UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION

                              WASHINGTON, DC 20549

                                    FORM 20-F

                  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
                      FOR THE YEAR ENDED DECEMBER 31, 2002

                         COMMISSION FILE NUMBER 1-12632

                          GRUPO CASA SABA, S.A. DE C.V.
             (Exact name of Registrant as specified in its charter)

                                 NOT APPLICABLE.
                 (Translation of Registrant's name into English)

                                     MEXICO
                 (Jurisdiction of Incorporation or Organization)

                          PASEO DE LA REFORMA, NO. 215
                    COLONIA LOMAS DE CHAPULTEPEC, C.P. 11000
                                  MEXICO, D.F.
                                     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,           NEW YORK STOCK EXCHANGE
       EACH REPRESENTING TEN ORDINARY
         SHARES, WITHOUT PAR VALUE

     ORDINARY SHARES, WITHOUT PAR VALUE        NEW YORK STOCK EXCHANGE
                                              (FOR LISTING PURPOSES ONLY)

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 CLASS OF CAPITAL OR COMMON STOCK AS OF
DECEMBER 31, 2002 WAS: 265,419,360 ORDINARY SHARES, WITHOUT PAR VALUE

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 __                ITEM 18 X
                                                            ---

<PAGE>


<TABLE>
<CAPTION>
                                TABLE OF CONTENTS

                                     PART I


<S>      <C>                                                                                                    <C>
Item 1.  Identity of Directors, Senior Management and Advisers....................................................1

Item 2.  Offer Statistics and Expected Timetable..................................................................1

Item 3.  Key Information..........................................................................................1

         Selected Financial Data..................................................................................1
         Dividends................................................................................................2
         Exchange Rate Information................................................................................4
         Risk Factors.............................................................................................5
         Forward-Looking Statements...............................................................................8

Item 4.  Information on the Company...............................................................................9

         History and Development of the Company...................................................................9
         Subsidiaries of the Company.............................................................................10
         Capital Expenditures....................................................................................10
         Business Overview.......................................................................................11
         Property, Plant and Equipment...........................................................................26

Item 5.  Operating and Financial Review and Prospects............................................................27

Item 6.  Directors, Senior Management and Employees..............................................................39

Item 7.  Major Shareholders and Related Party Transactions.......................................................43

Item 8.  Financial Information...................................................................................45

Item 9.  Offer and Listing Details...............................................................................45

         Trading History of Ordinary Shares and ADSs.............................................................45
         Trading on the Mexican Stock Exchange...................................................................48
         Share Repurchases.......................................................................................51

Item 10. Other Information.......................................................................................51

         Amendments to Mexican Securities Market Law.............................................................51
         Bylaws   ...............................................................................................52
         Material Contracts......................................................................................56
         Legal Proceedings.......................................................................................56
         Exchange Controls and Restrictions on Foreign Investment................................................56
         Taxation ...............................................................................................57
         Documents on Display....................................................................................61

Item 11. Quantitative and Qualitative Disclosures About Market Risk..............................................61

         Interest Rate Risk......................................................................................61
         Foreign Exchange Rate Risk..............................................................................61

Item 12. Description of Securities Other than Equity Securities..................................................61


                                     PART II


Item 13. Defaults, Dividend Arrearages and Delinquencies.........................................................62

Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds............................62

Item 15. Controls and Procedures.................................................................................62

Item 16. Reserved................................................................................................62


                                    PART III


Item 17. Financial Statements....................................................................................62

Item 18. Financial Statements....................................................................................62

Item 19. Exhibits ...............................................................................................63

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS......................................................................F-1

</TABLE>



<PAGE>


         Grupo Casa Saba, S.A. de C.V. is a limited liability stock corporation
with variable capital, or sociedad anonima de capital variable, organized under
the laws of Mexico. In this annual report on Form 20-F, the terms "we" and
"Grupo Casa Saba" refer to Grupo Casa Saba, S.A. de C.V. and its consolidated
subsidiaries, unless the context indicates otherwise.

         We publish our financial statements in accordance with accounting
principles generally accepted in Mexico, or Mexican GAAP, which differ in
significant respects from accounting principles generally accepted in the United
States, or U.S. GAAP, and accounting procedures and policies adopted in other
countries. The exchange rates used in preparing our financial statements are
determined by reference as of the specified date to the rate of Mexican Pesos
per U.S. Dollar as reported by Banco de Mexico, or the Mexican Central Bank, in
the Diario Oficial de la Federacion, or the Official Gazette of the Federation.
As of December 31, 2002, the rate of Mexican Pesos per U.S. Dollar as reported
by the Mexican Central Bank in the Official Gazette of the Federation was
Ps.10.3125 to one U.S. dollar. See "Key Information--Exchange Rate Information."
The exchange rates used in translating Pesos into U.S. Dollars included
elsewhere in this annual report are determined by reference to the exchange rate
reported by the Mexican Central Bank in the Official Gazette of the Federation
as of December 31, 2002, unless otherwise indicated.

         Provided that it is not specified otherwise, information included in
this annual report is as of December 31, 2002, references to "Ps." or "Pesos" in
this annual report are to Mexican Pesos and references to "Dollars," "U.S.
Dollars," "U.S. dollars," "$" or "U.S.$" are to United States dollars.

         Market share information for our private sector pharmaceutical sales is
based on statistics provided exclusively to us by Interdata, S.A. de C.V., a
private Mexican company that belongs to IMS A.G., known internationally as IMS
Health, and Camara Nacional de la Industria Farmaceutica or Canifarma, an
association of companies in the pharmaceutical sector.

<PAGE>


PART I

ITEM 1.  IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

         Not applicable.

ITEM 2.  OFFER STATISTICS AND EXPECTED TIMETABLE

         Not applicable.

ITEM 3.  KEY INFORMATION

                             SELECTED FINANCIAL DATA

         The information set forth in the following table has been selected from
our audited consolidated financial statements. You should read this information
with, and it is qualified in its entirety by reference to, our audited
consolidated financial statements and the accompanying notes included elsewhere
in this annual report. This information should also be read together with
"Operating and Financial Review and Prospects."

         We prepare our audited consolidated financial statements in accordance
with Mexican GAAP, which differ in some significant respects from U.S. GAAP.
Note 15 to our audited consolidated financial statements provides a description
of the principal differences between Mexican GAAP and U.S. GAAP as they relate
to us, and describes differences in presentation between the statement of
changes in financial position under Mexican GAAP and the requirements under U.S.
GAAP for a statement of cash flows. Note 16 to our audited consolidated
financial statements provides a partial reconciliation to U.S. GAAP of net
income and total stockholders' equity.

         Pursuant to Mexican GAAP, our audited consolidated financial statements
and the selected financial information set forth in the following table reflect
inventories at current replacement cost. All other non-monetary assets are
reflected using the Mexican National Consumer Price Index, or the NCPI.
Components of stockholders' equity are also restated using the NCPI. In
addition, the statement of income recognizes the effect of profits and losses in
purchasing power from holding monetary assets and monetary liabilities. Mexican
GAAP also requires the restatement of all financial statements in constant Pesos
as of the date of the last period reported and, accordingly, all information in
our audited consolidated financial statements and in the selected financial
information set forth in the following table has been restated in constant Pesos
as of December 31, 2002. See Note 3 to our audited consolidated financial
statements. The effect of inflation accounting under Mexican GAAP has not been
reversed in our reconciliation to U.S. GAAP. See Notes 15 and 16 to our audited
consolidated financial statements.

<PAGE>
<TABLE>
<CAPTION>

---------------------------------- ---------- -------------- -------------- -------------- --------------- --------------
YEAR  ENDED DECEMBER 31,             1998         1999           2000           2001            2002         2002 (1)
---------------------------------- ---------- -------------- -------------- -------------- --------------- --------------
              (in thousands of constant Pesos as of December 31, 2002 and U.S. Dollars, except share and per share data)
---------------------------------- ---------- -------------- -------------- -------------- --------------- ---------------
INCOME STATEMENT
MEXICAN GAAP:
<S>                                <C>           <C>            <C>            <C>             <C>              <C>
Net sales                         15,924,889     15,805,603     17,190,744     17,162,248      18,207,422  U.S.$1,765,572
Gross profit                       1,943,682      1,512,087      1,787,149      1,837,755       1,920,881         186,268
Operating expenses                 1,562,124      1,486,484      1,162,860      1,166,897       1,218,854         118,193
Operating income                     381,558         25,603        624,289        670,858         702,027          68,075
Comprehensive cost of financing,     279,834        327,440         85,575        149,802          15,526           1,505
net
Other (income) (2)                   (25,589)       (23,195)       (18,225)       (31,978)         (5,928)           (575)
Income (loss) before taxes and
employee profit sharing              127,313       (278,642)       556,935        553,036         692,429         `67,145
Net income (loss)                    126,767       (297,235)       439,366        428,663         543,930          52,746
Net income (loss) per Ordinary
Share (3)                             0.4581        (1.1161)        1.6554         1.6150          2.0493           0.199
Weighted average Ordinary Shares
outstanding (in thousands) (3)       276,734        266,321        265,419        265,419         265,419              --

U.S. GAAP (4):

Net sales                         15,924,889     15,805,603     17,190,744     17,162,248      18,207,422  U.S.$1,765,572
Gross profit                       1,943,682      1,512,087      1,787,149      1,837,755       1,920,881         186,268
Operating income                     373,910        168,880        786,910        697,009         675,682          65,521
Income (loss) before taxes and
employee profit sharing              119,666       (134,702)       719,556        579,187         666,084          64,590
Net income (4)                       220,521       (168,518)       601,987        454,814         517,585          50,192
Net income (loss) per Ordinary
share (3)                             0.7969        (0.6328)        2.2681         1.7136          1.9501          0.1891
Weighted average Ordinary Shares
outstanding (in thousands) (3)       276,734        266,321        265,419        265,419         265,419              --

BALANCE SHEET DATA
MEXICAN GAAP:


Property and equipment, net        1,227,294      1,153,860      1,080,794      1,004,396         974,580     U.S.$94,505
Total assets                       7,637,031      5,569,954      6,630,113      7,094,993       7,505,042         727,762
Short-term debt                    1,746,375         46,893         80,005        321,330         355,004          34,425
Long-term debt (5)                   675,250        886,796        671,148        400,605          42,996           4,169
Capital stock                        923,171        920,963        920,963        920,963         920,963          89,306
Total stockholders' equity (4)     2,681,085      2,267,225      2,552,846      2,773,492       2,980,973         289,064

U.S. GAAP (4):

Property and equipment, net        1,227,294      1,153,860      1,080,794      1,004,396         974,580     U.S.$94,505
Total assets                       7,637,031      7,084,027      6,630,113      7,094,993       7,505,042         727,762
Short-term debt                    1,746,375         46,893         80,005        321,330         355,004          34,425
Long-term debt                       675,250      2,381,357        671,149        400,605          42,996           4,169
Capital stock                        923,171        920,963        920,963        920,963         920,963          89,306
Total stockholders' equity (4)     2,040,771      1,755,351      2,552,084      2,798,881       2,946,666         285,737

</TABLE>

________________________

(1)   Peso amounts have been translated into U.S. Dollars, solely for the
      convenience of the reader, at the rate of Ps.10.3125 per U.S. $1.00 the
      Peso /U.S. Dollar exchange rate as of December 31, 2002, as reported by
      the Mexican Central Bank in the Official Gazette of the Federation.

(2)   Other income consists of fees on returned checks, miscellaneous articles
      and non-taxable items adjustments.

(3)   Based on the weighted average number of Ordinary Shares outstanding
      during each year.

(4)   For a discussion of the principal differences between U.S. GAAP and
      Mexican GAAP concerning net income and total stockholders' equity as
      well as a partial reconciliation to U.S. GAAP of net income and total
      stockholders' equity, see Notes 15 and 16 to our audited consolidated
      financial statements.

(5)   Our long-term debt under Mexican GAAP as of December 31, 2000 differs
      from our long-term debt under U.S. GAAP as of that date as a result of a
      difference in the accounting treatment of our financial restructuring,
      which we completed in January 2000. Under Mexican GAAP, our consolidated
      balance sheet as of December 31, 2000 gives effect to our financial
      restructuring. Under U.S. GAAP, our financial restructuring would have
      been classified as a subsequent event in the notes to our audited
      consolidated financial statements for the year ended December 31, 2000
      and reflected in our audited consolidated balance sheet as of December
      31, 2000. For 2002 our long-term debt reflects the term loan facility
      with Scotiabank Inverlat. See Note 8 to our audited consolidated
      financial statements.


                                    DIVIDENDS

         Under Mexican law, 5% of our net income in a given year must be
allocated annually to a legal reserve. This legal reserve shall be increased
annually until it reaches 20% of our capital stock. After this allocation is
made, it is possible to make additional allocations, such as a contribution of
funds for the payment of dividends or the creation of special reserves,
generally, but not necessarily, upon the recommendation of our Board of
Directors. We cannot pay dividends on our Ordinary Shares unless these
allocations are previously made. As of December 31, 2002, we had a legal reserve
of approximately Ps.52.7 million, which represented approximately 5.7% of our
capital stock as of that date. See Note 11 to our audited consolidated financial
statements. Five percent of our net income for the year ended December 31, 2002
has been applied to the legal reserve, and thus our annual shareholders'
meeting, held on April 22, 2003, approved the payment of a dividend in the
amount of Ps.100.0 million, equivalent to Ps.0.38 per Ordinary Shares.

         In 1999, 2000 and 2001, we did not declare any dividends, cash or
otherwise. See "--Risk Factors--Risk Factors Relating to Our Securities--Our
Controlling Shareholder Has the Ability to Restrict the Payment and Amount of
Dividends and the Terms of Our Indebtedness also Restrict the Declaration and
Payment of Dividends." Any determination to declare and pay dividends depends on
the following factors:

         o    the resolution by our shareholders in light of our results,
              financial condition, cash requirements, future prospects and
              other factors deemed relevant by our shareholders for this
              purpose;

         o    the extent to which we receive cash dividends, advances and other
              payments from our subsidiaries. We are a holding company with no
              significant operating assets other than the ones we own through
              our subsidiaries. Given the fact that we receive substantially
              all of our operating income from our subsidiaries, our ability to
              meet our financial obligations, including the payment of
              dividends, depends significantly on the profits we receive from
              our subsidiaries; and

         o    the extent to which we have cash available for distribution after
              funding our working capital needs, capital expenditures and
              investments.

         Our controlling shareholder has the ability to determine, by means of a
shareholder vote, whether we will declare and pay dividends, in cash or
otherwise. See "--Risk Factors-- Risk Factors Relating to Our Securities--Our
Controlling Shareholder Has the Ability to Restrict the Payment and Amount of
Dividends and the Terms of Our Indebtedness also Restrict the Declaration and
Payment of Dividends" and "Major Shareholders and Related Party Transactions
--Principal Shareholders." The terms of our existing indebtedness contain
covenants that restrict or otherwise limit our ability to declare and pay
dividends on our capital stock. See "Operating and Financial Review and
Prospects--Indebtedness--Scotiabank Inverlat Credit Facility." We cannot assure
you that we will not enter into arrangements with these types of covenants in
the future.

         Effective January 1, 1999, dividends payable on Ordinary Shares to
individuals and non-residents of Mexico represented by ADSs were subject to a
withholding tax in the amount of 7.5%. Effective January 1, 2000, this
withholding tax increased to 7.7%. See Note 11 to our audited consolidated
financial statements. Since January 1, 2002, no withholding tax applies to
dividends paid to individuals or non-residents of Mexico, on our ADSs. See
"Other Information--Taxation--Mexican Taxes--Dividends."

         To the extent that we declare and pay dividends on our Ordinary Shares,
these dividends are payable to the holders of our ADSs. Owners of our ADSs are
entitled to receive any dividends payable on the Ordinary Shares underlying
their ADSs. We pay all cash dividends in Pesos, to the depositary of our ADSs,
The Bank of New York Company of New York. Except as otherwise provided in the
deposit agreement pursuant to which our ADSs are issued, cash dividends received
by the depositary are converted by the depositary from Pesos into U.S. Dollars
and, after the deduction or upon payment of the depositary's expenses, are paid
to the holders of ADSs in U.S. Dollars.

<PAGE>

                            EXCHANGE RATE INFORMATION

         Since November 1991, Mexico has had a free market for foreign exchange.
Prior to December 21, 1994, the Mexican Central Bank, Banco de Mexico, kept the
Peso-U.S. Dollar exchange rate within a range prescribed by the Mexican
government through intervention in the foreign exchange market. Within this
range, Banco de Mexico generally intervened to reduce day-to-day fluctuations in
the exchange rate. In December 1994, the Mexican government suspended
intervention by Banco de Mexico and allowed the Peso to float freely against the
U.S. Dollar. Factors contributing to this decision included the size of Mexico's
then current account deficit, the level of Banco de Mexico's foreign exchange
reserves, rising interest rates for other currencies, especially the U.S.
Dollar, and reduced confidence of international investors in the Mexican
economy. The Peso declined sharply in December 1994 and continued to fall under
conditions of high volatility in 1995. In 1996 and most of 1997, the Peso fell
more slowly and was less volatile. During 1998, the foreign exchange markets
experienced volatility as a result of the financial crisis in Asia and Russia
and financial turmoil in countries such as Brazil and Venezuela. We cannot
assure you that the Mexican government will maintain its current policies with
regard to the Peso or that the Peso will not further depreciate or appreciate
significantly in the future.

         The following table sets forth, for the periods indicated, the high,
low, average and period-end free market exchange rates, as reported by the Board
of Governors of the U.S. Federal Reserve Bank of New York for the purchase of
U.S. Dollars, expressed in nominal Pesos per $1.0 U.S. Dollar. The noon buying
rate for Pesos on June 13, 2003, was Ps.10.60 per U.S. Dollar.

