRs will not be subject to U.S. federal income or
withholding tax on any gain realized on the sale of ADRs, unless (i) such gain
is effectively connected with the conduct by the Non-U.S. holder of a trade or
business in the United States, or (ii) in the case of gain realized by an
individual Non-U.S. holder, the Non-U.S. holder is present in the United States
for 183 days or more in the taxable year of the sale and certain other
conditions are met.


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United States Backup Withholding and Information Reporting

     A U.S. holder of ADRs may, under certain circumstances, be subject to
"backup withholding" with respect to certain payments to such U.S. holder, such
as dividends, interest or the proceeds of a sale or disposition of ADRs, unless
such holder (i) is a corporation or comes within certain exempt categories, and
demonstrates this fact when so required, or (ii) provides a correct taxpayer
identification number, certifies that it is not subject to backup withholding
and otherwise complies with applicable requirements of the backup withholding
rules. Any amount withheld under these rules does not constitute a separate tax
and will be creditable against the holder's U.S. federal income tax liability.
While Non-U.S. holders generally are exempt from backup withholding, a Non-U.S.
holder may, in certain circumstances, be required to comply with certain
information and identification procedures in order to prove this exemption.

                               Material Contracts

     We and our subsidiaries are parties to a variety of material agreements
with third parties, including shareholders' agreements, supply agreements and
purchase and service agreements. Set forth below are summaries of such
agreements. Because this is a summary, readers should not rely on these
summaries in lieu of reading the actual agreements, which we have either filed
or incorporated by reference in this Annual Report. See "Item 19. Exhibits."

     FEMSA Cerveza

     Shareholders' Agreement

     In connection with the subscription by Labatt of FEMSA Cerveza's capital
stock, Emprex and Labatt agreed that FEMSA Cerveza would be managed as a joint
venture. Accordingly, on September 12, 1994, Emprex, Labatt and FEMSA Cerveza
entered into a shareholders' agreement (as amended, the "FEMSA Cerveza
Shareholders' Agreement"), which, together with FEMSA Cerveza's bylaws, sets
forth the basic governance structure under which FEMSA Cerveza operates.

     In the FEMSA Cerveza Shareholders' Agreement, Emprex and Labatt (each, a
"Principal Cerveza Shareholder" and collectively, the "Principal Cerveza
Shareholders") confirm their agreement to the corporate governance provisions
set forth in FEMSA Cerveza's bylaws relating to the composition of the Board of
Directors and the executive officers of FEMSA Cerveza as well as to the election
of the members of such Board and officers. In addition, the FEMSA Cerveza
Shareholders' Agreement provides for the establishment of a management committee
to advise on strategic decisions and policies and to review, approve and oversee
important decisions of management, such as the approval of senior operating vice
presidents and the implementation of the annual budget and the annual business
plan.

     The Board of Directors of FEMSA Cerveza currently consists of fifteen
Directors and nine Alternative Directors who were elected at the annual ordinary
shareholders meeting for a renewable term of one year. Eleven Directors and
seven Alternative Directors were appointed by Emprex and four Directors and
Alternative Directors were appointed by Labatt.

     The management committee currently consists of nine members, one of whom is
the Chief Executive Officer of FEMSA Cerveza (with one vote), four of whom were
appointed by Emprex and four of whom were appointed by Labatt.

     The FEMSA Cerveza Shareholders' Agreement gives each of Labatt and Emprex
significant influence in the conduct of FEMSA Cerveza's business. In addition,
Labatt has the power to veto certain actions requiring approval by the Board of
Directors of FEMSA Cerveza, including amendments to the bylaws, reductions in
capital stock, certain mergers or spin-offs, initiation of bankruptcy or similar
proceedings, delisting any shares from the Mexican Stock Exchange and certain
other matters if any of such other matters are presented to a shareholders
meeting.


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<PAGE>

     In addition to the rights of first refusal provided for in FEMSA Cerveza's
bylaws regarding proposed transfers of shares, the FEMSA Cerveza Shareholders'
Agreement contemplates that a Principal Cerveza Shareholder may purchase the
interest in FEMSA Cerveza of the other in the event of a change of control in a
Principal Cerveza Shareholder.

     In the event that (i) one of the Principal Cerveza Shareholders buys the
other's interest in FEMSA Cerveza because of a change in control in the other
Principal Cerveza Shareholder; (ii) Labatt's ownership of FEMSA Cerveza's shares
of capital stock (other than certain limited voting shares) is reduced below 20%
of all such shares; or (iii) Emprex ceases to have managing control of FEMSA
Cerveza, and upon the request of the Principal Cerveza Shareholder whose
interest is not so affected, the FEMSA Cerveza Shareholders' Agreement requires
that FEMSA Cerveza's bylaws be amended to eliminate all share transfer
restrictions and all super-majority voting and quorum requirements, after which
the FEMSA Cerveza Shareholders' Agreement will terminate.

     The FEMSA Cerveza Shareholders' Agreement grants to the Principal Cerveza
Shareholders registration and tag-along rights with respect to their
shareholdings in FEMSA Cerveza. In addition, the FEMSA Cerveza Shareholders'
Agreement provides for consultation between the Principal Cerveza Shareholders
regarding potential investment opportunities in Latin America.

     As part of the FEMSA Cerveza Shareholders' Agreement, the Principal Cerveza
Shareholders have agreed not to compete with each other in Mexico or Canada and
not to engage in the manufacturing, sale or distribution of Mexican or Canadian
beers other than their respective brands. The Principal Cerveza Shareholders
have also agreed to share their know-how, expertise and technology.

     FEMSA Cerveza-Labatt U.S. Joint Venture Agreement

     On December 1, 1994, FEMSA Cerveza, Labatt and certain of their respective
affiliates entered into a Joint Venture Agreement (the "U.S. Joint Venture
Agreement") wherein they agreed to combine in Labatt USA, Labatt's business
related to the brewing, importation, distribution and sale of beer and other
malt beverages in the United States and FEMSA Cerveza's business related to the
importation, distribution and sale of beer in the United States. Under the U.S.
Joint Venture Agreement, Labatt and FEMSA Cerveza have 70% and 30% membership
interests, respectively, in Labatt USA.

     U.S. Distributor Agreement

     In connection with the U.S. Joint Venture Agreement, Labatt, FEMSA Cerveza
and certain of their respective affiliates (including Labatt USA) executed on
December 1, 1994 an Exclusive Distributor Agreement (the "U.S. Distributor
Agreement"). Under the U.S. Distributor Agreement, Labatt USA was appointed as
the sole and exclusive importer, distributor, marketer and seller of CCM's
brands in the United States. The term of the U.S. Distributor Agreement is 99
years, unless terminated earlier by FEMSA Cerveza (subject to the terms of the
Members Agreement, as defined below) following a change of control of Labatt, a
Prolonged Poor Performance (as defined in the Members Agreement) or a reduction
of Labatt's shareholding in FEMSA Cerveza to less than 20% (other than a
reduction resulting from certain permitted transfers). The U.S. Distributor
Agreement requires that CCM and Labatt USA agree on a price for the purchase by
Labatt USA of CCM's brands, which provides Labatt USA with a reasonable profit
and CCM with a recovery of its costs and a reasonable contribution to overhead
and profit.

     Members Agreement

     In connection with the U.S. Joint Venture Agreement, Labatt and FEMSA
Cerveza executed a Principal Owners and Members Agreement, dated March 1, 1996,
which, together with the limited liability agreements of Labatt USA, governs the
relationship of the parties with respect to Labatt USA (the "Members
Agreement"). The Members Agreement provides primarily for the events of
termination of the U.S. Distributor Agreement, restrictions on transfers of
membership interests, exit mechanisms (including certain puts and calls in case
of termination of the U.S. Distributor Agreement, a change of control or a
reduction of Labatt's shareholding in FEMSA Cerveza to less than 20%), and
agreements with regard to certain matters related to the conduct of the
business. The Members Agreement also requires a supermajority vote of six of the
seven members of the Board of Directors to approve certain matters, such as
distribution of profits policy, debt to capitalization ratio and annual
marketing plans (including marketing expenses). Two members of the Board of
Directors are appointed by FEMSA Cerveza and the other five members are
appointed by Labatt. The Members Agreement also grants registration and
tag-along rights to Labatt and FEMSA Cerveza with respect to their shareholdings
in Labatt USA.


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<PAGE>

     The executive committee of Labatt USA consists of five members, one of whom
is the Chief Executive Officer of Labatt USA (with no vote), two of whom are
appointed by FEMSA Cerveza and two of whom are appointed by Labatt. The
executive committee has the authority to advise the joint venture on strategic
decisions, such as the approval of senior operating vice presidents and to
review, approve and oversee the annual business plan and budget. FEMSA Cerveza
has the right to veto certain actions requiring the approval of the Board of
Directors of Labatt USA, including the introduction of new lines of business,
the acquisition or disposition of assets, the execution of material contracts
with affiliates and the marketing expenses for Labatt's brands and CCM's brands.

     Oxxo Distribution Agreement

     Pursuant to a distribution agreement (the "Oxxo Distribution Agreement"),
dated September 12, 1994, FEMSA Cerveza (acting through certain of its operating
subsidiaries) has appointed FEMSA Comercio as a non-exclusive distributor of the
beer products produced and sold by CCM, and FEMSA Comercio has agreed to
purchase all of its requirements for beer products from FEMSA Cerveza. The terms
under which FEMSA Cerveza's products are sold to FEMSA Comercio, including
pricing policy, are set forth in the Oxxo Distribution Agreement, provided,
however, that if FEMSA Cerveza shall grant to any third party more favorable
terms, such terms shall also be granted to FEMSA Comercio. The initial term of
the Oxxo Distribution Agreement is ten years, and thereafter shall be
automatically renewed for periods of five years, unless there is a material
change in market conditions and either party gives notice of termination for
that reason. The Oxxo Distribution Agreement may also be terminated in the event
of a default or bankruptcy of either party.

     Supply Agreement

     In connection with Labatt's investment in FEMSA Cerveza, on September 12,
1994, FEMSA Cerveza's principal operating subsidiaries entered into a supply
agreement with FEMSA Empaques (the "FEMSA Cerveza Supply Agreement"). Pursuant
to the FEMSA Cerveza Supply Agreement, FEMSA Cerveza has agreed to purchase all
of its packaging and similar product requirements from FEMSA Empaques. The FEMSA
Cerveza Supply Agreement provides that the transactions pursuant to the
agreement will be at competitive prices and that FEMSA Empaques will supply
FEMSA Cerveza in a continuous, adequate and reliable manner and at reasonable
standards of quality, innovation and levels of service. If FEMSA Empaques is
unable to satisfy fully FEMSA Cerveza's packaging requirements from FEMSA
Empaques' own production, FEMSA Empaques is required to purchase the additional
requirements from third party producers and sell such products to FEMSA Cerveza
at the price paid by FEMSA Empaques plus the direct costs incurred by FEMSA
Empaques in connection with such purchases. Furthermore, FEMSA Cerveza has
granted FEMSA Empaques a "right of first offer" to supply FEMSA Cerveza with new
packaging products as and when they are developed by FEMSA Empaques. The term of
the FEMSA Cerveza Supply Agreement was extended to December 31, 2003, and the
FEMSA Cerveza Supply Agreement will be automatically renewed for successive
three-year periods, unless cancelled in accordance with its terms.

     Services Agreement

     In 1994, FEMSA Servicios and FEMSA Cerveza entered into a services
agreement (the "FEMSA Cerveza Services Agreement") pursuant to which FEMSA
Servicios provides certain legal, auditing and other management and professional
services to FEMSA Cerveza on terms competitive with those of third party
providers. The term of the FEMSA Cerveza Services Agreement is indefinite so
long as FEMSA Cerveza continues to be a majority-owned subsidiary of Emprex.

     Logistics Management Agreement

     Logistica CCM has agreed with FEMSA Cerveza as of January 2, 1998 to
provide it for a term of five years with integrated logistics services for (i)
the deployment of raw and other materials (including cans and bottles) from
certain suppliers of CCM to CCM's plants and warehouses; (ii) the movement of
finished products from CCM's plants to its distribution centers; and (iii) the
return of empty bottles to CCM's plants. Logistica CCM also provides maintenance
services to CCM's transportation equipment.


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<PAGE>

     Labatt Services Agreement

     Labatt has agreed with CCM as of December 31, 1999 to provide specialized
services with respect to beer brewing, including, without limitation,
information systems, distribution, operations, brewing, marketing and brand
management. The agreement provides for a yearly amount payable in equal monthly
installments. The provisions are automatically renewable for a one year term,
subject to non-renewal by either party with notice to the other party.

     Coca-Cola FEMSA

     Shareholders' Agreement

     In connection with the subscription by Inmex (an indirect subsidiary of The
Coca-Cola Company) of 30% of Coca-Cola FEMSA's capital stock, FEMSA and The
Coca-Cola Company agreed that Coca-Cola FEMSA would be managed as a joint
venture. Accordingly, in June 1993, Emprex (a direct subsidiary of FEMSA), which
is the direct holder of the Coca-Cola FEMSA Series A Shares, Inmex and The
Coca-Cola Company entered into a shareholders' agreement. As a result of a
spin-off (escision ) of Emprex, CIBSA became Coca-Cola FEMSA's sole shareholder.
As of July 6, 2002, CIBSA, Emprex and Inmex entered into an amended and restated
shareholders' agreement. This agreement was further amended in May 2003 to add
as parties, two subsidiaries of The Coca-Cola Company that acquired Coca-Cola
FEMSA shares in connection with the acquisition of Panamco (as amended, the
"Coca-Cola FEMSA Shareholders' Agreement"). The Coca-Cola FEMSA Shareholder's
Agreement together with Coca-Cola FEMSA's bylaws, sets forth the basic rules
under which Coca-Cola FEMSA operates.

     The Coca-Cola FEMSA Shareholders' Agreement gives each of The Coca-Cola
Company and CIBSA significant influence in the conduct of Coca-Cola FEMSA's
business and gives them, together, the ability to control Coca-Cola FEMSA. CIBSA
and The Coca-Cola Company together, or CIBSA acting alone in certain limited
circumstances, will thus have the power to determine the outcome of all actions
requiring approval by the Board of Directors of Coca-Cola FEMSA, and CIBSA and
The Coca-Cola Company together, except in certain limited situations, will have
the power to determine the outcome of all actions requiring approval of the
shareholders of Coca-Cola FEMSA.

     The Coca-Cola FEMSA Shareholders' Agreement sets forth the shareholders'
understanding as to the effect of adverse actions taken by The Coca-Cola Company
under the bottler agreements as set forth in Coca-Cola FEMSA's bylaws. Coca-Cola
FEMSA's bylaws provide that a majority of the Directors appointed by CIBSA, upon
making a reasonable, good faith determination that any action taken by The
Coca-Cola Company under any bottler agreement between The Coca-Cola Company and
Coca-Cola FEMSA or any of its subsidiaries is materially adverse to the business
interests of Coca-Cola FEMSA, and the failure by The Coca-Cola Company to cure
such action within 60 days of notice thereof, may declare at any time within 90
days after such adverse action a "Simple Majority Period." During the Simple
Majority Period, certain decisions, which would ordinarily require the approval
of two Directors appointed by The Coca-Cola Company, such as those relating to
Coca-Cola FEMSA's business plans and those relating to a new line of business or
the termination of an existing line of business, can be made by a simple
majority vote of the Board of Directors of Coca-Cola FEMSA without obtaining the
approval of any Director appointed by The Coca-Cola Company. A majority of the
Directors appointed by CIBSA may terminate a Simple Majority Period, but once
having done so, cannot declare another Simple Majority Period within a one-year
period following that termination. If a Simple Majority Period persists for more
than one year, the provisions of the Coca-Cola FEMSA Shareholders' Agreement
addressing resolution of irreconcilable differences may be triggered.

     In addition to the rights of first refusal provided for in Coca-Cola
FEMSA's bylaws regarding proposed transfers of shares, the Coca-Cola FEMSA
Shareholders' Agreement contemplates three circumstances under which either The
Coca-Cola Company or CIBSA may purchase the interest of the other shareholder in
Coca-Cola FEMSA: (i) a change in control of either Inmex or CIBSA; (ii) the
existence of irreconcilable differences between CIBSA and The Coca-Cola Company;
or (iii) the occurrence of certain specified defaults.


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<PAGE>

     In the event that (i) CIBSA or The Coca-Cola Company buys the other's
interest in Coca-Cola FEMSA under any of these circumstances, or (ii) The
Coca-Cola Company's or CIBSA's ownership of Coca-Cola FEMSA's shares of capital
stock (other than certain limited voting shares) is reduced below 20% of all
such shares, and upon the request of the shareholder whose interest is not so
reduced, the Coca-Cola FEMSA Shareholders' Agreement requires that Coca-Cola
FEMSA's bylaws be amended to eliminate all share transfer restrictions and all
super-majority voting and quorum requirements, after which the Coca-Cola FEMSA
Shareholders' Agreement would terminate. In the event The Coca-Cola Company's or
CIBSA's ownership of Coca-Cola FEMSA's shares of capital stock (other than
certain limited voting shares) is reduced below 25% (but not below 20%) of all
such shares, and upon the request of the shareholder whose interest is not so
reduced, the Coca-Cola FEMSA Shareholders' Agreement requires that Coca-Cola
FEMSA's bylaws be amended to eliminate all super-majority voting and quorum
requirements, other than those relating to the share transfer restrictions.
After elimination of super-majority voting and quorum restrictions upon a
reduction of The Coca-Cola Company's ownership, Emprex acting alone could have
the power to determine most actions requiring shareholder or board approval by
virtue of its ownership of Coca-Cola FEMSA's Series A Shares.

     The Coca-Cola FEMSA Shareholders' Agreement also contains provisions
relating to Coca-Cola FEMSA's growth. It provides that The Coca-Cola Company
intends for Coca-Cola FEMSA to be one of a small number of its "anchor" bottlers
in Latin America. In particular, the parties agreed that it is desirable for
Coca-Cola FEMSA to expand by acquiring additional bottler territories in Mexico
and other Latin American countries in the event that any become available
("horizontal growth"). In addition, The Coca-Cola Company has agreed, subject to
a number of conditions, that if it obtains ownership of a bottler territory that
would fit well within Coca-Cola FEMSA's operations, it will give Coca-Cola FEMSA
the option to acquire such territory. The Coca-Cola Company has also agreed to
support prudent and sound modifications to Coca-Cola FEMSA's capital structure
to support horizontal growth. The Coca-Cola Company's agreement as to horizontal
growth would cease to be in effect upon (i) the elimination of certain
super-majority voting requirements in the event The Coca-Cola Company's or
Emprex's ownership of Coca-Cola FEMSA's shares of capital stock (other than
certain limited voting shares) is reduced below 25% of all such shares as
described above, or (ii) The Coca-Cola Company's election to terminate the
agreement following a specified default.

Bottler Agreements

     Bottler agreements are the standard contracts that The Coca-Cola Company
enters into with bottlers outside the United States for the sale of concentrates
for certain Coca-Cola trademark beverages. Coca-Cola FEMSA manufactures,
packages, distributes and sells soft drink beverages and bottled water in its
Mexican Territories under two Mexican bottler agreements it entered into with
The Coca-Cola Company. Coca-Cola FEMSA also manufactures, packages, distributes
and sells soft drink beverages and bottled water in its Buenos Aires Territory
under its Buenos Aires bottler agreement.

     These bottler agreements provide that Coca-Cola FEMSA will purchase its
entire requirement of concentrates for Coca-Cola trademark beverages from The
Coca-Cola Company and other authorized suppliers at prices, with terms of
payment, and on other terms and conditions of supply as determined from time to
time by The Coca-Cola Company at its sole discretion. Although the price
multipliers used to calculate the cost of concentrate and the currency of
payment, among other terms, are set by The Coca-Cola Company at its sole
discretion, Coca-Cola FEMSA sets the price of products sold to retailers at its
discretion, subject to the applicability of price restraints. Coca-Cola FEMSA
has the exclusive right to distribute Coca-Cola trademark beverages for sale in
its territories in authorized containers of the nature prescribed by the bottler
agreements and currently used by Coca-Cola FEMSA. These containers include
various configurations of cans and returnable and non-returnable bottles made of
glass, plastic and fountain containers. See "Item 4. Information on the
Company--Coca-Cola FEMSA--Sales."

     The bottler agreements include an acknowledgment by Coca-Cola FEMSA that
The Coca-Cola Company is the sole owner of the trademarks that identify the
Coca-Cola trademark beverages and of the secret formulas with which The
Coca-Cola Company's concentrates are made. Subject to Coca-Cola FEMSA's
exclusive right to distribute Coca-Cola trademark beverages in its territories,
The Coca-Cola Company reserves the right to import and export Coca-Cola
trademark beverages to and from Mexico and Argentina. Coca-Cola FEMSA's bottler
agreements do not contain restrictions on The Coca-Cola Company's ability to set
the price of concentrates charged to bottlers and do not impose minimum
marketing obligations on The Coca-Cola Company. The prices at which Coca-Cola
FEMSA purchases concentrates under the bottler agreements may vary materially
from the prices Coca-Cola FEMSA has historically paid, including during the
periods covered by our financial information attached to this Annual Report.
Under Coca-Cola FEMSA's bylaws and the shareholders' agreement, however, an
adverse action by The Coca-Cola Company under any of the bottler agreements may
result in a suspension of certain veto rights of the directors ("Series D
Directors") appointed by The Coca-Cola Company through Inmex. This provision
affords Coca-Cola FEMSA limited protection against The Coca-Cola Company's
ability to raise concentrate prices. See "Item 10. Additional
Information--Material Contracts--Coca-Cola FEMSA--Shareholders' Agreement.


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<PAGE>

     The Coca-Cola Company has the ability, at its sole discretion, to
reformulate any of the Coca-Cola trademark beverages and to discontinue any of
the Coca-Cola trademark beverages, subject to certain limitations, so long as
all Coca-Cola trademark beverages are not discontinued. The Coca-Cola Company
may also introduce new beverages in Coca-Cola FEMSA's territories; in that
event, Coca-Cola FEMSA will have, under the supplemental agreements discussed
below, the right of first refusal with respect to the manufacturing, packaging,
distribution and sale of such new beverages subject to the same obligations as
then exist with respect to the Coca-Cola trademark beverages under the bottler
agreements. The bottler agreements prohibit Coca-Cola FEMSA from producing or
handling cola products other than those of The Coca-Cola Company, or other
products or packages that would imitate, infringe upon or cause confusion with
the products, trade dress, containers or trademarks of The Coca-Cola Company, or
from acquiring or holding an interest in a party that engages in such
activities. The bottler agreements also prohibit us from bottling any soft drink
product except under the authority of, or with the consent of, The Coca-Cola
Company. The bottler agreements also impose restrictions concerning the use of
certain trademarks, authorized containers, packaging and labeling of The
Coca-Cola Company so as to conform to policies prescribed by The Coca-Cola
Company. In particular, Coca-Cola FEMSA is obligated to:

-    maintain such plant and equipment, staff and distribution facilities as are
     capable of manufacturing, packaging and distributing the Coca-Cola
     trademark beverages in authorized containers in accordance with Coca-Cola
     FEMSA's bottler agreements and in sufficient quantities to satisfy fully
     the demand for these beverages in Coca-Cola FEMSA's territories;

-    undertake adequate quality control measures prescribed by The Coca-Cola
     Company;

-    develop, stimulate and satisfy fully the demand for Coca-Cola trademark
     beverages using all approved means, which include the spending of
     advertising and other marketing funds;

-    maintain such sound financial capacity as may be reasonably necessary to
     assure performance by Coca-Cola FEMSA and its affiliates of Coca-Cola
     FEMSA's obligations to The Coca-Cola Company; and

-    submit annually to The Coca-Cola Company, Coca-Cola FEMSA's marketing,
     management, promotional and advertising plans for the ensuing year.

     The Coca-Cola Company has no obligation to participate in expenditures for
advertising and marketing, but it may, at its discretion, contribute to such
expenditures and undertake independent advertising and marketing activities, as
well as cooperative advertising and sales promotion programs that would require
Coca-Cola FEMSA's cooperation and support. In each of the past five years, The
Coca-Cola Company has contributed approximately half of Coca-Cola FEMSA's
advertising and marketing budget in the Mexican Territories and, since September
1994, approximately half of such budget in the Buenos Aires Territory. Although
Coca-Cola FEMSA believes that The Coca-Cola Company intends to continue to
provide cooperative advertising funds, it is not obligated to do so under the
bottler agreements. Consequently, future levels of advertising and marketing
support provided by The Coca-Cola Company may vary materially from the levels
historically provided. See Item 10. Additional Information--Material
Contracts--Coca-Cola FEMSA--Shareholders' Agreement.

     Coca-Cola FEMSA's two Mexican bottler agreements have terms of ten years
and will each expire on June 20, 2013. The Buenos Aires bottler agreement has a
term of ten years and will expire on September 1, 2004. The bottler agreements
are automatically renewable for ten-year terms, subject to non-renewal by either
party with notice to the other party. The bottler agreements are subject to
termination by The Coca-Cola Company in the event of default by Coca-Cola FEMSA.
The event of default provisions limiting the change in ownership or control of
Coca-Cola FEMSA and the assignment or transfer of the bottler agreements are
designed to preclude any person not acceptable to The Coca-Cola Company from
obtaining an assignment of a bottler agreement or from acquiring Coca-Cola
FEMSA, and are independent of similar rights of Inmex set forth in the Coca-Cola
FEMSA shareholders' agreement. These provisions may prevent changes in Coca-Cola
FEMSA's principal shareholders (as discussed below), including mergers or
acquisitions involving sales or dispositions of Coca-Cola FEMSA's capital stock,
without the consent of The Coca-Cola Company. See Item 10. Additional
Information--Material Contracts--Coca-Cola FEMSA--Shareholders' Agreement.