<TABLE>
<CAPTION>
                                                        EXCHANGE RATE(1)
                                     ----------------------------------------------------------
YEAR ENDED DECEMBER 31,                   HIGH          LOW       AVERAGE(2)    PERIOD END
------------------------             ----------------------------------------------------------
<S>                                      <C>           <C>           <C>           <C>
    1998.............................     10.63         8.04          9.15          9.90
    1999.............................     10.60         9.24          9.55          9.48
    2000.............................     10.09         9.18          9.46          9.62
    2001.............................      9.97         8.95          9.34          9.17
    2002.............................     10.43         9.00          9.66         10.43

MONTH ENDED................
---------------------------

    December 31, 2002................     10.43        10.10         10.23         10.43
    January 31, 2003.................     10.98        10.32         10.62         10.90
    February 28, 2003................     11.03        10.77         10.95         11.03
    March 31, 2003...................     11.24        10.66         10.91         10.78
    April 30, 2003...................     10.77        10.31         10.59         10.31
    May 31, 2003.....................     10.42        10.11         10.25         10.34
    June 13, 2003....................     10.74        10.24         10.52         10.60


_______________________
<FN>
(1)   The free market exchange rate is the Noon Buying Rate for Mexican Pesos,
      as reported by the Board of Governors of the U.S. Federal Reserve Bank
      of New York.

(2)   Annual average rates reflect the average of month end rates. Monthly
      average rates reflect the average of daily rates.
</FN>
</TABLE>

         We will pay any cash dividends in Pesos, and exchange rate fluctuations
will affect the U.S. Dollar amounts received by holders of ADSs upon the
conversion by the depositary of our ADSs, Bank of New York Company of New York,
of these cash dividends into U.S. Dollars. 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 Ordinary Shares on the Mexican Stock Exchange and, as a
result, have also affected the market price of the ADSs.

         The Mexican economy has suffered balance of payment deficits and
shortages in foreign exchange reserves. While the Mexican government does not
currently restrict the ability of Mexican or foreign individuals or entities to
convert Pesos to U.S. Dollars, we cannot assure you that the Mexican government
will not institute a restrictive exchange control policy in the future, as it
has done from time to time in the past. Any restrictive exchange policy could
adversely affect the ability of the depositary of our ADSs to convert dividends
received in Pesos to U.S. Dollars for purposes of making distributions to
holders of our ADSs, and could also have a material adverse effect on our
business and financial condition. See "--Risk Factors--Risks Factors Relating to
Developments in Mexico--Economic and Political Developments in Mexico May
Adversely Affect Our Business."

                                  RISK FACTORS

RISK FACTORS RELATING TO DEVELOPMENTS IN MEXICO

         ECONOMIC AND POLITICAL DEVELOPMENTS IN MEXICO MAY ADVERSELY AFFECT OUR
BUSINESS. We are a Mexican company. All of our business operations are located
in Mexico. As a result, our business may be affected by the general condition of
the Mexican economy, by the devaluation of the Peso, by inflation and high
interest rates, or by political developments in Mexico.

         MEXICO HAS IN THE PAST EXPERIENCED ADVERSE ECONOMIC CONDITIONS AND
ADVERSE CONDITIONS MAY RECUR. From 1982 to 1987, Mexico experienced periods of
slow or negative growth, high inflation, large devaluations of the Peso against
the U.S. Dollar and limited availability of foreign currency. In the late 1980s
and early 1990s, Mexico's growth rate increased, the inflation rate declined and
the U.S. Dollar/Peso exchange rate was relatively stable. In 1998, 1999 and
2000, Mexico's gross domestic product, or GDP, increased 4.8%, 3.7% and 6.6% and
inflation was 18.6%, 12.3% and 9.0%. However, in 2001 due to a slowdown in the
international economic environment, Mexico's GDP decreased 0.3% and inflation
declined to 4.4%. In 2002, the lack of improvement in the international economic
environment, including any U.S. recovery, together with the threat of war with
Iraq, was reflected in Mexico's GDP increasing by 0.9% and inflation reaching
5.7%. In the first quarter of 2003, the concerns previously mentioned continued
and a war with Iraq took place. All those factors combined, negatively impacted
Mexico's GDP, which grew in the period 2.3% and inflation was 1.3%.

         If the Mexican economy falls into a recession or if inflation and
interest rates increase significantly, our business, financial condition and
results of operations may be adversely affected for the following reasons:

         o    demand for products we distribute may decrease because consumers
              may reduce expenditures on these products; and

         o    demand for products we distribute may decrease because consumers
              may find it difficult to pay for these products.

         DEVALUATION OR FLUCTUATIONS OF THE PESO RELATIVE TO THE U.S. DOLLAR
COULD ADVERSELY AFFECT OUR FINANCIAL CONDITION AND RESULTS OF OPERATIONS. We are
affected by fluctuations in the value of the Peso against the U.S. Dollar. In
1999, the Peso appreciated by approximately 4.2% against the U.S. Dollar and in
2000, the Peso depreciated by approximately 1.5% against the U.S. Dollar. In
2001, and according to Noon Buying Rate for Mexican Pesos, as reported by the
Board of Governors of the U.S. Federal Reserve Bank of New York, the Peso
appreciated by approximately 4.7% against the U.S. Dollar. However, in 2002 the
Peso reflected pressures from an international environment with volatility and
geopolitical concerns, posting a depreciation or devaluation against the U.S.
Dollar of approximately 13.7%. In the first quarter of 2003 the war in Iraq and
the uncertainty regarding the recovery of the U.S. economy also adversely
impacted the Peso, resulting in a devaluation against the U.S. Dollar of
approximately 3.4%. Any future depreciation or devaluation of the Peso will
likely result in net foreign exchange losses.

         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 obtaining imported goods. Devaluation or depreciation of the
Peso against the U.S. Dollar may also adversely affect U.S. Dollar prices on our
securities. While the Mexican government does not currently restrict, and since
1982 has not restricted, the right or ability of Mexican or foreign individuals
to convert Pesos into U.S. Dollars or to transfer other currencies out of
Mexico, the Mexican government could institute restrictive exchange rate
policies in the future. Currency fluctuations are likely to have an effect on
our financial condition, results of operations and cash flows in future periods.

         Fluctuations in the exchange rate between the Peso and the U.S. dollar
will affect the U.S. dollar equivalent of the Peso price of the securities on
the Mexican Stock Exchange, including the Ordinary Shares and, as a result, will
likely affect the market price of the ADSs. Such fluctuations would also affect
the conversion by the Depositary, of any cash dividends paid on the Ordinary
Shares in Pesos, into U.S. Dollars.

         HIGH LEVELS OF INFLATION AND HIGH INTEREST RATES IN MEXICO COULD
ADVERSELY AFFECT OUR FINANCIAL CONDITION AND RESULTS OF OPERATIONS. In recent
years, Mexico has experienced high levels of inflation. The annual rate of
inflation, as measured by changes in the NCPI, was 18.6% for 1998, 12.3% for
1999, 9.0% for 2000, 4.4% for 2001, 5.7% for 2002 and 1.3% for the first quarter
of 2003. High inflation rates can adversely affect our business and our results
of operations in the following ways:

         o    inflation can adversely affect consumer purchasing power, thereby
              adversely affecting consumer demand for the products we
              distribute;

         o    to the extent inflation exceeds price increases, our prices and
              revenues will be adversely affected in "real" terms; and

         o    if the rate of Mexican inflation exceeds the rate of the
              devaluation of the Peso against the U.S. Dollar, U.S.
              Dollar-denominated sales will decrease in relative terms when
              stated in constant Mexican Pesos.

Mexico also has, and is expected to continue to have, high real and nominal
interest rates. The interest rates on 28-day Mexican government treasury
securities averaged approximately 24.8%, 21.3%, 15.3%, 11.3%, 7.1% and 8.8% for
1998, 1999, 2000, 2001, 2002 and the first quarter of 2003. Accordingly, if we
need to incur Peso-denominated debt in the future, it could be at high interest
rates.

         THE POLITICAL SITUATION IN MEXICO COULD NEGATIVELY AFFECT OUR OPERATING
RESULTS. Mexico has experienced political changes in recent years. This
instability affects Mexico's business and investment climate. As a Mexican
company with substantially all of our assets and operations in Mexico, the
political environment in Mexico has a significant impact on our financial
condition and results of operations.

         In July 2000, presidential and congressional elections took place, and
for the first time in 71 years, a new party controls the presidency. In December
2000, Vicente Fox Quesada, a member of the National Action Party (Partido Accion
Nacional) was inaugurated President. Since his inauguration, Mr. Fox has faced
many economic and political challenges derived mainly from the large opposition
in Congress as well as by the constant political struggles among the main
political parties who have failed to approve important reforms. In July 2003,
congressional elections will take place in Mexico. The composition of the new
Congress is likely to determine the legislative agenda for the next two years
and will have a significant impact on the future of key reforms the Fox
administration is promoting. We are unable to predict the impact that Mr. Fox's
administration will have on the existing regulatory scheme applicable to, or the
Mexican government's regulation of, our business. A change in government policy
could have a material adverse effect on our business, financial condition and
results of operations.

         MEXICAN ANTITRUST LAW AND REGULATIONS MAY AFFECT OUR ABILITY TO DO
BUSINESS. Mexico's federal antitrust law, or Ley Federal de Competencia
Economica, and its regulations, or Reglamento de la Ley Federal de Competencia
Economica, may affect some of our activities. In particular, these laws and
regulations may adversely affect our ability to acquire and sell businesses, or
to enter into joint ventures with competitors.

         OUR ABILITY TO INCREASE THE PRICES OF SOME PRODUCTS IS REGULATED BY THE
GOVERNMENT. Our historical operating performance has been significantly affected
by the Mexican government's control on prices in the pharmaceutical sector.
Prices of pharmaceuticals continue to be subject to approval by the Mexican
government. As a result, our suppliers, and in turn we, may not be able to
increase pharmaceutical prices at or above the rate of inflation, which would
substantially limit the growth of our pharmaceutical related revenues. Since
1990, the Mexican government has deregulated pharmaceutical prices to some
extent, and prices have modestly increased in the Mexican pharmaceutical market
as a result of this deregulation. However, we cannot assure you that the Mexican
government will continue to deregulate pharmaceutical prices, or if so, that our
ability to increase prices will continue to, or result in, the improvement of
our operating performance.

         ANY VALUE-ADDED TAX IMPOSED ON PRESCRIPTION DRUGS MAY ADVERSELY AFFECT
OUR BUSINESS, FINANCIAL CONDITION AND RESULTS OF OPERATIONS. Unlike the
HBA/other products, entertainment products, general merchandise and other
products and office products we distribute, the prescription drugs we distribute
are not currently subject to a 15% value-added tax. In April 2001, a proposal
was filed to the Mexican Congress, requesting a substantial amendment to Mexican
tax laws. One of the reforms contemplated by this proposal was an increase in
the value added tax for prescription drugs from 0% to 15%. Although such bill
was not passed by the Mexican Congress, a new proposal similar to the one filed
in April 2001, may be filed in the future. If prescription drugs become subject
to a value-added tax in excess of the currently applicable 0% rate, the prices
paid by consumers for prescription drugs could increase by the percentage amount
of the value-added tax rate. While any price increases resulting from the
imposition of a higher value-added tax would be non-recurring, we still believe
that these price increases would adversely impact consumer demand for these
products and result in a decrease in related revenues. To the extent any of
these price increases materially and adversely impact revenues related to
prescription drugs, our business, financial condition and results of operations
could be adversely affected. We cannot assure you that the proposal containing
this request or other similar proposal, will not be filed again before the
Mexican Congress involving a substantial amendment to Mexican tax laws and, if
enacted into law, will not adversely affect our business, financial condition or
results of operations.

         THE PROTECTIONS AFFORDED TO MINORITY SHAREHOLDERS IN MEXICO ARE
DIFFERENT FROM THOSE IN THE UNITED STATES. Under Mexican law, the protections
afforded to minority shareholders are different from those in the United States.
In particular, the law concerning fiduciary duties of directors is not
appropriately developed, there is no procedure for class actions or shareholder
derivative action, and there are different procedural requirements for bringing
shareholder lawsuits. As a result, in practice, it may be more difficult for our
minority shareholders to enforce their rights against us or our directors or
controlling shareholder than it would be for shareholders of a U.S. company. As
of June 1, 2001, the Ley del Mercado de Valores, or the Mexican Securities
Market Law, was amended in order to heighten the protection given to minority
shareholders and to bring corporate governance procedures of Mexican issuers up
to international standards. Regardless, we were required and amended our bylaws
in April 2002 to reflect these amendments to the Mexican Securities Market Law.
See "Other Information--Recent Amendments to the Mexican Securities Market Law."

RISK FACTORS RELATING TO THE COMPANY

         WE PARTICIPATE IN A COMPETITIVE MARKET AND INCREASED COMPETITION MAY
ADVERSELY AFFECT OUR BUSINESS. We face competition in the distribution of
pharmaceuticals, HBA/other products, entertainment products, general merchandise
and other products and office products. In pharmaceuticals, we face competition
primarily from Mexico's only other national distributor, Nacional de Drogas,
S.A. de C.V., or Nadro, and several regional distributors. In HBA/other
products, consumer products, entertainment products and general merchandise and
other products and office products, we compete with many manufacturers,
wholesalers and distributors that target the same markets that we do. We cannot
assure you that our performance will not be adversely impacted by increased
competition from these and other competitors in the future.

         THERE ARE DIFFERENCES IN CORPORATE DISCLOSURE AND ACCOUNTING STANDARDS
FOR MEXICAN COMPANIES AND THIS MAY CAUSE OUR FINANCIAL STATEMENTS TO DIFFER IN
CERTAIN RESPECTS FROM U.S. ISSUERS. A principal objective of the securities laws
of the United States, Mexico and other countries is to promote full and fair
disclosure of all material corporate information. However, there may be less
publicly available information about foreign issuers of securities listed in the
United States than is regularly published by or about domestic issuers of listed
securities. In addition, we prepare our financial statements in accordance with
Mexican GAAP, which differs from U.S. GAAP and accounting procedures adopted in
other countries in a number of respects. For example, most Mexican companies,
including us, must incorporate the effects of inflation directly in accounting
records and in their published financial statements. Thus, Mexican financial
statements and reported earnings may differ from those of companies in other
countries in this and other respects. Notes 15 and 16 to our audited annual
financial statements describes the principal differences between Mexican GAAP
and U.S. GAAP as they relate to us and provides a reconciliation to U.S. GAAP of
net income and total stockholders' equity.

         WE ARE CONTROLLED BY ONE CONTROLLING SHAREHOLDER. 85% of our
outstanding Ordinary Shares are directly owned by one shareholder, our
controlling shareholder. See "Major Shareholders and Related Party
Transactions--Principal Shareholders." Our controlling shareholder controls our
business and has the power to elect the majority of our Board of Directors, as
well as to determine the outcome of all actions that require shareholder
approval, including the determination to declare and pay dividends, in cash or
otherwise. See "Key Information--Dividends."

RISK FACTORS RELATED TO OUR SECURITIES

         OUR CONTROLLING SHAREHOLDER HAS THE ABILITY TO RESTRICT THE PAYMENT AND
AMOUNT OF DIVIDENDS. THE TERMS OF OUR INDEBTEDNESS ALSO RESTRICT THE DECLARATION
AND PAYMENT OF DIVIDENDS. By law, decisions regarding the payment and amount of
dividends are subject to approval of our shareholders, generally, but not
necessarily, on the recommendation of the Board of Directors. Our controlling
shareholder owns 85% of our outstanding Ordinary Shares and, so long as he
continues to own a majority of our outstanding shares, he will have the ability
to determine whether we will declare and pay dividends, in cash or otherwise.
See "--Dividends." In addition, the terms of our outstanding indebtedness
contain covenants that restrict, among other things, our ability to declare and
pay dividends on our capital stock. See "Operating and Financial Review and
Prospects--Indebtedness--Scotiabank Inverlat Credit Facility."

         FLUCTUATIONS IN THE U.S. ECONOMY OR THE GLOBAL ECONOMY IN GENERAL MAY
ADVERSELY AFFECT MEXICO'S ECONOMY AND OUR BUSINESS. Mexico's economy is
vulnerable to market downturns and economic slowdowns in the U.S. and elsewhere
in the world. The slowdown in the growth of the U.S. economy, exacerbated by the
September 11 terrorist attacks and the war in Iraq, has negatively affected
Mexican businesses and limited access to capital for many Mexican companies. In
addition, as has happened in the past, financial problems or an increase in the
perceived risks associated with investing in emerging economies could limit
foreign investment in Mexico and adversely affect the Mexican economy. For
example, in October 1997, prices of Mexican debt securities and equity
securities decreased substantially following a sharp decline in Asian securities
markets, and in the second half of 1998, prices of Mexican securities were
negatively impacted by economic crises in Russia and Brazil. The latest crisis
in Argentina caused instability in Latin America's financial markets impacting
negatively the performance of Mexican debt and equity securities. Future
economic problems in U.S. or globally could severely limit our access to capital
and could adversely affect our business.

         PREEMPTIVE RIGHTS MAY BE UNAVAILABLE TO HOLDERS OF OUR ADSS. UNDER
MEXICAN LAW, OUR SHAREHOLDERS HAVE PREEMPTIVE RIGHTS. This means that, in the
event that we issue new Ordinary Shares for cash, our shareholders will have the
right to purchase the number of Ordinary Shares necessary to maintain their
existing share participation. U.S. holders of our ADSs cannot exercise their
preemptive rights unless we register any newly issued Ordinary Shares under the
Securities Act of 1933 or qualify for an exemption from registration. If U.S.
holders of our ADSs cannot exercise their preemptive rights, the interests of
these holders would be diluted in the event that we issue new Ordinary Shares
for cash. We intend to evaluate at the time of any offering of preemptive rights
the costs and potential liabilities associated with registering any additional
Ordinary Shares. We cannot assure you that we will register any new Ordinary
Shares that we issue for cash. In addition, although the deposit agreement
provides that the Depositary may, after consulting with us, sell preemptive
rights in Mexico or elsewhere outside the United States and distribute the
proceeds to holders of ADSs, under current Mexican law, these sales are not
possible.

         OUR BYLAWS MAY ONLY BE ENFORCED IN MEXICO. Our bylaws provide that our
shareholders must file any legal actions concerning our bylaws, before courts
located in Mexico City. See "Other Information--Bylaws."

                           FORWARD-LOOKING STATEMENTS

         Some written information and oral statements made or incorporated by
reference from time to time by us or our representatives in this annual report,
other reports, filings with the Securities and Exchange Commission, or the SEC,
press releases, conferences, or otherwise, are "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995.
Forward-looking statements, which are subject to various risks and
uncertainties, include, without limitation, any statement that may predict,
forecast, indicate, or imply future results, performance, or achievement, and
may contain forward-looking terminology such as "anticipate," "believe,"
"continue," "expect," "estimate," "project," "will," "will be," "will continue,"
"will likely result," "may," "plan," or words or phrases of similar meaning.
Forward-looking statements involve risks and uncertainties that may cause actual
results to differ materially from the forward-looking statements. The risks and
uncertainties are detailed from time to time in reports we file before the SEC
and include, among others, the following:

         o    international, national and local general economic and market
              conditions;

         o    the overall size and growth of the Mexican pharmaceutical market;

         o    intense competition among distributors, suppliers and sellers of
              pharmaceuticals;

         o    fluctuations and difficulty in forecasting operating results;

         o    dependence on suppliers;

         o    general risks associated with doing business in Mexico, including
              political and economic instability and changes in government
              regulations; and

         o    other factors referenced in this annual report.

         The risks summarized above are not exhaustive. Other sections of this
annual report may include additional factors that could adversely impact our
business and financial performance. Moreover, we operate in a very competitive
and rapidly changing environment. New risk factors emerge from time to time and
it is not possible for our management to predict all of these risk factors, nor
can it assess the impact of all of these risk factors on our business or the
extent to which any factor, or combination of factors, may cause actual results
to differ materially from those contained in any forward-looking statements.
Given these risks and uncertainties, investors and analysts should not place
undue reliance on forward-looking statements as a prediction of actual results.
Accordingly, when considering forward-looking statements, investors and analysts
should bear in mind the factors described in "--Risk Factors" and other
cautionary statements appearing in "Operating and Financial Review and
Prospects" and elsewhere in this annual report.

         The predictive and forward-looking statements in this annual report may
never materialize and are made under the SEC's disclosure safe harbor.
Forward-looking statements speak only as of the date they are made, and we do
not undertake any obligation to update them in light of new information or
future developments.

ITEM 4.  INFORMATION ON THE COMPANY

                     HISTORY AND DEVELOPMENT OF THE COMPANY

         Grupo Casa Saba, S.A. de C.V. is a sociedad anonima de capital
variable, or limited liability stock corporation with variable capital, which
was organized under the laws of the United Mexican States on November 16, 1982.
Our deed of incorporation was registered with the Public Registry of Commerce
in Mexico City on January 10, 1983 under Commercial Folio Number 55,635.
Pursuant to the terms of our estatutos sociales, or bylaws, our corporate
existence continues through 2099. Our principal executive offices are located
at Paseo de la Reforma, No. 215, Colonia Lomas de Chapultepec, C.P. 11000,
D.F., Mexico. Our telephone number at that address is 52 555 284-6600.

         Grupo Casa Saba was founded as a pharmacy in 1892, and is currently one
of the leading multi-channel, multi-product national wholesale distributors in
Mexico, operating through one of the largest nationwide distribution network of
its type. We distribute pharmaceutical products, HBA/other products, general
merchandise and other products, entertainment products and office products. We
distribute the majority of these products on a non-exclusive basis. With over
110 years of experience, we serve the majority of Mexico's pharmacies, mass
merchandisers, retail stores and other specialized channels nationwide.

         On February 1, 2000, Xtra Inmuebles, S.A. de C.V., or Xtra Inmuebles,
an entity beneficially owned and controlled by our controlling shareholder,
acquired 225,606,457 of our Ordinary Shares on the Mexican Stock Exchange
through a tender offer. Immediately thereafter, all of these Ordinary Shares
were acquired from Xtra Inmuebles by our controlling shareholder.

         Following the completion of our financial restructuring and the tender
offer, our controlling shareholder, by means of a shareholder vote, amended our
bylaws, replaced our incumbent Board of Directors with nine of his appointees,
elected a new management, including a new Chief Executive Officer and Chief
Financial Officer, among others, and changed the corporate name of our company
from Grupo Casa Autrey, S.A. de C.V. to Grupo Casa Saba, S.A. de C.V. For a
description of our financial restructuring and subsequent refinancing of our
restructured indebtedness, see "Operating and Financial Review and Prospects
-Indebtedness." For a description of our controlling shareholder and his current
ownership stake in our company, see "Major Shareholders and Related Party
Transactions-Principal Shareholders".

         We refinanced our restructured indebtedness in December 2000 through a
term loan facility from Banamex, and further refinanced this indebtedness in
June 2001 through a term loan facility with Scotiabank Inverlat, S.A.,
Institucion de Banca Multiple, Grupo Financiero Scotiabank Inverlat, or
Scotiabank Inverlat. See "Operating and Financial Review and
Prospects--Indebtedness" and Note 8 to our audited consolidated financial
statements.

                           SUBSIDIARIES OF THE COMPANY

         The following table sets forth our significant subsidiaries:

                                                JURISDICTION OF      PERCENTAGE
NAME OF SUBSIDIARY(1)                            INCORPORATION      OWNERSHIP(2)
Casa Saba, S.A. de C.V.(3)                           Mexico            99.9%
Drogueros, S.A. de C.V.(4)                           Mexico            99.9%
Grupo Mexatar, S.A. de C.V.(5)                       Mexico            99.9%
Centennial, S.A. de C.V.(6)                          Mexico            99.9%
Inmuebles Visosil, S.A. de C.V.(7)                   Mexico            99.9%
Publicaciones CITEM, S.A. de C.V.(8)                 Mexico            99.9%
Transportes Marproa, S.A. de C.V.(9)                 Mexico            99.9%
Servicios Corporativos Saba, S.A. de C.V.(10)        Mexico            99.9%
Distribuidora Casa Saba, S.A. de C.V. (11)           Mexico            99.9%

__________________

(1)   With the exception of Casa Saba, S.A. de C.V., none of our operating
      subsidiaries is a "significant subsidiary" within the meaning of Rule
      1-02(w) of Regulation S-X of the Securities Act of 1933.

(2)   Percentage of equity owned by us directly or indirectly through
      subsidiaries or affiliates.

(3)   Direct subsidiary through which we distribute pharmaceutical products to
      private and government clients.

(4)   Indirect subsidiary through which we distribute pharmaceutical products
      to private and government clients.

(5)   Indirect subsidiary through which we distribute office and electronic
      products, including keyboards, audio and television equipment and
      related accessories.

(6)   Indirect subsidiary through which we distribute general merchandise and
      other products.

(7)   Indirect subsidiary through which we lease real property to our
      subsidiaries. Inmuebles Visosil, S.A. de C.V. owns substantially all of
      the capital stock of Drogueros, S.A. de C.V., another indirect
      subsidiary of Grupo Casa Saba.

(8)   Direct subsidiary through which we distribute publications.

(9)   Direct subsidiary through which we deliver products to our distribution
      centers throughout Mexico. We place centralized purchase orders for all
      of our distribution centers directly with suppliers, who deliver these
      centralized purchase orders to Transportes Marproa, S.A. de C.V., or
      Marproa. Marproa then distributes customized orders to each of our 22
      distribution centers throughout Mexico. Marproa also provides freight
      services to third parties at market rates.

(10)  Indirect subsidiary that provides administrative, legal, accounting, tax
      planning, financial counseling and other professional services to Casa
      Saba, S.A. de C.V.

(11)  Direct subsidiary that provides logistical and transportation services
      to Casa Saba, S.A. de C.V.



                              CAPITAL EXPENDITURES

         The table below sets forth our capital expenditures, investments and
acquisitions for the years ended December 31, 2000, 2001 and 2002. For a
discussion of how we fund our capital expenditures, investments and acquisitions
in 2002, as well as a more detailed description of our capital expenditures,
investments and acquisitions, see "Operating and Financial Review and
Prospects--Liquidity and Capital Resources--Overview" and "--Capital
Expenditures."

<TABLE>
<CAPTION>
                                                        YEAR ENDED DECEMBER 31,
                                       -----------------  --------------  ---------------
                                            2000               2001             2002
                                       -----------------  --------------  ---------------
                                       (MILLIONS OF CONSTANT PESOS AS OF DECEMBER 31, 2002)

<S>                                            <C>                 <C>          <C>
Distribution fleet..................    Ps     24.9        Ps      7.0    Ps     30.0
Technology and computer
    equipment.......................            9.5                3.1            2.6
Acquisitions........................            0.0               11.3            0.0
Other general capital expenditures..            0.0                1.0            0.0
    TOTAL CAPITAL EXPENDITURES         -----------------  --------------  ---------------
                                        Ps     34.5        Ps     22.3    Ps     32.6
                                       =================  ==============  ===============
</TABLE>

         In 2002, we relied on a combination of internally generated funds and
bank loans to fund our capital expenditures, investments and acquisitions.

                                BUSINESS OVERVIEW

         Grupo Casa Saba was founded as a pharmacy in 1892, and is currently one
of the leading multi-channel, multi-product national wholesale distributors in
Mexico, operating through one of the largest nationwide distribution network of
its type. We distribute pharmaceutical products, HBA/other products,
entertainment products, general merchandise and other products and office
products. We distribute the majority of these products on a non-exclusive basis.
With over 110 years of experience, we supply the majority of Mexico's
pharmacies, mass merchandisers, retail stores and other specialized channels
nationwide.

         We currently distribute over 16,000 different products, including
approximately:

         o    4,800 pharmaceutical products;

         o    4,200 health and beauty products;

         o    1,100 general merchandise and other products; and

         o    6,200 publications.

         We distribute these products throughout Mexico, using our nationwide
distribution network, to the following clients:

         o    more than 20,100 privately owned pharmacies;

         o    approximately 2,800 privately owned pharmacy chains and over 50
              government pharmacies;

         o    approximately 1,900 regional and national supermarkets;

         o    approximately 700 magazine stores, 150 newsstands, 180 nationwide
              agents and 150 schools;

         o    over 70 department stores; and

         o    approximately 200 major wholesalers and 1,200 convenience stores.

         Our core business is the wholesale distribution of pharmaceutical
products. We seek to distribute Pharmaceutical products on a
"full-line/full-service" basis, pursuant to which we distribute a wide array of
pharmaceutical and other products, as well as provide our clients with a range
of value-added services, including multiple daily deliveries and emergency
product replacement services. In the case of general merchandise and other
products as well as for the products we distribute exclusively, we also provide
our clients with specialized value-added services on a product-by-product basis,
which include merchandising, marketing support and other customer counseling
services.

         Our principal strengths are our nationwide distribution network,
through which we can deliver products within 12 to 24 hours from the time of
order, our state-of-the-art technology, our commitment to customer service and
our well-trained and experienced personnel. In addition, as a result of our
continued use of new technologies since the early 1990s, we have increased our
operating efficiency and distribution capacity.

         The following table shows our sales by product category, as a
percentage of net sales for the last three years:

                                                      YEAR ENDED DECEMBER 31,
                                                  ---------- ---------- --------
                                                     2000      2001        2002
  Private Pharmaceuticals(1)..................      78.1%      80.8%      81.4%
  Government Pharmaceuticals..................       4.8%       3.5%       4.0%
  HBA/Other Products(2).......................      10.2%       9.9%       9.7%
  General Merchandise and Other Products......       1.2%       0.9%       0.8%
  Publications................................       4.4%       4.5%       3.9%
  Office Products(3)..........................       1.3%       0.4%       0.2%
       Total..................................    ---------- ---------- --------
                                                   100.0%     100.0%     100.0%
                                                  ========== ========== ========
________________________

(1)   For a brief description of the types of products included within the
      term "pharmaceutical products" for purposes of this annual report, as
      well as a discussion of the differences between the pharmaceutical
      markets in Mexico and the United States, see "--Pharmaceutical
      Industry."

(2)   In 2000 includes some revenues for services, including shipping,
      management services and rent, provided by some of our subsidiaries to
      entities beneficially owned by members of the Autrey family, some of
      whom were former shareholders. Revenues from these services represented
      less than 1% of the total net sales from HBA/Other products from January
      through February 2000.

(3)   As a result of the sale of Papelera General, S.A. de C.V., or Papelera
      General, the subsidiary through which we distributed office supplies, in
      August 2000, net sales and related percentages for the year ended
      December 31, 2000 only reflect revenues from the sale of office supplies
      through Papelera General for the seven month period ended July 31, 2000.
      Similarly, figures in 2001 are not comparable with 2000, since they do
      not include revenues from Papelera General. See "--Office Products,"
      "Operating and Financial Review and Prospects--Net Office Supply Sales"
      and "Major Shareholders and Related Party Transactions--Related Party
      Transactions." Net sales and related percentages for the years ended
      December 31, 2000 and December 31, 2001 reflect revenues from the sale
      of office and electronic products from Casio through Grupo Mexatar, S.A.
      de C.V., or Mexatar.


         In our distribution of pharmaceutical products, we generally are not a
"demand creator," since we do not advertise products or suggest or provide
substitute products for those ordered.

         Mexico's vast and mountainous terrain and old road network connecting
small towns present a difficult environment for distribution. Distribution is
further complicated in Mexico City and the surrounding areas due to traffic
congestion. We believe that we will continue to overcome these constraints with
our strategically located distribution centers near Mexico's major population
centers.

         As of December 31, 2002, we distributed products to our clients
nationwide using a distribution network consisting of 22 distribution centers,
representing over 110,000 square meters of warehouse space. From these 22
distribution centers, using a fleet of over 900 vans, trucks and cars, we filled
more than 5 million orders in 2002, averaging more than 400,000 orders per
month. For a list of our distribution centers and their locations, see
"--Property, Plant and Equipment."

BUSINESS STRATEGY

         Since the acquisition of our company in February 2000, which is
described under the caption "--History and Development of the Company," we have
been operating under the direction of new management. Under the direction of our
new management, the main targets of our business strategy in 2001 and 2002 were
to:

         o    focus on our core business and increase our market share in the
              distribution of pharmaceutical products as well as in our other
              existing markets;

         o    improve our financial and operation results through a more
              efficient operation;

         o    increase the size and diversity of our existing client base;

         o    reduce our expenses as well as its relation to sales;

         o    maintain a state of the art technology in all of our
              subsidiaries; and

         o    complement our existing businesses through the continued
              introduction of technological tools, such as
              www.farmaservicios.com, www.farmaservicios.pdv and HYPERDATY, an
              Internet-based system that allows suppliers to analyze sales,
              prices and inventories of their products by extracting
              information directly from our electronic data warehouse.

         The objectives summarized above will continue to be the main targets of
our business strategy in 2003.

         As a result of these measures, as of December 31, 2002, we had:

         o    continued to enhance a state of the art distribution network for
              the warehousing and delivery of our various products and
              communicating with our clients and suppliers through Mexico;

         o    increased the operational efficiency of our distribution centers
              and back-office support systems;

         o    renewed and standardized our transportation fleet;

         o    maintained our market share and expanded our channels of
              distribution;

         o    continued developing technologies to improve the efficiency of
              our operations and better serve our clients, including the
              launching of a new version of our "Daty System", now known as
              "HyperDaty";

         o    started an operational and administrative restructuring of our
              entertainment division "Citem" to achieve higher profitability
              levels; and

         o    restructured and rebalanced some of the general merchandise and
              other products lines to increase the profitability and presence
              of "Centennial" in the exclusive products distribution channel in
              Mexico.

         During 2002 we continued investing in order to sustain a
state-of-the-art technology in our distribution centers, as well as to renew our
transportation fleet and improve the quality of service that we offer to our
clients. Our operations were based on strict cost and expense controls that seek
a more efficient and profitable distribution network. For 2003 we expect to
continue operating under a similar scheme, pursuing an increase in our client
base, net sales and profitability levels.

INCREASE OUR MARKET SHARE IN OUR EXISTING MARKETS

         As a result of the measures summarized below and according to
Interdata, we had an approximate 28% share of the Mexican private pharmaceutical
market in 2000, 2001 and 2002. In 2003, we will continue focusing our efforts to
increase market share in our core business, which is the distribution of
pharmaceutical products and implementing the following measures, which mostly
were introduced in 2000:

         o    focus on our different client needs through the implementation of
              logistic processes that will allow us to visit clients more
              frequently and with a higher service quality;

         o    implement innovative and proactive commercial strategies to
              fulfill the requirements of the private pharmaceutical market;

         o    continue strengthening our relationships with our existing
              suppliers and clients through the direct involvement of our top
              management to identify and respond quickly to the changing needs
              and long-term goals of our suppliers and clients;

         o    continue improving the quality and commitment of our private
              pharmaceutical sales force;

         o    targeting new clients;

         o    maintaining a state-of-the-art transportation fleet;

         o    upgrading our management and internal control systems; and

         o    introducing and implement strength quality control procedures in
              our distribution centers to improve productivity and reduce
              billing and order errors.

         We did not make any significant investments in our non-core businesses
in 2001 and 2002, and we do not have any plans to do so in 2003. We will
continue to evaluate the profitability of our non-core businesses throughout
2003, and should any of our non-core businesses represent a potential growth
opportunity for us, we will consider taking steps to improve the market share
of, and/or making an investment in, those businesses at that time. We cannot
assure you that any of our non-core businesses will be profitable, or if so,
that we will invest in these businesses.

IMPROVE OUR FINANCIAL RESULTS AND THE EFFICIENCY OF OUR OPERATIONS

         Our management intends to continue to improve our financial results and
the efficiency of our operations in 2003 through:

         o    maintaining strict cost and operating controls, including, but
              not limited to, the following:

         o    the establishment of profitability levels as well as goals to be
              achieved by each division;

         o    the continued implementation of tight controls in all our
              processes, including inventories, purchasing, accounting,
              payments and suppliers;

         o    the establishment of innovative commercial strategies that
              fulfill the requirements of the private pharmaceutical market;

         o    regularly revising all of our routes;

         o    an aggressive collection policy for delinquent accounts
              receivable;

         o    new and more efficient management reports; and

         o    reducing our levels of outstanding indebtedness;

         o    implementing cost-reduction measures, as described under the
              caption "--More Aggressively Cut Our Costs and Expenses";

         o    disposing of or discontinuing certain non-core businesses or
              other arrangements that are not sufficiently profitable;

         o    terminating distribution agreements related to products that are
              not sufficiently profitable and actively seeking to enter into
              distribution agreements that will permit us to distribute
              products at sufficient margin levels, particularly with respect
              to our health-and-beauty aids, entertainment and general
              merchandise and other products;

         o    managing more efficiently our working capital; and

         o    using various management control systems, personnel training,
              organizational logistics and new technologies, which we believe
              increased our operating efficiency and distribution capabilities.