                                      140
<PAGE>

     In connection with Coca-Cola FEMSA's bottler agreements, Coca-Cola FEMSA
also entered into a tradename licensing agreement with The Coca-Cola Company on
June 21, 1993, pursuant to which Coca-Cola FEMSA is authorized to use certain
trademark names of The Coca-Cola Company. The agreement has an indefinite term,
but is terminated if Coca-Cola FEMSA ceases to manufacture, market, sell and
distribute Coca-Cola products pursuant to the bottler agreements or if the
Coca-Cola FEMSA shareholders' agreement is terminated. The Coca-Cola Company
also has the right to terminate the license agreement if Coca-Cola FEMSA uses
its trademark names in a manner not authorized by the bottler agreements.

     Coca-Cola FEMSA entered into two supplemental agreements with The Coca-Cola
Company on June 21, 1993 and September 1, 1994, which together clarify and
expand certain provisions of Coca-Cola FEMSA's bottler agreements. Among other
things, the supplemental agreements:

-    specify that Coca-Cola FEMSA has a right of first refusal with respect to
     the production and distribution of certain new trademark products of The
     Coca-Cola Company in the territories;

-    detail the calculation of certain payments upon the occurrence of certain
     breaches;

-    describe certain rights of first negotiation and first refusal of The
     Coca-Cola Company upon termination of any of the bottler agreements;

-    set forth procedural details for notification and communication relating to
     specific provisions of the bottler agreements; and

-    provide that The Coca-Cola Company may authorize other distributors of
     fountain syrup within the territories and will reimburse Coca-Cola FEMSA
     for documented costs relating to enforcement actions to protect certain
     trademarks of The Coca-Cola Company.

     The arrangements between The Coca-Cola Company and the Panamco bottling
territories are also governed by bottler agreements. These agreements have
different expiration dates and provide The Coca-Cola Company with rights and
protections that are similar to those provided to it under Coca-Cola FEMSA's
bottler agreements. The bottler agreements covering Panamco's Mexican
Territories have a uniform term ending in 2005, while the Panamco bottler
agreements in Guatemala, Nicaragua, Costa Rica, Panama, Venezuela, Colombia and
Brazil have five year terms.

     FEMSA Empaques

     Ball Licensing Agreement

     Famosa has entered into a number of licensing agreements pursuant to which
it has licensed technology pertaining to the manufacture of can bodies and can
ends. Effective as of April 1, 2002, Famosa entered into a new Proprietary
Technology Licensing Agreement between Ball and Famosa (the "Ball Licensing
Agreement"). The terms and conditions of the new Ball Licensing Agreement are
basically the same as those contained in the licensing agreement dated as of
January 1, 1997. Famosa continues to have the exclusive right to use, in Mexico,
technology developed by Ball for the manufacture of drawn and ironed aluminum
and tin-plated steel cans and convenience end closures for such cans for beer
and soft drink products. The Ball Licensing Agreement also provides Famosa with
a non-exclusive right to sell such cans and end closures manufactured pursuant
to the Ball Licensing Agreement throughout the world, other than in the United
States and Canada. In addition, the Ball Licensing Agreement incorporates the
terms of the Proprietary Technology Cross Licensing Agreement executed with Ball
on January 1, 1997 (the "Cross Licensing Agreement") pursuant to which Famosa
obtained, for as long as the Ball Licensing Agreement is exclusive, an exclusive
right to use technology developed by Ball's other licensees with respect to the
manufacture of cans and can ends. The term of the Ball Licensing Agreement shall
expire March 31, 2007.


                                      141
<PAGE>

     Glass Technology Agreement

     Sivesa entered into an Advanced Technology Agreement dated July 21, 1987,
as amended on July 7, 1992 (the "Advanced Technology Agreement"), with
Glastechnik Winckler & Co. GMBH ("Glastechnik"), a German company based in
Hamburg, Germany and Heye Glass, a German limited partnership based in
Obernkirchen, Germany. Under the Advanced Technology Agreement, Heye Glass
undertook to train the technical personnel of Sivesa in the operation and
maintenance of certain equipment provided by Glastechnik, and to supervise and
assist during the construction and commissioning of such equipment. The Advanced
Technology Agreement was renewed before its expiration and is effective until
July 20, 2009.

     Logistics Management Agreement

     As of January 2000, FEMSA Logistica has agreed to provide FEMSA Empaques,
for a term of 5 years, with integrated logistics services for the deployment of
beverage cans from FEMSA Empaques' Toluca beverage can plant to CCM's Orizaba
plant.

     Logistica

     Oracle License Agreement

     In August 2000, FEMSA Logistica entered into a license agreement with
Oracle, that grants FEMSA Logistica a perpetual license to use the following
three modules in order to build an electronic logistics and transportation
exchange: (a) the marketplace module, an electronic platform for sale
transactions over the internet; (b) the supply chain module, an electronic
platform that allows participants within the supply chain to participate in
inventory management and other logistics operations; and (c) the logistics
module, an electronic platform for the direct purchase of freight services by
bidding or catalog sales. The agreement requires an initial payment by FEMSA
Logistica of approximately US$1.3 million, but additional license payments may
be required if volume on the three exchanges exceeds specified levels.

     Perfil Corporativo

     On November 2, 2001, Coca-Cola FEMSA entered into two franchise bottling
agreements with Promotora de Marcas Nacionales, S.A. de C.V., a subsidiary of
Perfil Corporativo, under which Coca-Cola FEMSA became the sole franchisee for
the production, bottling, distribution and sale of Mundet brands in the Valley
of Mexico and most of its Southeast Mexico Territory. Each franchise agreement
has a term of ten years and will expire on November 2, 2011. The bottling
provisions are automatically renewable for ten-year terms, subject to
non-renewal by either party with notice to the other party. Other terms and
conditions of the franchise agreements are similar to the current arrangements
that Coca-Cola FEMSA has entered into with The Coca-Cola Company for the
bottling and distribution of Coca-Cola trademark soft drink beverages.

                              Documents on Display

     The materials referred to in this Annual Report, the Annual Report itself
and the exhibits hereto, may be inspected and copied at the SEC's public
reference room in Washington, D.C. Please call the SEC at 1-800-SEC-0330 for
further information on the public reference room. In addition, we began making
filings with the SEC Electronic Data Gathering, Analysis and Retrieval System
("EDGAR") in 2002. Any filings made electronically will be available to the
public over the internet at the SEC's web site at http://www.sec.gov.



                                      142
<PAGE>



ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     Our business activities require the holding or issuing of financial
instruments that expose us to market risks related to changes in interest rates,
foreign currency exchange rates, equity risk and commodity price risk.

                               Interest Rate Risk

     Interest rate risk exists principally with respect to our indebtedness that
bears interest at floating rates. At December 31, 2002, we had outstanding
indebtedness of Ps. 10,679 million, of which 29.8% bore interest at fixed
interest rates and 70.2% bore interest at variable interest rates. Swap
contracts held by us effectively switch a portion of our variable-rate
indebtedness into fixed-rate indebtedness. Consequently, as of December 31, 2002
we had 50.6% of fixed-rate debt and 49.4% of variable-rate debt. The interest
rate on our variable rate debt is determined by reference to LIBOR, Cetes, U.S.
treasury bonds and TIIE (the Tasa de Interes Interbancaria de Equilibrio or
Equilibrium Interbank Interest Rate). If these reference rates increase, our
interest payments would consequently increase.

     The table below provides information about our financial instruments that
are sensitive to changes in interest rates, including interest rate swaps and
debt obligations. For debt obligations, the table presents principal payments
and related weighted average interest rates by expected maturity dates. For
interest rate swaps, the table presents notional amounts and weighted average
interest rates by expected (contractual) maturity dates. Notional amounts are
used to calculate the contractual payments to be exchanged under the contract.
Weighted average variable rates are based on the reference rates on December 31,
2002, plus spreads, contracted by us. The instruments' actual payments are
denominated in U.S. Dollars and Pesos. All the payments in the table are
presented in Pesos, our reporting currency, utilizing the December 31, 2002
exchange rate of 10.459 Pesos per U.S. Dollar.

     The table below also includes the fair value of long-term bank loans and
syndicated loans which is based on the discounted value of contractual cash
flows. The discount rate is estimated using rates currently offered for debt
with similar terms and remaining maturities. Furthermore, the fair value of
long-term notes payable is based on quoted market prices, and the fair value of
the interest rate swaps is estimated based on quoted market prices to terminate
the contracts on December 31, 2002. As of December 31, 2002, this represents an
additional payment amount of Ps. 123 million.


                                      143
<PAGE>

<TABLE>
<CAPTION>


                          Principal by Year of Maturity
                              At December 31, 2002
                           Millions of Constant Pesos

                                                                                                    At December 31,
                                           At December 31, 2002                                           2001
                                                                     2008 and            Fair       Carrying   Fair
                         2003      2004    2005    2006       2007   thereafter  Total   Value       Value     Value
                         ----      ----    ----    ----       ----   ----------  -----   -----      --------   -----
<S>                      <C>         <C>    <C>    <C>         <C>     <C>       <C>     <C>            <C>     <C>
Fixed Rate Debt
-------------------
  U.S. Dollars.........    42     1,046     --    2,092         --        --    3,180   3,601          2,994    3,314
                                            --                  --        --
  Weighted average
  rate.................   7.3%     9.4%     --     9.0%         --        --     9.1%                   9.0%
                                            --                  --        --

Variable Rate Debt
  U.S. Dollars.........   654    2,319     682      513         70        62    4,299   4,412          3,646    3,701
  Weighted average
  rate.................   6.7%    7.2%   2.7%     2.8%       3.6%       2.0%     5.7%                   6.9%
  Pesos................   180      180    680      910      1,250        --     3,200   3,197            846      846
                                                                         --
  Weighted average
  rate.................   7.1%         7.1%   8.4%     8.6%       8.8%    --     8.5%                   7.0%
                                                                          --

Interest Rate Swaps
 U.S. Dollars:
  Variable to Fixed....   --        261     --    1,465                   --    1,726   (123)          1,310      (1)
                          --                --                            --
  Average pay rate.....          4.935%          3.877%
  Average receive
  rate.................         Libor+1%         Libor(1)
  Pesos:
  Variable to Fixed....                                        500        --      500      --
                                                                          --               --
  Average pay rate.....                                    10.530%
  Average receive
  rate.................                                  TIIE+0.5%
</TABLE>

(1) FEMSA has two interest-rate swap contracts outstanding, with reference rates
    to 3-month LIBOR and 6-month LIBOR.

     A hypothetical, instantaneous and unfavorable change of 100 basis points in
the average interest rate applicable to floating-rate liabilities held at
December 31, 2002 would increase our interest expense by approximately Ps. 75
million, or 14.5% over a 12-month period of 2003, assuming no additional debt is
incurred during such period.

                       Foreign Currency Exchange Rate Risk

     Our principal exchange rate risk involves changes in the value of the Peso
and Argentine peso relative to the U.S. Dollar. In 2002, approximately 93.5% of
our consolidated total revenues was denominated in Pesos, 2.7% was denominated
in Argentine pesos and 3.8% in other foreign currencies, principally in U.S.
Dollars. We estimate that a majority of our consolidated costs and expenses are
denominated in Pesos for Mexican subsidiaries and in Argentine pesos for
Coca-Cola FEMSA Buenos Aires. Substantially all of our foreign currency
denominated costs and expenses are denominated in U.S. Dollars. As of December
31, 2002, 69.6% of our indebtedness was denominated in U.S. Dollars and the
remaining 30.4% in Pesos. Decreases in the value of the Peso relative to the
U.S. Dollar will increase the cost in Pesos of our foreign currency denominated
operating costs and expenses and of the debt service obligations with respect to
our foreign currency denominated indebtedness. A depreciation of the Peso
relative to the U.S. Dollar will also result in foreign exchange losses as the
Peso value of our foreign currency denominated indebtedness is increased.

     Our exposure to market risk associated with changes in foreign currency
exchange rates relates primarily to U.S. Dollar-denominated debt obligations as
shown in the interest risk table above. We occasionally utilize currency forward
contracts to hedge our exposure to the U.S. Dollar relative to the Peso and
Argentine peso.


                                      144
<PAGE>

     As of December 31, 2002 and 2001, we did not have any forward agreements to
hedge our operations denominated in U.S. Dollars, and we did not have any call
option agreements to buy U.S. Dollars.

     The fair value of the foreign currency forward contracts is estimated based
on quoted market prices of each agreement at year end assuming the same maturity
dates originally contracted. The fair value of the call option agreements is
estimated based on quoted market prices of the cost of such agreements,
considering the same amounts, exchange rates and maturity dates originally
contracted.

     As of December 31, 2002, we had two forward agreements for the purchase of
euros in a notional amount of US$7 million, to hedge the exchange rate risk
between the U.S. Dollar and the Euro for the purchase of equipment. The fair
value is estimated based on quoted market exchange rate to terminate the
contracts at the reporting date, which as of December 31, 2002 represented a
gain of Ps. 4 million.
<TABLE>
<CAPTION>

                             Euro-Forward Agreements
        Millions of U.S. Dollars ($) and Millions of Constant Pesos (Ps)

                                                          At December 31, 2002
                                                          ---------------------
                                                          Notional
                                                          Amount     Fair Value
<S>                                                        <C>       <C>    <C>
Euro-Forwards:
To cover Peso risk..........................              $   7      Ps      4
Weighted average rate U.S. Dollar per Euro:
    Contracted..............................              0.98742           --
    Quoted Market...........................              1.036             --
</TABLE>

     A hypothetical, instantaneous and unfavorable 10% devaluation in the value
of the Peso relative to the U.S. Dollar occurring on December 31, 2002, would
have resulted in an increase in our net consolidated integral cost of financing
expense of approximately Ps. 517 million over a 12-month period of 2003,
reflecting higher interest expense and foreign exchange gain generated by the
cash balances held in U.S. Dollars as of that date, net of the loss based on our
U.S. Dollar-denominated indebtedness at December 31, 2002. However, this result
does not take into account any gain on monetary position that would be expected
to result from an increase in the inflation rate generated by a devaluation of
the Peso relative to the U.S. Dollar, which gain on monetary position would
reduce the consolidated net integral cost of financing.

     As of the date of this Annual Report, the uncertainty and instability of
the Argentine peso continues. The exchange rate at that date was approximately
Aps. 2.90 per U.S. Dollar, representing a revaluation of approximately 14% with
respect to December 31, 2002. We expect this situation to continue during the
second half of 2003, due to the recent presidential election and the possibility
of an adverse impact from new political and economic decisions on our results of
operations and stockholders' equity. A hypothetical, instantaneous and
unfavorable 10% devaluation in the value of the Argentine Peso relative to the
U.S. Dollar occurring on December 31, 2002, would produce a reduction in
stockholders' equity of approximately Ps. 80 million.

                                   Equity Risk

     In 1997, certain of our subsidiaries commenced an Executive Incentive
Program (as defined in Item 6, "Compensation of Directors and Officers"), which
is administered by a trust for the benefit of the participating executive
officers. In November 1997, we hedged our obligations under the Executive
Incentive Program by investing in options related to our BD Units. See "Item 6.
Directors, Senior Management and Employees Compensation." We hedged our
potential obligation under the bonus program by investing in cash-settled
options which were deposited in a trust. The cost of the purchased options was
recorded in other assets and was amortized over the original five-year term of
the options. As of December 31, 2002, the cost has been completely amortized,
and as of December 31, 2001 the unamortized cost amounted to Ps. 19 million. A
portion of the options expired in October 2002 and were exercised, recognizing a
gain of Ps. 1 million, in 2002. The remaining outstanding options expire in
September 2003.


                                      145
<PAGE>



     At December 31, 2002, the stock market price of a BD Unit was Ps. 37.93
million. The fair value of the options is estimated based on quoted market
prices to terminate the contracts on December 31, 2002.
<TABLE>
<CAPTION>

                                                                        Fair Value (Millions of Pesos)
                                                                      2002                         2001
                                                            ------------------------      ------------------------
<S>                                                              <C>         <C>            <C>            <C>
Equity Risk:
    Call Options on BD Units (long)(1)
       Contracts (one BD Unit per contract)....               356,449        Ps. 62        3,796,810      Ps. 16
       Strike Price (U.S. Dollars per BD Units)              $20.0979                         $3.614

    Put Options on BD Units (short)(1)
       Contracts (one BD Unit per contract)....               356,449       Ps. (14)              --            --
       Strike Price (U.S. Dollars per BD Units)              $40.0779                             --

(1)  Put and Call option contracts are European and can be either settled in
     cash or in shares.
</TABLE>


                              Commodity Price Risk

     On January 1, 2002, FEMSA Cerveza entered into agreements with Petroleos
Mexicanos ("PEMEX"), maturing in December 2003, which gives it the right to
purchase natural gas at a fixed price for three years. However, as a result of
the decrease in international natural gas prices, FEMSA Cerveza entered into a
swap agreement maturing in December 2003.

     Additionally, during 2002 we have entered into various derivative contracts
maturing in 2003 and 2004 to hedge the cost of aluminum.

     The result of the commodity price contracts was a gain of Ps. 17 million in
2002, which is recorded in the results of operations for the year. The fair
value is estimated based on quoted market prices to terminate the contracts at
the reporting date.
<TABLE>
<CAPTION>

         The outstanding contracts and their terms are as follows:
<S>                               <C>                   <C>                    <C>
Maturity Date                     Contract Type          Notional Amount        Fair Value
                                                         (in millions)        (in millions)
----------------------------- ----------------------- ---------------------- ------------------

2003                                  Put Options            Ps.    76          Ps.   (3)
                                      Seagulls                  180                   (7)
                                      Swaps                     424                   (8)
                                      Collar                    151                  (11)
----------------------------- ----------------------- ---------------------- ------------------
2004                                  Put Options               360                  (25)
                                      Swaps                     154                   (3)
</TABLE>




                                      146
<PAGE>


ITEMS 12-14.      NOT APPLICABLE














                                      147
<PAGE>



ITEM 15. CONTROLS AND PROCEDURES

     (a) Within the 90 days prior to the date of this report, we carried out an
evaluation under the supervision and with the participation of our management,
including our Chief Executive Officer and Chief Financial Officer, of the
effectiveness of the design and operation of our disclosure controls and
procedures. There are inherent limitations to the effectiveness of any system of
disclosure controls and procedures, including the possibility of human error and
the circumvention or overriding of the controls and procedures. Accordingly,
even effective disclosure and control procedures can only provide reasonable
assurance of achieving their control objectives. Based upon and as of the date
of that evaluation, our Chief Executive Officer and Chief Financial Officer
concluded that our disclosure controls and procedures are effective to provide
reasonable assurance that information required to be disclosed in the reports we
file and submit under the Securities Exchange Act of 1934 is recorded,
processed, summarized and reported as and when required.

     (b) There were no significant changes in our internal controls or in other
factors which could significantly affect our internal controls subsequent to the
date we carried out our evaluation.





                                      148
<PAGE>



ITEMS 16-17.      NOT APPLICABLE









                                      149
<PAGE>



ITEM 18. FINANCIAL STATEMENTS

See pages F-1 through F-48, incorporated herein by reference.










                                      150
<PAGE>
<TABLE>
<CAPTION>



ITEM 19. EXHIBITS


<S>        <C>
1.1        Bylaws (estatutos sociales) of FEMSA (formerly known as Valores Industriales, S.A.), together with an
           English translation (incorporated by reference to FEMSA's registration statement on Form F-4 filed on
           April 9, 1998 (File No. 333-8618)).

2.1        Deposit Agreement, among FEMSA (formerly known as Valores
           Industriales, S.A.), Citibank, N.A., and all registered holders and
           beneficial owners from time to time of any American Depositary
           Receipts, including the form of American Depositary Receipt
           (incorporated by reference to FEMSA's registration statement on Form
           F-4 filed on April 9, 1998 (File No. 333-8618)).

2.2        Specimen certificate representing a BD Unit, consisting of one Series
           B Share, two Series D-B Shares and two Series D-L Shares, together
           with an English translation (incorporated by reference to FEMSA's
           registration statement on Form F-4 filed on April 9, 1998 (File No.
           333-8618)).

2.3        US$80,000,000 Credit Agreement, dated August 8, 2001, among FEMSA
           Comercio, the financial institutions party thereto, BBVA Bancomer,
           S.A. and BBVA Securities, Inc. (incorporated by reference to FEMSA's
           Form 20-F filed on June 20, 2001 (File No. 1-14814)).

2.4        US$60,000,000 Credit Agreement, dated December 18, 2002, among FEMSA Empaques, Fabricas Monterrey, S.A.
           de C.V., Silices de Veracruz, S.A. de C.V., the financial institutions party thereto, BBVA Bancomer,
           S.A., Institucion de Banca Multiple, Grupo Financiero BBVA Bancomer, BankBoston N.A. and Export
           Development Canada

2.5        Amendment, dated April 9, 2003, to the Credit Agreement, dated December 18, 2002, among FEMSA Empaques,
           Fabricas Monterrey, S.A. de C.V., Silices de Veracruz, S.A. de C.V., BBVA Bancomer, S.A., Institucion
           de Banca Multiple, Grupo Financiero BBVA Bancomer, BankBoston N.A., Export Development Canada and Banco
           Nacional de Comercio Exterior, S.N.C.

2.6        FEMSA Cerveza, Note Purchase Agreement, dated October 28, 1999,
           US$150,000,000 8.92% Senior Notes due 2004 (incorporated by reference
           to FEMSA's annual report on Form 20-F filed June 27, 2000 (File No.
           1-14814)).

2.7        Indenture Agreement between Coca-Cola FEMSA and Citibank, N.A., as
           trustee, dated October 28, 1996 (incorporated by reference to FEMSA's
           registration statement on Form F-4 filed on April 9, 1998 (File No.
           333-8618)).

2.8        Note Purchase Agreement, dated August 26, 1994, among Coca-Cola FEMSA
           and the holders specified therein (incorporated by reference to
           FEMSA's registration statement on Form F-4 filed on April 9, 1998
           (File No. 333-8618)).

2.9        Voting Trust Agreement among certain principal shareholders of FEMSA
           together with an English translation (incorporated by reference to
           FEMSA's registration statement on Form F-4 filed on April 9, 1998
           (File No. 333-8618)).

2.10       Term Loan Agreement, dated April 23, 2003, among Coca-Cola FEMSA, JPMorgan Chase Bank, Banco J.P.
           Morgan, S.A., Morgan Stanley Senior Funding, Inc., J.P. Morgan Securities Inc., Banco Nacional de
           Mexico, S.A., BBVA Bancomer and ING Bank, N.V. (incorporated by reference to Coca-Cola FEMSA's annual
           report on Form 20-F filed on June 27, 2003 (File No. 1-2260)).

2.11       Bridge Loan Agreement, dated April 23, 2003, among Coca-Cola FEMSA, JPMorgan Chase Bank, Banco J.P.
           Morgan, S.A., Morgan Stanley Senior Funding, Inc., J.P. Morgan Securities Inc., Banco Nacional de
           Mexico, S.A., BBVA Bancomer and ING Bank, N.V. (incorporated by reference to Coca-Cola FEMSA's annual
           report on Form 20-F filed on June 27, 2003 (File No. 1-2260)).

2.12       Mexican Certificados Bursatiles in the amount of Ps. 2,000 million (maturing in four years).

2.13       Mexican Certificados Bursatiles in the amount of Ps. 1,250 million (maturing in five years).

2.14       Mexican Certificados Bursatiles in the amount of Ps. 1,000 million (maturing in seven years).
</TABLE>


                                      151
<PAGE>

<TABLE>
<CAPTION>

<S>        <C>
3.1        Shareholders' Agreement, dated September 12, 1994, as amended, among FEMSA, Labatt Brewing Company
           Limited and FEMSA Cerveza (incorporated by reference to FEMSA's
           registration statement on Form F-4 filed on April 9, 1998 (file No.
           333-8618)).

4.1        Joint Venture Agreement, dated December 1, 1994, among Labatt, Labatt Holdings, Inc. ("Labatt
           Holdings"), Labatt USA, Inc., Labatt Importers, Inc., Latrobe Brewing Company, Labatt Holdings II Inc.
           ("Labatt Holdings II"), FEMSA Cerveza, Multi-National Investment Corporation, Wisdom Import Sales
           Company, Inc. ("Wisdom Import Sales Company"), LF Holdings I. L.L.C. ("LF Holdings I"), LF Holdings II
           L.L.C. ("LF Holdings II"), Latrobe Brewing Company L.L.C. and Labatt USA L.L.C. (incorporated by
           reference to FEMSA's registration statement on Form F-4 filed on April 9, 1998 (File No. 333-8618)).

4.2        Distribution Agreement, dated December 1, 1994, among FEMSA Cerveza,
           Labatt, and certain affiliates (incorporated by reference to FEMSA's
           registration statement on Form F-4 filed on April 9, 1998 (File No.
           333-8618)).

4.3        Members Agreement, dated March 1, 1996, among FEMSA Cerveza and
           Labatt (incorporated by reference to FEMSA's registration statement
           on Form F-4 filed on April 9, 1998 (File No. 333-8618)).