MORE AGGRESSIVELY REDUCE OUR COSTS AND EXPENSES

         We continued to implement our cost and expenses-reduction program
throughout 2002. In connection with our cost and expenses-reduction program and
our efforts to improve the efficiency of our distribution centers and of our
logistics processes, in 2002 our operating expenses grew at a lower rate than
our sales, improving the financial results of the Group. Our newer
transportation fleet has allowed us to reduce maintenance expenses and in our
warehouses we have obtained savings in different areas like packaging.

         Our management intends to continue to implement these and other
measures, as well as to further reduce administrative costs and expenses, in
2003.

CONTINUE TO USE THE INTERNET TO COMPLEMENT OUR EXISTING BUSINESS

         We continued to use an online distributor and information site,
www.farmaservicios.com , which we currently make available to our clients free
of charge. Clients that log on to www.farmaservicios.com are able to communicate
and/or negotiate the terms of their distributorship arrangements directly with
us, as well as place and track their orders and shipments, on line. In addition,
these clients have access to a wide range of additional services, including news
and industry information, free e-mail, business advice and a variety of special
promotions. We believe that www.farmaservicios.com is an innovative, value-added
service that only we can make available to our clients. www.farmaservicios.com
provides our clients with a quicker and more convenient way to link their demand
to our inventory and place and track their orders unlike other traditional
distribution channels. www.farmaservicios.com also provides our clients with a
link to our existing point-of-sale system, www.farmaservicios.pdv, which is
described under the caption "--Technology Information Systems."

         In 2000, we entered into an exclusive joint venture with Grupo Televisa
S.A., or Televisa, to develop an online drugstore and information site for
consumers, www.estarbien.com. Following the instructions of our management to
focus our Internet-related efforts on the constant development of web-based
solutions for our clients and suppliers, such as www.farmaservicios.com and
www.farmaservicios.pdv, we postponed the development of this portal in the first
quarter of 2001. As a result, this portal is currently not operational. We
cannot assure you that we will ultimately develop this portal, or if so, that
the portal will be profitable.

CAPITALIZE ON OUR FAVORABLE CAPITAL STRUCTURE

         As a result of the completion of our financial restructuring in January
2000 and the subsequent refinancing of our indebtedness in June 2001, we have
significantly improved our debt profile. As of December 31, 2002, we had
outstanding indebtedness in the aggregate principal amount of approximately
Ps.$398.0 million (the equivalent of approximately U.S.$38.6 million). See
"Operating and Financial Review and Prospects--Indebtedness" and Note 8 to our
audited consolidated financial statements. We did not have in 2002, and do not
anticipate having in 2003, any significant borrowing needs in connection with
the implementation of our business plan.

         In the past, our debt profile significantly limited our ability to be
commercially aggressive and focus our efforts on ways to increase our net sales
and further develop our core pharmaceutical business, which resulted in the loss
of a portion of our market shares in some of the markets in which we did and
continue to do business. In 2000, our favorable capital structure gave us the
flexibility to implement measures to increase our net sales and to support our
growth strategy, as well as to allow us to react quickly to market
opportunities. In 2001 our capital structure together with lower interest rates,
allowed us to reduce by approximately 18% our interest expense. In 2002 we
continued reducing our debt levels, prepaying part of our long term debt with
the cash generated by our operations. As a result, we reduced 44.9% of our
cost-bearing liabilities. Interest paid in 2002 was 61.6% less than interest
paid in 2001 due both to lower debt levels and lower interest rates.

PHARMACEUTICAL INDUSTRY

         In Mexico, pharmaceuticals are available to the public through both
private and government distribution channels. In contrast to the United States,
the Mexican government plays a significant role in the market for
pharmaceuticals. In the United States, pharmaceutical products consist of
prescription pharmaceutical products that may be sold only in licensed
pharmacies, as well as "over-the-counter" pharmaceuticals that may be sold
without a prescription in licensed pharmacies and other outlets. In contrast to
the United States, in Mexico pharmaceutical products consist of prescription
pharmaceutical products that may be sold only in licensed pharmacies,
"over-the-counter" pharmaceuticals that may be sold without a prescription in
licensed pharmacies and other outlets and "over-the-counter" pharmaceuticals
that may be sold without a prescription, but only in licensed pharmacies. For
purposes of this annual report, prescription pharmaceutical products include
"over-the-counter" pharmaceuticals that may be sold without a prescription, but
only in licensed pharmacies.

         The following table sets forth the percentages both in units and in
Pesos of government sales in the pharmaceutical market:

                                                  YEAR ENDED DECEMBER 31,
                                          -------------------------------------
                                           2000(1)      2001(4)        2002(4)
                                          ----------- ------------ ------------

 GOVERNMENT SALES IN THE MEXICAN
 PHARMACEUTICAL MARKET(2)

      In Units(3)                           42.90%         n.a            n.a
      In Pesos(3)                           21.31%         n.a            n.a

 _____________________

(1)   In 2000, Canifarma changed the method by which it calculates net sales
      to governmental entities and the related percentage of the Mexican
      pharmaceutical market represented by net sales to governmental entities
      (in both units and Pesos). In prior periods, the net sales and related
      percentage share figures reflected units of, and Peso amounts in respect
      of sales of, prescription drugs. In 2000, the net sales and percentage
      share figures reflect units of, and Peso amounts in respect of sales of,
      prescription drugs, prescription drug components, first aid products and
      other related over-the-counter products. As a result of this change, net
      sales, related percentage, average unit price and growth in average unit
      price figures for the year ended December 31, 2000 are not comparable to
      figures in prior periods.

(2)   Source: Canifarma.

(3)   Source: Interdata and Canifarma.

(4)   As of the date of this annual report no information from Canifarma was
      available for 2001 and 2002.



         The Secretaria de Salud, or the Mexican Ministry of Health, oversees
the provision of public health care through hospitals in Mexico, pharmacies and
clinics operated by various governmental agencies and state-owned institutions.
Distribution of pharmaceuticals within the public sector is largely undertaken
by each governmental agency through direct purchases from manufacturers during
yearly bidding programs based primarily on price.

         Based on information from Interdata, we estimate that approximately 90%
of private sector pharmaceutical sales are placed through wholesalers, which in
turn sell primarily to retail pharmacies. The remaining 10% of private sector
pharmaceutical sales are placed directly by manufacturers to a few large
pharmaceutical retail chains, such as Farmacias Guadalajara, that purchase
sufficiently large volumes to have direct access to the laboratories. Most
manufacturers have adopted a "wholesaler only" policy because it is the most
cost-efficient method of distributing their products. Nearly all of the
individual pharmaceutical purchases take place at retail pharmacies and are
either paid for by the individuals or through private health insurance. The
following table shows annual sales and average unit prices in U.S. Dollars and
growth rates for the private and public sectors of the Mexican pharmaceutical
market.

<TABLE>
<CAPTION>
                                                           YEAR ENDED DECEMBER 31,
                                      ----------------------------------------------------------
                                            2000(1)               2001(5)            2002(5)
<S>                                            <C>                 <C>                <C>
PRIVATE SECTOR(2)
      Sales in millions(3)                   US$5,739.9          US$6,728.2         US$6,768.3
      Sales in millions of units(4)               991.0               965.8              988.0
      Average unit price                     US$   5.79          US$   6.97         US$   6.85
      Growth in average unit price                 16.3%               20.4%              -1.7%
 PUBLIC SECTOR(2)
      Sales in millions                      US$1,554.0                 n.a                n.a
      Sales in million units(4)                   745.0                 n.a                n.a
      Average unit price                     US$   2.08                 n.a                n.a
      Growth in average unit price                 --                   n.a                n.a

_____________________
<FN>
(1)   In 2000, Canifarma changed the method by which it calculates net sales
      to governmental entities and the related percentage of the Mexican
      pharmaceutical market represented by net sales to governmental entities
      (in both units and Pesos). In prior periods, the net sales and related
      percentage share figures reflected units of, and Peso amounts in respect
      of sales of, prescription drugs. In 2000, the net sales and percentage
      share figures reflect units of, and Peso amounts in respect of sales of,
      prescription drugs, prescription drug components, first aid products and
      other related over-the-counter products. As a result of this change, net
      sales, related percentage, average unit price and growth in average unit
      price figures for the year ended December 31, 2000 are not comparable to
      figures in prior periods.

(2)   Statistics based on information made publicly available by Interdata for
      private sector data and Canifarma for public sector data.

(3)   Revenues based on prices charged by wholesalers to retailers.

(4)   In Mexico, pharmaceutical products are distributed in pre-packaged doses
      or units, which may vary in size from year to year.

(5)   As of the date of this annual report no information from Canifarma was
      available for 2001 and 2002.
</FN>
</TABLE>


INDUSTRY PRICES

         As a result of government regulation, Mexican pharmaceutical prices are
lower than in other countries like the United States of America. We believe that
price increases of pharmaceutical and over-the-counter products in Mexico
continue to represent a significant area of future revenue growth for us. Prior
to 1990, the Mexican government determined pharmaceutical prices and did not
increase pharmaceutical prices at the rate of inflation, thereby limiting the
growth of our revenues from pharmaceutical distribution. As of 1990, the Mexican
government, acting through the Secretaria de Comercio y Fomento Industrial, or
Secofi, now known as the Ministry of Economy and Canifarma, entered into a
series of agreements to deregulate the prices of domestically manufactured
pharmaceutical products, which constitute most of the pharmaceutical products we
sell. In order to obtain the benefits of these agreements, many Mexican
pharmaceutical manufacturers have agreed with Canifarma to continue submitting
price increase proposals for approval by the Ministry of Economy. Under current
practice, any manufacturer seeking a price increase must file a request before
the Ministry of Economy, outlining the reasons for the price increase. The most
important factors considered by the Ministry of Economy are the minimum wage
increase, the inflation rate, the exchange rate and the amount of foreign direct
investment that the manufacturer commits to its Mexican facilities. If the
Ministry of Economy does not respond within 30 days, the increase is
automatically granted. Canifarma and the Ministry of Economy continuously engage
in negotiations regarding the level of price increases for individual products
and for the pharmaceutical sector as a whole. In the case of new pharmaceutical
products, the manufacturer is required to file a request for a price increase
before the Ministry of Economy, which outlines the price for the new product and
the rationale behind the chosen price. Since 1990, prices have increased above
the rate of inflation, and in 2001 according to Interdata, the average price per
unit increased by 20.4% in "dollar terms". However, in 2002 the price per unit
decreased by 1.7% "in dollar terms" with respect to 2001, reflecting in part the
devaluation of approximately 13.7% that the peso suffered in 2002. The
devaluation of the peso may affect our ability to increase the prices of some of
our products. See "Key Information--Risk Factors--Risk Factors Relating to
Developments in Mexico."

         Retailers that purchase from us range in size from small rural
pharmacies to national government institutions, including:

         o    ISSSTE - The Instituto de Seguridad y Servicios Sociales para los
              Trabajadores del Estado, the health and social security
              institution for Mexican federal government employees;

         o    PEMEX - The hospitals and pharmacies of Petroleos Mexicanos, the
              Mexican national oil company. In 1998, after bidding, we were
              awarded eight PEMEX contracts to serve different hospitals
              nationwide for the next two years. Our sales to PEMEX in 1999 and
              2000 accounted for 4.6% and 4.8% of our total net sales. In 1999
              and 2000 we had 100% of the PEMEX contracts. Due to new
              conditions on our PEMEX contract, sales to PEMEX during 2001
              accounted for 3.5% of our total net sales. In January 2001, we
              were awarded with approximately 60% of the total PEMEX contract
              to serve different hospitals in four specific regions of Mexico.
              During 2002 sales to PEMEX represented approximately 4.0% of our
              total sales and were 19.40% higher that in 2001. We cannot assume
              that we will be awarded contracts with PEMEX similar to these we
              have had in previous years;

         o    IMSS- The hospitals and pharmacies of the Instituto Mexicano del
              Seguro Social, the health and social security institution for
              Mexican employees of private companies; and

         o    During 2000, 2001 and 2002, Mexican government entities as a
              whole (excluding "ISSSTE TIENDAS" since they are considered by us
              a supermarket chain), accounted for approximately 4.8% and 3.5%
              and 4.0% of our net sales.

PUBLIC SECTOR PHARMACEUTICAL DISTRIBUTION

         According to Canifarma, the public sector market for pharmaceutical
products (prescription drugs only) in Mexico accounted for the sale of 745
million units in 2000, representing sales of approximately U.S.$1,554.0 million
(approximately 21.3% of total market sales). As of the date of this annual
report no information from Canifarma was available for 2001 and 2002.

         Since the Mexican government generally buys directly from manufacturers
through IMSS and ISSSTE, it is able to buy at prices that are substantially
lower than those for private entities. Our sales to IMSS, ISSSTE and PEMEX are
not in bulk and, therefore, are not at bulk prices. Instead, we deliver
pharmaceutical products to ISSSTE Tiendas at prices comparable to those prices
we charge our large private sector customers. We sell our pharmaceutical
products to all 280 supermarket pharmacies operated by ISSSTE at private sector
prices because it provides additional services and increased efficiency. Since
our sales to ISSSTE's Tiendas pharmacies are not through the usual public sector
channels, Canifarma classifies them as private sector sales. Sales to PEMEX are
at prices substantially lower than those for the private sector.

PRIVATE SECTOR PHARMACEUTICAL DISTRIBUTION

         Our customers in the private sector consist primarily of over 20,000
privately owned pharmacies, as well as national and regional pharmaceutical and
supermarket chains (comprising approximately 4,700 stores) and the pharmacies
associated with private hospitals. We were the first nationwide wholesale
distributor of pharmaceuticals to enter the private sector market in Mexico, and
since the 1960s we have been one of only two wholesalers providing national
coverage. We believe that our coverage of customers is the highest in the
industry and that we cater to a majority of retailers nationwide.

         According to Interdata and our estimates, in 2000, 2001 and 2002, Grupo
Casa Saba and Nadro, Mexico's only other national pharmaceutical distributor,
together accounted for over 55% of prescription and over-the-counter
pharmaceutical sales through private sector wholesale pharmaceutical channels in
Mexico. Mexico has adopted individual dosage packaging, i.e., pharmaceuticals
are distributed in pre-packaged dosages rather than in bulk. Retail customers
demand a rapid and continuous supply of pharmaceutical products. As a result,
inventory turnover is quite high. Consequently, shortages and stock-outs are
common and pharmacies are forced to rely on multiple suppliers. We have sought
to overcome these market constraints by maintaining a superior distribution
network. Through more than 110 years of experience, we have developed
sophisticated transportation and inventory logistics, which enable us to
distribute our products in less than 24 hours from the time of order nationwide.
We believe that we are able to fill the highest rate of orders in the industry,
and plan to expand our distribution network to continue to improve our
distribution capabilities.

VALUE-ADDED PHARMACEUTICAL SERVICES

         We believe that we distinguish ourselves from our competitors, in part,
by the wide range of value-added services we provide our customers in addition
to our products. For example, we provide pharmacies suggested retail price lists
that are updated immediately upon notice of price changes from the suppliers.
These price lists are the only notices used by pharmacies to adjust their
prices. We also provide inventory, purchasing management, price updates and
advisory services to our customers through direct personal computer links
between us and individual pharmacies using www.farmaservicios.pdv, our
proprietary point-of-sale system. See "--Technology Information
Systems--Pharmacy Personal Point-of-Sale Computers." We also provide our
customers with an immediate product replacement service. If any item from a
customer's order is out of stock, www.farmaservicios.pdv adds the client's name
together with the specific out of stock item to the product replacement list.
This ensures that the product will be delivered to the client as soon as it is
received at one of our distribution centers, without requiring the client to
reorder the product.

         We also offer our customers a series of specialized services, including
training, conferences and trade fairs. Some services to customers are supported
by a monthly pharmaceutical publication, "Farmservicios Editorial," formerly
"Correo Farmaceutico," a monthly magazine and product catalog. We also provide
our clients with a pharmaceutical dictionary, which lists all pharmaceuticals
sold by pharmacists, together with a description of each drug's use.

         We have already established an online distribution and information
site for our clients and suppliers, www.farmaservicios.com, which we currently
make available to them free of charge. Clients that log on to
www.farmaservicios.com are able to communicate and/or negotiate the terms of
their distributorship arrangements directly with us, and to place and track
their orders and shipments, on line. In addition, these clients also have
access to a wide range of additional services, including news and industry
information, free e-mail, business advice and a variety of special promotions.
We believe that www.farmaservicios.com is an innovative, value-added service
that only we can make available to our clients. www.farmaservicios.com also
links to www.farmaservicios.pdv, and to our HYPERDATY system. See "--Technology
Information Systems."

HBA/OTHER PRODUCTS

         We distribute health and beauty aids (HBA) and various consumer
products that are typically sold through supermarkets, convenience stores and
pharmacies in Mexico. HBA/other products consist principally of basic
toiletries, the majority of which are distributed on a non-exclusive basis. We
also distribute some products on an exclusive basis, like:

         o    Mexsana talcum powders from Schering Plough (since 1999); and

         o    Coppertone suntan lotions (since 1999).

         In some cases, we enter into short-term exclusive distribution
agreements on a preliminary, experimental basis, in order to test the real
demand for specific products. If upon the termination of these agreements, we
conclude that there is no significant demand for a specific product, we cease
the distribution of such product. For this reason, in the normal course of
business, products we distribute one year may not be distributed the next. We
are currently seeking to enter into distribution agreements to distribute
HBA/other products at acceptable margin levels. We cannot assure you that we
will enter into distribution agreements to distribute any or all of these
products at acceptable margin levels.

         We provide manufacturers with highly specialized integrated services.
These services range from purchasing, planning, centralized sales,
merchandising, collections, execution of promotions and product information. We
believe that our services in this area are unique and unparalleled and are not
available nationwide through any other entity.

         We anticipate that the market in Mexico for health and beauty aids and
other consumer products will continue to grow due to the young profile of the
Mexican population, over half of which is currently below the age of 20. We
believe that as the Mexican population continues to grow, and as consumers'
disposable income increases, this division could account for the important
increases in demand of our products.

GENERAL MERCHANDISE AND OTHER PRODUCTS

         We distribute general merchandise and other products that are generally
sold through grocery stores, supermarkets, convenience stores, major warehouses
and pharmacies in Mexico. Prior to 2002, we referred to these products as
non-perishable food/consumer products. The general merchandise products we
distribute consist primarily of packaged and canned foods, candies, chocolates
and freezer products among others. The other products we distribute consist of
over-the-counter products, household cleansers, toiletries, Casio products,
Disney licensed products, among others. General merchandise and other products
we distribute are mostly products sold on exclusive basis in specified areas
pursuant to contractual arrangements, including:

         o    Brunswick Sea Food products (since 1994);

         o    Canderel and Nutra Sweet products (since 1999);

         o    Kraft Foods (candies division) (since 1999);

         o    Anton Berg (since 2001);

         o    Vital Care (since 2002);

         o    Delico Freezer Products (since 2002);

         o    Color Concepts (since 2002);

         o    Futura Trading (since 2002);

         o    Casio - Keyboard, Digital Camera, Audio and T.V. (since 1999);
              and

         o    Cure Brand (since 2002).

ENTERTAINMENT

         We distribute books and magazines, a large majority of which we
distribute on an exclusive basis, through our publishing subsidiary,
Publicaciones Citem, S.A. de C.V., or Citem, which is among the leading
distributors of weekly magazines in Mexico. We are also one of the leading
suppliers of self-service store chains, as well as the exclusive supplier of
Walmart's Mexico, VIPS and Porton, restaurant chains in Mexico City. In 2002 we
co-published children's books with approximately 23 international publishers.
However, due to Citem's current restructuring process we decided not to enter
into any co-publishing agreement in 2003. There can be no assurance that we will
enter into new co-publishing agreements in the future.

         We believe that Citem is one of the leading magazine distributors in
Mexico, selling primarily through 180 nationwide agents, 700 book stores, and
150 schools, as well as through four firms affiliated with the Union of
Newspaper Boys in Mexico City. Citem also distributes entertainment products
through other establishments, including supermarkets, convenience stores, formal
indoor newsstands and magazine "bullpens," airports, libraries and hotel
magazine stores.

         In addition, Citem offers one of the most efficient forces of
rack-jobbers, or shelf-keeping merchandisers, to VIPS and Porton, that keep the
shelves of over 150 stores across Mexico, duly organized. In the second quarter
of 2000, we discontinued the operations of uno@uno, and leased its assets to a
third party for a term of two years.

         In 2000, we also distributed to 25 export clients, consisting of
magazine and book wholesalers, in North, Central and South America. Revenues
from sales to export clients in the United States, Central America, South
America and the Caribbean accounted for approximately 55%, 18% 17% and 10% of
our total export sales in 2000. In 2001 we continued with our exports to the
United States, Central America, South America and the Caribbean accounting for
approximately 54%, 17%, 20% and 9%, respectively, of our export sales. In 2002
we continued with our international operations, the United States, Central
America, South America and the Caribbean representing 54%; 11%; 7%; and 28%,
respectively, of our export sales.

         In 2001 Citem secured the distribution of new publications, expanding
its client base with the distribution of albums and stickers from leading
licensors and publishers in the market. Despite the economic slowdown and
supported by new contracts for distributing publications, Citem increased its
total sales during 2001 in 1.7%.

         To improve its infrastructure and increase operating profitability, in
the last quarter of 2001Citem moved its distribution center from Mexico City to
the State of Mexico.

         In the second half of 2002, started an administrative and operational
restructuring to achieve higher levels of profitability. As a result, several
magazines and books were eliminated from our supplier base, generating a
decrease in Citem's sales of 8.5% compared to sales in 2001. The restructuring
process has not been completed. However, we expect to in the second half of 2003
and to start generating higher levels of sales and operating profit in our
publications division.

OFFICE PRODUCTS

         In August 2000, we sold all of the outstanding capital stock of our
wholly owned subsidiary Papelera General, a regional office-supply wholesale
distributor, and the assets related to this business, including two warehouses
in Mexico City, to Adolfo I. Autrey, a former principal shareholder, director
and executive officer, for Ps.37.5 million (the equivalent of approximately
U.S.$3.9 million). Following this sale, we no longer conduct any business
through, nor with, Papelera General, other than a lease for office space and
licensing and trademark arrangements. See "Major Shareholders and Related Party
Transactions--Related Party Transactions."

         Following the sale of Papelera General, we continue to distribute
office and electronic products from Casio, including keyboards, calculators,
audio and television equipment and related accessories, through Mexatar. We
acquired Mexatar in December 1998. Due to negotiations with Casio, as of this
date we only acquire from Casio keyboards, audio and T.V. products as well as
digital cameras, products that we distribute under normal operations. The
distribution of other electronic products will continue only until our inventory
of such products permits it. There can be no assurance that we will enter into a
distribution agreement with Casio or any other supplier of similar products, or
if so, under terms favorable to us.

EXCLUSIVE DISTRIBUTION AGREEMENTS

         In the areas of HBA/other, general merchandise and other products and
entertainment products, exclusive distribution agreements are typically limited
to specified products, channels and geographic areas. Some of our exclusive
distribution agreements can be terminated without cause, by means of proper
notice, given by either party. We do not anticipate the imminent termination of
any of these agreements, other than those that we terminate if the products
distributed are not sufficiently profitable. Before entering into exclusive
distribution arrangements, in occasions we require that each prospective
supplier agrees to advertise its services and offer a specific number of
promotions and trade discounts to ensure that the supplier is seeking to take a
leading position in the Mexican market. We provide manufacturers with highly
specialized integrated services, ranging from purchasing, planning, centralized
sales, merchandising, collections, execution of promotions and the provision of
information. We believe that these services are not provided, nationwide, by any
other entity.

         In 2000, following the instructions of our management, we terminated
several of our exclusive distribution agreements, due to the fact that the
margins on products distributed pursuant to these agreements were not
sufficiently profitable. We are currently seeking to enter into exclusive
distribution agreements that will allow us to distribute products, particularly
HBA/other, entertainment, general merchandise and other products at acceptable
margin levels. We cannot assure you that we will enter into distribution
agreements to distribute any or all of these products at acceptable margin
levels.

PURCHASING

         We order all of our products on an ongoing basis, negotiating quantity
and price periodically, rather than committing to contractual terms. While the
majority of our suppliers are Mexican companies, we do purchase some products
from international manufacturers. We negotiate exchange risks by purchasing
these products in Pesos or setting a limit on our exchange risk exposure.

         In prior periods, each of our distribution centers placed its own
orders on a weekly basis, directly to suppliers. These orders were placed
through our computerized order system, Electronic Document Interchange, or EDI.
Suppliers delivered orders directly to the distribution warehouse that placed
the order, or to our transportation subsidiary, Marproa. Suppliers typically
delivered bulk orders directly to the distribution warehouse that placed the
order.

         In the second half of 2000, we centralized our purchasing to improve
our financial results and increase the efficiency of our operations. As a
result, all of our orders for all of our distribution centers are placed through
our centralized system.

         Deliveries of non-Mexican products are performed through Mexican
customs, near the U.S. border and are typically made directly from the supplier
to a Mexican customs agent. Once the customs concludes the importing procedure,
the products are sent to our distribution center by ground transportation.

         Marproa is a common carrier that also provides freight services to
third parties at market rates. From Marproa, we make deliveries several times a
week to each of our 22 distribution centers.

         Maintaining good relationships with our over 600 suppliers and
publishers is important to competitive success because of the tight inventory
policies prevalent in the pharmaceutical industry in Mexico. We are committed to
making rapid and timely deliveries to our customers.

         We have also installed EDI, which enables us to communicate
electronically with our suppliers and customers. For example, we use EDI for
order placement, order confirmation and price changes. We also offer our
suppliers access to our daily transactions database through the Internet at
HYPERDATY, where they can track performance of their products. See "--Technology
Information Systems" below.

PHARMACEUTICAL AND HBA/OTHER PRODUCTS

         We purchase pharmaceutical products from over 290 laboratories and
manufacturers. Most of these suppliers are located in the Federal District of
Mexico. More than two-thirds of the suppliers that manufacture pharmaceuticals
and HBA/other products in Mexico are owned primarily by large multinational
companies. Purchases made from these suppliers represent more than 80% of our
pharmaceutical and HBA/Other products purchases.

ENTERTAINMENT PRODUCTS

         In 2001 we distributed, through Citem, over 1,100 magazine titles and
over 5,500 book titles from approximately 400 publishers. In 2001, Citem secured
the distribution of new publications, expanding its client base with the
distribution of albums and stickers from leading licensors and publishers in the
market. Nearly all products purchased may be returned to the publisher, with the
exception of a small number of book titles. Citem's inventory consists primarily
of books. In 2002 Citem distributed over 1,200 magazine titles and approximately
5,000 book titles from approximately 340 publishers. In the second half of 2002,
we started an administrative and operational restructuring to achieve higher
levels of profitability. Due to this process, several magazines and books were
eliminated from our supplier base, generating a decrease in Citem's sales of
8.5% compared with sales in 2001. The restructuring process to date has not been
completed. However, we expect to complete the process in the second half of 2003
and to improve Citem's supplier data base as well as its revenues, all under
strict profitability parameters.

ELECTRONIC AND OFFICE PRODUCTS

         Through July 2000, we purchased office supplies pursuant to a number of
supply arrangements with various third party suppliers. Following the sale of
Papelera General in August 2000, we continued to distribute office products and
electronic products from Casio, including keyboards, calculators, audio and
television equipment and related accessories, through Mexatar. Due to
negotiations with Casio, we are currently distributing under normal operations
keyboards, digital cameras and audio and T.V. equipment, and the rest of the
electronics products that we used to distribute will continue only until we run
out of inventory. There can be no assurance that we will enter into a different
distribution agreement with Casio or any other supplier, or if so, under terms
favorable to us.

COMPETITION

PHARMACEUTICAL PRODUCTS

         Our primary competitor in the pharmaceutical distribution business is
Nadro, Mexico's only other national pharmaceutical distributor. One of our other
primary competitors is Marzam, S.A. de C.V., Mexico's other large regional
distributor. Our other major competitors include approximately ten regional
distributors, some of which own chains of pharmacies.

         We believe that our distribution services are superior to those of
regional distributors due to the speed with which we distribute our products, as
well as the quality and value added services we provide.

HBA/OTHER PRODUCTS

         Our competition in the HBA/other product sales segment is similar to
the competition we face in our distribution of pharmaceutical products. We
compete primarily with manufacturers that deliver directly to supermarkets and
with various regional distributors. In addition, Nadro and other regional
wholesalers distribute HBA/other products.

GENERAL MERCHANDISE AND OTHER PRODUCTS

         Our principal competitors in the general merchandise and other products
market segment are manufacturers that deliver directly to supermarkets and some
regional distributors. We compete directly with many middle wholesalers and
product-specialized wholesalers that distribute to convenience stores,
independent grocery stores and mom and pop stores, or changarros. None of these
wholesalers has a significant market share.

         Grupo Corvi, S.A. de C.V., or Corvi, a Mexican company, is one of the
largest wholesalers of independent grocery stores. Corvi's distribution to
middle wholesalers and product-specialized wholesalers and supermarket stores
does not represent direct competition for us, since we distribute mainly
exclusive lines to these channels.

ENTERTAINMENT

         Our principal competitors in our publications product line include:

         o    Intermex, a company owned by Televisa, which primarily
              distributes its own publications;

         o    Codiplyrsa, which primarily distributes popular magazines
              nationwide;

         o    Novedades, which primarily distributes its own publications;

         o    DIMSA, which distributes primarily English-language publications;
              and

         o    Sayrols, which distributes magazines.

OFFICE PRODUCTS AND ELECTRONICS

         Following the sale of Papelera General in August 2000, we are no longer
engaged in the distribution of office products through Papelera General, but
continue to distribute office and electronic products from Casio through
Mexatar, and face competition from regional wholesalers in connection with the
distribution of these products. However, due to negotiations with Casio, as of
this date we only acquire from Casio keyboards, digital cameras, audio and T.V.
products that we distribute under normal operations. The distribution of other
electronic products will continue only until our inventory of such products
permits it. We cannot assure you that we will enter into a distribution
agreement with Casio or any other supplier of similar products, or if so, under
terms favorable to us.

PAYMENTS AND COLLECTIONS

         Most of our sales are made on credit, with customers signing promissory
notes for each invoice indicating the delivery of a product. Cash-on-delivery
terms are used only for new clients or for those whose credit has been
temporarily suspended. We negotiate the number of days that we will extend to
our clients on a case-by-case basis. The determination of the number of days
that we will extend credit to a particular client depends on a number of
factors, including the client's creditworthiness, as well as the length and
nature of the client's relationship with us. The determination of the number of
days that we will extend credit to a particular client also depends on our
current business strategy. For example, in connection with our efforts to
increase sales to particular sectors of the market, in the past we extended
credit to clients in these sectors on more favorable terms than those offered to
overall client base, and as a result, the maturity of accounts receivable due
from clients in these sectors was slightly higher than the average maturity of
accounts receivable due from our overall client base in some periods. Although
we are currently seeking to reduce the average maturity of our accounts
receivable and maintain an aggressive collection policy for delinquent accounts
receivable in connection with our efforts to improve our financial results and
the efficiency of our operations, we cannot assure you that we will not extend
credit to clients in particular sectors on more favorable terms than those
offered to our overall client base in the future. See "Information of the
Company--Business Overview--Business Strategy--Improve Our Financial Results and
the Efficiency of Our Operations." The average maturity of accounts receivable
due from our overall client base was 51 days in 2000, 60 days in 2001 and 64
days in 2002.

         The following chart sets forth the average maturity of accounts
receivable due from various sectors of the market.

      ---------------------------------------------------------- ---------
      Credit terms                                               Days
      ---------------------------------------------------------- ---------
      Pharmacies                                                 35
      Supermarkets and local wholesalers                         46
      Government                                                 53
      Publications to wholesalers                                48
      Publications to retailers (1)                              30

(1) National retail chains are centralized.


REGULATION

         Our business is primarily regulated by the Ley General de Salud, or
General Health Law, and the accompanying regulations. Two federal agencies under
the executive branch of the Mexican government, the Mexican Ministry of Health
and the Mexican Ministry of Economy, regulate the pharmaceuticals industry. We
must obtain an authorization from the Mexican Ministry of Health to distribute
prescription drugs and over-the-counter pharmaceuticals on the wholesale level.
We believe that we have obtained all necessary authorization and permits
required for the operation of our business and we do not foresee any revocation,
cancellation or termination of such authorizations and permits.

         The Ministry of Economy regulates both the wholesale and retail prices
of prescription and over-the-counter pharmaceutical products. Mexican law
requires us to sell all prescription and over-the-counter products at a price
equal to or lower than the price approved by the Ministry of Economy for each
product. The Ministry of Economy periodically receives and, if appropriate,
approves revised price lists submitted by manufacturers on a product-by-product
basis.

TECHNOLOGY INFORMATION SYSTEMS

         We periodically acquire and use new technologies to increase our
efficiency and distribution capabilities. All dealings with suppliers, lessors,
banks and insurance companies, as well as our treasury, are centralized. We
believe that our technology information systems have been, and will continue to
be, instrumental in our ability to provide value-added services to our clients.

RETAIL ORDER COMPUTERS

         An important part of our sales representatives uses a portable
hand-held computer terminal to take and process orders. These orders are
transmitted via telephone lines to a central computer at each distribution
center. The orders are then printed and separated by route and filled according
to a departure schedule. We continually upgrade our systems to increase the
effectiveness of our ordering system, installing individual workstations in more
locations, tracking the orders of customers and suppliers in the systems network
and ensuring the accurate fulfillment of those orders.

PHARMACY PERSONAL POINT-OF-SALE COMPUTERS

         We have developed a point-of-sale software known as
www.farmaservicios.pdv., which was previously known as Sistema Especializado
Autrey, or SEA. www.farmaservicios.pdv is a PC-based application that has been
designed to meet the needs of our pharmacy customers. www.farmaservicios.pdv has
point-of-sale, inventory control and Internet capabilities to update and
synchronize data using web technology. Clients that use www.farmaservicios.pdv
can access and synchronize point-of-sale inventory and other databases through
our business-to-business website, www.farmaservicios.com. Pharmacies that use
our system are linked to our inventory control and order placement systems,
which allow these pharmacies to order items electronically, view current product
prices and track promotional discounts and outstanding orders. Additionally,
through this system, we can also assist customers with their own inventory
control and business management. www.farmaservicios.pdv can operate on a
stand-alone PC or in a network environment, depending on the customer's
particular needs. The pharmacy owners purchase the PCs and related hardware and
we provide the software package. We charge an annual license fee for this
software. Management believes that www.farmaservicios.pdv will continue to be an
important factor in developing customer loyalty and improving overall customer
service to our primary client base, pharmacies. Because of their high quality,
we believe that www.farmaservicios.pdv systems are outselling all competing
systems combined. As of December 31, 2002, more than 2,500
www.farmaservicios.pdv systems had been installed at customer locations.

AUTOMATIC PICKING TECHNOLOGY

         We were the first Mexican wholesaler to install automated pickers in
our distribution centers. An automated picker is a computerized robot that
matches an order number with an order number previously submitted by one of our
sales representatives, selects the appropriate item(s) ordered and deposits the
item(s) in a box for delivery. Each automated picker processes approximately 50%
of the total units sold out of each distribution center where one is located and
is significantly more efficient than a team of experienced workers. The
automated pickers operate at high speed with extremely high accuracy and include
error correction features. As of December 31, 2002, 4 of our 22 distribution
centers had automated pickers. The installation of additional automated pickers
in our distribution centers currently without automation will depend upon
whether we deem the cost to be justifiable.