4.4        Distribution Agreement, dated September 12, 1994, between FEMSA Cerveza and FEMSA Comercio
           (incorporated by reference to FEMSA's registration statement on Form F-4 filed on April 9, 1998 (File
           No. 333-8618)).

4.5        Supply Agreement, dated September 12, 1994, between FEMSA Cerveza and
           FEMSA Empaques (incorporated by reference to FEMSA's registration
           statement on Form F-4 filed on April 9, 1998 (File No. 333-8618)).

4.6        Services Agreement, dated September 12, 1994, between FEMSA Cerveza
           and FEMSA Servicios (incorporated by reference to FEMSA's
           registration statement on Form F-4 filed on April 9, 1998 (File No.
           333-8618)).

4.7        Services Agreement, dated December 31, 1999, between Cerveceria Cuauhtemoc Moctezuma and Labatt.

4.8        Amended and Restated Shareholder's Agreement, dated July 6, 2002, among CIBSA, Emprex, The Coca-Cola
           Company and Inmex (incorporated by reference to Coca-Cola FEMSA's
           annual report on Form 20-F filed on June 27, 2003 (File No.
           1-12260)).

4.9        Amendment, dated May 6, 2003, to Shareholders' Agreement as amended
           and restated on July 6, 2002, among CIBSA, Emprex, The Coca-Cola
           Company and Inmex (incorporated by reference to Coca-Cola FEMSA's
           annual report on Form 20-F filed on June 27, 2003 (File No.
           1-12260)).

4.10       Bottler Agreement, dated June 21, 1993, with respect to the Valley of
           Mexico, between Coca-Cola FEMSA and The Coca-Cola Company, together
           with an English translation (incorporated by reference to FEMSA's
           registration statement on Form F-4 filed on April 9, 1998 (File No.
           333-8618)).

4.11       Supplemental Agreement, dated June 21, 1993, with respect to the
           Valley of Mexico, between Coca-Cola FEMSA and The Coca-Cola Company,
           together with an English translation (incorporated by reference to
           FEMSA's registration statement on Form F-4 filed on April 9, 1998
           (File No. 333-8618)).

4.12       Bottler Agreement, dated June 21, 1993, with respect to Southeast
           Mexico, between Coca-Cola FEMSA and The Coca-Cola Company, together
           with an English translation (incorporated by reference to FEMSA's
           registration statement on Form F-4 filed on April 9, 1998 (File No.
           333-8618)).

4.13       Supplemental Agreement, dated June 21, 1993, with respect to
           Southeast Mexico, between Coca-Cola FEMSA and The Coca-Cola Company,
           together with an English translation (incorporated by reference to
           FEMSA's registration statement on Form F-4 filed on April 9, 1998
           (File No. 333-8618)).

4.14       Bottler Agreement, dated August 22, 1994, with respect to the greater
           Buenos Aires area, between Coca-Cola FEMSA and The Coca-Cola Company,
           together with an English translation (incorporated by reference to
           FEMSA's registration statement on Form F-4 filed on April 9, 1998
           (File No. 333-8618)).
</TABLE>

                                      152
<PAGE>
<TABLE>
<CAPTION>

<S>        <C>
4.15       Supplemental Agreement, dated August 22, 1994, with respect to the
           greater Buenos Aires area, between Coca-Cola FEMSA and The Coca-Cola
           Company, together with an English translation (incorporated by
           reference to FEMSA's registration statement on Form F-4 filed on
           April 9, 1998 (File No. 333-8618)).

4.16       Amendment, dated August 4, 1995, to the Bottler Agreement with
           respect to the greater Buenos Aires area between Coca-Cola FEMSA and
           The Coca-Cola Company dated August 22, 1994, together with an English
           translation (incorporated by reference to FEMSA's registration
           statement on Form F-4 filed on April 9, 1998 (File No. 333-8618)).

4.17       Bottler Agreement, dated December 1, 1995, with respect to former
           SIRSA San Isidro Refrescos, S.A. I y C ("SIRSA"), between Coca-Cola
           FEMSA and The Coca-Cola Company, together with an English translation
           (incorporated by reference to FEMSA's registration statement on Form
           F-4 filed on April 9, 1998 (File No. 333-8618)).

4.18       Supplemental Agreement, dated December 1, 1995, with respect to
           former SIRSA territory, between Coca-Cola FEMSA and The Coca-Cola
           Company, together with an English translation (incorporated by
           reference to FEMSA's registration statement on Form F-4 filed on
           April 9, 1998 (File No. 333-8618)).

4.19       Amendment, dated February 1, 1996, to Bottler Agreement with respect
           to former SIRSA territory, dated December 1, 1995, between Coca-Cola
           FEMSA and The Coca-Cola Company, together with an English translation
           (incorporated by reference to FEMSA's registration statement on Form
           F-4 filed on April 9, 1998 (File No. 333-8618)).

4.20       Bottler Agreements, dated November 2, 2001, with respect to the
           Mundet brands in the Valley of Mexico and most of Southeast Mexico,
           between subsidiaries of Coca-Cola FEMSA and Promotora de Marcas
           Nacionales, S.A. de C.V. (incorporated by reference to Coca-Cola
           FEMSA's annual report on Form 20-F filed on July 1, 2002 (File No.
           1-12260)).

4.21       Bottler Agreement with respect to the Mexican Golfo area between
           Panamco Golfo, S.A. de C.V. and The Coca-Cola Company, dated July 1,
           1999 (English Translation) (incorporated by reference to Coca-Cola
           FEMSA's annual report on Form 20-F filed June 27, 2003 (File No.
           1-12260)).

4.22       Bottler Agreement with respect to the Mexican Bajio area between
           Panamco Bajio, S.A. de C.V. and The Coca-Cola Company, dated July 1,
           1999 (English Translation) (incorporated by reference to Coca-Cola
           FEMSA's annual report on Form 20-F filed June 27, 2003 (File No.
           1-12260)).

4.23       Form of Bottler Agreement covering all territories outside of Mexico
           that belonged to Panamco, including schedule of covered territories
           (English Translation) (incorporated by reference to Coca-Cola FEMSA's
           annual report on Form 20-F filed June 27, 2003 (File No. 1-12260)).

4.24       Supply Agreement, dated June 21, 1993, between Coca-Cola FEMSA and
           FEMSA Empaques (incorporated by reference to FEMSA's registration
           statement on Form F-4 filed on April 9, 1998 (File No. 333-8618)).

4.25       Services Agreement, dated June 21, 1993, between Coca-Cola FEMSA and
           FEMSA Servicios (incorporated by reference to FEMSA's registration
           statement on Form F-4 filed on April 9, 1998 (File No. 333-8618)).

4.26       Sugar Sale and Purchase Agreement, dated March 22, 2002, between Nacional Financiera, S.N.C. and
           Propimex, S.A. de C.V. (incorporated by reference to Coca-Cola FEMSA's Form 20-F filed on July 1, 2002
           (File No. 1-12260)).

4.27       PET Purchase Agreement, dated April 1998, between Coca-Cola FEMSA and ALPLA Fabrica de Plasticos, S.A.
           de C.V. (incorporated by reference to Coca-Cola FEMSA's Form 20-F filed on July 1, 2002 (File No.
           1-12260)).

4.28       Licensing Agreement, dated April 1, 2002, between Famosa and Ball Corporation.

4.29       Advanced Technology Agreement, dated July 21, 1987, and amended July
           7, 1992, among Sivesa, Glastechnik Winckler & Co. GMBH, and Heye
           Glass (incorporated by reference to FEMSA's registration statement on
           Form F-4 filed on April 9, 1998 (File No. 333-8618)).
</TABLE>

                                      153
<PAGE>
<TABLE>
<CAPTION>

<S>         <C>
4.30       Software License Agreement, dated August 30, 2000, between FEMSA
           Logistica and Oracle (incorporated by reference to FEMSA's Form 20-F
           filed on June 20, 2001 (File No. 1-14814)).

8.1        Significant subsidiaries

12.1       Certification, pursuant to Section 906 of the Sarbanes-Oxley Act of
           2002, dated June 27, 2003.
</TABLE>


Omitted from the exhibits filed with this Annual Report are certain instruments
and agreements with respect to long-term debt of Coca-Cola FEMSA, none of which
authorizes securities in a total amount that exceeds 10% of the total assets of
Coca-Cola FEMSA. We hereby agree to furnish to SEC copies of any such omitted
instruments or agreements as the Commission requests.



                                      154
<PAGE>


REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS


To the Stockholders of Fomento Economico Mexicano, S. A. de C. V.,


We have audited the accompanying consolidated balance sheets of Fomento
Economico Mexicano, S.A. de C.V. (a Mexican corporation) and Subsidiaries
(collectively referred to as the "Company") as of December 31, 2002 and 2001,
and the related consolidated statements of income, changes in stockholders'
equity and changes in financial position for each of the three years in the
period ended December 31, 2002, all expressed in millions of Mexican pesos of
purchasing power as of December 31, 2002. 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 did not audit the
financial statements of certain consolidated subsidiaries, which statements
reflect total assets of approximately 12% and 11% of the consolidated totals as
of December 31, 2002 and 2001, respectively, and total revenues of 26%, 22% and
19% of the consolidated totals for each of the three years in the period ended
December 31, 2002, respectively. Those statements were audited by other auditors
whose reports have been furnished to us, and our opinion, insofar as it relates
to the amounts included for those entities, is based solely on the reports of
such other auditors.


We conducted our audits in accordance with auditing standards generally accepted
in Mexico and in the United States of America. Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits and the reports of the other auditors provide a reasonable basis for our
opinion.

In our opinion, based on our audits and the reports of the other auditors, such
consolidated financial statements referred to above present fairly, in all
material respects, the financial position of Fomento Economico Mexicano, S.A. de
C.V. and Subsidiaries as of December 31, 2002 and 2001, and the results of their
operations, the changes in their stockholders' equity and the changes in their
financial position for each of the three years in the period ended December 31,
2002 in conformity with accounting principles generally accepted in Mexico.

As mentioned in Note 4:

-    Effective January 1, 2000 the new procedures for the recognition of
     deferred income taxes as prescribed by revised Bulletin D-4, "Accounting
     for Income Taxes, Tax on Assets and Employee Profit Sharing", were adopted.

-    Effective January 1, 2001 the new procedures for the recognition of all
     financial instruments as prescribed by Bulletin C-2, "Financial
     Instruments", were adopted.

Accounting practices used by the Company in preparing the accompanying
consolidated financial statements conform with accounting principles generally
accepted in Mexico but do not conform with accounting principles generally
accepted in the United States of America (U.S. GAAP). A description of these
differences and a reconciliation of consolidated net income and stockholders'
equity to U.S. GAAP as permitted by the regulations of the U.S. Securities and
Exchange Commission, which allow omission of the requirement to quantify, in the
U.S. GAAP reconciliation, the differences attributable to the effects of
comprehensive inflation adjustments recorded locally, are set forth in Notes 24
and 25.

Our audits also comprehended the translation of the Mexican peso amounts into
U.S. dollar amounts and, in our opinion, such translation has been made in
conformity with the basis stated in Note 2. The translation of the financial
statement amounts into U.S. dollars and the translation of the financial
statements into English have been made solely for the convenience of readers in
the United States of America.


Monterrey, N.L., Mexico
January 29, 2003, except for Note 27 as to which the date is May 6, 2003



                                      F-1
<PAGE>
<TABLE>
<CAPTION>



FOMENTO ECONOMICO MEXICANO, S.A. DE C.V. AND SUBSIDIARIES
Consolidated Balance Sheets
At December 31, 2002 and 2001
Amounts expressed in millions of US dollars ($) and in millions of constant Mexican pesos (Ps.) as of December 31, 2002

                                                                              2002                                2001
ASSETS
<S>                                                            <C>                     <C>                     <C>
Current Assets:
     Cash and cash equivalents                            $      1,392         Ps.        14,556     Ps.         7,619
     Accounts receivable                                           299                     3,132                 3,392
     Inventories                                                   465                     4,867                 4,413
     Recoverable taxes                                              32                       332                    13
     Prepaid expenses                                               59                       612                   554
Total Current Assets                                             2,247                    23,499                15,991
Investments in shares                                               52                       544                   437
Property, plant and equipment                                    2,845                    29,753                28,849
Other assets                                                       536                     5,612                 4,609
Goodwill and other intangible assets                                57                       596                 1,250
TOTAL ASSETS                                              $      5,737         Ps.        60,004     Ps.        51,136
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
     Bank loans                                           $        299         Ps.         3,127     Ps.         1,198
     Interest payable                                               15                       152                   162
     Current maturities of long-term debt                           84                       876                   367
     Suppliers                                                     485                     5,071                 4,513
     Taxes payable                                                  74                       773                 1,079
     Accounts payable, accrued expenses and other liabilities      171                     1,795                 1,387
Total Current Liabilities                                        1,128                    11,794                 8,706
Long-Term Liabilities:
     Bank loans and notes payable                                  937                     9,803                 7,117
     Labor liabilities                                             102                     1,072                   800
     Deferred taxes                                                381                     3,987                 3,943
     Other liabilities                                              52                       535                   565
Total Long-Term Liabilities                                      1,472                    15,397                12,425
Total Liabilities                                                2,600                    27,191                21,131

Stockholders' Equity:
     Minority interest in consolidated subsidiaries                937                     9,798                 8,832
     Majority interest:
       Capital stock                                               390                     4,081                 4,081
       Additional paid-in capital                                  952                     9,952                 9,952
       Retained earnings from prior years                        1,188                    12,430                 9,731
       Net income for the year                                     271                     2,837                 3,393
       Cumulative translation adjustment                          (40)                     (415)                 (189)
       Cumulative result of holding non-monetary assets          (561)                   (5,870)               (5,795)
Total Majority Interest                                          2,200                    23,015                21,173

Total Stockholders' Equity                                       3,137                    32,813                30,005
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                $      5,737         Ps.        60,004     Ps.        51,136
</TABLE>


The accompanying notes are an integral part of these consolidated balance
sheets. Monterrey, N.L., Mexico, January 29, 2003



Jose Antonio                                         Federico Reyes Garcia
Chief Exectuive Officer                              Chief Financial Officer


                                      F-2
<PAGE>

<TABLE>
<CAPTION>

FOMENTO ECONOMICO MEXICANO, S.A. DE C.V. AND SUBSIDIARIES
Consolidated Income Statements
For the years ended December 31, 2002, 2001 and 2000.
Amounts expressed in millions of US dollars ($) and in millions of constant
Mexican pesos (Ps.) as of December 31, 2002

                                                                     2002                        2001             2000

   <S>                                                    <C>             <C>                <C>             <C>
    Net sales                                         $     5,043      Ps.   52,746     Ps.    49,952   Ps.     47,805
    Other operating revenues                                   19               195               145               64
Total revenues                                              5,062            52,941            50,097           47,869
Cost of sales                                               2,521            26,364            24,871           23,729
----------------------------------------------------------------------------------------------------------------------
Gross profit                                                2,541            26,577            25,226           24,140
----------------------------------------------------------------------------------------------------------------------
Operating expenses:
    Administrative                                            446             4,659             4,608            4,424
    Sales                                                   1,196            12,511            12,118           12,090
----------------------------------------------------------------------------------------------------------------------
                                                            1,642            17,170           16,726            16,514
----------------------------------------------------------------------------------------------------------------------
Income from operations                                        899             9,407              8,500           7,626
Participation in the results of affiliated companies            8                84                 33              37
----------------------------------------------------------------------------------------------------------------------
                                                              907             9,491              8,533           7,663
Integral result of financing:
    Interest expense                                          (87)             (906)             (948)          (1,160)
    Interest income                                            43               446               476              441
    Foreign exchange gain (loss)                             (31)              (325)              230           (1,121)
    Gain (loss) on monetary position                          37                389               (40)             269
----------------------------------------------------------------------------------------------------------------------
                                                             (38)              (396)             (282)          (1,571)
Other income (expenses), net                                 (82)              (858)             (297)             243
----------------------------------------------------------------------------------------------------------------------
Income for the year before income tax, tax on assets
    and employee profit sharing                              787              8,237             7,954            6,335
Income tax, tax on assets and employee
    profit sharing                                           346              3,624             2,945            2,508
----------------------------------------------------------------------------------------------------------------------
Net income before change in accounting principle             441              4,613             5,009            3,827
Change in accounting principle                                 -                  -               (29)               -
----------------------------------------------------------------------------------------------------------------------
Consolidated net income for the year                  $       441    Ps.      4,613   Ps.       4,980   Ps.      3,827
----------------------------------------------------------------------------------------------------------------------
    Net majority income                                       271             2,837             3,393            2,748
    Net minority income                                       170             1,776             1,587            1,079
----------------------------------------------------------------------------------------------------------------------
Consolidated net income for the year                  $       441    Ps.      4,613    Ps.      4,980     Ps.    3,827
----------------------------------------------------------------------------------------------------------------------
Net majority income per share
    (US dollars and constant Mexican pesos):
    Per Series "B" share
       Before change in accounting principle          $     0.046    Ps.      0.478    Ps.      0.576     Ps.    0.459
       After change in accounting principle                 0.046             0.478             0.571            0.459

    Per Series "D" share
       Before change in accounting principle                0.057             0.597             0.720            0.574
       After change in accounting principle                 0.057             0.597             0.714            0.574


        The accompanying notes are an integral part of these consolidated income statements.
</TABLE>


                                      F-3
<PAGE>

<TABLE>
<CAPTION>


FOMENTO ECONOMICO MEXICANO, S.A. DE C.V AND SUBSIDIARIES Consolidated Statements
of Changes in Financial Position For the years ended December 31, 2002, 2001 and
2000.
Amounts expressed in millions of US dollars ($) and in millions of constant
Mexican pesos (Ps.) as of December 31, 2002

                                                                     2002                       2001              2000
----------------------------------------------------------------------------------------------------------------------
<S>                                                            <C>           <C>                <C>              <C>
Resources Generated by (Used in):
Operations:
    Consolidated net income for the year              $        441   Ps.     4,613     Ps.      4,980   Ps.      3,827
    Depreciation                                               227           2,378              2,290            2,415
    Amortization and other                                     216           2,259              1,571            1,494
----------------------------------------------------------------------------------------------------------------------
                                                              884            9,250              8,841            7,736
----------------------------------------------------------------------------------------------------------------------
    Working capital:
       Accounts receivable                                      40             418               (154)             168
       Inventories                                             (66)           (686)               (17)            (434)
       Prepaid expenses                                         (5)            (56)                (9)            (166)
       Suppliers and other liabilities                          84             873                221              856
       Recoverable taxes, net                                  (58)           (607)               645             (216)
       Interest payable                                         (1)            (10)               (47)              45
       Labor liabilities                                         -               -                (90)              (5)
----------------------------------------------------------------------------------------------------------------------
Net Resources Generated by Operating Activities                878           9,182              9,390            7,984
----------------------------------------------------------------------------------------------------------------------
Investments:
    Investments in shares                                     (12)            (127)                78              689
    Property, plant and equipment                            (295)          (3,086)            (3,219)          (3,006)
    Deferred charges                                         (235)          (2,454)            (2,095)          (1,565)
    Acquisition of Promotora de Marcas Nacionales               -                -               (167)              68
    Sale of fixed assets of Amoxxo                              -                -                242                -
    Sale of fixed assets of Coca-Cola FEMSA                     -                -                129
     -
    Other assets, net                                        (16)             (164)               195             (710)
----------------------------------------------------------------------------------------------------------------------
Net Resources Used in Investing Activities                   (558)          (5,831)            (4,837)          (4,524)
----------------------------------------------------------------------------------------------------------------------
Financing Activities:
    Bank loans and notes payable                              524            5,482               (508)            (620)
    Amortization in real terms of long-term liabilities       (37)            (390)              (293)            (243)
    Notes payable and others                                    7               78                (68)            (357)
    Dividends declared and paid                              (109)          (1,140)              (632)            (720)
    Repurchase of FEMSA shares                                  -                -                (68)            (256)
    Decrease in the minority interest of:
       FEMSA Cerveza                                            -                -               (119)            (169)
       Logistica-CCM                                            -                -                (37)               -
       Amoxxo                                                   -                -               (335)               -
    Cumulative translation adjustment                         (42)            (444)               774              306
----------------------------------------------------------------------------------------------------------------------
Net Resources Generated by (Used in) Financing Activities     343            3,586             (1,286)          (2,059)
----------------------------------------------------------------------------------------------------------------------
Net Increase in Cash and Cash Equivalents                     663            6,937              3,267            1,401
Cash and Cash Equivalents at the Beginning of the Year        729            7,619              4,352            2,951
----------------------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents at the End of the Year       $    1,392    Ps.    14,556    Ps.       7,619        Ps. 4,352
----------------------------------------------------------------------------------------------------------------------


    The accompanying notes are an integral part of these consolidated statements of changes in financial position.
</TABLE>




                                      F-4
<PAGE>

<TABLE>
<CAPTION>



FOMENTO ECONOMICO MEXICANO, S.A. DE C.V. AND SUBSIDIARIES
Consolidated Statements of Changes in Stockholders' Equity
For the years ended December 31, 2002, 2001 and 2000.
Amounts expressed in millions of constant Mexican pesos (Ps.) as of December 31, 2002

                                                  Capital    Additional     Retained           Net    Cumulative    Cumulative
                                                    Stock       Paid-in     Earnings       Income    Translation        Result
                                                                Capital   from Prior       for the   Adjustment     of Holding
                                                                               Years          Year                Non-monetary
                                                                                                                        Assets
<S>                                       <C>      <C>    <C>    <C>     <C>    <C>    <C>     <C>   <C>    <C>    <C>    <C>
Balances at December 31, 1999              Ps.      4,105  Ps.    9,952   Ps.  8,196    Ps.  3,436    Ps. (740)    Ps. (4,116)
Transfer of prior year income                                                  3,436        (3,436)
Dividends declared and paid                                                    (594)
Deferred income tax effect                                                   (3,280)
Repurchase of FEMSA shares                           (19)                      (237)
Decrease in the minority interest of
FEMSA Cerveza
Comprehensive income                                                                         2,748          156          (810)
Balances at December 31, 2000             Ps.        4,086 Ps.    9,952  Ps.  7,521     Ps.  2,748   Ps.   (584)    Ps.(4,926)
Transfer of prior year income                                                 2,748         (2,748)
Repurchase of FEMSA shares                                (5)                   (63)
Dividends declared and paid                                                    (475)
Decrease in the minority interest of:
FEMSA Cerveza
Logistica-CCM
Amoxxo
Comprehensive income                                                                         3,393           395         (869)
Balances at December 31, 2001              Ps.       4,081 Ps.    9,952   Ps. 9,731     Ps.  3,393   Ps.   (189)    Ps.(5,795)
Transfer of prior year income                                                 3,393         (3,393)
Dividends declared and paid                                                    (694)
Comprehensive income                                                                         2,837          (226)         (75)
Balances at December 31, 2002              Ps.       4,081 Ps.    9,952  Ps. 12,430    Ps.   2,837    Ps.  (415)    Ps.(5,870)
</TABLE>

<TABLE>
<CAPTION>


                                              Total      Minority     Total
                                              Majority   Interest     Stockholders'
                                              Interest   in           Equity
                                                         Consolidated
                                                         Subsidiaries
<S>                                        <C>    <C>    <C>    <C>    <C>    <C>
Balances at December 31, 1999                Ps. 20,833   Ps. 8,479   Ps.  29,312
Transfer of prior year income
Dividends declared and paid                     (594)          (126)        (720)
Deferred income tax effect                     (3,280)       (1,248)      (4,528)
Repurchase of FEMSA shares                       (256)                      (256)
Decrease in the minority interest of
FEMSA Cerveza                                                  (169)        (169)
Comprehensive income                             2,094          984         3,078
Balances at December 31, 2000              Ps.  18,797    Ps. 7,920   Ps.  26,717
Transfer of prior year income
Repurchase of FEMSA shares                        (68)                       (68)
Dividends declared and paid                      (475)         (157)        (632)
Decrease in the minority interest of:
FEMSA Cerveza                                                  (119)        (119)
Logistica-CCM                                                   (37)         (37)
Amoxxo                                                         (335)        (335)
Comprehensive income                            2,919         1,560         4,479
Balances at December 31, 2001              Ps.  21,173   Ps.   8,832  Ps.  30,005
Transfer of prior year income
Dividends declared and paid                      (694)         (446)       (1,140)
Comprehensive income                             2,536         1,412        3,948
Balances at December 31, 2002              Ps.  23,015    Ps. 9,798   Ps.  32,813


The accompanying notes are an integral part of these consolidated statements of changes in stockholders' equity.
</TABLE>



                                      F-5
<PAGE>




FOMENTO ECONOMICO MEXICANO, S.A. DE C.V. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
At December 31, 2002, 2001 and 2000
Amounts expressed in millions of US dollars ($) and in millions of constant
Mexican pesos (Ps.) as of December 31, 2002
-------------------------------------------------------------------------------

Note 1.    Activities of the Company.