COMPUTERIZED PURCHASE ORDER PLACEMENT SYSTEM

         We have developed and continue to update an automatic inventory control
and order placement system. This system utilizes inventory optimization software
to track historic demand for products and to forecast future demand. The system
also seeks to optimize inventory levels and order sizes at each distribution
center through a "just-in-time" inventory approach.

NEW BACK-OFFICE AND ACCOUNTING SERVICES

         In 2000, we finished transferring all of our back-office information
systems over to a multidimensional database that operates using a software
program called BaaN. The database provides us with a strong analytical tool for
decision-making that affects all aspects of our operations. BaaN is an
integrated back-office and accounting system that currently manages our General
Ledger, Accounts Receivable, Accounts Payable, Fixed Assets Control System and
Treasury, as well as other financial information. In 2001 and 2002 we continued
to update all of our back-office information systems in order to improve our
internal processes as well as our administrative reports.

DATA WAREHOUSING AND HYPERDATY

         We maintain an electronic data warehouse through which information
relating to our clients' transactions can be extracted for internal purposes or
for their suppliers upon request for a fee. We also maintain HYPERDATY
(previously known as DATY), an Internet-based system that allows suppliers to
analyze sales, prices and inventories of their products by extracting
information directly from our electronic data warehouse. HYPERDATY provides, on
a nationwide basis, two years of monthly information and 30 days of daily
information on 340 regions within 48 hours of the occurrence of any transaction.
Our management believes that these services allow suppliers to better manage
their product needs and fosters long-lasting relationships with suppliers. In
addition, we believe that HYPERDATY represents a competitive advantage and is
one of the reasons why we could be a preferred distributor among our suppliers.
Currently, our clients and suppliers are able to access HYPERDATY through
www.farmaservicios.com.

SOFTWARE

         We license www.farmaservicios.pdv to our clients for an annual fee. We
also license software designed by other third parties from such third parties.

                          PROPERTY, PLANT AND EQUIPMENT

         As of December 31, 2002, our principal properties consisted of 22
distribution centers, complete with all of the equipment necessary to operate
these centers, and approximately 15 other properties. Most of our fixed assets
are wholly owned and have been pledged to secure our outstanding indebtedness.
See "Operating and Financial Review and Prospects--Indebtedness--Scotiabank
Inverlat Credit Facility" and Note 8 to our annual consolidated financial
statements.

         As of December 31, 2002, our distribution centers represented more than
110,000 square meters of warehouse space. From these 22 distribution centers,
using a fleet of over 900 vans, trucks and cars, we filled nearly 5 million
orders in 2002, averaging approximately 400,000 orders per month. All of our
distribution centers are strategically located near Mexico's major population
centers.

         The following table shows our current distribution centers and their
locations in alphabetical order, as of December 31, 2002:

          DISTRIBUTION CENTER'S NAME       LOCATION (CITY, STATE)
--------- -------------------------------- --------------------------------
1.        Taxquena                         Mexico City, Distrito Federal
2.        Chihuahua                        Chihuahua, Chihuahua
3.        Coatzacoalcos                    Coatzacoalcos, Veracruz
4.        Culiacan                         Culiacan, Sinaloa
5.        Guadalajara                      Guadalajara, Jalisco
6.        Hermosillo                       Hermosillo, Sonora
7.        Juarez                           Ciudad Juarez, Chihuahua
8.        La Laguna                        Gomez Palacio, Durango
9.        Leon                             Leon, Guanajuato
10.       Centennial                       Tlalnepantla, Mexico
11.       Monterrey                        Monterrey, Nuevo Leon
12.       Morelia                          Morelia, Michoacan
13.       Peninsular                       Merida, Yucatan
14.       Citem                            Tlalnepantla, Mexico
15.       Puebla                           Puebla, Puebla
16.       Reynosa                          Reynosa, Tamaulipas
17.       Tampico                          Tampico, Tamaulipas
18.       Tijuana                          Tijuana, Baja California
19.       Tlahuac                          Mexico City, Distrito Federal
20.       Tuxtla                           Tuxtla Gutierrez, Chiapas
21.       Vallejo                          Mexico City, Distrito Federal
22.       Veracruz                         Veracruz, Veracruz
--------- -------------------------------- --------------------------------

         In connection with our cost-cutting program and our efforts to
consolidate our operations and improve our profitability in 2000, we opened one
distribution center in Puebla in connection with our efforts to increase our
market share. In the fourth quarter of 2001 we relocated our distribution center
"Casa Saba Centro" located in Mexico City, Federal District to Taxquena also,
within Mexico City, Federal District. We also relocated "Citem" from Taxquena to
Tlalnepantla, in the State of Mexico. In 2002 we did not make any changes in our
distribution centers infrastructure.

ITEM 5.  OPERATING AND FINANCIAL REVIEW AND PROSPECTS

         The following discussion should be read in conjunction with our audited
consolidated financial statements and the accompanying notes included elsewhere
in this annual report. Our audited consolidated financial statements have been
prepared in accordance with Mexican GAAP, which differ in some significant
respects from U.S. GAAP. Note 15 to our audited consolidated financial
statements provides a description of the principal differences between Mexican
GAAP and U.S. GAAP, and describes differences in presentation between the
statement of changes in financial position under Mexican GAAP and the
requirements under U.S. GAAP for a statement of cash flows. Note 15 to our
audited consolidated financial statements provides a description of our profit
sharing and income taxes, and goodwill under U.S. GAAP. Note 16 to our audited
consolidated financial statements provides a partial reconciliation to U.S. GAAP
of net income and total stockholders' equity.

         Mexican GAAP requires that our audited consolidated financial
statements recognize certain effects of inflation. In accordance with Mexican
GAAP, except as otherwise indicated, financial data for all periods presented in
our audited consolidated financial statements on this annual report have been
restated in constant Pesos as of December 31, 2002.

EFFECTS OF ECONOMIC AND MEXICAN GOVERNMENTAL FACTORS ON OUR
RESULTS OF OPERATIONS

         Our operations and assets are located in Mexico. As a consequence, our
results of operations may be affected by the general condition of the Mexican
economy, Mexican inflation, interest rates and political developments in Mexico.

ECONOMIC SITUATION

         The economic crises in Asia, Russia, Brazil and other emerging markets
adversely affected the Mexican economy, and future developments in Mexico and
other markets could adversely affect the Mexican economy in future periods.

         In 1998, 1999 and 2000, Mexico's gross domestic product, or GDP,
increased 4.8%, 3.7% and 6.6% and inflation was 18.6%, 12.3% and 9.0%. However,
in 2001 due to a slowdown in the international economic environment, Mexico's
GDP decreased 0.3% and inflation declined to 4.4%. In 2002 the lack of
improvement in the international economic environment including any U.S.
recovery together with the threat of war with Iraq, was reflected in Mexico's
GDP increasing by 0.9% and inflation reaching 5.7%. In the first quarter of
2003, the concerns previously mentioned continued and a war with Iraq took
place. All those factors combined, negatively impacted Mexico's GDP, which grew
in the period 2.3% and inflation was 1.3%.

         If the Mexican economy falls into a recession or if inflation and
interest rates increase significantly, our business, financial condition and
results of operations may be adversely affected for the following reasons:

         o    demand for products we distribute may decrease because consumers
              may reduce expenditures for these products; and

         o    demand for products we distribute may decrease because consumers
              may find it difficult to pay for these products.

CURRENCY FLUCTUATIONS

         Although we currently do not have any substantial U.S.
Dollar-denominated indebtedness and do not expect to incur in any U.S.
Dollar-denominated indebtedness in the near term in connection with our current
business plan, we may be required to do so in the future. Substantially all of
our revenues are and will continue to be Peso-denominated. As a result, should
we incur in any substantial U.S. Dollar-denominated indebtedness, we would be
adversely affected by decreases in the value of the Peso against the U.S.
Dollar, which would most likely result in our incurrence in net foreign exchange
losses. In 2002, based on changes in the Noon Buying Rate for Mexican Pesos as
reported by the Board of Governors of the U.S. Federal Reserve Bank of New York,
the Peso depreciated by approximately 13.7% against the U.S. Dollar, and in the
first quarter of 2003, the Peso depreciated by approximately 3.4% against the
U.S. Dollar.

         Severe devaluation or depreciation of the Peso may also result in
disruption of the international foreign exchange markets. This 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 any
non-Peso-denominated indebtedness we may incur in the future, which could, in
turn, affect our ability to obtain foreign services and products. Devaluation or
depreciation of the Peso against the U.S. Dollar may also adversely affect U.S.
Dollar prices for our securities.

INFLATION AND INTEREST RATES

         In recent years, Mexico has experienced high levels of inflation. The
rate of inflation, as measured by changes in NCPI, was 9.0%, 4.4% and 5.7% for
2000, 2001 and 2002. High inflation rates can adversely affect our business and
our results of operations by adversely affecting consumer purchasing power,
thereby adversely affecting consumer demand for the products we distribute and
to the extent inflation exceeds our price increases or to the extent we do not
increase our prices, our prices and revenues by adversely affecting our prices
in "real" terms.

         Mexico has had, and is expected to continue to have, high real and
nominal interest rates. The interest rates on 28-day Mexican government treasury
securities averaged approximately 15.3%, 11.3% and 7.1% for 2000, 2001 and 2002,
respectively. Accordingly, if we need to incur Peso-denominated indebtedness in
the future, it will most likely be at higher interest rates than in the USA.

INTRODUCTION TO OUR OPERATIONS

         The following table sets forth the real price increases and unit volume
growth for our private pharmaceutical division, our core business division:

                                                     YEAR ENDED DECEMBER 31,
                                                --------------------------------
                                                 2000        2001         2002
                                                -------    -------      --------
   TOTAL PRIVATE PHARMACEUTICALS
   MARKET:
       Real Unit Price Increases..............    6.1%        7.9%         7.2%
       Growth in Units........................    4.0%       (2.4%)        2.3%

   GRUPO CASA SABA PRIVATE
   PHARMACEUTICAL PRODUCTS:
       Real Unit Price Increases..............    5.8%        5.9%         5.5%
       Growth in Units........................    6.3%       (2.5%)        1.3%

   MARKET SHARE OF GRUPO CASA SABA:...........   28.2%       28.3%        28.0%
   INFLATION(1)...............................    9.0%        4.4%         5.7%

__________________

(1) Based on the changes in the NCPI


         The unit volume growth in the Mexican private pharmaceutical market, in
which we conduct our main distribution business, was due to a higher demand of
pharmaceutical products in Mexico. For a more detailed description of the
Mexican private pharmaceutical market and our private pharmaceutical business,
see "Information on the Company--Business Overview--Pharmaceutical Industry."

         The following table sets forth our net sales by division and the
corresponding growth rates for each of our divisions, for the years ended
December 31, 2000, or 2000, December 31, 2001, or 2001, and December 31, 2002,
or 2002. Data is restated in constant Pesos as of December 31, 2002.



<TABLE>
<CAPTION>
                                                             YEAR ENDED DECEMBER 31,
                                                   ---------------------------------------------------
                                                       2000              2001              2002
                                                   ---------------------------------------------------
                                                   (MILLIONS OF CONSTANT PESOS AS OF DECEMBER 31, 2002)
   <S>                                              <C>            <C>               <C>
  PHARMACEUTICALS:
  Private sector................................     Ps.13,425.7    Ps.13,871.2       Ps.14,830.5
  % Growth......................................          12.4%             3.3%              6.9%
  Government....................................         825.5            606.4             724.1
  % Growth......................................          14.1%           (26.5%)            19.4%
  HBA/OTHER PRODUCTS(1).........................       1,753.4          1,695.2           1,759.9
  % Growth......................................          (6.0)%           (3.3)%             3.8%
  GENERAL MERCHANDISE AND OTHER PRODUCTS........         206.2            159.4             153.8
  % Growth......................................         (32.9)%          (22.7)%            (3.5)%
  ENTERTAINMENT PRODUCTS........................         756.4            769.5             704.2
  % Growth......................................          17.3%             1.7%             (8.5)%
  OFFICE PRODUCTS(2)............................         223.5             60.5              34.9
  % Growth......................................         (29.3)%          (72.9)%           (42.3)%
                                                    -------------   -------------     ------------
         TOTAL..................................    Ps.17,190.7     Ps.17,162.2       Ps.18,207.4
                                                    =============   =============     ============
         Total % Growth.........................            8.8%           (0.2)%             6.1%
                                                    =============   =============     ============
_________________
<FN>
(1)   Includes some revenues for services, including shipping, management
      services and rent, provided by some of our subsidiaries to entities
      beneficially owned by members of the Autrey family, some of whom were
      former shareholders. See "Major Shareholders and Related Party
      Transactions--Related Party Transactions." Revenue from these services
      represented less than 1% of the total net sales from HBA/Other products
      from January through February 2000.

(2)   As a result of the sale of Papelera General, the subsidiary through
      which we distributed office supplies, in August 2000, net sales and
      related percentages for 2000 only reflect revenues from the sale of
      office supplies through Papelera General for the seven month period
      ended July 31, 2000. Net sales and related percentages for 2000 and 2001
      reflect revenues from the sale of office and electronic products from
      Casio through Mexatar.
</FN>
</TABLE>


         The following table sets forth the net sales for each of our divisions
and our results of operations as a percentage of our total net sales:

<TABLE>
<CAPTION>
                                                                        YEAR ENDED DECEMBER 31,
                                                        -----------------------------------------------
                                                              2000            2001           2002
                                                        --------------- -------------- --------------
     <S>                                                      <C>             <C>            <C>
 PHARMACEUTICALS:
       Private sector...............................          78.1%           80.8%          81.4%
       Government...................................           4.8%            3.5%           4.0%
 HBA/OTHER PRODUCTS(1)..............................          10.2%            9.9%           9.7%
 GENERAL MERCHANDISE AND OTHER PRODUCTS.............           1.2%            0.9%           0.8%
 ENTERTAINMENT PRODUCTS.............................           4.4%            4.5%           3.9%
 OFFICE PRODUCTS(2).................................           1.3%            0.4%           0.2%
                                                        --------------- -------------- --------------
                                                             100.0%          100.0%         100.0%
                                                        =============== ============== ==============
 COST OF SALES......................................          89.6%           89.3%          89.5%
 GROSS PROFIT.......................................          10.4%           10.7%          10.5%
 OPERATING EXPENSES(3):
       Selling expenses.............................           2.8%            2.8%           2.9%
       Administrative expenses......................           4.0%            4.0%           3.8%
                                                        --------------- -------------- --------------
                                                               6.8%            5.8%           6.7%
       OPERATING INCOME.............................           3.6%            3.9%           3.9%
                                                        --------------- -------------- --------------
 COMPREHENSIVE COST OF FINANCING, NET...............           0.5%            0.9%           0.1%
 OTHER INCOME.......................................          (0.1)%          (0.2)%            0%
 INCOME TAX AND EMPLOYEE PROFIT SHARING.............           0.7%            0.7%           0.8%
                                                        --------------- -------------- --------------
       NET INCOME...................................           2.6%            2.5%           3.0%
                                                        --------------- -------------- --------------
                                                             100.0%          100.0%         100.0%
                                                        =============== ============== ==============
_______________________
<FN>
(1)   Includes some revenues for services, including shipping, management
      services and rent, provided by some of our subsidiaries to entities
      beneficially owned by members of the Autrey family, some of whom were
      former shareholders. See "Major Shareholders and Related Party
      Transactions." Revenues from these services represented less than 1% of
      the total net sales from HBA/Other products from January through
      February 2000.

(2)   As a result of the sale of Papelera General, the subsidiary through
      which we distributed office supplies, in August 2000, net sales and
      related percentages in 2000 reflect revenues from the sale of office
      supplies through Papelera General only for the seven month period ended
      July 31, 2000. Net sales and related percentages for 2000 and 2001
      reflect revenues from the sale of office and electronic products from
      Casio through Mexatar.

(3)   Total operating expenses include severance payments made to personnel,
      in addition to selling and administrative expenses in 2000. No such
      payments were made in 2001 and 2002.
</FN>
</TABLE>


RESULTS OF OPERATIONS

         In accordance with Mexican GAAP, Peso amounts presented below for 2000,
2001 and 2002 are reflected in constant Pesos as of December 31, 2002.

YEAR ENDED DECEMBER, 31, 2002 COMPARED TO YEAR ENDED DECEMBER, 31 2001

         TOTAL NET SALES. Net Sales for 2002 amounted to Ps.18,207.4 million,
representing an increase of 6.1% over 2001. The increase in sales is a
reflection of the solid growth shown by the national pharmaceutical sector, and
in particular our private pharmaceutical division, which continued as the
primary driver of sales growth for Grupo Casa Saba. Government pharmaceutical
division also had a positive performance in 2002, reflecting an increase in
sales of 19.4% versus 2001. The growth of these two divisions combined with an
increase of 3.8% in HBA/other products, allowed us to finish the year with an
increase in total sales of 6.1% and to offset a decrease of 8.5% posted by our
entertainment or publications division as well as a 14.2% decrease in our office
supplies and general merchandise and other products divisions.

         NET PRIVATE PHARMACEUTICAL SALES. The net sales of our private
pharmaceutical division increased to Ps.14,830.5 million, or 6.9%, in 2002 from
Ps.13,871.2 million in 2001, mainly as a result of the private pharmaceutical
market growth and the solid performance of our commercial strategies. As
mentioned before, our net private pharmaceutical division continues to be the
primary driver of sales growth for Grupo Casa Saba. Net sales of our private
pharmaceutical division increased its participation to total sales to 81.4%,
from 80.8% in 2001.

         NET GOVERNMENT PHARMACEUTICAL SALES. Net sales of our government
pharmaceutical division showed a positive performance during the whole year,
posting a 19.4% increase over 2001. This increase is a response to a greater
demand for pharmaceutical products by government hospitals and institutions, as
well as to the proactive participation of Grupo Casa Saba in the government
sector. In this division we reflect sales to PEMEX, which are related to bidding
processes. Therefore, there can be no assurance that we will be awarded similar
contracts with PEMEX in the future. See "Information on the Company--Business
Overview--Pharmaceutical Industry--Industry Prices." As a percentage of our
total net sales and due to the growth reflected during the year our government
pharmaceutical division increased its participation from 3.5% in 2001 to 4.0% in
2002.

         NET HBA/OTHER PRODUCT SALES. The net sales of our HBA/other products
division reflected during 2002 an increase of 3.8% with respect to 2001. This
increase is a result of both a dynamic market related to these types of products
and the solid market positioning that Casa Saba maintains in this area. As a
percentage of total sales and reflecting a smaller increase than the private
pharmaceutical division, sales for HBA/other decreased to 9.7% in 2002 from 9.9%
in 2001.

         GENERAL MERCHANDISE AND OTHER PRODUCTS SALES. The net sales of our
general merchandise and other products division decreased to Ps.153.8 million,
or 3.5%, in 2002 from Ps.159.4 million in 2001. This decrease in sales
responds to the fact that we continued with the process of incorporating lines
of General Merchandise and rebalancing previous lines. In this process,
product distribution agreements were terminated following a determination by
our management that the margins on products distributed pursuant to these
agreements were not sufficiently profitable. We are currently seeking to enter
into distribution agreements that will permit us to distribute general
merchandise and other products at acceptable margin levels. There can be no
assurance that we will enter into distribution agreements to distribute
general merchandise and other products at acceptable margin levels in the
future. As a percentage of our total net sales, the net sales of general
merchandise and other products division decreased to 0.8% in 2002 from 0.9% in
2001.

         NET ENTERTAINMENT SALES. The net sales of our entertainment division
"Citem" in 2002 decreased 8.5% with respect to 2001. In the second half of 2002,
"Citem" went through a period of operating and administrative restructuring
which sought to improve the levels of operating efficiency and profitability per
segment in this division. Likewise, the market that this type of product targets
did not record very dynamic results, influenced by the economic environment. As
a percentage of our total net sales, the net sales of our entertainment division
decreased to 3.9% in 2002 from 4.5% in 2001.

         NET OFFICE PRODUCTS SALES. The net sales of our office products
division decreased to Ps.34.9 million, or 42.3%, in 2002 from Ps.60.5 million
in 2001. The decrease in sales reflects a rebalancing of the existing lines in
this division, which included the elimination of some products that did not
fulfill our profitability standards. As a percentage of our total net sales,
the net sales of our office products division decreased to 0.2% in 2002 from
0.4% in 2001.

         GROSS PROFIT. Cost of sales in 2002 was Ps.16,286.5 million or 6.3%
higher than that in 2001. In 2002, the increase in the cost of sales was higher
than the sales growth. Gross margin in 2002 decreased to 10.55% from 10.7% in
2001. The lower gross margin reflects the commercial conditions that prevailed
in the year as well as our commercial strategies. Gross profit for the period
amounted to Ps.1,920.9 million, representing an increase of 4.5% from 2001.

         EXPENSES. Operating expenses in 2002 were Ps.1,218.9 million,
representing an increase of 4.5% over 2001. This increase is attributable
principally to the increase in 2002 of our sales. The increase in operating
expenses is less on a percentage basis than the increase in our sales. The ratio
of expenses to sales decreased to 6.7% in 2002 from 6.8% in 2001.

         OPERATING INCOME. Operating income for 2002 was Ps.702.0 million, 4.6%
higher than in 2001. Our operating margin was 3.86% in 2002 compared to 3.91% in
2001. Operating income plus depreciation and amortization in 2002 was Ps.799.6
million, compared to Ps.776.70 million in 2001.

         COMPREHENSIVE COST OF FINANCING, NET. We, like all Mexican companies,
report four items within this line item: interest expense, interest income,
foreign exchange (gain) loss and (gain) loss on net monetary position.

         Foreign exchange losses (or gains) arise primarily from U.S.
Dollar-denominated position or loans as the Peso devalues or appreciates against
the U.S. Dollar. In the past, we have borrowed in U.S. Dollars upon a
determination that money market conditions generated a favorable cost-benefit
tradeoff in comparison to borrowing in Pesos. The gain or loss on net monetary
position incorporates the effect of inflation on monetary assets and
liabilities. Monetary gains arise from holding a net monetary liability position
during periods of inflation, while monetary losses arise from holding a net
monetary asset position during periods of inflation.

         In 2002 comprehensive cost of financing, net was Ps.15.5 million, which
compared to the Ps.149.8 million in 2001, represents a decrease of 89.6%. The
reduction is basically a product of lower interest paid, which decreased 61.6%
in 2002 compared to 2001. At the same time, interest earned increased 194.2%,
which was added to greater income from exchange income and monetary gains. See
"--Indebtedness" and Note 8 to our audited consolidated financial statements.

         ASSETS TAX, INCOME TAXES AND EMPLOYEE PROFIT SHARING. Provisions for
taxes and employee profit-sharing during 2002 amounted Ps.148.5 million, 19.4%
higher than that seen in 2001. The provision for taxes and PTU (employee
profit-sharing) was 21.45% of pre-tax income. Income tax in 2002 was Ps.166.6
million and Income tax offset by prior year tax loss carryforwards was
Ps.(125.6) million. Asset tax in 2002 was Ps.8.6 million, recovery of asset tax
paid in prior years was Ps.40.6 million and deferred income tax was Ps.136.4
million.

         In July 2000, the Mexican Institute of Public Accountants, or MIPA,
issued Circular 54, "Bulletin D-4 Interpretations," which clarified a number of
issues concerning the application of Bulletin D-4. Bulletin D-4, which relates
to accounting for deferred taxes, became effective on January 1, 2000. Bulletin
D-4 requires us to calculate deferred income taxes by using the comprehensive
asset and liability method. Pursuant to this method, deferred income taxes are
calculated by applying the applicable income tax rate to the temporary
differences between the accounting and tax values of assets and liabilities as
of the date of the relevant financial statements. Bulletin D-4 will continue to
impact our effective tax rates in future periods. See Notes 3(i), 9 and 15(b) to
our audited consolidated financial statements.

         NET INCOME. Net profit for the year amounted to Ps.543.9 million, 26.9%
higher than in 2001. Consequently, net profit to sales for 2002 increased to
3.0% compared to 2.5% in 2001.

YEAR ENDED DECEMBER 31, 2001 COMPARED TO YEAR ENDED DECEMBER 31, 2000

         TOTAL NET SALES. Our net sales in 2001 continued exceeding the
equivalent of approximately one billion U.S. Dollars for the fifth consecutive
year. However, net sales slightly decreased to Ps.17,162.2 million, or 0.2%, in
2001 from Ps.17,190.7 million in 2000. This decrease was mainly due to our focus
on profitability, which generated the sale of some business units like Papelera
General as well as the cancellation of some distribution lines. Lower sales
volume to government pharmacies, as a result of an approximately 40% lower
contract with PEMEX, also affected our comparative results.

         Even though we faced in 2001 decreases in terms of sales in almost all
of our divisions due to the factors mentioned above and a slower economic
environment, sales from our core division, private pharmaceuticals reflected in
2001 an increase of 3.3% with respect to the previous year. Sales from our
Entertainment division, Citem, also generated positive comparisons in 2001,
increasing by 1.7% with respect to 2000. The increases shown by private
pharmaceuticals and entertainment were offset by decreases of 26.5%, 3.3%, 22.7%
and 72.9% in government pharmaceuticals, HBA/other products, general merchandise
and other products and office products.

         NET PRIVATE PHARMACEUTICAL SALES. The net sales of our private
pharmaceutical division increased to Ps.13,871.2 million, or 3.3%, in 2001 from
Ps.13,425.7 million in 2000. This increase was due primarily to our strategy of
growing with profitability, which increased our efforts in improving our service
quality with all of our clients. We believe that these efforts allowed us to
maintain our market share, which according to Interdata was above 28%. Its
important to mention that we see our private pharmaceuticals division as our
core business and we will sustain our efforts for improving its growth with
profitability.

         As a percentage of our total net sales, the net sales of our private
pharmaceutical division increased to 80.8% in 2001 from 78.1% in 2000.

         NET GOVERNMENT PHARMACEUTICAL SALES. The net sales of our government
pharmaceutical division reflected in 2001 an important decrease of 26.5%, mainly
due to a lower contract with PEMEX. Therefore, sales in this division were
reduced from Ps.825.5 million in 2000 to Ps.606.4 in 2001. Contracts with PEMEX
are obtained by region through bidding processes and in 2001, we were awarded
with fewer regions than in 2000 and therefore our total contract was
approximately 40% lower than in 2000. See "Information on the Company--Business
Overview--Pharmaceutical Industry--Industry Prices." We cannot assure that we
will be awarded similar contracts with PEMEX in the future. As a percentage of
our total net sales, the net sales of our government pharmaceutical division
decreased to 3.5% in 2001 from 4.8% in 2000.

         NET HBA/OTHER PRODUCT SALES. The net sales of our HBA/other products
division decreased to Ps.1,695.2 million, or 3.3%, in 2001 from Ps.1,753.4
million in 2000. This reduction was due primarily to a decrease in the number of
units sold as a result of the termination of several exclusive and non-exclusive
distribution agreements with some of our suppliers. These distribution
agreements were terminated following the determination of our management, that
the margins on products distributed pursuant to these agreements were not
sufficiently profitable. Also, a slower economic environment affected the
results of this division. We are currently seeking to enter into distribution
agreements that will allow us to distribute HBA/other products at acceptable
margin levels. We cannot assure you that we will enter into distribution
agreements to distribute HBA/other products at acceptable margin levels in the
future. As a percentage of our total net sales, the net sales of our HBA/other
products division decreased to 9.9% in 2001 from 10.2% in 2000.

         GENERAL MERCHANDISE AND OTHER PRODUCTS SALES. The net sales of our
general merchandise and other products division decreased to Ps.159.4 million,
or 22.7%, in 2001 from Ps.206.2 million in 2000. This decrease was due primarily
to a reduction in the number of units sold as a result of the termination of
several exclusive and non-exclusive distribution agreements with some of our
suppliers of general merchandise and other products. These distribution
agreements were terminated following a determination by our management that the
margins on products distributed pursuant to these agreements were not
sufficiently profitable. We are currently seeking to enter into distribution
agreements that will permit us to distribute general merchandise and other
products at acceptable margin levels. We cannot assure you that we will enter
into distribution agreements to distribute general merchandise and other
products at acceptable margin levels in the future. As a percentage of our total
net sales, the net sales of our general merchandise and other products division
decreased to 0.9% in 2001 from 1.2% in 2000.

         NET ENTERTAINMENT SALES. The net sales of our entertainment division
increased to Ps.769.5 million, or 1.7%, in 2001 from Ps.756.4 million in 2000.
This increase was due to the secure of the distribution of new publications,
which allowed Citem to expand its client base with albums and stickers from
leading licensors and publishers in the market. As a percentage of our total net
sales, the net sales of our entertainment division increased to 4.5% in 2001
from 4.4% in 2000.

         NET OFFICE PRODUCTS SALES. The net sales of our office products
division decreased to Ps.60.5 million, or 72.9%, in 2001 from Ps.223.5 million
in 2000. We sold Papelera General, the subsidiary through which we distributed
office products, in August 2000. As a result of this sale, net sales for this
division in 2000 reflect revenues from the sale of office products through
Papelera General only for the seven month period ended July 31, 2000, and as a
result, are not comparable to net sales in prior periods. In 2001 we faced
though comparisons in the first seven months of the year, since we did not have
Papelera's General contributions. Net sales for this division also reflect
revenues from the sale of office and electronic products from Casio through
Mexatar. We acquired Mexatar in December 1998. As a percentage of our total net
sales, the net sales of our office supplies division decreased to 0.4% in 2001
from 1.3% in 2000.

         GROSS PROFIT. Despite our sales decrease of 0.2%, gross profit
increased to Ps.1,837.8 million, or 2.8%, in 2001 from Ps.1,787.1 million in
2000. This improvement was mainly due to higher margins obtained as a result of
better processes and controls in our purchasing and operations areas. During
2001, our gross margin increased to 10.7% from 10.4% in 2000. Also, the higher
gross profit and gross margin was generated by our new sales mix, resulted from
the termination of several exclusive and non-exclusive distribution agreements
related to products that we could not distribute at a sufficient margin. We are
currently seeking to enter into distribution agreements to distribute HBA/other
and general merchandise and other products at acceptable margin levels. We
cannot assure you that we will enter into distribution agreements to distribute
any or all of these products at acceptable margin levels in the future.

         EXPENSES. As a result of our strategy of high control in our
administrative and sales expenses and our cost-cutting program, we maintained
almost without change our sales and administrative expenses during 2001. Our
ratio of total operating expenses to net sales stayed at a similar level of 6.8%
for both 2001 and 2000. Our total operating expenses were Ps.1,162.9 million in
2000 and Ps.1,166.9 million in 2001.

         Our cost-cutting program was more aggressively implemented since 2000
than in prior periods. In connection with our cost-cutting program in 2000, we
further reduced our employee headcount by an additional 502 employees. As of
December 31, 2000, we had 5,107 employees, an 8.9% percent decrease as compared
to 5,609 employees as of December 31, 1999. In connection with these efforts, in
2000 we had extraordinary expenses in the amount of Ps.9.4 million, as a
consequence of severance payments made to personnel as a result of our work
force reductions and some costs related to our financial restructuring, which we
completed in 2000. In 2001 we reduced our employee headcount in 71 employees. As
of December 31, 2001 we had 5,036 employees or 1.4% less than in 2000.

         OPERATING INCOME. Mainly due to our higher gross margins, our operating
income in 2001 increased to Ps.670.9 million, or 7.5%, with respect to the
Ps.624.3 million generated in 2000. Our operating margin increased to 3.9% in
2001 from 3.6% in 2000.

         COMPREHENSIVE COST OF FINANCING, NET. We, like all Mexican companies,
report four items within this line item: interest expense, interest income,
foreign exchange (gain) loss and (gain) loss on net monetary position.

         Foreign exchange losses (or gains) arise primarily from U.S.
Dollar-denominated loans or position as the Peso devalues or appreciates against
the U.S. Dollar. In the past, we have borrowed in U.S. Dollars upon a
determination that money market conditions generated a favorable cost-benefit
tradeoff in comparison to borrowing in Pesos. The gain or loss on net monetary
position incorporates the effect of inflation on monetary assets and
liabilities. Monetary gains arise from holding a net monetary liability position
during periods of inflation, while monetary losses arise from holding a net
monetary asset position during periods of inflation.

         In 2001 our comprehensive cost of financing increased significantly
from Ps.85.6 million in 2000 to Ps.149.8 million in 2001 or by 75.0%. This was
due primarily to a lower inflation rate that generated lower monetary gains.
Monetary gains in 2001 were 75.2% below the reported in 2000 staying at Ps.33.0
million in 2001. It is important to mention that as a result of our financial
restructuring, which we completed in January 2000, and to a decline in interest
rates, interest expense in 2001 was 18.1% lower than in 2000. See
"--Indebtedness" and "--Banamex Credit Facilities."

         ASSETS TAX, INCOME TAXES AND EMPLOYEE PROFIT SHARING. As a result of
our tax loss carryforwards in 2001, our net income tax was Ps.36.8 million, or
0.2% of our total net sales. Therefore, we did not pay any net asset tax in
2001. For a description of available tax loss carryforwards in 2001, and
existing limitations on our use of these tax loss carryforwards, see Note 12 to
our audited consolidated financial statements. Employee profit sharing was
Ps.0.1 million in 2001.

         In May 1999, the Mexican Institute of Public Accountants, or MIPA,
issued a revised Bulletin D-4, "Accounting for Income Tax, Assets Tax and
Employees' Profit Sharing." In July 2000, MIPA issued Circular 54, "Bulletin D-4
Interpretations," which clarified a number of issues concerning the application
of Bulletin D-4. Bulletin D-4, which relates to accounting for deferred taxes,
became effective on January 1, 2000. Bulletin D-4 requires us to calculate
deferred income taxes by using the comprehensive asset and liability method.
Pursuant to this method, deferred income taxes are calculated by applying the
applicable income tax rate to the temporary differences between the accounting
and tax values of assets and liabilities as of the date of the relevant
financial statements. Bulletin D-4 will continue to impact our effective tax
rates in future periods. See Notes 3(i), 9 and 15(b) to our audited consolidated
financial statements.

         Deferred income tax in 2001 was Ps.87.5 million or 14.2% lower than
Ps.102.0 million reported in 2000.

         NET INCOME. Mainly due to a higher comprehensive cost of financing, net
income in 2001 was 2.4% lower than in 2000. We had a net income of Ps.428.7
million in 2001 with a relation to total sales or a net margin of 2.5%, against
Ps.439.4 million and a net margin of 2.6% in 2000.

INDEBTEDNESS

         As a result of our commitment to reduce our cost-bearing liabilities,
we applied part of the cash generated by our operations in 2002 to pay down debt
in the amount of Ps.323.9. As of December 31, 2002, we had Ps.43.0 million of
maturities of long-term debt and P.s.355.0 million of current maturities of
long-term debt. Its important to mention that our current maturities of
long-term debt include our working capital credit lines, which are renewed
depending on our cash flow requirements. See Note 8 to our audited consolidated
financial statements. As of March 31, 2003, we had Ps.439.3 million in aggregate
principal amount of outstanding indebtedness.

         Our aggregate outstanding indebtedness as of December 31, 2001 reflects
the effects of our financial restructuring, which we completed in February 2000,
and the subsequent refinancing of this indebtedness in December 2000 through a
term loan facility with Banamex. See "--Banamex Credit Facilities." We further
refinanced this indebtedness in June 2001 through a term loan facility with
Scotiabank Inverlat. See "--Scotiabank Inverlat Credit Facility."

BANAMEX CREDIT FACILITIES

         On December 5, 2000, we entered into a term loan facility with Banamex.
We borrowed approximately Ps.687.2 million under this facility, which we used to
repay all of our then outstanding indebtedness. Indebtedness outstanding under
this loan bore interest at a variable rate equal to the Equilibrium Interbank
Interest Rate published from time to time by Banco de Mexico, plus 250 basis
points, and was payable in monthly installments consisting of both principal and
interest from December 2000 through January 2005. We also entered into a
Ps.240.0 million working capital facility with Banamex on March 27, 2000, the
terms of which were substantially similar to those of the term loan facility.