Fomento Economico Mexicano, S.A. de C.V. ("FEMSA") is a Mexican holding company.
The principal activities of FEMSA and its subsidiaries ("the Company"), as an
economic unit, are carried out by operating subsidiaries, and grouped under
direct and indirect holding company subsidiaries (the "Subholding Companies") of
FEMSA. The following is a description of such activities, together with
ownership interest in each Subholding Company:
<TABLE>
<CAPTION>

-------------------------------------------------------------------------------
Subholding Company                    % Ownership      Activities
-------------------------------------------------------------------------------
<S>                                       <C>          <C>
FEMSA Cerveza, S.A. de C.V.              70.0%          Production, distribution and marketing of beer through its
and Subsidiaries                                        principal operating subsidiary, Cerveceria Cuauhtemoc
("FEMSA Cerveza")                                       Moctezuma, S.A. de C.V., which operates six breweries
                                                        throughout Mexico and produces and distributes 15 different
                                                        brands of beer, of which the five most important are:
                                                        Tecate, Carta Blanca, Superior, Sol and XX Lager. Labatt
                                                        Brewing Company Limited ("Labatt") and its holding company,
                                                        Stellamerica Holdings Limited ("Stellamerica"), jointly own
                                                        30% of FEMSA Cerveza's capital stock.

Coca-Cola  FEMSA,  S.A. de C.V. and      51.0%         Production,  distribution and marketing of certain Coca-Cola
Subsidiaries                                           trademark  beverages  in two  territories  in Mexico and one
("Coca-Cola FEMSA")                                    territory in Argentina.  The Inmex Corporation,  an indirect
                                                       subsidiary of The Coca-Cola  Company,  owns 30% of Coca-Cola
                                                       FEMSA's  capital  stock.  In addition,  shares  representing
                                                       19% of  Coca-Cola  FEMSA's  capital  stock are listed on the
                                                       Bolsa Mexicana de Valores,  S.A. de C.V. ("BMV") and The New
                                                       York Stock Exchange, Inc. ("NYSE").

FEMSA  Empaques,  S.A. de C.V.  and      99.9%         Production and distribution of a wide variety of packaging
Subsidiaries                                           materials primarily to the beverage and food industries,
("FEMSA Empaques")                                     including products such as aluminum beverage cans and tops,
                                                       steel food cans, bottle caps and other closures, glass
                                                       beverage bottles, labels and other flexible packaging
                                                       materials, plastic cases, coolers, commercial refrigeration
                                                       equipment, detergents, lubricants and adhesives.

FEMSA  Comercio,  S.A. de C.V.  and      99.9%         Operation of a chain of convenience stores under the trade name
Subsidiaries                                           "OXXO" and the operation of "Oxxo Express Service Centers",
("FEMSA Comercio")                                     convenience stores with gas stations.

--------------------------------------------------------------------------------------------------------------------
</TABLE>


                                      F-6
<PAGE>


<TABLE>
<CAPTION>

<S>                                   <C>                <C>
--------------------------------------------------------------------------------------------------------------------
Subholding Company                 % Ownership         Activities
--------------------------------------------------------------------------------------------------------------------
Logistica-CCM,  S.A.  de C.V.  and       70.0%         Provide transportation, logistics and maintenance services to
Subsidiaries                                           FEMSA Cerveza's subsidiaries.  Labatt and Stellamerica
("Logistica-CCM")                                      jointly own 30% of Logistica-CCM's capital stock.


FEMSA Logistica, S.A. de C.V.            99.9%         Provide  transportation,  logistics and maintenance services
and Subsidiaries                                       to FEMSA's  subsidiaries  other than those of FEMSA Cerveza,
("FEMSA Logistica")                                    and to third parties.
--------------------------------------------------------------------------------------------------------------------
</TABLE>


In general extraordinary stockholder meetings of FEMSA Cerveza and Logistica-CCM
held on December 20, 2002, the merger of Logistica-CCM into FEMSA Cerveza was
approved. The merger will become effective January 1, 2003.

Oxxo Express, S.A. de C.V. ("Oxxo Express", previously Empresas Amoxxo, S.A. de
C.V.) was a joint venture between Amoco Mexico Holding Company, a subsidiary of
BP Amoco, p.l.c., and Desarrollo Comercial FEMSA, S.A. de C.V. ("DCF", a
subsidiary of FEMSA), that operated 31 service centers consisting of convenience
stores located at gas stations. On September 3, 2001, the joint venture
agreement was terminated, resulting in DCF obtaining complete legal and
operating control of 17 service centers of Oxxo Express. This transaction
represented a reduction of FEMSA's minority interest of Ps. 335. On March 26,
2002, FEMSA Comercio acquired Oxxo Express from DCF, integrating the service
centers with the chain of OXXO stores.

On October 25, 2001, through an indirect subsidiary, FEMSA acquired Promotora de
Marcas Nacionales, S.A. de C.V. ("Promotora de Marcas Nacionales"), whose
principal asset is the Mundet trademark soft drinks. The cost of the acquisition
was Ps. 167, primarily representing a trademark of Ps. 145, which is presented
in other assets in the balance sheet and is being amortized on a straight-line
basis over 20 years; additionally, concentrate production equipment was acquired
for Ps. 22. FEMSA will continue operating the present Mundet franchises, and
Coca-Cola FEMSA was designated to produce, distribute and market Mundet
trademark soft drinks in its territories. The results of operations of the
acquired company are included in the consolidated results of FEMSA since the
acquisition date.


Note 2.    Basis of Presentation.

The consolidated financial statements of the Company are prepared in accordance
with accounting principles generally accepted in Mexico ("Mexican GAAP"), which
differ in certain significant respects from accounting principles generally
accepted in the United States of America ("US GAAP"), as further explained in
Note 24. A reconciliation from Mexican GAAP to US GAAP is included in Note 25.

The consolidated financial statements are stated in millions of Mexican pesos
("Ps."). The translations of Mexican pesos into US dollars ("$") are included
solely for the convenience of the reader, using the exchange rate as of December
31, 2002 of 10.459 Mexican pesos to one US dollar. Such convenience translations
should not be construed as representations that the Mexican peso accounts have
been, could have been, or could in the future be, converted into US dollars at
this or any other exchange rate.

The consolidated financial statements include the financial statements of FEMSA
and those of all companies in which it owns directly or indirectly a majority of
the outstanding capital stock and/or exercises control. All intercompany account
balances and transactions have been eliminated in such consolidation.

                                      F-7
<PAGE>


Note 3.    Foreign Subsidiary Incorporation.

The accounting records of the foreign subsidiaries are maintained in the
currency of the country where they are located.

The financial statements of the foreign subsidiaries are restated to the
purchasing power of the local currency at the end of the year applying the
inflation rate of the country of origin and are subsequently translated into
Mexican pesos using the year-end exchange for their inclusion in the
consolidated financial statements.

The variation in a net investment in foreign subsidiaries generated by exchange
rate fluctuations is included in the cumulative translation adjustment and is
recorded directly in stockholders' equity.

The foreign exchange gain or loss generated from the financing obtained to
acquire foreign subsidiaries, net of the related tax effect, is included in the
cumulative translation adjustment, to the extent the net investment in the
foreign subsidiaries is considered to be an economic hedge of such debt. The
foreign exchange gain or loss associated with any unhedged portion of such debt
is recorded in the results of the year.

The gain or loss on monetary position resulting from the hedged portion of the
financing is computed using the inflation rate of the country in which the
acquired subsidiary is located, because it is considered an integral part of the
investment in such subsidiary, and is included in the integral result of
financing.

The goodwill resulting from the acquisition of foreign subsidiaries is
maintained in the functional currency of the foreign subsidiary, since such
investment will be recovered in such currency, and is restated applying the
inflation factor of the country of origin and using the year-end exchange rate.

In December 2001, the Argentine government adopted a series of economic
measures, the most important of which consisted of restrictions on cash
withdrawals and foreign exchange transactions. On January 6, 2002, the Argentine
government published the Economic Emergency Law that will be in effect through
December 10, 2003. This law grants powers to the government to establish the
system that will determine the exchange rate of the Argentine peso with respect
to foreign currencies and to establish foreign exchange regulations.

Due to the instability of the Argentine economy and the devaluation of Argentine
peso, the Company has recognized a loss in the value of its investment in
Coca-Cola FEMSA de Buenos Aires, S.A. ("Coca-Cola FEMSA Buenos Aires"). As of
December 31, 2002 and 2001, the losses accumulated in stockholders' equity
generated by the Argentine peso devaluation amount to:
<TABLE>
<CAPTION>

---------------------------------------------------------------------------------------------------------------------
                                                                                             2002               2001
---------------------------------------------------------------------------------------------------------------------
<S>                                                                                <C>       <C>     <C>        <C>
Stockholders' equity:
     Majority interest                                                             Ps.        785     Ps.        454
     Minority interest                                                                        754                437
---------------------------------------------------------------------------------------------------------------------
                                                                                   Ps.      1,539     Ps.        891
---------------------------------------------------------------------------------------------------------------------
</TABLE>

As a result of the continuing difficult economic situation in Argentina, the
uncertainty with respect to the period of recovery, and the instability of the
exchange rate, on July 1, 2002, the Company determined the value of Coca-Cola
FEMSA Buenos Aires based on price market value multiples of comparable
businesses resulting in the recognition of an impairment of goodwill generated
by the acquisition of Ps. 402, which was recorded in other expenses in the
results of the year.


As a result, the net investment in Coca-Cola FEMSA Buenos Aires is no longer
considered to be an economic hedge of the liabilities denominated in US dollars
incurred to acquire Coca-Cola FEMSA Buenos Aires.


                                      F-8
<PAGE>

Note 4.    Significant Accounting Policies.

The Company's accounting policies are in accordance with Mexican GAAP, which
require that the Company's management make certain estimates and use certain
assumptions to determine the valuation of various items included in the
consolidated financial statements. The Company's management believes that the
estimates and assumptions used were appropriate as of the date of these
consolidated financial statements.

The significant accounting policies are as follows:

a)   Recognition of the Effects of Inflation:
     The recognition of the effects of inflation in the financial information
     consists of:

     -    Restating non-monetary assets such as inventories and fixed assets,
          including related costs and expenses when such assets are consumed or
          depreciated.

     -    Restating capital stock, additional paid-in capital and retained
          earnings by the amount necessary to maintain the purchasing power
          equivalent in Mexican pesos on the dates such capital was contributed
          or income generated, through the use of factors derived from the
          National Consumer Price Index ("NCPI").

     -    Including in stockholders' equity the cumulative effect of holding
          non-monetary assets, which is the net difference between changes in
          the replacement cost of non-monetary assets and adjustments based upon
          NCPI factors.

     -    Including in the cost of financing the purchasing power gain or loss
          from holding monetary items.

     The Company restates its consolidated financial statements in terms of the
     purchasing power of the Mexican peso as of the most recent balance sheet
     date by using NCPI factors for Mexican subsidiaries, and by using for
     foreign subsidiaries the inflation rate plus the latest year-end exchange
     rate of the country in which the foreign subsidiary is located.

     The Company restates its income statement using NCPI factors determined
     from the month in which the transaction occurred to the most recent balance
     sheet date.

     Financial information for the Mexican subsidiaries for prior years was
     restated using NCPI factors. Financial information for foreign subsidiaries
     and affiliated companies included in the consolidated financial statements
     was restated using the inflation rate of the country in which the foreign
     subsidiary or affiliated company is located and then translated at the
     year-end exchange rate of the Mexican peso. Accordingly, the amounts are
     comparable with each other and with the preceding years since all are
     expressed in the purchasing power of the respective currencies as of the
     end of the latest years presented.

b)   Cash and Cash Equivalents:
     Cash consists of non-interest bearing bank deposits. Cash equivalents
     consist principally of short-term bank deposits and fixed-rate investments
     with brokerage houses valued at the quoted market prices.

c)   Inventories and Cost of Sales:
     The value of inventories is adjusted to replacement cost, without exceeding
     market value. Cost of sales is determined based on replacement cost at the
     time of sale. Advances to suppliers to purchase raw materials and spare
     parts are included in the inventory account and are restated by applying
     NCPI factors, considering their average age.

                                      F-9
<PAGE>

d)   Prepaid Expenses:
     These represent payments for services that will be received over the next
     12 months. Prepaid expenses are recorded at historical cost and recognized
     in the income statement of the month in which the services or benefits are
     received. Prepaid expenses are principally represented by advertising,
     leasing and promotional expenses.

     Advertising costs consist of television and radio advertising airtime paid
     in advance, which are generally amortized over a 12-month period based on
     the transmission of the television and radio spots. The related production
     costs are recognized in the results of operations the first time the
     advertising takes place.

     Promotional costs are expensed as incurred, except for those promotional
     costs related to the launching of new products or presentations. Those
     costs are recorded as prepaid expenses and amortized over the year, during
     which they are estimated to increase sales of the related products or
     presentations to normal operating levels, which is generally one year.

e)   Bottles and Cases:
     Bottles and cases are recorded at acquisition cost and restated to their
     replacement cost.

     FEMSA Cerveza includes bottles and cases in inventories. Breakage is
     charged to expense as incurred. For the years ended December 31, 2002, 2001
     and 2000, breakage expense amounted to Ps. 22, Ps. 41 and Ps. 34,
     respectively.

     Coca-Cola FEMSA includes bottles and cases in property, plant and
     equipment. For financial reporting purposes, breakage is recorded as an
     expense as it is incurred. Depreciation is computed only for tax purposes
     using the straight-line method at a rate of 10% per year. The Company
     estimates that breakage expense is similar to the depreciation calculated
     on an estimated useful life of approximately four years for returnable
     glass bottles, four years for returnable cases and one year for returnable
     plastic bottles. For the years ended December 31, 2002, 2001 and 2000,
     breakage expense amounted to Ps. 192, Ps. 199 and Ps. 279, respectively.
     Bottles and cases in circulation, which have been placed in the hands of
     customers, are presented net of deposits received from customers, and the
     difference between the cost of these assets and the deposits received is
     amortized according to their useful lives.

f)   Investments in Shares:
     The investments in shares of affiliated companies are initially recorded at
     their acquisition cost and subsequently valued using the equity method.
     Investments in affiliated companies in which the Company does not have
     significant influence are recorded at cost and restated based upon NCPI
     factors.

g)   Property, Plant and Equipment:
     These assets are initially recorded at their cost of acquisition and/or
     construction. Property, plant and equipment of domestic origin, except
     bottles and cases of Coca-Cola FEMSA (see Note 4 e), are restated by
     applying NCPI factors. Imported equipment is restated by applying the
     inflation rate of the country of origin and then translated at the year-end
     exchange rate.

     Depreciation of property, plant and equipment is computed using the
     straight-line method, based on the value of the restated assets reduced by
     their residual values. Depreciation rates are determined by the Company
     together with independent appraisers, considering the estimated remaining
     useful lives of the assets.

    The annual average depreciation rates of the assets are as follows:
<TABLE>
<CAPTION>

     <S>                                                                                                   <C>
    ----------------------------------------------------------------------------------------------------------------
     Buildings and construction                                                                               2.82%
     Machinery and equipment                                                                                  5.54%
     Distribution equipment                                                                                   7.38%
     Other equipment                                                                                          7.37%
    ----------------------------------------------------------------------------------------------------------------
</TABLE>


                                      F10
<PAGE>

     The main types of machinery and equipment include: bottling production
     lines, bottle washer machines, conveyors, packaging equipment, can and
     crown cap production lines, glass bottle production equipments, as well as
     storage and container equipment.

h)   Other Assets:
     Represent payments whose benefits will be received in future years. These
     consist principally of:

-    Agreements with customers for the right to sell and promote the Company's
     products during certain periods of time, which are being considered as
     monetary assets and amortized in accordance with the timing of the
     receipt by the Company of such benefits, as set forth in terms of such
     agreements, which beginning 2001, is in base of the volume sold by the
     customers. The average term of these agreements is between three and four
     years.

     Prior to 2002, the amortization of these expenses was included in
     operating expenses. Beginning 2002, the Company adopted the provisions of
     Emerging Issues Task Force ("EITF") No. 01-09, "Accounting for
     Consideration Given by a Vendor to a Customer (Including a Reseller of
     the Vendor's Products)" of the Financial Accounting Standards Board
     ("FASB"), which requires presenting the amortization of these capitalized
     amounts as a reduction of net sales. The income statements of the years
     2001 and 2000 have been reclassified to conform to this change in
     presentation.



     The amortization for the years ended December 31, 2002, 2001 and 2000
     recognized in selling expenses amounted to Ps. 951, Ps. 851 and Ps. 636,
     respectively.

-    Leasehold improvements, which are restated by applying NCPI factors, are
     amortized using the straight-line method over the term in which the
     benefits are expected to be received.

-    Start-up expenses represent costs incurred prior to the opening of an
     Oxxo store, including rent, permits and licenses. Such amounts are
     restated based on NCPI factors and are amortized on a straight-line basis
     over the period during which the related benefits are expected to be
     received.

i)   Goodwill and Other Intangible Assets:
     This is the difference between the price paid and the book value of the
     shares and/or assets acquired, which is substantially equal to the fair
     value of such assets. This difference is amortized over a period of no more
     than 20 years. Goodwill is recorded in the functional currency of the
     subsidiary in which the investment was made and is restated by applying the
     inflation rate of the country of origin and the year-end exchange rate.

j)   Payments from The Coca-Cola Company:
     The Coca-Cola Company participates in the advertising and promotional
     programs of Coca-Cola FEMSA. The resources received for advertising and
     promotional incentives are included as a reduction of selling expenses. The
     net expenses incurred were Ps. 715, Ps. 693 and Ps. 707 during the years
     ended December 31, 2002, 2001 and 2000, respectively.

     In addition, since 1999 The Coca-Cola Company has made payments in
     connection with Coca-Cola FEMSA's refrigeration equipment investment
     program. These resources are related to the increase in volume sales of
     Coca-Cola products that result from such expenditures and will be
     reimbursed if the established conditions in the contracts are not met. The
     refrigeration equipment investments, net of the participation of The
     Coca-Cola Company, are recorded in property, plant and equipment.


                                      F-11
<PAGE>



k)   Labor Liabilities:
     Labor liabilities include obligations for pension and retirement plan,
     seniority premiums and postretirement medical services, based on actuarial
     calculations by independent actuaries, using the projected unit credit
     method. These liabilities are considered to be non-monetary and are
     restated using NCPI factors, with such restatement presented in
     stockholders' equity. The increase in labor liabilities of the year is
     charged to expense in the income statement.

     The unamortized prior service costs are recorded as expenses in the income
     statement over the year during which the employees will receive the
     benefits of the plan, which in the case of pension and retirement plans and
     seniority premiums is 14 years and for postretirement medical services is
     20 years, both since 1996.

     The main subsidiaries of the Company have established funds for the payment
     of pension benefits and postretirement medical services through irrevocable
     trusts with the employees as beneficiaries.

    Severance indemnities are charged to expenses on the date that they are
    incurred. The severance payments resulting from the Company's reduction of
    personnel, as a result of the restructuring of certain areas, are included
    in other expenses, net. During the years ended December 31, 2002, 2001 and
    2000, these amounted to Ps. 162, Ps. 169 and Ps. 226, respectively.

l)   Revenue Recognition: Revenue is recognized upon shipment of goods to
     customers or upon delivery to the customer and the customer has taken
     ownership of the goods. Net sales reflect units delivered at selling list
     prices reduced by promotion allowances and discounts.

     Cost of sales includes expenses related to raw materials used in production
     process, labor (wages and other benefits), depreciation of production
     facilities and equipment and other costs including fuel, electricity,
     breakage of returnable bottles in the production process, equipment
     maintenance, inspection, and inter and intra-plant transfer costs.

     Administrative expenses include labor costs (salaries and other benefits)
     for employees not directly involved in the sale of the Company's products,
     professional services fees, depreciation of offices facilities and
     amortization of capitalized software costs.

     Selling expenses include:

     a)   Distribution: labor costs (salaries and other benefits), outbound
          freight costs, warehousing costs of finished products, breakage for
          returnable bottles in the distribution process, depreciation and
          maintenance of trucks and other distribution facilities and equipment.
          During the years ended December 31, 2002, 2001 and 2000, these
          distribution costs amounted to Ps. 3,299, Ps. 3,581 and Ps. 3,712,
          respectively.
     b)   Sales: labor costs (salaries and other benefits) and sales commission
          paid to sales personnel.
     c)   Marketing: labor costs (salaries and other benefits), promotions and
          advertising costs.

m)   Income Tax, Tax on Assets and Employee Profit Sharing: The Company
     determines and records its income tax, tax on assets and employee profit
     sharing in accordance with the tax legislation and revised Bulletin D-4,
     "Tratamiento Contable del Impuesto Sobre la Renta, del Impuesto al Activo y
     la Participacion de los Trabajadores en las Utilidades" (Accounting for
     Income Tax, Tax on Assets and Employee Profit Sharing), which requires that
     deferred tax assets and liabilities be recorded for all temporary
     differences between the accounting and tax bases of assets and liabilities.

     The balance of deferred income tax and deferred tax on assets is determined
     using the liability method, which takes into account all temporary
     differences between the accounting and tax bases of assets and liabilities.
     Deferred employee profit sharing is calculated considering only those
     temporary differences that arise from the reconciliation between the
     accounting income for the year and the basis for employee profit sharing
     that are expected to generate a benefit or liability within a defined year.


                                      F-12
<PAGE>

     The balance of deferred taxes is comprised of monetary and non-monetary
     items, based on the temporary differences from which it is derived.
     Deferred taxes are classified as a long-term asset or liability, regardless
     of when the temporary differences are expected to reverse.

     The deferred tax provision for the year to be included in the results of
     operations is determined by comparing the deferred tax balance at end of
     the year to the balance at the beginning of the year, excluding from both
     balances any temporary differences that are recorded directly in
     stockholders' equity. The deferred taxes related to such temporary
     differences are recorded in the same stockholders' equity account. The
     initial effect of the application of this new bulletin as of January 1,
     2000 was recorded in retained earnings and minority interest (see Note 21
     d).

     FEMSA has received authorization from the Secretaria de Hacienda y Credito
     Publico ("SHCP") to prepare its income tax and tax on asset returns on a
     consolidated basis, which includes the proportional taxable income or loss
     of its Mexican subsidiaries, which is limited to 60% of the stockholders'
     participation.

n)   Integral Result of Financing: The integral result of financing includes:

     Interest:
     Interest income and expenses are recorded when earned or incurred,
     respectively.

     Foreign Exchange Gains and Losses:
     Transactions in foreign currency are recorded in Mexican pesos using the
     exchange rate applicable on the date they occur. Assets and liabilities in
     foreign currencies are adjusted to the year-end exchange rate, recording
     the resulting foreign exchange gain or loss directly in the income
     statement, except for the foreign exchange gain or loss from financing
     obtained for the acquisition of foreign subsidiaries (see Note 3).

     Gain (Loss) on Monetary Position:
     This is the result of the effects of inflation on monetary items. The gain
     (loss) on monetary position for Mexican subsidiaries is computed by
     applying NCPI factors to the net monetary position at the beginning of each
     month, excluding the financing contracted for the acquisition of foreign
     companies (see Note 3).

     The gain (loss) on monetary position of foreign subsidiaries is computed by
     applying the monthly inflation rate of the country in which such subsidiary
     is located to the net monetary position at the beginning of each month,
     expressed in such country's local currency, then translating the monthly
     results into Mexican pesos using the year-end exchange rate, except as
     mentioned in Note 3.

o)   Financial Instruments:
     The Company frequently contracts financial instruments to manage the
     financial risks associated with its operations. If the instrument is used
     to manage the risk related with the Company's operations, the effect is
     recorded in cost of sales and in operating expenses. If the instrument is
     used to manage the risks related with the financing operations, the effect
     is recorded in interest expense or in the foreign exchange loss (gain),
     depending on the related contract.

     Prior to 2001, the Company recorded in the result of the year the effect of
     financial instruments at their maturity date, except for foreign exchange
     options, for which the premium paid was amortized throughout the life of
     the contract.

     Beginning in January 2001, Bulletin C-2, "Instrumentos Financieros"
     (Financial Instruments) went into effect, which requires an enterprise to
     record all financial instruments in the balance sheet as assets or
     liabilities. The bulletin requires that financial instruments entered into
     for hedging purposes be valued using the same valuation criteria applied to
     the hedged asset or liability.


                                      F-13
<PAGE>

     Additionally, financial instruments entered into for purposes other than
     hedging the operations of the Company should be valued at fair market
     value. The difference between the financial instrument's initial value and
     fair market value should be recorded in the income statement at the end of
     the year. The initial effect of this bulletin is included in net income of
     2001, net of taxes, as a change in accounting principle, which amount to
     Ps. 29.

p)   Cumulative Result of Holding Non-monetary Assets:
     This represents the sum of the difference between book values and
     restatement values, as determined by applying NCPI factors to non-monetary
     assets such as inventories and fixed assets, and their effect on the income
     statement when the assets are consumed or depreciated.

q)   Comprehensive Income:
     Comprehensive income is comprised of the net income and other comprehensive
     income items such as the translation adjustment and the result of holding
     non-monetary assets and is presented in the consolidated statement of
     changes in stockholders' equity.

r)   Valuation of Goodwill and Long-Lived Assets:
     The Company reviews the carrying value of its goodwill and long-lived
     assets for impairment whenever events or changes in circumstances indicate
     that the carrying amount of an asset may not be recoverable. In order to
     determine whether an impairment exists, management compares estimated
     future cash flows to be generated by those assets with their carrying
     value. If such assets are considered to be impaired, the impairment charge
     to be recognized in net income is measured by the amount by which the
     carrying amount exceeds their fair value.

Note 5.    Accounts Receivable.
<TABLE>
<CAPTION>

                                                                                        2002                  2001
-------------------------------------------------------------------------------------------------------------------
<S>                                                                         <C>       <C>       <C>        <C>
Trade                                                                        Ps.       2,465      Ps.        2,502
Allowance for doubtful accounts                                                        (281)                 (226)
Notes receivable                                                                         407                   355
The Coca-Cola Company                                                                    114                   140
Travel advances to employees                                                              30                    22
Insurance claims                                                                          22                    27
Rent of warehouses                                                                        13                    11
Loans to employees                                                                         6                    13
Other                                                                                    356                   548
-------------------------------------------------------------------------------------------------------------------
                                                                             Ps.       3,132     Ps.         3,392
-------------------------------------------------------------------------------------------------------------------

The changes in the allowance for doubtful accounts are as follows:

                                                                                            2002              2001
-------------------------------------------------------------------------------------------------------------------
    Balance at the beginning of the year                                         Ps.         226    Ps.        232
    Provision for the year                                                                   121               122
    Write-offs                                                                              (54)             (119)
    Restatement of the balance at the beginning of the year                                 (12)               (9)
-------------------------------------------------------------------------------------------------------------------
    Balance at the end of the year                                               Ps.         281    Ps.       226
-------------------------------------------------------------------------------------------------------------------
</TABLE>

                                      F-14
<PAGE>
<TABLE>
<CAPTION>

Note 6.    Inventories.
                                                                                             2002              2001
---------------------------------------------------------------------------------------------------------------------
<S>                                                                                <C>     <C>      <C>     <C>
Finished products                                                                   Ps.      1,592    Ps.      1,423
Raw materials                                                                                1,448             1,392
Bottles and cases of FEMSA Cerveza                                                           1,085             1,039
Spare parts                                                                                    317               318
Advances to suppliers                                                                          312               135
Work in process                                                                                139               124
Advertising and promotional materials                                                           11                13
Allowance for obsolescence                                                                    (36)              (31)
---------------------------------------------------------------------------------------------------------------------
                                                                                   Ps.      4,867   Ps.       4,413
---------------------------------------------------------------------------------------------------------------------


Note 7.    Prepaid Expenses.

                                                                                              2002              2001
---------------------------------------------------------------------------------------------------------------------
Advertising                                                                         Ps.        539    Ps.        499
Leasing                                                                                         31                28
Other                                                                                           42                27
---------------------------------------------------------------------------------------------------------------------
                                                                                   Ps          612    Ps.        554
---------------------------------------------------------------------------------------------------------------------


The advertising and promotional expenses recorded in the income statement for
the years ended December 31, 2002, 2001 and 2000 are as follows:

                                                                            2002              2001              2000
---------------------------------------------------------------------------------------------------------------------
Advertising                                                       Ps.        776    Ps.        801    Ps.        945
Promotional expenses                                                         121               105               115
---------------------------------------------------------------------------------------------------------------------

Note 8.    Investments in Shares.

---------------------------------------------------------------------------------------------------------------------
Company                                                             Ownership                 2002              2001
---------------------------------------------------------------------------------------------------------------------
FEMSA Cerveza:
    Labatt-USA LLC ("Labatt")                                             30.00%    Ps.        172    Ps.        117
    Associated companies of FEMSA Cerveza                              Various                 106                52
    Rio Blanco Trust (waste water treatment plant)                        33.71%                86                68
    Other associates                                                                            16                20
Coca-Cola FEMSA:
    Industria Envasadora de
    Queretaro, S.A. de C.V. ("IEQSA")                                     19.60%                68                62
Coca-Cola FEMSA Buenos Aires:
    Complejo Industrial Can S.A. ("CICAN")                                48.10%                46                64
Other associates                                                       Various                  50                54
---------------------------------------------------------------------------------------------------------------------
                                                                                    Ps.       544    Ps.         437
---------------------------------------------------------------------------------------------------------------------
</TABLE>

                                      F-15
<PAGE>

On May 31, 2000, FEMSA Empaques' sale of Corrugados de Tehuacan, S.A. de C.V. to
Willamette Industries, Inc. was completed. The sales price was $ 71, and the net
proceeds were used to pay debt. The gain on the sale was $5, net of fee
payments, and is included in other income (expenses), net.


Note 9.    Property, Plant and Equipment.
<TABLE>
<CAPTION>

                                                                                              2002              2001
---------------------------------------------------------------------------------------------------------------------
<S>                                                                                <C>       <C>    <C>       <C>
Land                                                                                Ps.      3,369    Ps.      3,433
Buildings                                                                                   12,792            12,464
Machinery and equipment                                                                     29,449            27,792
Accumulated depreciation                                                                  (18,344)          (17,073)
Construction in progress                                                                     1,443             1,307
Bottles and cases of Coca-Cola FEMSA                                                           284               212
Assets stated at realizable value                                                              760               714
---------------------------------------------------------------------------------------------------------------------
                                                                                    Ps.     29,753   Ps.      28,849
---------------------------------------------------------------------------------------------------------------------

The Company has identified fixed assets consisting mainly of land, buildings and
equipment for disposal, in accordance with an approved program for the disposal
of certain investments. Such assets are not in use and have been valued at their
estimated realizable value, according to independent appraisals. Such assets are
allocated as follows:

                                                                                              2002              2001
---------------------------------------------------------------------------------------------------------------------
FEMSA Cerveza                                                                       Ps.        393    Ps.        303
Coca-Cola FEMSA                                                                                  -                26
FEMSA Empaques                                                                                  39                33
FEMSA                                                                                          328               352
---------------------------------------------------------------------------------------------------------------------
                                                                                    Ps.        760    Ps.        714
---------------------------------------------------------------------------------------------------------------------

Those fixed assets recorded at their estimated realizable value are considered
monetary assets on which a loss on monetary position is computed and recorded in
the results of operations.

Note 10.   Other Assets.

                                                                                              2002              2001
---------------------------------------------------------------------------------------------------------------------
Agreements with customers of FEMSA Cerveza and Coca-Cola FEMSA                      Ps.      2,274    Ps.      2,199
Leasehold improvements                                                                       1,385             1,162
Long-term accounts receivable                                                                  463               415
Recoverable taxes (Note 22 a)                                                                  379               410
Additional labor liabilities (Note 14)                                                         284               105
Deferred acquisition costs of Panamco                                                          261                 -
Cost of systems implementation                                                                 171                30
Start-up expenses                                                                               84                61
Prepaid advertising                                                                             25                61
Yankee bond issuance costs                                                                      23                30
Bonus program (Note 15)                                                                          -                19
Other                                                                                          263               117
---------------------------------------------------------------------------------------------------------------------
                                                                                    Ps.      5,612    Ps.      4,609
---------------------------------------------------------------------------------------------------------------------
</TABLE>


                                      F-16
<PAGE>


<TABLE>
<CAPTION>


Note 11.   Goodwill and Other Intangible Assets.

                                                                                              2002              2001
---------------------------------------------------------------------------------------------------------------------
<S>                                                                                <C>        <C>     <C>     <C>
Coca-Cola FEMSA:
    Coca-Cola FEMSA Buenos Aires                                                    Ps.        908    Ps.      1,112
    Tapachula territory                                                                        139               139
FEMSA:
    Minority interest acquisition                                                              254               254
    Mundet trademark                                                                           149               145
Accumulated amortization                                                                     (452)             (400)
Impairment of the goodwill generated by Coca-Cola FEMSA Buenos Aires                         (402)                 -
---------------------------------------------------------------------------------------------------------------------
                                                                                    Ps.       596     Ps.      1,250
---------------------------------------------------------------------------------------------------------------------


Note 12.   Balances and Transactions with Related Parties and Affiliated Companies.

The consolidated balance sheet and income statement include the following
balances and transactions with related parties and affiliated companies:


Balance Sheet                                                                                 2002              2001
---------------------------------------------------------------------------------------------------------------------
Assets (accounts receivable)                                                        Ps.        624    Ps.        673
Liabilities (suppliers and other liabilities)                                                  321               162
Long-term debt with BBVA Bancomer, S.A. (Note 16) (1)                                        1,465               776
---------------------------------------------------------------------------------------------------------------------


Transactions                                                                2002              2001              2000
---------------------------------------------------------------------------------------------------------------------
Income:
    Sales to and other revenues from affiliated
       Companies of FEMSA Cerveza                                 Ps.      1,610    Ps.      1,059    Ps.      1,077
    Sales of cans to IEQSA                                                   355               393               452
    Interest income (1)                                                      111               101               100
---------------------------------------------------------------------------------------------------------------------
Expenses:
    Purchase of concentrate from The Coca-Cola Company                     2,559             2,643             2,603
    Purchases from Grupo Industrial BIMBO, S.A. de C.V. (1)                  460               383               325
    Purchase of canned products from IEQSA and CICAN                         235               552               355
    Insurance premiums (1)                                                   152                83                11
    Services paid to Labatt                                                  114               122               118
    Interest expense (1)                                                       7                24                 7
    Other                                                                     15                23                29
---------------------------------------------------------------------------------------------------------------------

(1) There are common members of the Board of Directors
</TABLE>


                                      F-17
<PAGE>





Note 13.   Balances and Transactions in Foreign Currency.

Assets, liabilities and transactions denominated in a foreign currency, other
than the functional currency of the reporting unit, translated into US dollars
are as follows:
<TABLE>
<CAPTION>


                                          Applicable
Balances                                  Exchange Rate (1)             Short-Term         Long-Term  (a)   Total
---------------------------------------------------------------------------------------------------------------------
<S>                      <C>                            <C>                   <C>                 <C>         <C>
December 31, 2002:       Assets                         10.459        $       638        $         19     $      657
                         Liabilities                                          389                 652          1,041

December 31, 2001:       Assets                          9.180        $       293        $         17     $      310
                         Liabilities                                          269                 647            916
---------------------------------------------------------------------------------------------------------------------

(1) Mexican pesos per one US dollar

---------------------------------------------------------------------------------------------------------------------
Transactions                                                                2002              2001              2000
---------------------------------------------------------------------------------------------------------------------
Revenues                                                              $      217         $     204        $      192
Expenses:
    Purchases of raw materials                                               229               201               219
    Technical assistance fees                                                 32                44                21
    Interest and other                                                       245               177               204
---------------------------------------------------------------------------------------------------------------------
                                                                      $      506         $     422        $      444
---------------------------------------------------------------------------------------------------------------------
</TABLE>

As of January 29, 2003, the issue date of these consolidated financial
statements, the exchange rate was 10.986 Mexican pesos per one US dollar, and
the foreign currency position was similar to that December 31, 2002.


Note 14.   Labor Liabilities.

The actuarial calculations for the Mexican subsidiaries' pension and retirement
plans, seniority premiums and postretirement medical service liabilities and the
cost for the year were determined using the following long-term assumptions:

                                                                  Real Rates
--------------------------------------------------------------------------
Annual discount rate                                                 6.0%
Salary increase                                                      2.0%
Return on assets                                                     6.0%
--------------------------------------------------------------------------

In June 2001, the Company decreased the projected service obligation derived
from a change in the actuarial calculations based on a confirmation received
from the Mexican Social Security Institute ("IMSS") regarding the interpretation
of Article 28 of the Social Security Law in effect in July 1997, in which the
IMSS increased the pensions to those insured for disability, old age, and
discharge due to aging.



                                      F-18
<PAGE>

<TABLE>
<CAPTION>



The balances of the liabilities and the trust assets as well as the expenses for
the year are as follows:

                                                                                              2002            2001
---------------------------------------------------------------------------------------------------------------------
<S>                                                                                <C>      <C>     <C>        <C>
Pension and retirement plans:
    Vested benefit obligation                                                       Ps.      1,274    Ps.      1,084
    Non-vested benefit obligation                                                            1,006               943
---------------------------------------------------------------------------------------------------------------------
    Accumulated benefit obligation                                                           2,280             2,027
    Excess of projected benefit obligation over accumulated benefit obligation                 208               200
---------------------------------------------------------------------------------------------------------------------
    Projected benefit obligation                                                             2,488             2,227
Pension plan funds at fair value                                                           (1,581)           (1,559)
---------------------------------------------------------------------------------------------------------------------
Unfunded projected benefit obligation                                                          907               668
    Unrecognized net transition obligation services                                          (369)             (369)
    Unrecognized actuarial net gain                                                             46               228
---------------------------------------------------------------------------------------------------------------------
                                                                                               584               527
    Additional labor liability                                                                 264                87
---------------------------------------------------------------------------------------------------------------------
    Total                                                                           Ps.        848    Ps.        614
---------------------------------------------------------------------------------------------------------------------

Seniority premiums:
    Vested benefit obligation                                                       Ps.         58    Ps.         59
    Non-vested benefit obligation                                                               47                44
    Accumulated benefit obligation                                                             105               103
    Excess of projected benefit obligation over accumulated benefit obligation                   9                 8
    Projected benefit obligation                                                               114               111
    Recognized net transition obligation services                                             (17)              (14)
                                                                                                97                97
    Additional labor liability                                                                  20                18
---------------------------------------------------------------------------------------------------------------------
    Total                                                                           Ps.        117    Ps.        115



Postretirement medical services:
    Vested benefit obligation                                                       Ps.        173    Ps.        159
    Non-vested benefit obligation                                                              174               177
---------------------------------------------------------------------------------------------------------------------
    Accumulated benefit obligation                                                             347               336
    Medical services funds at fair value                                                      (41)              (26)
---------------------------------------------------------------------------------------------------------------------
    Unfunded status                                                                            306               310
    Unrecognized net transition obligation                                                    (62)              (66)
    Unrecognized actuarial net loss                                                          (137)             (173)
---------------------------------------------------------------------------------------------------------------------
    Total                                                                           Ps.        107    Ps.         71
---------------------------------------------------------------------------------------------------------------------
    Total Labor Liabilities                                                         Ps.      1,072    Ps.        800



Expense for the year                                                        2002              2001              2000
---------------------------------------------------------------------------------------------------------------------
Pension plan                                                      Ps.        124    Ps.        100    Ps.        138
Seniority premiums                                                            21                20                18
Postretirement medical services                                               41                40                14
---------------------------------------------------------------------------------------------------------------------
                                                                  Ps.        186    Ps.        160    Ps.        170
---------------------------------------------------------------------------------------------------------------------
</TABLE>



                                      F-19
<PAGE>


The accumulated actuarial gains and losses were generated by the differences in
the assumptions used for the actuarial calculations at the beginning of the year
versus the real behavior of those variables at the end of the year.

At December 31, 2002 and 2001 the projected benefit obligation in some
subsidiaries was less than the accumulated benefit obligation reduced by the
amount of the plan assets at fair value, resulting in an additional liability,
which is recorded as an intangible asset included in other assets (see Note 10).

The trust assets consist of fixed income and variable funds, valued at market.
The contribution to the pension plan and postretirement medical services funds
by certain subsidiaries amounted to Ps. 65 and Ps. 52 at December 31, 2002 and
2001, respectively.

The integral result of financing includes the interest cost related to labor
liabilities, net of the return on plan assets. This amounted to Ps. 60, Ps. 48
and Ps. 48 for the years ended December 31, 2002, 2001 and 2000, respectively.


Note 15.   Bonus Program.

Certain subsidiaries of the Company have implemented a bonus program for the
benefit of certain executive officers of such subsidiaries. Under the terms of
this program approved in April 1997, the executive officers were to be entitled
on the fifth anniversary of the program to a cash payment of a special bonus
based on the officer's salary and the amount of the increase in real terms in
the market value of FEMSA shares during the preceding five years, provided that
no payments would be made unless the market value of FEMSA shares has at least
doubled in real terms by such fifth anniversary. In March 2002, the Company
amended certain terms of the program and extended the program by one year. As a
result, the program will not expire until March 2003. For the executives of
Coca-Cola FEMSA, the bonus program is based in equally on the market value of
FEMSA shares and on the market value of Coca-Cola FEMSA shares.

The Company hedged its potential obligation under the bonus program by investing
in cash-settled options, and such purchased options were deposited in a trust.
The cost of the purchased options has been recorded in other assets and was
amortized over the original five-year term of the options. As of December 31,
2002, the amount has been completely amortized, and as of December 31, 2001 the
unamortized cost amounted to Ps. 19 (see Note 10). A portion of the options
expired in October 2002 and were exercised, recognizing a gain of Ps. 1, in the
results of the year. The remaining outstanding options expire in September 2003.

The purchased options are "marked to market", and any income derived therefrom
is recorded only to the extent that such income exceeds the potential
compensation as a function of the special bonuses that would be due based on the
stock price at the end of each reporting year. As of the date of these financial
statements, no income has been recorded.

Additionally, in 1999 the Company instituted a new compensation plan for certain
key executives, which consists of granting them an annual bonus based on each
executive's responsibilities within the organization and the executives'
performance during the previous year, which is accrued over a period of five
years beginning in 1999. The annual bonus is recorded in the results of
operations of the year.

For each key executive, on an annual basis, the net after-tax amount will be
irrevocably transferred in kind to a trust, which through the instructions of a
technical committee can:

--   Acquire stock of FEMSA or any of its subsidiaries that are listed on the
     Mexican stock exchange or certificates of deposit that represent shares
     listed in the NYSE, and/or
--   Acquire purchase options of the stock mentioned above.

The executives will have access to the assigned stock or options in 20%
increments in each of the five years following the granting of the bonus.


                                      F-20
<PAGE>




Note 16.   Bank Loans and Notes Payable.

Current bank loans and notes payable outstanding at December 31, 2002 and 2001,
principally consist of revolving loans denominated in US dollars with a weighted
average annual interest rate of 4.8% and 5.0%, respectively.

Long-term bank loans and notes payable of the Company are as follows
(denominated in US dollars, unless otherwise indicated):
<TABLE>
<CAPTION>
<S>                                                      <C>                 <C>       <C>     <C>       <C>

----------------------------------------------------------------------------------------------------------------
Bank                                                     Interest Rate (1)              2002               2001
----------------------------------------------------------------------------------------------------------------
FEMSA Cerveza:
  Banamex, S.A.                                                  8.80% (3)   Ps.       2,500    Ps.           -
  Private placement                                              8.89%                 1,987              1,844
  Scotiabank Inverlat, S.A.                                      7.63% (3)               640                846
  Bayerische Vereinsbank, AG                                     2.46%                   422                262
  Comerica Bank                                                  4.94%                   261                243
  Various                                                        2.81%                    74                 29
----------------------------------------------------------------------------------------------------------------
                                                                                       5,884              3,224

Coca-Cola FEMSA:
  Yankee bond                                                    8.95% (2)             2,092              1,941
  Private placement                                              9.40% (2)             1,046                970
  Various                                                        9.65%                    41                 52
----------------------------------------------------------------------------------------------------------------
                                                                                       3,179              2,963

FEMSA Empaques:
  BBVA Bancomer, S.A.                                            2.39%                   628                  -
  Bayerische Vereinsbank, AG                                     7.32% (2)                42                 79
  Bayerische Vereinsbank, AG                                     2.62%                    21                 31
  Landesbank SH Girozentrale, Kill                               4.32%                    12                 28
  Royal Bank of Canada, New York                                 5.22%                     -                291
  Rabobank Nederland, New York                                   7.41%                     -                 11
----------------------------------------------------------------------------------------------------------------
                                                                                         703                440

FEMSA Comercio:
  BBVA Bancomer, S.A.                                            2.69%                   837                776
----------------------------------------------------------------------------------------------------------------


FEMSA Logistica:
  Citibank, N.A.                                                 4.56%                    76                 81
----------------------------------------------------------------------------------------------------------------
                                                                                      10,679              7,484

Current maturities of long-term debt                                                    (876)              (367)
----------------------------------------------------------------------------------------------------------------
                                                                             Ps.       9,803    Ps.       7,117
----------------------------------------------------------------------------------------------------------------

(1) Weighted average variable interest rate of the year
(2) Fixed interest rate
(3) Denominated in Mexican pesos
</TABLE>


                                      F-21
<PAGE>



Maturities of long-term bank loans as of December 31, 2002 are as follows:

--------------------------------------------------------------------------------
Current maturities of long-term debt                              Ps.       876
2004                                                                      3,544
2005                                                                      1,362
2006                                                                      3,515
2007                                                                      1,320
2008                                                                         19
2009                                                                         43
--------------------------------------------------------------------------------
                                                                  Ps.    10,679
--------------------------------------------------------------------------------

Each subholding has bank loans from different financial institutions, with
different restrictions and covenants. As of December 31, 2002, the companies
were in compliance with all restrictions and covenants established in their loan
agreements.



Note 17.   Fair Value of Financial Instruments.

a) Long-term Debt:

   The fair value of long-term bank loans and syndicated loans is based on the
   discounted value of contractual cash flows. The discount rate is estimated
   using rates currently offered for debt of similar amounts and maturities. The
   fair value of long-term debt is based on quoted market prices.


--------------------------------------------------------------------------------
                                                          2002             2001
--------------------------------------------------------------------------------
Carrying value                                   Ps.     9,803    Ps.     7,117

Fair value                                              10,333            7,492

--------------------------------------------------------------------------------


b) Cash-Settled Options:
   The terms of and accounting for the cash-settled options for the purchase of
   shares of FEMSA are described in Note 15. The fair value is estimated based
   on quoted market prices to terminate the contracts at the reporting date.


--------------------------------------------------------------------------------
                                                          2002             2001
--------------------------------------------------------------------------------
Notional amount                                  Ps.       224    Ps.       370

Carrying value                                               -               19

Fair value                                                  48               16
--------------------------------------------------------------------------------

c) Interest Rate Swaps:

   The Company uses interest rate swaps to manage the interest rate risk
   associated with its borrowings, pursuant to which it pays amounts based on a
   fixed rate and receives amounts based on a floating rate. Additionally, the
   Company sold some put options as a complement to the swap agreements, for
   which a premium was received. The net effect of the year is recorded in the
   financing expenses and amounted to Ps. 37 in 2002.

   The fair value is estimated based on quoted market prices to terminate the
   contracts at the reporting date.


                                      F-22
<PAGE>



   At December 31, 2002, the Company has the following outstanding agreements:



--------------------------------------------------------------------------------
Maturity                                              Notional           Fair
Date                                                   Amount            Value
--------------------------------------------------------------------------------
September 2004                                         Ps. 261          Ps. (10)
July 2006                                                  628              (59)
August 2006                                                837              (54)
December 2007                                              500                -
--------------------------------------------------------------------------------

d) Forward Agreements to Purchase Euros:
   At December 31, 2002, the Company has two forward agreements for the
   purchase of euros in a notional amount of $7, for the purpose of hedging the
   exchange risk between the dollar and the euro for the purchase of equipment.
   The fair value is estimated based on quoted market exchange rate to terminate
   the contracts at the reporting date, which as of December 31,2002, represents
   a gain of Ps. 4.

e) Commodity Price Contracts:
   On January 1, 2001, the Company entered into agreements with Petroleos
   Mexicanos ("PEMEX"), maturing December 2003, which establish the right to
   purchase natural gas at a fixed price for three years. However, as a result
   of the decrease in international natural gas prices, the Company entered into
   a swap agreement maturing December 2003.

   Additionally, during 2002 the Company has entered into various derivative
   contracts maturing in 2003 and 2004 to hedge the cost of aluminum.

   The result of the commodity price contracts was a gain of Ps. 17 in 2002,
   which is recorded in the results of operations of the year. The fair value is
   estimated based on quoted market prices to terminate the contracts at the
   reporting date.

   The outstanding contracts and their terms are as follows:

--------------------------------------------------------------------------------
Maturity           Contract                           Notional           Fair
Date               Type                                Amount            Value
--------------------------------------------------------------------------------
2003               Put options                         Ps.  76          Ps.  (3)
                   Seagulls                                180               (7)
                   Swaps                                   424               (8)
                   Collar                                  151              (11)

--------------------------------------------------------------------------------
2004               Swaptions                               360              (25)
                   Swaps                                   154               (3)
--------------------------------------------------------------------------------


                                      F-23
<PAGE>




Note 18.   Minority Interest in Consolidated Subsidiaries.

--------------------------------------------------------------------------------
                                                          2002             2001
--------------------------------------------------------------------------------
FEMSA Cerveza                                        Ps. 5,250        Ps. 4,922
Coca-Cola FEMSA                                          4,472            3,833
Logistica-CCM                                               76               77
--------------------------------------------------------------------------------
                                                     Ps. 9,798        Ps. 8,832
--------------------------------------------------------------------------------


Note 19.   Stockholders' Equity.

As of December 31, 2002, the capital stock of FEMSA was comprised of
5,297,310,450 common shares, without par value and with no foreign ownership
restrictions. Fixed capital amounts to Ps. 300 (nominal value) and the variable
capital may not exceed 10 times the minimum fixed capital stock.

The characteristics of the common shares are as follows:

--   Series "B" shares, with unlimited voting rights, which at all times must
     represent a minimum of 51% of total capital stock.
--   Series "L" shares, with limited voting rights, which may represent up to
     25% of total capital stock.
--   Series "D" shares, with limited voting rights, which individually or
     jointly with series "L" shares may represent up to 49% of total capital
     stock.

The Series "D" shares are comprised as follows:

--   Subseries "D-L" shares may represent up to 25% of the series "D" shares.
--   Subseries "D-B" shares may comprise the remainder of outstanding series "D"
     shares.
--   The non-cumulative premium dividend to be paid to series "D" stockholders
     will be 125% of any dividend paid to series "B" stockholders.

The Series "B" and "D" shares are linked together in related units as follows:
--   "B units" each of which represents five series "B" shares and which is
     traded on the BMV.
--   "BD units" each of which represents one series "B" share, two subseries
     "D-B" shares and two subseries "D-L" shares, and which is traded both on
     the BMV and the NYSE.
--   The related units will cease to be linked together on May 2008, after a
     period of 10 years from the date of the first issue. Subseries "D-B" shares
     will be converted into series "B" shares, and subseries "D-L" shares will
     be converted into series "L" shares.

As of December 31, 2002, FEMSA's capital stock is comprised as follows:

--------------------------------------------------------------------------------
                                   "B" Units       "BD" Units         Total
--------------------------------------------------------------------------------
Units                             419,569,500      639,892,590    1,059,462,090
--------------------------------------------------------------------------------
Shares:
  Series "B"                    2,097,847,500      639,892,590    2,737,740,090

  Series "D"                                -    2,559,570,360    2,559,570,360
    Subseries "D-B"                         -    1,279,785,180    1,279,785,180
    Subseries "D-L"                         -    1,279,785,180    1,279,785,180
--------------------------------------------------------------------------------
Total Shares                    2,097,847,500    3,199,462,950    5,297,310,450
--------------------------------------------------------------------------------

                                      F-24
<PAGE>

The restatement of stockholders' equity for inflation is allocated to each of
the various stockholders' equity accounts, as follows:


--------------------------------------------------------------------------------
                                             Historical                Restated
                                                   Cost  Restatement      Value
--------------------------------------------------------------------------------
Capital stock                                 Ps. 2,649    Ps. 1,432  Ps. 4,081
Additional paid-in capital                        5,909        4,043      9,952
Retained earnings from prior years               11,797          633     12,430
Net income for the year                           2,760           77      2,837
--------------------------------------------------------------------------------


At an ordinary stockholder meeting held on March 13, 2002, the stockholders
approved a dividend of 0.1120 pesos (nominal value) per series "B" share and
0.1400 pesos (nominal value) per series "D" share, which was paid in May 2002.

The net income of each Mexican subsidiary is subject to the legal requirement
that 5% thereof be transferred to a legal reserve until such reserve equals 20%
of capital stock. This reserve may not be distributed to stockholders during the
existence of the subsidiary, except as stock dividends. As of December 31, 2002,
this reserve for FEMSA amounted to Ps. 326.

Retained earnings and other reserves distributed as dividends, as well as the
effects derived from capital reductions, are subject to income tax at the rate
in effect, except for the restated stockholder contributions and distributions
made from consolidated taxable income, denominated "Cuenta de Utilidad Fiscal
Neta Consolidada" ("CUFIN"). From 1999 to 2001, the deferral of a portion (3% in
1999 and 5% in 2000 and 2001) of the income tax was allowed, until the
distribution of such earnings as dividends. For this purpose a "Cuenta de
Utilidad Fiscal Neta Consolidada Reinvertida" ("CUFINRE") was created, which
like CUFIN represents previously taxed earnings. Beginning in 2002, the right to
defer payment of this income tax was eliminated.

Dividends paid in excess of CUFIN and CUFINRE will be subject to income taxes at
a grossed-up rate based on the current statutory rate. Beginning in 2003, this
tax may be credited against the income tax of the year in which the dividends
are paid and in the following two years against the income tax and estimated tax
payments.

As of December 31, 2002, the balances of CUFIN and CUFINRE amounted to Ps. 9,512
and Ps. 2,985, respectively, and the deferred tax payments were Ps. 222.

At an ordinary stockholder meeting held on March 13, 2002, the stockholders
approved a maximum of Ps. 3,000 for a stock repurchase program.

The Company implemented the stock repurchase program beginning in October 2000.
The nominal value of the repurchased shares was recorded as a reduction of
common stock, and the remainder was applied against the reserve for the
acquisition of Company stock within retained earnings. The shares purchased were
retired.
<TABLE>
<CAPTION>
<S>                                                <C>                <C>                   <C>            <C>
----------------------------------------------------------------------------------------------------------------------
                                                   Millions of                                Retained
                                                      Shares           Capital Stock          Earnings          Total
----------------------------------------------------------------------------------------------------------------------
As of December 31, 2000                                 33.7              Ps.     19         Ps.   237      Ps.   256
From January 4, 2001 to January 16, 2001                10.3                       5                63             68
----------------------------------------------------------------------------------------------------------------------
Total                                                   44.0              Ps.     24         Ps.   300      Ps.   324
----------------------------------------------------------------------------------------------------------------------
</TABLE>

At an ordinary stockholder meeting of FEMSA Cerveza held on March 5, 2002, the
stockholders approved a dividend of Ps. 481, which was paid in May 2002. The
corresponding payment to the minority interest of Ps. 144 is presented as a
reduction of minority interest in the statement of changes in stockholders'
equity.

                                      F-25
<PAGE>

At an ordinary stockholder meeting of Logistica-CCM held on March 5, 2002, the
stockholders approved a dividend of Ps. 52, which was paid in May 2002. The
corresponding payment to the minority interest of Ps. 15 is presented as a
reduction of minority interest in the statement of changes in stockholders'
equity.

At an ordinary stockholder meeting of Coca-Cola FEMSA held on March 12, 2002,
the stockholders approved a dividend of Ps. 585, which was paid in May 2002. The
corresponding payment to the minority interest of Ps. 287 is presented as a
reduction of minority interest in the statement of changes in stockholders'
equity.


Note 20.   Net Majority Income per Share.

This represents the net majority income corresponding to each share of the
Company's capital stock, computed on the basis of the weighted average number of
shares outstanding during the year. Additionally, the net income distribution
according to the dividend rights of each share series is presented.

The following presents the computed weighted average number of shares and the
distribution of income per share series:
<TABLE>
<CAPTION>
<S>                                                             <C>           <C>            <C>           <C>
---------------------------------------------------------------------------------------------------------------------
                                                                                  Millions of Shares
                                                                 ----------------------------------------------------
                                                                      Series "B"                     Series "D"
                                                                 ----------------------        ----------------------
                                                                  Number      Weighted          Number      Weighted
                                                                               Average                       Average
---------------------------------------------------------------------------------------------------------------------
 At December 31, 2000                                            2,739.80     2,745.80         2,567.80     2,591.80
---------------------------------------------------------------------------------------------------------------------
From January 1 to December 31, 2001                              2,739.80     2,739.80         2,567.80     2,567.80
Repurchases of the Company's shares between
 January 4 and January 16, 2001                                     (2.1)        (2.0)            (8.2)        (8.0)
---------------------------------------------------------------------------------------------------------------------
 At December 31, 2002                                            2,737.70     2,737.70         2,559.60     2,559.60
---------------------------------------------------------------------------------------------------------------------
Dividend rights                                                      1.00                          1.25
Allocation of earnings:
  2000                                                             45.85%                        54.15%
   2001 and 2002                                                   46.11%                        53.89%
---------------------------------------------------------------------------------------------------------------------
</TABLE>

Note 21.   Tax System.

a)   Income Tax:

     Mexican income tax is computed on taxable income, which differs from
     accounting income principally due to the difference between purchases and
     cost of sales, the treatment of the integral result of financing, the cost
     of labor liabilities and depreciation. Taxable income is increased or
     reduced by the effects of inflation on certain monetary assets and
     liabilities through the tax inflationary component, which is similar to the
     gain or loss on monetary position.

     The statutory income tax rate from 2000 through 2002 is 35%. Beginning
     2003, the rate will be reduced one percentage point per year through 2005,
     when the rate will be 32%.

     The taxable income of Argentina differs from accounting income principally
     due to differences in depreciation and provisions. The Argentine statutory
     income tax rate is 35%.

                                      F-26
<PAGE>


b)   Tax on Assets:

     The Mexican tax on assets is computed at an annual rate of 1.8% based on
     the average of certain assets at tax restated value less certain
     liabilities. The tax on assets is paid only to the extent that it exceeds
     the income tax of the year. If in any year a tax on assets payment is
     required, this amount can be credited against the excess of income taxes
     over the tax on assets in each of the preceding three years. Additionally,
     this payment may be restated and credited against the excess of income
     taxes over asset taxes for the following 10 years.

     The tax laws in Argentina established a Tax on Minimum Presumptive Income
     ("TMPI"), which, similar to the Mexican tax on assets, is paid only to the
     extent that it exceeds the income taxes of the year. Any required payment
     of TMPI is recoverable to the extent that the income taxes exceed the TMPI
     of the following four years.

c)   Employee Profit Sharing:

     Employee profit sharing is computed at the rate of 10% of the individual
     taxable income of each of the Mexican subsidiaries, except that
     depreciation of historical rather than restated values is used, foreign
     exchange gains and losses are not included until the asset is disposed of
     or the liability is due, and the other effects of inflation are also
     excluded.

     The present tax law in Argentina does not consider any statutory employee
     profit sharing.

d)   Deferred Income Taxes and Employee Profit Sharing:

     Beginning 2000, revised Bulletin D-4 requires that deferred tax assets and
     liabilities be recorded for all temporary differences between the
     accounting and tax bases of assets and liabilities.

     The initial effect of the application of this bulletin generated a deferred
     tax liability of Ps. 4,528 and a reduction of Ps. 3,280 and Ps. 1,248 in
     majority and minority stockholders' equity, respectively.

     The temporary differences that generated deferred income tax liabilities
     (assets) are as follows:

--------------------------------------------------------------------------------
Deferred Income Taxes                                         2002         2001
--------------------------------------------------------------------------------
Allowance for doubtful accounts                          Ps.   (95)   Ps.   (79)
Inventories                                                  1,448        1,446
Prepaid expenses                                                55            -
Property, plant and equipment                                3,404        3,058
Investments in shares                                            8           22
Deferred charges                                              (125)         (75)
Pension plan                                                  (199)        (186)
Seniority premiums                                             (33)         (34)
Medical services                                               (36)         (25)
Recoverable tax on asset                                       (78)         (80)
Tax loss carryforwards                                        (114)         (80)
Other reserves                                                (248)         (24)
--------------------------------------------------------------------------------
                                                         Ps. 3,987    Ps. 3,943
--------------------------------------------------------------------------------

     As mentioned in clause a) above, the statutory rate will be reduced from
     35% to 32%, resulting in a reduction of the balance of deferred taxes as of
     December 31, 2002 and 2001, based on the expected dates of reversal of the
     temporary differences.

                                      F-27
<PAGE>


     The changes in the balance of the deferred income taxes for the year are as
     follows:

--------------------------------------------------------------------------------
                                                              2002         2001
--------------------------------------------------------------------------------
Balance at beginning of the year                         Ps. 3,943    Ps. 4,263
Gain on monetary position                                       19           12
Provision for the year                                         147          140
Change in the statutory income tax rate                       (132)        (252)
Result of holding non-monetary assets                           10         (220)
--------------------------------------------------------------------------------
Balance at end of the year                               Ps. 3,987    Ps. 3,943
--------------------------------------------------------------------------------

     At December 31, 2002, there are temporary differences between the
     accounting income for the year and the bases for employee profit sharing,
     therefore the Company considered a provision for deferred employee profit
     sharing of Ps. 8.

e)   Income Tax, Tax on Asset and Employee Profit Sharing Provisions:

--------------------------------------------------------------------------------
                                                 2002         2001         2000
--------------------------------------------------------------------------------
Current income taxes                        Ps. 3,273    Ps. 2,736    Ps. 2,075
Tax on assets                                      34           29           21
Deferred income taxes                             147          140          166
Change in the statutory income tax rate          (132)        (252)           -
--------------------------------------------------------------------------------
                                                3,322        2,653        2,262
Employee profit sharing                           310          292          246
Deferred employee profit sharing                   (8)           -            -
--------------------------------------------------------------------------------
                                            Ps. 3,624    Ps. 2,945    Ps. 2,508
--------------------------------------------------------------------------------


f)   Tax Loss Carryforwards and Recoverable Tax on Assets:

     Tax loss carryforwards and recoverable tax on assets may be applied against
     taxable income of the 10 years following the year when they are generated,
     in accordance with the Mexican income tax law.


     The expiration dates of such amounts are as follows:


--------------------------------------------------------------------------------
                                                    Tax Loss        Recoverable
Year                                             Carryforwards     Tax on Assets
--------------------------------------------------------------------------------
2004                                             Ps.         -     Ps.        22
2005                                                         -                 5
2006                                                        12                 5
2007                                                        22                 6
2008                                                        24                 8
2009                                                        13                 1
2010                                                        37                 5
2011                                                        56                10
2012                                                       191                16
--------------------------------------------------------------------------------
                                                 Ps.       355     Ps.        78
--------------------------------------------------------------------------------

                                      F-28
<PAGE>


g)   Reconciliation of Effective Tax Rate:
<TABLE>
<CAPTION>
<S>                                                                      <C>                 <C>                <C>
---------------------------------------------------------------------------------------------------------------------
                                                                          2002               2001               2000
---------------------------------------------------------------------------------------------------------------------
Statutory income tax rate                                                  35%                35%                35%
   Difference between book and tax inflationary effects                     -                  -                 (1)
   Non-deductible expenses                                                  3                  2                  2
   Impairment of the goodwill generated by Coca-Cola
     FEMSA Buenos Aires                                                     2                  -                  -
   Effect of change in tax rate                                            (1)                (3)                 -
   Other                                                                    1                 (1)                 -
---------------------------------------------------------------------------------------------------------------------
Effective income tax rate                                                  40%                33%                36%
---------------------------------------------------------------------------------------------------------------------
</TABLE>


Note 22. Contingencies and Commitments.

a)   Contingencies:

     --   During 2002, Coca-Cola FEMSA initiated an appeal related to the IEPS
          ("Special Tax on Products and Services") applicable to inventories
          produced with high fructose content at the end of 2001 and early in
          2002. The Company expects a favorable decision based on a legal
          opinion of the Company's tax attorneys.

     --   Additionally, on April 29, 2002 a subsidiary of FEMSA Cerveza filed a
          lawsuit against certain affiliates of Labatt to enjoin the integration
          of the beer brands of Beck's North America in the beer distribution
          portfolio of Labatt USA. The subsidiary of FEMSA Cerveza obtained a
          preliminary injunction from the lower court. Labatt's affiliates filed
          a notice of appeal from the preliminary injunction. As of the issuance
          date of the financial statement, the appeal procedure is pending.

     --   The Company has two issues pending resolution with SHCP


          1.   In 1998 and 1999, due to adjustments to consolidated asset taxes
               derived from increased shareholdings in subsidiaries, the Company
               determined an asset tax receivable and filed for refund. The tax
               authorities rejected the refund request, and the Company has
               appealed that decision.



          2.   In 1998, as a result of the restatement of tax losses for
               inflation due to the increased shareholdings in subsidiaries, the
               Company determined an income tax receivable and filed for refund,
               which was also rejected by the tax authorities. The Company has
               appealed that decision.



          In the opinion of the Company's legal counsel, reasonable bases exist
          to obtain a favorable resolution of both issues, as a result of which
          the Company recorded a receivable for refundable taxes in 1999 with a
          credit to the results of operations. At December 31, 2002, the
          receivable amounted to Ps. 379 and is presented in other assets.



     --   The SHCP determined taxes due by FEMSA Cerveza related to exports in
          1998 and 1999 to countries considered to be tax heavens. The Company
          has appealed these tax assessments and filed the corresponding
          documentation. To date this matter is unresolved, and the Company's
          legal counsel believes that reasonable bases exist to obtain a
          favorable resolution.

                                      F-29
<PAGE>


b)   Commitments:

     As of December 31, 2002, the Company has minimum operating lease
     commitments as follows:

--   In dollars, for the leasing of production machinery and equipment,
     distribution equipment and computing equipment.

--   In pesos, for the leasing of land for the operations of FEMSA Comercio.

     The contracts expire as follows:

--------------------------------------------------------------------------------
2003                                                    $   26          Ps.  236
2004                                                        22               213
2005                                                        16               200
2006                                                         8               187
2007                                                         4               173
2008                                                         -               159
2009                                                         -               151
2010 to 2020                                                 -               817
--------------------------------------------------------------------------------

Note 23.   Information by Segment.

Relevant information concerning the major subsidiaries of FEMSA, which represent
different segments, is as follows:

--------------------------------------------------------------------------------
Total Revenues (1)                             2002          2001          2000
--------------------------------------------------------------------------------
FEMSA Cerveza                            Ps. 20,815    Ps. 20,703    Ps. 19,841

Coca-Cola FEMSA Mexico                       16,198        15,181        14,478
Coca-Cola FEMSA Buenos Aires                  1,422         1,549         1,557
FEMSA Empaques                                6,599         6,577         6,929
FEMSA Comercio                               12,740        10,732         8,957
FEMSA Logistica and Logistica-CCM             1,458         1,540         1,549
Other                                         1,942         1,486         1,149
Consolidation adjustments                    (8,233)       (7,671)       (6,591)
--------------------------------------------------------------------------------
                                         Ps. 52,941    Ps. 50,097    Ps. 47,869
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
Income from Operations                         2002          2001          2000
--------------------------------------------------------------------------------
FEMSA Cerveza (2)                        Ps.  3,546    Ps.  3,326    Ps.  3,141
Coca-Cola FEMSA Mexico                        4,421         3,829         3,053
Coca-Cola FEMSA Buenos Aires (3)                 19            44            27
FEMSA Empaques                                  905           856         1,009
FEMSA Comercio                                  487           297           304
FEMSA Logistica and Logistica-CCM(4)            119            99           114
Other                                           967           716           279
Consolidation adjustments                      (973)         (634)         (264)
--------------------------------------------------------------------------------
                                         Ps.  9,491    Ps.  8,533    Ps.  7,663
--------------------------------------------------------------------------------

(1)  Sales and transfers between geographic areas are not significant
(2)  Includes equity method of affiliated companies of Ps. 84, Ps. 33 and Ps.
     37, respectively
(3)  Includes the amortization of goodwill for Coca-Cola FEMSA Buenos Aires of
     Ps. 37, Ps. 101 and Ps. 108, respectively
(4)  Excludes operating expense in connection with e-commerce project, which
     amounted to Ps. 29, Ps. 42 and Ps. 29, respectively.

                                      F-30
<PAGE>




--------------------------------------------------------------------------------
Depreciation                                   2002          2001          2000
--------------------------------------------------------------------------------
FEMSA Cerveza                            Ps.  1,114    Ps.    991    Ps.    966
Coca-Cola FEMSA Mexico (1)                      705           818           941
Coca-Cola FEMSA Buenos Aires (1)                168           106           114
FEMSA Empaques                                  262           246           252
FEMSA Comercio                                   90            81            84
FEMSA Logistica and Logistica-CCM                33            36            48
Other                                             6            12            10
--------------------------------------------------------------------------------
                                         Ps.  2,378    Ps.  2,290    Ps.  2,415
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Amortization and Other Non-Cash
 Charges (2)                                   2002          2001          2000
--------------------------------------------------------------------------------
FEMSA Cerveza                            Ps.  1,170    Ps.  1,072    Ps.  1,041
Coca-Cola FEMSA Mexico                          168            59            83
Coca-Cola FEMSA Buenos Aires                     (3)           83            90
FEMSA Empaques                                   65           163            90
FEMSA Comercio                                  152           133           138
FEMSA Logistica and Logistica-CCM                 3           (15)          (18)
Other                                           140           (64)           70
--------------------------------------------------------------------------------
                                         Ps.  1,695    Ps.  1,431    Ps.  1,494
--------------------------------------------------------------------------------


--------------------------------------------------------------------------------
Impairment of Long-Lived Assets                2002          2001         2000
--------------------------------------------------------------------------------
FEMSA Cerveza                            Ps.    162    Ps.    140    Ps.      -
Coca-Cola FEMSA                                 402             -             -
--------------------------------------------------------------------------------
                                         Ps.    564    Ps.    140    Ps.      -
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
Interest Expense                               2002          2001          2000
--------------------------------------------------------------------------------
FEMSA Cerveza                            Ps.    311    Ps.    311    Ps.    342
Coca-Cola FEMSA Mexico                          330           328           364
Coca-Cola FEMSA Buenos Aires                      4             2             3
FEMSA Empaques                                  251           437           782
FEMSA Comercio                                  103           100            96
FEMSA Logistica and Logistica-CCM                 8            10            30
Other                                           336           402           374
Consolidation adjustments                      (437)         (642)         (831)
--------------------------------------------------------------------------------
                                         Ps.    906    Ps.    948    Ps.  1,160
--------------------------------------------------------------------------------

(1)  Includes breakage of bottles
(2)  Excludes the non-cash charges relative to current assets and liabilities

                                      F-31
<PAGE>




--------------------------------------------------------------------------------
Interest Income                                2002          2001          2000
--------------------------------------------------------------------------------
FEMSA Cerveza                            Ps.     87    Ps.     77    Ps.    143
Coca-Cola FEMSA Mexico                          247           273           131
Coca-Cola FEMSA Buenos Aires                      5             -             6
FEMSA Empaques                                   26            53            78
FEMSA Comercio                                   25            24            24
FEMSA Logistica and Logistica-CCM                 7            12            20
Other                                           486           687           898
Consolidation adjustments                      (437)         (650)         (859)
--------------------------------------------------------------------------------
                                         Ps.    446    Ps.    476    Ps.    441
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
Income Tax and Tax on Assets                   2002          2001          2000
--------------------------------------------------------------------------------
FEMSA Cerveza                            Ps.  1,158    Ps.    883    Ps.  1,012
Coca-Cola FEMSA Mexico                        1,728         1,300           870
Coca-Cola FEMSA Buenos Aires                    (17)           31            31
FEMSA Empaques                                  130           233            95
FEMSA Comercio                                  168           125           119
FEMSA Logistica and Logistica-CCM                31            26            24
Other                                           124            55           111
--------------------------------------------------------------------------------
                                         Ps.  3,322    Ps.  2,653    Ps.  2,262
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
Capital Expenditures (1)                       2002          2001          2000
--------------------------------------------------------------------------------
FEMSA Cerveza                            Ps.  3,166    Ps.  3,533    Ps.  3,024
Coca-Cola FEMSA Mexico                        1,278           930           879
Coca-Cola FEMSA Buenos Aires                     63            26            46
FEMSA Empaques                                  245            91           161
FEMSA Comercio                                  824           615           542
FEMSA Logistica and Logistica-CCM                12           117           (88)
Other                                           (48)            2             7
--------------------------------------------------------------------------------
                                         Ps.  5,540    Ps.  5,314    Ps.  4,571
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
Long-term Assets                                             2002          2001
--------------------------------------------------------------------------------
FEMSA Cerveza                                          Ps. 19,630    Ps. 18,876
Coca-Cola FEMSA Mexico                                      7,148         7,073
Coca-Cola FEMSA Buenos Aires                                1,034         1,116
FEMSA Empaques                                              4,018         3,960
FEMSA Comercio                                              2,903         2,409
FEMSA Logistica and Logistica-CCM                             517           534
Other                                                       7,043         5,642
Consolidation adjustments                                  (5,788)       (4,465)
--------------------------------------------------------------------------------
                                                       Ps. 36,505    Ps. 35,145
--------------------------------------------------------------------------------

(1)  Includes investments in property, plant and equipment and deferred charges

                                      F-32
<PAGE>

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------
Total Assets                                                                              2002               2001
---------------------------------------------------------------------------------------------------------------------
<S>                                                                                        <C>                <C>
FEMSA Cerveza                                                                       Ps.    28,416     Ps.     24,645
Coca-Cola FEMSA Mexico                                                                     14,778             12,896
Coca-Cola FEMSA Buenos Aires                                                                1,262              1,364
FEMSA Empaques                                                                              6,230              6,317
FEMSA Comercio                                                                              5,374              3,851
FEMSA Logistica and Logistica-CCM                                                             765                760
Other                                                                                      10,240              8,283
Consolidation adjustments                                                                 (7,182)            (6,980)
---------------------------------------------------------------------------------------------------------------------
                                                                                    Ps.    59,883     Ps.     51,136

Recoverable taxes                                                                             121                  -
---------------------------------------------------------------------------------------------------------------------
                                                                                    Ps.    60,004     Ps.     51,136
---------------------------------------------------------------------------------------------------------------------

---------------------------------------------------------------------------------------------------------------------
Total Liabilities                                                                             2002              2001
---------------------------------------------------------------------------------------------------------------------
FEMSA Cerveza                                                                       Ps.      8,419    Ps.      5,462
Coca-Cola FEMSA Mexico                                                                       5,677             4,979
Coca-Cola FEMSA Buenos Aires                                                                   247               352
FEMSA Empaques                                                                               4,502             4,657
FEMSA Comercio                                                                               4,125             2,815
FEMSA Logistica and Logistica-CCM                                                              241               241
Other                                                                                        6,823             4,479
Consolidation adjustments                                                                  (6,830)           (6,065)
---------------------------------------------------------------------------------------------------------------------
                                                                                    Ps.     23,204    Ps.     16,920

Deferred income tax liability                                                                3,987             3,943
Accrued income taxes                                                                             -               268
---------------------------------------------------------------------------------------------------------------------
                                                                                    Ps.     27,191    Ps.     21,131
---------------------------------------------------------------------------------------------------------------------
</TABLE>

Note 24. Differences Between Mexican GAAP and US GAAP.

The consolidated financial statements of the Company are prepared in accordance
with Mexican GAAP, which differs in certain significant respects from US GAAP. A
reconciliation of the reported majority net income, majority stockholders'
equity and majority comprehensive income to US GAAP is presented in Note 25. It
should be noted that this reconciliation to US GAAP does not include the
reversal of the restatement of the financial statements as required by Bulletin
B-10, "Reconocimiento de los Efectos de Inflacion en la Informacion Financiera"
(Recognition of the Effects of Inflation in the Financial Information), of
Mexican GAAP.

The application of this bulletin represents a comprehensive measure of the
effects of price-level changes in the Mexican economy and, as such, is
considered a more meaningful presentation than historical cost-based financial
reporting in Mexican pesos for both Mexican and US accounting purposes.


                                      F-33
<PAGE>

The principal differences between Mexican GAAP and US GAAP included in the
reconciliation that affect the consolidated financial statements of the Company
are described below:

a)  Restatement of Prior Year Financial Statements:

    As explained in Note 4 a), in accordance with Mexican GAAP, the financial
    statements for Mexican subsidiaries for prior years was restated using NCPI
    factors, and for foreign subsidiaries and affiliated companies for prior
    years was restated using the inflation rate of the country in which the
    foreign subsidiary or affiliated company is located, then translated to
    Mexican pesos at the year-end exchange rate.

    Under US GAAP, the restatement of prior year financial statements is not
    required. However, the Company applies the regulations of the Securities and
    Exchange Commission of the United States of America ("SEC"), which require
    that prior year financial statements be restated in constant units of the
    reporting currency, in this case the Mexican peso, which requires the
    restatement of such prior year amounts using NCPI factors.

    Additionally, all other US GAAP adjustments for prior years have been
    restated based upon the SEC methodology.

b)  Classification Differences:

    Certain items require a different classification in the balance sheet or
    income statement under US GAAP. These include:


o        As explained in Note 4 c), under Mexican GAAP advances to suppliers are
         recorded as inventories. Under US GAAP advances to suppliers are
         classified as prepaid expenses.

o        The impairment of goodwill and other long-lived assets, the gain or
         loss on the disposition of fixed assets, all severance indemnities, and
         employee profit sharing must be included in operating expenses under US
         GAAP.

c)  Deferred Promotional Expenses:

    As explained in Note 4 d), for Mexican GAAP purposes, the promotional costs
    related to the launching of new products or presentations are recorded as
    prepaid expenses. For US GAAP purposes, such promotional costs are expensed
    as incurred.

d)  Start-up Expenses:

    As explained in Note 4 h), under Mexican GAAP, start-up expenses are
    capitalized and are amortized at the start of operations using the
    straight-line method. Under US GAAP, these expenses must be recorded in the
    income statement as incurred.

e)  Goodwill and Other Intangible Assets:

    As mentioned in Note 4 i), under Mexican GAAP, goodwill must be amortized
    over a period of no more than 20 years. Under US GAAP, in accordance with
    the Statement of Financial Accounting Standards ("SFAS") No. 142 "Goodwill
    and Other Intangible Assets" effective in January 1, 2002, goodwill is no
    longer subject to amortization, but rather it is subject to periodic
    assessment for impairment by applying a fair-value-based test.



                                      F-34
<PAGE>

    In accordance with SFAS No. 142, the Company discontinued the amortization
    of goodwill effective January 1, 2002. The financial statement impact was to
    reduce amortization expense and increase net income under US GAAP by Ps. 442
    (Ps. 0.074 per Series "B" share and Ps. 0.093 per Series "D" share) for the
    year ended December 31,2002. A reconciliation of previously reported net
    income and income per share under US GAAP to the amounts adjusted to exclude
    goodwill amortization is as follows:

<TABLE>
<CAPTION>

     ---------------------------------------------------------------------------------------------------------------
                                                                                     Goodwill
                                                        Reported                 Amortization              Adjusted
     ---------------------------------------------------------------------------------------------------------------
     2002:
<S>                                                        <C>                          <C>                   <C>
     Net income for the year                     Ps.       3,083       Ps.                  -        Ps.      3,083
     Net income per Series "B" shares                      0.519                            -                 0.519
     Net income per Series "D" shares                      0.649                            -                 0.649
     ---------------------------------------------------------------------------------------------------------------
     ---------------------------------------------------------------------------------------------------------------
     2001:
     Net income for the year                               3,178                          448                 3,626
     Net income per Series "B" shares                      0.535                        0.075                 0.610
     Net income per Series "D" shares                      0.669                        0.094                 0.763
     ---------------------------------------------------------------------------------------------------------------
     ---------------------------------------------------------------------------------------------------------------
     2000:
     Net income for the year                               2,571                          453                 3,024
     Net income per Series "B" shares                      0.429                        0.076                 0.505
     Net income per Series "D" shares                      0.537                        0.095                 0.632
     ---------------------------------------------------------------------------------------------------------------
</TABLE>

     As a result of the adoption of this standard, the Company performed an
     impairment test as of January 1, 2002 and found no impairment. Subsequent
     impairment tests will be performed annually by the Company, unless an event
     occurs or circumstances change that would more likely than not reduce the
     fair value of a reporting unit below its carrying amount, in which case an
     impairment test would be performed between annual tests. As mentioned in
     Note 3, due to significant adverse changes in the Argentine economy during
     2002, on July 1, 2002 the Company recognized an impairment of the goodwill
     generated by the acquisition of Coca-Cola FEMSA Buenos Aires.

f)  Restatement of Imported Equipment:

    As explained in Note 4 g), under Mexican GAAP, imported machinery and
    equipment have been restated by applying the inflation rate of the country
    of origin, then translated at the year-end exchange rate of the Mexican
    peso.

    Under US GAAP, the restatement of machinery and equipment is not required.
    However, the Company applies the SEC regulations which require that all
    machinery and equipment, both domestic and imported, be restated using NCPI
    factors.

g) Capitalization of the Integral Result of Financing:

    Under Mexican GAAP, the capitalization of the integral result of financing
    (interest, foreign exchange and monetary position) generated by loan
    agreements obtained to finance investment projects is optional. The Company
    does not capitalize the integral result of financing.

    In accordance with US GAAP, if interest is incurred during the construction
    of qualifying assets, capitalization is required as part of the cost of such
    assets. Accordingly, a reconciling item for the capitalization of a portion
    of the integral result of financing is included in the US GAAP
    reconciliation of the majority net income and majority stockholders' equity.
    If the borrowings are denominated in US dollars, the weighted-average
    interest rate on all such outstanding debt is applied to the balance of
    construction-in-progress to determine the amount to be capitalized. If the
    borrowings are denominated in Mexican pesos, the amount of capitalizable
    interest determined as noted above is reduced by the gain on monetary
    position associated with the debt.


                                      F-35
<PAGE>

h) Financial Instruments:

    In accordance with Mexican GAAP, as mentioned in Note 4 o), beginning in
    January 2001 Bulletin C-2 became effective.

    Under US GAAP, SFAS No. 133, "Accounting for Derivative Instruments and
    Hedging Activities", also became effective in 2001. SFAS No. 133, was
    amended, establishes accounting and reporting standards requiring that every
    derivative instrument (including certain derivative instruments embedded in
    other contracts) be recorded in the balance sheet as either an asset or
    liability measured at its fair value. SFAS No. 133 requires that changes in
    the fair value of the derivative instrument be recognized in:

    o The net income of the year; or
    o Other comprehensive income, if the instruments represent cash flow hedges
      that qualify for hedge accounting.

    For purposes of SFAS No. 133, the Company elected not to designate its
    financial instruments as hedges for the derivative instruments and
    accordingly the entire effect of the valuation of those instruments
    contracted before January 1, 2001, was recognized in the income statement as
    a change in accounting principle under US GAAP at January 1, 2001.

    Prior to 2001, in accordance with Mexican GAAP, the income statement effect
    of forward contracts was recorded at the maturity of each contract. In
    accordance with US GAAP, the income statement effect was determined by the
    difference between the exchange rate at the date the contract was signed and
    the forward exchange rate, amortizing such difference on a straight-line
    basis over the term of the contract.

    Under Mexican GAAP, the swap agreements for natural gas and aluminum prices,
    as well as cash-settled options contracted by the Company (see Note 17),
    have been designated as hedges and accordingly valued using the same
    valuation criteria applied to the underlying asset or liability, which are
    registered in the income statement when the consumption or payment takes
    place. However, under US GAAP, these agreements must be adjusted to their
    market value, recognizing the corresponding asset or liability. Since the
    hedging relationship required by US GAAP has not been adequately documented,
    a reconciling item has been included in the US GAAP reconciliation to adjust
    earnings for this difference in valuation method.


i)  Deferred Income Taxes and Employee Profit Sharing:

    The Company follows SFAS No. 109, "Accounting for Income Taxes", for US GAAP
    purposes, which differs from Mexican GAAP as follows:

o    Under Mexican GAAP, deferred taxes are classified as non-current, while
     under US GAAP are based on the classification of the related asset or
     liability.

o    Under Mexican GAAP, the effects of inflation on the deferred tax balance
     generated by monetary items are recognized in the result on monetary
     position. Under US GAAP, the deferred tax balance is classified as a
     non-monetary item. As a result, the consolidated income statement differs
     with respect to the presentation of the gain (loss) on monetary position
     and deferred income tax provision.

o    Under Mexican GAAP, the change in statutory income tax rate (see Note 21 a)
     approved early in 2002 prior to issuance of the financial statements was
     considered in the calculation of deferred taxes at December 31, 2001. Under
     US GAAP, a change in statutory tax rate may not be considered until the
     enactment date, which was January 1, 2002.

                                      F-36
<PAGE>

o    Under Mexican GAAP, deferred employee profit sharing is calculated
     considering only those temporary differences that arise during the year and
     which are expected to turn around within a defined period, while under US
     GAAP, the same liability method as used for deferred income taxes is
     applied.

o    The differences in the restatement of imported machinery and equipment, the
     capitalization of financing costs, the pension plan and financial
     instruments mentioned in Note 24 f), g), h) and j) generate a difference
     calculating the deferred income tax under US GAAP compared to the one
     presented under Mexican GAAP (see Note 21 d).
<TABLE>
<CAPTION>

---------------------------------------------------------------------------------------------------------------------
Reconciliation of Deferred Income Taxes                                                       2002              2001
---------------------------------------------------------------------------------------------------------------------
<S>                                                                                          <C>               <C>
Deferred income taxes under Mexican GAAP                                           Ps.       3,987     Ps.     3,943
US GAAP adjustments:
    Property, plant and equipment                                                              379               889
    Capitalization of integral result of financing                                             166               184
    Start-up expenses                                                                         (29)              (21)
    Pension plan                                                                                22                27
    Financial instruments                                                                      (1)                 -
    Restatement effect                                                                           -                32
---------------------------------------------------------------------------------------------------------------------
Total Adjustments                                                                              537             1,111
---------------------------------------------------------------------------------------------------------------------
Deferred income taxes under US GAAP                                                Ps.       4,524     Ps.     5,054
---------------------------------------------------------------------------------------------------------------------
</TABLE>

The total deferred income taxes under US GAAP include the corresponding current
portion as of December 31, 2002 and 2001 of Ps. 1,408 and Ps. 1,367,
respectively.

The changes in the balance of the deferred income taxes for the year are as
follows:
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------
                                                                                              2002              2001
---------------------------------------------------------------------------------------------------------------------
<S>                                                                                          <C>               <C>
 Balance at beginning of the year                                                  Ps.       5,054    Ps.      5,194
 Provision for the year                                                                      (201)             (145)
 Change in the statutory income tax rate                                                     (275)                 -
 Cumulative translation adjustment                                                            (66)                 -
 Inflation adjustment                                                                           12                 5
---------------------------------------------------------------------------------------------------------------------
 Balance at end of the year                                                        Ps.       4,524    Ps.      5,054
---------------------------------------------------------------------------------------------------------------------
</TABLE>

                                      F-37
<PAGE>
<TABLE>
<CAPTION>

---------------------------------------------------------------------------------------------------------------------
Reconciliation of Deferred Employee Profit Sharing                                           2002               2001
---------------------------------------------------------------------------------------------------------------------
<S>                                                                                         <C>                <C>
Deferred employee profit sharing under Mexican GAAP                                Ps.        (8)     Ps.          -
US GAAP adjustments:
Current:
Allowance for doubtful accounts                                                              (26)               (23)
    Inventories                                                                               414                395
    Prepaid expenses                                                                           10                  -
Non-current:
Property, plant and equipment                                                               1,309              1,217
    Capitalization of interest expense                                                         41                 44
    Deferred charges                                                                            3                 12
    Pension plan                                                                             (52)               (45)
    Seniority premiums                                                                        (9)               (10)
    Medical services                                                                         (11)                (7)
    Foreign exchange effect                                                                     -                (1)
    Other reserves                                                                           (41)                  5
---------------------------------------------------------------------------------------------------------------------
Total Adjustments                                                                           1,638              1,587
---------------------------------------------------------------------------------------------------------------------
Deferred employee profit sharing under US GAAP                                     Ps.      1,630     Ps.      1,587
---------------------------------------------------------------------------------------------------------------------
</TABLE>

The changes in the balance of the deferred employee profit sharing for the year
are as follows:
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------
                                                                                             2002               2001
---------------------------------------------------------------------------------------------------------------------
<S>                                                                                         <C>                <C>
    Balance at beginning of the year                                               Ps.      1,587     Ps.      1,595
    Provision for the year                                                                     43                (3)
    Inflation adjustment                                                                        -                (5)
---------------------------------------------------------------------------------------------------------------------
    Balance at end of the year                                                     Ps.      1,630     Ps.      1,587
---------------------------------------------------------------------------------------------------------------------
</TABLE>

j)  Pension Plan:

    Under Mexican GAAP, the liabilities for employee benefits are determined
    using actuarial computations in accordance with Bulletin D-3, "Obligaciones
    Laborales" (Labor Obligations), which is substantially the same as US GAAP
    SFAS No. 87, "Employers' Accounting for Pensions", except for the initial
    year of application of both bulletins, which generates a difference in the
    unamortized prior service costs and in the amortization expense.

    Under Mexican GAAP and US GAAP, there is no difference in the liabilities
    for seniority premiums and postretirement medical benefits.

    The Company has prepared a study of pension costs under US GAAP based on
    actuarial calculations using the same assumptions applied under Mexican GAAP
    (see Note 14).

                                      F-38
<PAGE>


    The required disclosures under SFAS No. 87 are as follows:
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------
Net Pension Cost                                                          2002               2001               2000
---------------------------------------------------------------------------------------------------------------------
<S>                                                                         <C>                <C>                <C>
Service cost                                                    Ps.         72     Ps.         63     Ps.         86
Interest cost                                                              129                117                130
Actual return on pension plan funds                                       (93)               (91)               (94)
Net amortization and deferral                                               32                 36                 40
---------------------------------------------------------------------------------------------------------------------
Net pension cost (US GAAP)                                                 140                125                162
Net pension cost recorded (Mexican GAAP)                                   124                100                138
---------------------------------------------------------------------------------------------------------------------
Additional expense that must be recognized under
    US GAAP                                                    Ps.          16    Ps.          25    Ps.          24
---------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------
<S>                                                                                          <C>                <C>
Pension Liability                                                                            2002               2001
---------------------------------------------------------------------------------------------------------------------
Projected benefit obligation                                                       Ps.      2,488     Ps.      2,232
Pension plan funds at fair value                                                          (1,581)            (1,559)
---------------------------------------------------------------------------------------------------------------------
Unfunded projected benefit obligation                                                         907                673
Unrecognized net transition obligation                                                      (386)              (441)
Unrecognized actuarial gain                                                                     -                217
---------------------------------------------------------------------------------------------------------------------
Total unfunded accrued pension liability under US GAAP                                        521                449
Total unfunded accrued pension liability under Mexican GAAP                                   584                527
---------------------------------------------------------------------------------------------------------------------
Liability that must be canceled under US GAAP                                      Ps.       (63)     Ps.       (78)
---------------------------------------------------------------------------------------------------------------------

---------------------------------------------------------------------------------------------------------------------
Change in Projected Benefit Obligation                                                       2002               2001
---------------------------------------------------------------------------------------------------------------------
Obligation at the beginning of the year                                           Ps.       2,232     Ps.      2,501
Service cost                                                                                   72                 63
Interest cost                                                                                 129                117
Actuarial loss                                                                                165                142
Adjustment in projected benefit (Note 14)                                                       -              (444)
Benefits paid on pension plan funds                                                         (110)              (147)
---------------------------------------------------------------------------------------------------------------------
Obligation at the end of the year                                                 Ps.       2,488     Ps.      2,232
---------------------------------------------------------------------------------------------------------------------

---------------------------------------------------------------------------------------------------------------------
Change in Pension Plan Funds                                                                 2002               2001
---------------------------------------------------------------------------------------------------------------------
Balance at the beginning of the year                                              Ps.       1,559     Ps.      1,512
Actual return on plan assets in real terms                                                     93                 91
Actuarial gain                                                                                 39                 55
Employer contribution on pension plan funds                                                     -                 48
Benefits paid on pension plan funds                                                         (110)              (147)
---------------------------------------------------------------------------------------------------------------------
Balance at the end of the year                                                    Ps.       1,581     Ps.      1,559
---------------------------------------------------------------------------------------------------------------------
</TABLE>

k)  Minority Interest:

    Under Mexican GAAP, the minority interest in consolidated subsidiaries is
    presented as a separate component within stockholders' equity in the
    consolidated balance sheet.

    Under US GAAP, this item must be excluded from consolidated stockholders'
    equity in the consolidated balance sheet. Additionally, the minority
    interest in the net earnings of consolidated subsidiaries is excluded from
    consolidated net income.

                                      F-39

<PAGE>

    The US GAAP adjustments shown in Note 25 a) and b) are calculated on a
    consolidated basis. Therefore, the minority interest effect is presented as
    a separate line item, in order to obtain net income and stockholders'
    equity.

    The minority interest in US GAAP adjustments is as follows:
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------
Income Statement                                                          2002               2001               2000
---------------------------------------------------------------------------------------------------------------------
<S>                                                                         <C>                <C>                <C>
Restatement of imported machinery and equipment                 Ps.         18     Ps.         13    Ps.          21
Capitalization of the integral result of financing                          10                  -               (12)
Financial instruments                                                       10                  -                 41
Deferred income taxes                                                    (103)                 40               (89)
Deferred employee profit sharing                                            47                 31               (75)
Goodwill                                                                  (18)                  -                  -
Pension plan cost                                                            3                  3                 86
Deferred promotional expense                                                 5                  -                  -
---------------------------------------------------------------------------------------------------------------------
                                                                Ps.       (28)     Ps.         87    Ps.        (28)
---------------------------------------------------------------------------------------------------------------------

---------------------------------------------------------------------------------------------------------------------
Stockholders' Equity                                                                         2002               2001
---------------------------------------------------------------------------------------------------------------------
Restatement of imported machinery and equipment                                    Ps.      (213)     Ps.      (398)
Capitalization of the integral result of financing                                          (159)              (171)
Financial instruments                                                                          12                  -
Deferred income taxes                                                                         126                268
Deferred employee profit sharing                                                              444                398
Goodwill                                                                                     (18)                  -
Accumulated pension plan liability                                                            (4)                (7)
Deferred promotional expense                                                                    5                  -
---------------------------------------------------------------------------------------------------------------------
                                                                                          Ps. 193     Ps.         90
---------------------------------------------------------------------------------------------------------------------
</TABLE>


l)  Acquisition of Minority Interest:

    In accordance with Mexican GAAP, the Company applied the entity theory to
    the acquisition of the minority interest by FEMSA in May 1998, through the
    Exchange Offer. Accordingly, no goodwill was created as a result of such
    acquisition and the difference between the book value of the shares acquired
    by FEMSA and the FEMSA shares exchanged was recorded as additional paid-in
    capital. The direct out-of-pocket costs identified with the purchase of
    minority interest are treated as an additional purchase cost and included in
    other expenses.

    In accordance with US GAAP, the acquisition of a minority interest must be
    accounted under the purchase method, using the market value of shares
    received by FEMSA in the Exchange Offer to determine the cost of the
    acquisition of such minority interest and the related goodwill. Until
    December 2001, goodwill was amortized over a period of 40 years, and
    beginning 2002, in accordance with SFAS No. 142 (see Note 24 e), goodwill is
    no longer amortizable. Under US GAAP, the direct out-of-pocket costs
    identified with the purchase of minority interest are treated as additional
    goodwill.

                                      F-40
<PAGE>

     Additionally, SFAS No. 142 requires the allocation of all goodwill to the
     related reporting units. The allocation of the goodwill generated by the
     previously mentioned acquisition of minority interest is as follows:
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------

---------------------------------------------------------------------------------------------------------------------
<S>                                                                                                            <C>
FEMSA Cerveza                                                                                         Ps.      7,641
Coca-Cola FEMSA                                                                                                3,896
FEMSA Empaques                                                                                                 1,879
FEMSA Comercio                                                                                                   890
---------------------------------------------------------------------------------------------------------------------
                                                                                                      Ps.     14,306
---------------------------------------------------------------------------------------------------------------------
</TABLE>

m)  Comprehensive Income:

    In Note 25 c), a reconciliation of majority comprehensive income under
    Mexican GAAP to US GAAP is presented. The reconciling items include
    adjustments to net income and other comprehensive income.

n)  Statement of Cash Flows:

    Under Mexican GAAP, the Company presents a consolidated statement of changes
    in financial position in accordance with Bulletin B-12, "Estado de Cambios
    en la Situacion Financiera" (Statement of Changes in Financial Position),
    which identifies the generation and application of resources by the
    differences between beginning and ending financial statement balances in
    constant Mexican pesos. Bulletin B-12 also requires that monetary and
    foreign exchange gains and losses be treated as cash items for the
    determination of resources generated by operations.

    In accordance with US GAAP, the Company follows SFAS No. 95 "Statement of
    Cash Flows", which is presented excluding the effects of inflation (see Note
    24 o).

o)  Summarized Financial Information under US GAAP:
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------
Balance Sheets                                                                               2002               2001
---------------------------------------------------------------------------------------------------------------------
<S>                                                                                        <C>                <C>
Current assets                                                                    Ps.      23,449     Ps.     16,066
Property, plant and equipment                                                              31,413             31,083
Other assets                                                                               20,765             20,376
---------------------------------------------------------------------------------------------------------------------
Total assets                                                                               75,677             67,525
---------------------------------------------------------------------------------------------------------------------
Current liabilities                                                                        13,601             10,544
Long-term liabilities                                                                      10,875              8,181
Other liabilities                                                                           4,829              4,824
---------------------------------------------------------------------------------------------------------------------
Total liabilities                                                                          29,305             23,549
Minority interest in consolidated subsidiaries                                              9,605              8,780
Stockholders' equity                                                                       36,767             35,196
---------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity                                        Ps.      75,677     Ps.     67,525
---------------------------------------------------------------------------------------------------------------------
</TABLE>

                                      F-41
<PAGE>

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------
Income Statements                                                      2002               2001               2000
---------------------------------------------------------------------------------------------------------------------
<S>                                                                     <C>                <C>                <C>
Total revenues                                                  Ps.     52,941     Ps.     52,720     Ps.     50,158
Income from operations                                                   8,473              7,452              6,777
Income before income tax and tax on assets                               7,737              7,449              5,648
Income tax and tax on assets                                             2,850              2,636              1,923
---------------------------------------------------------------------------------------------------------------------
Income before change in accounting principle                             4,887              4,813              3,725
Change in accounting principle                                               -               (52)                  -
---------------------------------------------------------------------------------------------------------------------
Income before minority interest                                          4,887              4,761              3,725
Minority interest in results of consolidated subsidiaries                1,804              1,583              1,154
---------------------------------------------------------------------------------------------------------------------
Net income                                                               3,083              3,178              2,571
    Cumulative translation adjustment                                    (373)              (442)                364
    Cumulative result of holding non-monetary assets                     (445)              (884)              (764)
---------------------------------------------------------------------------------------------------------------------
Other comprehensive income                                               (818)            (1,326)              (400)
---------------------------------------------------------------------------------------------------------------------
Comprehensive income                                            Ps.      2,265    Ps.       1,852     Ps.      2,171
---------------------------------------------------------------------------------------------------------------------
Net income per Series "B" share (constant pesos):
    Before change in accounting principle                       Ps.      0.519     Ps.      0.544     Ps.      0.429
    After change in accounting principle                                 0.519              0.535              0.429
Net income per Series "D" share (constant pesos):
    Before change in accounting principle                       Ps.      0.649     Ps.      0.680     Ps.      0.537
    After change in accounting principle                                 0.649              0.669              0.537
---------------------------------------------------------------------------------------------------------------------
</TABLE>

                                      F-42
<PAGE>
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------
Cash Flows (1)                                                            2002               2001               2000
---------------------------------------------------------------------------------------------------------------------
<S>                                                                      <C>                <C>                <C>
Net income                                                       Ps.     4,726     Ps.      4,372     Ps.      3,227
Non-cash items                                                           4,128              4,321              3,768
---------------------------------------------------------------------------------------------------------------------
Gross operating cash flows                                               8,854              8,693              6,995
---------------------------------------------------------------------------------------------------------------------
Working capital investment                                                 355              (107)                448
Recoverable taxes, net                                                   (225)                641              (849)
Interest payable                                                           (1)               (36)                 53
Labor obligations                                                        (101)               (87)              (101)
---------------------------------------------------------------------------------------------------------------------
Net cash flows from operating activities                                 8,882              9,104              6,546
---------------------------------------------------------------------------------------------------------------------
Investment in:
    Shares                                                                 (3)                 77                589
    Property, plant and equipment                                      (5,299)            (4,658)            (4,006)
    Other assets                                                          (97)                 71              (222)
---------------------------------------------------------------------------------------------------------------------
Net cash flows used in investing activities                            (5,399)            (4,510)            (3,639)
---------------------------------------------------------------------------------------------------------------------
Bank loans                                                               4,493                 10              (389)
Decrease in capital stock                                                    -                (6)               (17)
Dividends declared and paid                                            (1,095)            (1,101)              (981)
Other financial transactions                                               480              (291)                125
---------------------------------------------------------------------------------------------------------------------
Net cash flows used in financing activities                              3,878            (1,388)            (1,262)
Effect of exchange rate changes on cash                                      -               (25)              (221)
---------------------------------------------------------------------------------------------------------------------
Net increase in cash and cash equivalents                                7,361              3,181              1,424
Cash and cash equivalents at the beginning of the year                   7,195              4,014              2,590
---------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at the end of the year                 Ps.    14,556     Ps.      7,195     Ps.      4,014
---------------------------------------------------------------------------------------------------------------------
Supplemental cash flows information:
    Interest paid                                                Ps.       364     Ps.        418     Ps.        492
    Income tax and tax on assets paid                                    3,629              2,007              2,484
---------------------------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------
Statements of Changes in Stockholders' Equity                                                  2002             2001
---------------------------------------------------------------------------------------------------------------------
<S>                                                                                          <C>              <C>
Stockholders' equity at the beginning of the year                                    Ps.     35,196 Ps.       33,887
Purchase of Company's shares                                                                      -             (68)
Dividends declared and paid                                                                   (694)            (475)
Cumulative translation adjustment                                                             (373)            (442)
Result of holding non-monetary assets                                                         (445)            (884)
Net income for the year                                                                       3,083            3,178
---------------------------------------------------------------------------------------------------------------------
Stockholders' equity at the end of the year                                          Ps.     36,767   Ps.     35,196
---------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Expressed in millions of historical Mexican pesos

                                      F-43
<PAGE>

Note 25.   Reconciliation of Mexican GAAP to US GAAP.

a) Reconciliation of Net Income for the Year:
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------
                                                                            2002              2001              2000
---------------------------------------------------------------------------------------------------------------------
<S>                                                                        <C>               <C>               <C>
 Net majority income under Mexican GAAP                            Ps.     2,837   Ps.       3,393   Ps.       2,748
 US GAAP adjustments:
    Restatement of prior year financial statements (Note 24 a)                 -                86                48
    Deferred promotional expenses (Note 24 c)                               (10)                 -                 -
    Start-up expenses (Note 24 d)                                           (23)              (17)              (24)
    Goodwill (Note 24 e)                                                      55                 -                 -
    Restatement of imported machinery and equipment
    (Note 24 f)                                                            (113)              (97)              (75)
    Capitalization  of the integral  result of financing (Note 24           (38)              (11)                13
    g)
    Financial instruments (Note 24 h)                                        (2)                84              (84)
    Deferred income taxes (Note 24 i)                                        472                62               238
    Deferred employee profit sharing (Note 24 i)                            (51)                 3               146
    Pension plan (Note 24 j)                                                (16)              (25)              (24)
    Minority interest (Note 24 k)                                           (28)                87              (28)
    Acquisition of minority interest (Note 24 l)                               -             (387)             (387)
---------------------------------------------------------------------------------------------------------------------
Total Adjustments                                                            246             (215)             (177)
---------------------------------------------------------------------------------------------------------------------
Net income under US GAAP                                           Ps.     3,083     Ps.     3,178    Ps.      2,571
---------------------------------------------------------------------------------------------------------------------
</TABLE>

    Under US GAAP, the monetary position effect of the income statement
    adjustments is included in each adjustment, except for the capitalization of
    the integral result of financing, goodwill and pension plan liabilities,
    which are non-monetary.



b)   Reconciliation of Stockholders' Equity:
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------
                                                                                              2002              2001
---------------------------------------------------------------------------------------------------------------------
<S>                                                                                         <C>               <C>
Majority stockholders' equity under Mexican GAAP                                    Ps.     23,015   Ps.      21,173
US GAAP adjustments:
    Restatement of prior year financial statements (Note 24 a)                                   -               213
    Deferred promotional expense (Note 24 c)                                                  (10)                 -
    Start-up expenses (Note 24 d)                                                             (84)              (61)
    Goodwill (Note 24 e)                                                                        55                 -
    Restatement of imported machinery and equipment (Note 24 f)                              1,173             1,824
    Capitalization of the integral result of financing (Note 24 g)                             487               525
    Financial instruments (Note 24 h)                                                          (2)                 -
    Deferred income taxes (Note 24 i)                                                        (537)           (1,111)
    Deferred employee profit sharing (Note 24 i)                                           (1,638)           (1,587)
    Pension plan (Note 24 j)                                                                    63                78
    Minority interest (Note 24 k)                                                              193                90
    Acquisition of minority interest (Note 24 l)                                            14,052            14,052
---------------------------------------------------------------------------------------------------------------------
Total Adjustments                                                                           13,752            14,023
---------------------------------------------------------------------------------------------------------------------
Stockholders' equity under US GAAP                                                  Ps.     36,767    Ps.     35,196
---------------------------------------------------------------------------------------------------------------------
</TABLE>

                                      F-44
<PAGE>

c)   Reconciliation of Comprehensive Income:
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------
                                                                          2002               2001               2000
---------------------------------------------------------------------------------------------------------------------
<S>                                                                      <C>                <C>                <C>
Majority comprehensive income under Mexican GAAP               Ps.       2,536    Ps.       2,919    Ps.       2,094
US GAAP adjustments:
    Net income (Note 25 a)                                                 246              (215)              (177)
    Translation adjustment                                               (147)              (554)                129
    Result of holding non-monetary assets                                (370)              (298)                125
---------------------------------------------------------------------------------------------------------------------
Comprehensive income under US GAAP                             Ps.       2,265       Ps.    1,852     Ps.      2,171
---------------------------------------------------------------------------------------------------------------------
</TABLE>

Note 26. Future Impact of Recently Issued Accounting Standards Not Yet in
         Effect.


a)   In Mexican GAAP:

     Bulletin B-5, "Informacion Financiera por Segmentos" (Financial Information
     by Segment ) ("Bulletin B-5"):

     In April 2003,Bulletin B-5 issued by the Mexican Institute of Public
     Accountants ("IMCP"), went into effect superseding the provisions in
     International Accounting Standard ("IAS") No. 14, "Segment Reporting",
     which was suppletory based on the provisions in Bulletin A-8, "Aplicacion
     Supletoria de Normas Internacionales de Contabilidad" (Suppletory
     Application of International Accounting Standards), with respect to
     disclosing financial information by segment. The provisions of this new
     bulletin are substantially similar to those of IAS No. 14; however, they
     incorporate a managerial focus, which requires at a minimum disclosure of
     the segment information that is used by management to make decisions. These
     new provisions do not change the segment information previously presented
     by the Company.


     Bulletin C-8, "Activos Intangibles" (Intangible Assets)  ("Bulletin C-8"):

     In January 2002, the IMCP issued new Bulletin C-8, whose provisions are
     mandatory for fiscal years beginning January 1, 2003. Bulletin C-8
     supersedes the former Bulletin C-8, "Intangibles" and establishes that
     project development costs should be capitalized if they fulfill the
     criteria established for recognition as assets. Any start-up expenses
     incurred after the effective date of this bulletin should be recorded as an
     expense unless they meet certain criteria. The unamortized balance of
     capitalized start-up expenses under the former Bulletin C-8 will continue
     to be amortized. Bulletin C-8 requires identifying all intangible assets to
     reduce as much as possible the goodwill relative to business combinations.
     The Company does not anticipate that this new standard will have a
     significant impact on its financial position or results of operations.


     Bulletin C-9, "Pasivo, Provisiones, Activos y Pasivos Contingentes y
     Compromisos" (Liabilities, Provisions, Contingent Assets and Liabilities,
     and Commitments) ("Bulletin C-9"):

     In December 2002, issued new Bulletin C-9, whose provisions are mandatory
     for fiscal years beginning January 1, 2003. Bulletin C-9 supersedes the
     former Bulletins C-9, "Pasivos" (Liabilities), and C-12, "Contingencias y
     Compromisos" (Contingencies and Commitments), and establishes additional
     guidelines clarifying the accounting for liabilities, provisions, and
     contingent assets and liabilities, and establishes new standards for the
     use of present value techniques to measure liabilities and accounting for
     the early settlement of obligations. The Company does not anticipate that
     this new standard will have a significant impact on its financial position
     or results of operations.

                                      F-45
<PAGE>

     Boletin C-12, "Instrumentos Financieros con Caracteristicas de Pasivo, de
     Capital o de Ambos" (Financial Instruments with Characteristics of
     Liabilities, Equity or Both) ("Bulletin C-12"):

     In May 2003, the IMCP issued Bulletin C-12, whose provisions are mandatory
     for fiscal years beginning January 1, 2004, although early application is
     encouraged. C-12 incorporates the related portions of other bulletins
     issued by the IMCP with respect to the issuance of debt, capital or
     compound financial instruments, as well as those standards considered
     necessary for the accounting recognition of such instruments. As a result,
     C-12 indicates the basic distinctions between liabilities and equity and
     establishes the rules for the initial classification and measurement of the
     liability and equity components of compound financial instruments.
     Subsequent recognition and measurement of the liability and equity
     components of financial instruments remains subject to previously issued
     applicable standards. The Company does not anticipate that this new
     standard will have a significant impact on its financial position or
     results of operations.

     Bulletin C-15, "Deterioro en el Valor de los Activos de Larga Duracion y su
     Disposicion" (Impairment in the Value of Long-Lived Assets and Their
     Disposal) ("Bulletin C-15"):

     In March 2003, the IMCP issued Bulletin C-15, whose application is
     mandatory for financial statements of periods beginning on or after January
     1, 2004, although early application is encouraged. C-15 establishes, among
     others, new principles for the calculation and recognition of impairment
     losses for long-lived assets and their reversal. It also provides examples
     of indicators of possible impairment in the carrying amount of tangible and
     intangible long-lived assets in use, including goodwill. The calculation of
     such loss requires the determination of the recoverable value, which is now
     defined as the greater of the net selling price of a cash-generating unit
     and its value in use, which is the present value of discounted future net
     cash flows. The accounting principles issued prior to this new Bulletin
     used future net cash flows, without requiring the discounting of such cash
     flows. The Company does not anticipate that this new standard will have a
     significant impact on its financial position or results of operations.


b)   In US GAAP:

     SFAS No. 143, "Accounting for Asset Retirement Obligations" ("SFAS No.
     143"):

     In June 2001, the FASB issued SFAS No. 143, which is effective for the
     Company beginning in 2003. The Company plans to adopt this new standard in
     2003. SFAS No. 143 addresses financial accounting and reporting for
     obligations associated with the retirement of tangible long-lived assets
     and the associated asset retirement costs. It applies to legal obligations
     associated with the retirement of long-lived assets that result from the
     acquisition, construction, development and/or the normal operation of a
     long-lived asset, except for certain obligations of lessees. This Statement
     requires that the fair value of a liability for an asset retirement
     obligation be recognized in the year in which it is incurred if a
     reasonable estimate of fair value can be made. The associated asset
     retirement costs are capitalized as part of the carrying amount of the
     long-lived asset. The Company does not anticipate that this new standard
     will have a significant impact on its financial position or results of
     operations.

     SFAS No. 145, "Rescission of FASB Statements No. 4, 44, and 64, Amendment
     of FASB Statement No. 13, and Technical Corrections" ("SFAS No. 145"):

     In April 2002, the FASB issued SFAS No. 145, which requires that gains and
     losses from extinguishment of debt in all years presented be classified as
     extraordinary items only if they meet the criteria of APB Opinion 30,
     "Reporting the Results of Operations--Discontinued Events and Extraordinary
     Items".

     The amendment of SFAS No. 13, "Accounting for Leases", eliminates an
     inconsistency between the required accounting for sale-leaseback
     transactions and the required accounting for certain lease modifications
     that have economic effects that are similar to sale-leaseback transactions.
     The new standard will be effective for financial statements issued for
     fiscal years beginning after May 15, 2002 and lease transactions occurring
     after May 15, 2002, with early application encouraged. The Company plans to
     adopt this new standard in 2003. The Company does not anticipate that this
     new standard will have a significant impact on its financial position or
     results of operations.

                                      F-46
<PAGE>

     SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal
     Activities" ("SFAS No. 146"):

     In June 2002 the FASB issued SFAS No. 146, which nullifies Emerging Issues
     Task Force ("EITF") Issue No. 94-3, "Liability Recognition for Certain
     Employee Termination Benefits and Other Costs to Exit an Activity
     (including Certain Costs Incurred in a Restructuring)". The principal
     difference between SFAS No. 146 and EITF 94-3 relates to its requirement
     that a liability for a cost associated with an exit or disposal activity be
     recognized and measured initially at fair value when the liability is
     incurred, as opposed to recognition under EITF 94-3 at the date of an
     entity's commitment to an exit plan. The provisions of SFAS No.146 will be
     effective for exit or disposal activities that are initiated after December
     31, 2002, with early application encouraged. Previously issued financial
     statements may not be restated, and the provisions of EITF 94-3 shall
     continue to apply for an exit activity initiated under an exit plan prior
     to the initial application of SFAS No. 146. The Company plans to adopt this
     new standard in 2003. The Company does not anticipate that this new
     standard will have a significant impact on its financial position or
     results of operations.

     FASB Interpretation No. 45, "Guarantor's Accounting and Disclosure
     Requirements for Guarantees, Including Indirect Guarantees of Indebtedness
     of Others" ("FIN 45"):

     In November 2002, the FASB issued FIN 45, which requires that the guarantor
     recognize, at the inception of certain guarantees, a liability for the fair
     value of the obligation undertaken in issuing such guarantee. FIN 45 also
     requires additional disclosure requirements about the guarantor's
     obligations under certain guarantees that it has issued. The initial
     recognition and measurement provisions of this interpretation are
     applicable on a prospective basis to guarantees issued or modified after
     December 31, 2002, and the disclosure requirements are effective for
     financial statement periods ending after December 15, 2002. The Company
     does not expect the adoption of FIN 45 will have a material impact on its
     financial position, results of operations or cash flows.

     EITF Issue 02-16, "Accounting by a Customer (Including a Reseller) for
     Certain Consideration Received from a Vendor" ("EITF 02-16"):

     In January 2003, the EITF concluded in EITF 02-16, whose provisions are
     required for financial statements for fiscal years beginning after December
     15,2002, with pro forma retroactive disclosure encouraged. EITF 02-16
     addresses the accounting for cash consideration received from a vendor by a
     reseller of a vendor's products. The EITF reached a consensus that cash
     consideration represents a reimbursement of costs incurred by the customer
     to sell the vendor's products and should be characterized as a reduction of
     that cost when recognized in the customer's income statement if the cash
     consideration represents a reimbursement of a specific, incremental,
     identifiable cost incurred by the customer in selling the vendor's products
     or services. Accordingly, the payments received by Coca-Cola FEMSA from The
     Coca-Cola Company for cooperative advertising (see Note 4j) are properly
     classified as a reduction of selling expenses. As a result, this new
     bulletin will have no impact on the Company's financial statements.

     SFAS No. 149, "Amendments of Statement 133 on Derivative Instruments and
     Hedging Activities" ("SFAS No. 149"):

     In April 2003, the FASB issued SFAS No. 149, which amends and clarifies
     financial accounting and reporting for derivative instruments, including
     certain derivative instruments embedded in other contracts and for hedging
     activities under SFAS No. 133. The changes in this Statement improve
     financial reporting by requiring that contracts with comparable
     characteristics be accounted for similarly. The new standard will be
     effective for contracts entered into or modified after June 30, 2003,
     except as stated below and for hedging relationships designated after June
     30, 2003. In addition, except as stated below, all provisions of this
     Statement should be applied prospectively.

     The provisions of this Statement that relate to SFAS No. 133 implementation
     issues that have been effective for fiscal quarters that began prior to
     June 15, 2003, should continue to be applied in accordance with their
     respective effective dates. The Company does not anticipate that this new
     standard will have a significant impact on its financial position or
     results of operations.

     SFAS No. 150, "Accounting for Certain Financial Instruments with
     Characteristics of both Liabilities and Equity" ("SFAS No. 150"):

     In May 2003, the FASB issued SFAS No. 150, which aims to eliminate
     diversity in practice by requiring that the following three types of
     financial instruments be reported as liabilities by their issuers:

                                      F-47
<PAGE>

-    Mandatorily redeemable instruments (i.e., instruments issued in the form of
     shares that unconditionally obligate the issuer to redeem the shares for
     cash or by transferring other assets);

-    Forward purchase contracts, written put options, and other financial
     instruments not in the form of shares that either obligate or may obligate
     the issuer to settle its obligation for cash or by transferring other
     assets;

-    Certain financial instruments that include an obligation that (1) the
     issuer may or must settle by issuing a variable number of its equity shares
     and (2) has a "monetary value" at inception that (a) is fixed, (b) is tied
     to a market index or other benchmark (something other than the fair value
     of the issuer's equity shares) or (c) varies inversely with the fair value
     of the equity shares, for example, a written put option.

To date these types of instruments have been variously reported by their issuers
as liabilities, as part of equity, or between the liability and equity sections
(sometimes referred to as "mezzanine" reporting) of the balance sheet. The
provisions of SFAS No. 150 are effective for financial instruments entered into
or modified after May 31, 2003, and pre-existing instruments effective at the
beginning of the first interim period beginning after June 15, 2003. The Company
does not expect that the adoption of SFAS No. 150 will have a material impact on
its financial position, results of operations or cash flows.


Note 27. Subsequent event

On May 6, 2003, Coca-Cola FEMSA acquired 100% of the outstanding stock of
Panamerican Beverages, Inc. ("Panamco") for $3,709, excluding transaction
expenses. As part of the acquisition, the Company assumed $885 of debt, of which
$373 million was repaid in connection with the acquisition.

The transaction was financed with new indebtedness in Mexican pesos of Ps. 7,998
and US dollars of $1,234, an equity contribution from FEMSA of $260, an exchange
of The Coca-Cola Company's equity interests in Panamco valued at $674 for new
shares of Coca-Cola FEMSA, the assumption of indebtedness of $512 and cash on
hand of $285.

Transaction costs and expenses, including financial and advisory fees, and costs
associated with exiting activities of the former Panamco business include: (i)
closing certain acquired facilities; (ii) rationalizing and consolidating
operations, (iii) relocating the corporate and other offices, and (iv) other
costs associated with the integration of the operations are expected to be
material. These costs will be recorded on the Company's Consolidated Balance
Sheet as adjustments to the purchase price or on the Company's Consolidated
Statements of Income as expenses, as appropriate.

Assets acquired and liabilities assumed as part of this acquisition will be
recorded on the Company's consolidated balance sheet as of the acquisition date
based upon their estimated fair values at such date. The excess of the purchase
price over the estimated fair values of the underlying assets acquired and
liabilities assumed will be allocated as identifiable intangible assets,
principally bottling agreement rights, which the Company has determined have an
indefinite life. Appraisals and valuations of the acquired tangible and
intangible assets in each of the eight countries in which Panamco operated are
currently in process. The Company is unable to provide a preliminary estimate of
the fair value of the assets acquired and liabilities assumed due to the
incomplete nature of the valuations and pending the finalization of the
integration plans.

After the transaction, FEMSA indirectly owns 45.7% of the economic value of
Coca-Cola FEMSA and 53.6% of the voting shares. The Coca-Cola Company indirectly
owns 39.6% of the economic value and 46.4% of the voting shares. The public owns
the remaining economic value.

                                      F-48
<PAGE>


                         REPORT OF INDEPENDENT AUDITORS



To the Stockholders of
Femsa Comercio, S.A. de C.V.


We have audited the accompanying consolidated balance sheets of Femsa Comercio,
S.A. de C.V. and Subsidiaries, as of December 31, 2002 and 2001, and the related
consolidated statements of income, changes in stockholders' equity and changes
in financial position for the years then ended. These consolidated 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 and in the United States of America. Those standards require that we
plan and perform our audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement and that they were
prepared in accordance with generally accepted accounting principles in Mexico.
An audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Femsa Comercio, S.A.
de C.V. and Subsidiaries at December 31, 2002 and 2001, and the results of their
operations, the changes in their stockholders' equity and the changes in their
financial position for the years then ended, in conformity with accounting
principles generally accepted in Mexico, which differ in certain respects from
accounting principles generally accepted in the United States of America, as
described in Note 16 to the financial statements.


                                                    Mancera, S. C.
                                                 A Member Practice of
                                                 Ernst & Young Global



                                          C.P.C. Roberto Rodriguez Castaneda


San Pedro Garza Garcia, N.L.
January 29, 2003


<PAGE>

                                    SIGNATURE

         Pursuant to the requirements of Section 12 of the Securities Exchange
Act of 1934, the registrant certifies that it meets all the requirements for
filing on Form 20-F and has duly caused this Annual Report to be signed on its
behalf by the undersigned, thereunto duly authorized.

Dated:  June 27, 2003


                                  FOMENTO ECONOMICO MEXICANO, S.A. de C.V.

                                  By: /s/__Federico Reyes_________
                                           Federico Reyes
                                           Executive Vice President of
                                           Planning and Finance


<PAGE>


                                 CERTIFICATIONS


I,  JOSE ANTONIO FERNANDEZ certify that:

1.   I have reviewed this Annual Report on Form 20-F of Fomento Economico
     Mexicano, S.A., de C.V.;

2.   Based on my knowledge, this Annual Report does not contain any untrue
     statement of a material fact or omit to state a material fact necessary to
     make the statements made, in light of the circumstances under which such
     statements were made, not misleading with respect to the period covered by
     this Annual Report;

3.   Based on my knowledge, the financial statements, and other financial
     information included in this Annual Report, fairly present in all material
     respects the financial condition, results of operations and cash flows of
     the registrant as of, and for, the periods presented in this Annual Report;

4.   The registrant's other certifying officers and I are responsible for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-15 and 15d-15) for the registrant and have:

     (a) Designed such disclosure controls and procedures to ensure that
     material information relating to the registrant, including its consolidated
     subsidiaries, is made known to us by others within those entities,
     particularly during the period in which this Annual Report is being
     prepared;

     (b) Evaluated the effectiveness of the registrant's disclosure controls and
     procedures as of a date within 90 days prior to the filing date of this
     Annual Report (the "Evaluation Date"); and

     (c) Presented in this Annual Report our conclusions about the effectiveness
     of the disclosure controls and procedures based on our evaluation as of the
     Evaluation Date;

5.   The registrant's other certifying officers and I have disclosed, based on
     our most recent evaluation, to the registrant's auditors and the audit
     committee of registrant's board of directors (or persons performing the
     equivalent functions):

     (a) All significant deficiencies in the design or operation of internal
     controls which could adversely affect the registrant's ability to record,
     process, summarize and report financial data and have identified for the
     registrant's auditors any material weaknesses in internal controls; and

     (b) Any fraud, whether or not material, that involves management or other
     employees who have a significant role in the registrant's internal
     controls; and

6.   The registrant's other certifying officers and I have indicated in this
     Annual Report whether there were significant changes in internal controls
     or in other factors that could significantly affect internal controls
     subsequent to the date of our most recent evaluation, including any
     corrective actions with regard to significant deficiencies and material
     weaknesses.




Date: June 27, 2003                   /s/__Jose Antonio Fernandez__
                                           Jose Antonio Fernandez
                                           Chief Executive Officer

<PAGE>

                                 CERTIFICATIONS

I,  FEDERICO REYES GARCIA, certify that:

1.   I have reviewed this Annual Report on Form 20-F of Fomento Economico
     Mexicano, S.A. de C.V.;

2.   Based on my knowledge, this Annual Report does not contain any untrue
     statement of a material fact or omit to state a material fact necessary to
     make the statements made, in light of the circumstances under which such
     statements were made, not misleading with respect to the period covered by
     this Annual Report;

3.   Based on my knowledge, the financial statements, and other financial
     information included in this Annual Report, fairly present in all material
     respects the financial condition, results of operations and cash flows of
     the registrant as of, and for, the periods presented in this Annual Report;

4.   The registrant's other certifying officers and I are responsible for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-15 and 15d-15) for the registrant and have:

     (a) Designed such disclosure controls and procedures to ensure that
     material information relating to the registrant, including its consolidated
     subsidiaries, is made known to us by others within those entities,
     particularly during the period in which this Annual Report is being
     prepared;

     (b) Evaluated the effectiveness of the registrant's disclosure controls and
     procedures as of a date within 90 days prior to the filing date of this
     Annual Report (the "Evaluation Date"); and

     (c) Presented in this Annual Report our conclusions about the effectiveness
     of the disclosure controls and procedures based on our evaluation as of the
     Evaluation Date;

5.   The registrant's other certifying officers and I have disclosed, based on
     our most recent evaluation, to the registrant's auditors and the audit
     committee of registrant's board of directors (or persons performing the
     equivalent functions):

     (a) All significant deficiencies in the design or operation of internal
     controls which could adversely affect the registrant's ability to record,
     process, summarize and report financial data and have identified for the
     registrant's auditors any material weaknesses in internal controls; and

     (b) Any fraud, whether or not material, that involves management or other
     employees who have a significant role in the registrant's internal
     controls; and

6.   The registrant's other certifying officers and I have indicated in this
     Annual Report whether there were significant changes in internal controls
     or in other factors that could significantly affect internal controls
     subsequent to the date of our most recent evaluation, including any
     corrective actions with regard to significant deficiencies and material
     weaknesses.




Date: June 27, 2003                   /s/__Federico Reyes Garcia____
                                           Federico Reyes Garcia
                                           Chief Financial Officer