         The Banamex term loan and working capital facilities contained various
restrictive covenants and also required us to maintain, on a quarterly basis,
various liquidity, leverage, interest and net worth coverage tests. In addition,
indebtedness under the Banamex term loan facility was secured by a combination
of a pledge of all of the fixed assets, including accounts receivable,
inventories, properties and equipment, of Casa Saba, as well as pledges in
respect of the real estate and fixed assets of some of our subsidiaries.

         We repaid all indebtedness outstanding under the Banamex term loan
facility with the proceeds from a new term loan facility with Scotiabank
Inverlat. See "--Scotiabank Inverlat Credit Facility."

SCOTIABANK INVERLAT CREDIT FACILITY

         On June 29, 2001, we entered into a term loan facility with Scotiabank
Inverlat for the amount of up to Ps.650.0 million. We borrowed Ps.645.0 million
under this facility, all of which we used, as was required by the terms of the
facility, to repay all of our outstanding indebtedness under our term loan and
working capital facilities with Banamex. Indebtedness outstanding under this
facility bears interest at a variable monthly rate equal to the Equilibrium
Interbank Interest Rate published from time to time by Banco de Mexico plus 175
basis points. Indebtedness outstanding under this facility is payable in 54
monthly installments consisting of principal and interest from July 2001 through
2005. Indebtedness outstanding under this facility is secured through a
combination of a pledge of all of the real estate and fixed assets, including
accounts receivable, inventories and equipment, of Casa Saba, as well as pledges
in respect of the real estate and fixed assets of some of our other
subsidiaries. This term loan facility contains various restrictive covenants,
including among others, restrictions on our ability to pay dividends, incur
additional indebtedness and apply proceeds from the sale of non-core assets. The
term loan facility also requires us to maintain certain financial ratios.

         We also entered into a Ps.300 million unsecured revolving credit
facility with Scotiabank Inverlat on June 29, 2001. This facility terminates
on September 3, 2003 and the Company is currently negotiating an extension of
such term. On July 31, 2002 Scotiabank Inverlat increased this facility to
Ps.450 million. Disbursements under this facility are evidenced by promissory
notes and the maturity of the borrowings varies from one day to a maximum of
one year. As of March 31, 2003, the utilized portion of this facility was
Ps.280 million, all of which was used to meet working capital needs.

LIQUIDITY AND CAPITAL RESOURCES

OVERVIEW

         Historically, our cash and capital requirements have been satisfied
through cash from operations and bank loans. Similar to prior years, in 2003 we
plan to continue to satisfy our cash and capital expenditure requirements
primarily through a combination of cash from operations and bank loans.

         Net working capital (current assets less current liabilities) as of
December 31, 2002 was Ps.2,256.4 million, as compared to Ps.2,110.4 million as
of December 31, 2001.

         Our cash flows are subject to seasonal fluctuations and market
conditions. To maintain a larger winter inventory and to support inventory for
two weeks of holidays in December, during which suppliers do not make sales or
deliveries, our accounts payable and inventories typically increase at year-end.
After reaching their highest levels in December, our inventories gradually
decrease to their normal operational levels of approximately 40 inventory days,
which typically occurs over January. Our inventories, net at December 31, 2002
were Ps.2,934.2 million or 4.1%, as compared to Ps.2,818.8 million at December
31, 2001. In 2002, we had inventories at an average of 64.9 days. Inventories
were held an average of 66 days during 2001 and an average of 58 days during
2000.

ACCOUNTS RECEIVABLE

         In 2002, due to market conditions and certain commercial strategies
implemented, accounts receivable, net increased to Ps.3,235.3 million or 13.6%
as compared to Ps.2,847.6 million as of December 31, 2001. The average maturity
of our accounts receivable in 2002 increased to 64 days as compared to 60 days
in 2001. Our accounts receivable net was Ps.2,441.7 million as of December 31,
2000 and the average maturity of our accounts receivable was 51 days in 2000.

         For a description of the nature and amounts of accounts receivable due
from current and former related parties, see "Major Shareholders and Related
Party Transactions--Related Party Transactions" and Notes 3(e) and 4 to our
audited consolidated financial statements.

TRADE ACCOUNTS PAYABLE

         In 2002, trade accounts payable increased 7.9% to Ps.3,554.6 million as
compared to Ps.3,294.9 million as of December 31, 2001. The average maturity
days in our trade accounts payable increased to 79 days in 2002 as compared to
77 days in 2001, as a result of the efforts and strategies implemented by our
purchasing area. Our trade accounts payable was Ps.3,180.9 million as of
December 31, 2000 and the average maturity of our trade accounts payable was 74
days in 2000.

         For a description of the nature and amounts of trade accounts payable
owed to current and former related parties, see "Major Shareholders and Related
Party Transactions--Related Party Transactions" and Note 7 to our audited
consolidated financial statements.

CAPITAL EXPENDITURES

         In 2002 our capital expenditures amounted Ps.32.6 million and were
directed to the purchase of technology and computer equipment (Ps.2.6 million)
as well as vehicles for our distribution fleet (Ps.30 million). As in previous
periods, the expenditures were financed with bank borrowings and our cash
generation.

         In 2001, we spent approximately Ps.7.0 million to purchase vehicles for
our distribution fleet, as well as Ps.3.1 million to purchase technology and
computer equipment. Also, we spent Ps.11.3 millions in acquisitions and Ps.1.0
million in other general capital expenditures. We funded these capital
expenditures primarily through internally generated funds and bank borrowings.

         During 2000, we spent approximately Ps.24.9 million to purchase
vehicles for our distribution fleet and approximately Ps.9.5 million for
additional technology and computer equipment. We funded these capital
expenditures primarily through internally generated funds and bank borrowings.

ACCOUNTING PRONOUNCEMENTS AND RELATED EFFECTS

         Effective January 1, 2000, we adopted Bulletin D-4 on "Accounting for
Income Tax and Employees' Profit Sharing," the adoption of which was mandatory
for all Mexican companies as of this date. As a result of our adoption of
Bulletin D-4, we recognized an opening deferred income tax liability and a
corresponding decrease in our stockholders' equity in the amount of Ps.33.4
million, which amount was included in our statement of stockholders' equity.

         In June 2001, the Financial Accounting Standards Board, or FASB, issued
Statement of Financial Accounting Standards (SFAS) 142, "Goodwill and Other
Intangible Assets" which superseded APB Opinion 17, "Intangible assets". Under
the new rules, goodwill and intangible assets deemed to have indefinite lives
are no longer to be amortized over their remaining economic useful lives.
Instead they will be subject to annual impairment tests in accordance with SFAS
142. Other intangible assets with finite lives will continue to be amortized
over their remaining economic useful lives. As the result of such adoption,
beginning January 1, 2002, amortization ceased for goodwill under U.S. GAAP.

         The Company applied the provisions of SFAS 142 beginning on January 1,
2002. The Company has completed a transitional fair value based impairment test
on its goodwill as of January 1, 2002. Based on the results of this test, the
fair value of the goodwill is equivalent to or greater than the recorded value
as of January 1, 2002, therefore, no adjustment has been made to the carrying
value of the goodwill in the Company's financial statements.

         As of December 31, 2002, the Company has total consolidated goodwill,
net of accumulated amortization of Ps.234.1 million.

         The following table adjusts earnings and earnings per share for the
adoption of SFAS 142:

<TABLE>
<CAPTION>
                                                                  YEAR ENDED DECEMBER 31,
                                                        2000             2001             2002
                                                  ------------------------------------------------------
                                                  (IN THOUSANDS OF CONSTANT PESOS AS OF DECEMBER 31, 2002)
<S>                                                    <C>              <C>                <C>
Reported net earnings (U.S. GAAP)                 Ps.   601,987        Ps.  454,814        Ps.   517,585

Add:
    Goodwill amortization, net of tax
                                                         26,789              26,789                    -
                                                  --------------       -------------     ---------------
    Adjusted net earnings                         Ps.   628,776        Ps.  481,603        Ps.   517,585
    Basic and diluted earnings per share:
    Reported net earnings                         Ps.      2.27        Ps.     1.71        Ps.      1.95
Add:
    Goodwill amortization, net of tax             Ps.      0.10        Ps.     0.10        Ps.         -
                                                  --------------       -------------     ---------------
    Adjusted net earnings                         Ps.      2.37        Ps.     1.81        Ps.      1.95
                                                  ==============       =============     ===============
</TABLE>


         In August 2001, FASB issued SFAS 143, "Accounting for Asset Retirement
Obligations". This statement addresses financial accounting and reporting for
obligations associated with the retirement of tangible long-lived assets and the
associated asset retirement costs. SFAS 143 requires an enterprise to record the
fair value of an asset retirement obligation as a liability in the period in
which it incurs a legal obligation associated with the retirement of a tangible
long-lived asset. SFAS 143 also requires the enterprise to record the contra to
the initial obligation as an increase to the carrying amount of the related
long-lived asset (i.e., the associated asset retirement costs) and to depreciate
that cost over the remaining useful life of the asset. The liability is adjusted
at the end of each period to reflect the passage of time (i.e., accretion
expense) and changes in the estimated future cash flows underlying the initial
fair value measurement. Enterprises are required to adopt SFAS 143 for fiscal
years beginning after June 15, 2002. Management does not anticipate a
significant impact on its financial position or its results of operations, or
cash flows.

         In April 2002, the FASB issued SFAS 145, "Rescission of FASB Statements
No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical
Corrections". SFAS 145 eliminates extraordinary accounting treatment for
reporting gain or loss on debt extinguishment, and amends other existing
authoritative pronouncements to make various technical corrections, clarify
meanings, or describe their applicability under changed conditions. The
provisions of SFAS 145 related to the rescission of FASB Statement No. 4 are
applicable in fiscal years beginning after May 15, 2002, the provisions related
to FASB Statement No. 13 are effective for transactions occurring after May 15,
2002, and all other provisions are effective for financial statements issued on
or after May 15, 2002; however, early application is encouraged. Debt
extinguishments reported as extraordinary items prior to scheduled or early
adoption of SFAS 145 would be reclassified in most cases following adoption.
Management does not expect the adoption of SFAS 145 to have a material effect on
the Company's financial position, results of operations, or cash flows.

         In June 2002, the FASB issued Statement No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities. ("SFAS 146"). SFAS 146 applies to
costs associated with an exit activity (including restructuring) or with a
disposal of long-lived assets. Those activities can include eliminating or
reducing product lines, terminating employees and contracts and relocating plant
facilities or personnel. SFAS 146 is effective prospectively for exit or
disposal activities initiated after December 31, 2002, with earlier adoption
encouraged. The Company does not believe the adoption of this standard will have
a material impact on its financial position, results of operations, or cash
flows.

         In December 2002, the FASB issued Statement No. 148, "Accounting for
Stock-Based Compensation-Transition and Disclosure", ("SFAS 148") an amendment
of FASB Statement No. 123. SFAS 148 amends FASB Statement No. 123, "Accounting
for Stock-Based Compensation", to provide alternative methods of transition for
an entity that voluntarily changes to the fair value based method of accounting
for stock-based employee compensation and to require prominent disclosures about
the effects on reported net income of an entity's accounting policy decisions
with respect to stock-based employee compensation. SFAS 148 also amends APB
Opinion No. 28, "Interim Financial Reporting," to require disclosures about
those effects in interim financial information. The Company currently accounts
for its stock-based compensation awards to employees and directors under the
accounting prescribed by Accounting Principles Board Opinion No. 25 and provides
the disclosures required by SFAS No. 123. The Company does not believe the
adoption of this standard will have a material impact on its financial position,
results of operations, or cash flows.

         In November 2002, the FASB issued Interpretation 45 (FIN 45),
"Guarantor's Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others". For a guarantee subject to FASB
Interpretation 45, a guarantor is required to:

         o    measure and recognize the fair value of the guarantee at
              inception (for many guarantees, fair value will be determined
              using a present value method); and

         o    provide new disclosures regarding the nature of any guarantees,
              the maximum potential amount of future guarantee payments, the
              current carrying amount of the guarantee liability, and the
              nature of any recourse provisions or assets held as collateral
              that could be liquidated and allow the guarantor to recover all
              or a portion of its payments in the event guarantee payments are
              required.

         The disclosure requirements of this Interpretation are effective for
financial statements for fiscal years ending after December 15, 2002 and did not
have a material effect on the Group's financial statements. The initial
recognition and measurement provisions are effective prospectively for
guarantees issued or modified on or after January 1, 2003, which should not have
a material effect on the Group's financial statements.

         On January 31, 2003, the FASB issued FASB Interpretation No. 46,
"Consolidation of Variable Interest Entities" ("FIN 46"). FIN 46 clarifies
existing accounting for whether variable interest entities, as defined in the
interpretation, should be consolidated in financial statements based upon the
investees ability to finance its activities without additional financial support
and whether investors possess characteristics of a controlling financial
interest. FIN 46 applies to years or interim periods beginning after June 15,
2003 with certain disclosure provisions required for financial statements issued
after January 31, 2003. Management is currently evaluating the applicability of
FIN 46 to its leases with related parties, but does not anticipate a material
impact on financial position or results of operations. See Note 7(i) to our
audited consolidated financial statements.

         On April 30, 2003 the FASB issued Statement No. 149, "Amendment of
Statement 133 on Derivative Instruments and Hedging Activities." The Statement
amends and clarifies accounting for derivative instruments, including certain
derivative instruments embedded in other contracts, and for hedging activities
under Statement 133. The amendments set forth in Statement 149 improve financial
reporting by requiring that contracts with comparable characteristics be
accounted for similarly. In particular, this Statement clarifies under what
circumstances a contract with an initial net investment meets the characteristic
of a derivative as discussed in Statement 133. In addition, it clarifies when a
derivative contains a financing component that warrants special reporting in the
statement of cash flows. This Statement is effective for contracts entered into
or modified after June 30, 2003.

         On May 15, 2003 the FASB issued Statement No. 150, "Accounting for
Certain Financial Instruments with Characteristics of both Liabilities and
Equity". The Statement improves the accounting for certain financial instruments
that, under previous guidance, issuers could account for as equity. The new
Statement requires that those instruments be classified as liabilities in
statements of financial position. In addition to its requirements for the
classification and measurement of financial instruments in its scope, Statement
150 also requires disclosures about alternative ways of settling the instruments
and the capital structure of entities, all of whose shares are mandatorily
redeemable. Most of the guidance in Statement 150 is effective for all financial
instruments entered into or modified after May 31, 2003. Management does not
anticipate a material impact on the Company.

ITEM 6.  DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

BOARD OF DIRECTORS

         The following table sets forth the names of our current directors,
their dates of birth, their principal occupation, their business experience,
including other directorships, and their years of service as directors. Each of
the following directors was elected for a one-year term by our shareholders at
our annual shareholders' meeting, which was held on April 22, 2003.

<TABLE>
<CAPTION>

        DIRECTORS
  NAME AND DATE OF BIRTH           PRINCIPAL OCCUPATION              BUSINESS EXPERIENCE         FIRST ELECTED
--------------------------       --------------------------        --------------------------  --------------------------
<S>                             <C>                               <C>                           <C>
    Isaac Saba Raffoul             Chairman of the Board          President and Director -       February 2000
        (10/17/23)                                                 Xtra Inmuebles, S.A. de C.V.

     Moises Saba Ades           Vice Chairman of the Board       Director - Xtra Inmuebles,      February 2000
        (07/12/63)                                                      S.A. de C.V.

    Alberto Saba Ades           Vice Chairman of the Board       Director - Xtra Inmuebles,      February 2000
        (07/09/65)                                                      S.A. de C.V.

     Manuel Saba Ades         Vice Chairman of the Board and     Director - Xtra Inmuebles,      February 2000
        (11/03/67)                Chief Executive Officer               S.A. de C.V.

   Gabriel Saba D'jamus      Assistant Chief Executive Officer    Executiv Director - Grupo      February 2000
        (07/27/69)                                                Industrial Imperium, S.A.
                                                                           de C.V.

    Agustin Rodriguez                    Director                     Investor Advisor           February 2000
        Legorreta                                                     -Internacional de
        (02/11/63)                                                 Capitales, S.A. de C.V.

   Raul Fernandez Diaque                 Director                     Investor Advisor           February 2000
         (05/16/63)                                                   -Internacional de
                                                                   Capitales, S.A. de C.V.

</TABLE>

         Francisco Fuentes Ostos is the Secretary of our Board of Directors.
Moises Saba Ades, Alberto Saba Ades and Manuel Saba Ades are sons of Isaac Saba
Raffoul. Gabriel Saba D'jamus is the nephew of Isaac Saba Raffoul. Manuel Saba
Ades, Moises Saba Ades, Alberto Saba Ades and Gabriel Saba D'jamus are cousins.

ALTERNATE DIRECTORS

         Set forth below are the names of the alternate members of our board of
directors. The alternate members of our board serve for a one-year term.


<TABLE>

  NAME AND DATE OF BIRTH            PRINCIPAL OCCUPATION             BUSINESS EXPERIENCE       FIRST ELECTED
--------------------------       --------------------------        --------------------------  --------------------------
<S>                           <C>                                    <C>                        <C>
Ivan Moguel Kuri            Tax Adviser to Grupo Casa Saba, S.A.      Partner - Chevez,        February 2000
(01/31/63)                                 de C.V.                 Ruiz, Zamarripa y Cia,
                                                                            S.C.
Alejandro Sadurni Gomez            Chief Financial Officer         Former Chief Financial      February 2000
(10/8/59)                                                                Officer of
                                                                      Administration -
                                                                     INMAS, S.A. de C.V.
</TABLE>

BOARD OF DIRECTORS

         The management of our business is vested in our Board of Directors. Our
bylaws provide that the number of seats on our Board of Directors shall be
determined by our shareholders at a general ordinary shareholders' meeting held
for the purpose of appointing and electing directors; provided, however, that in
no case shall our Board of Directors consist of less than five seats. Our bylaws
also provide that our shareholders may, but are not required to, nominate and
elect corresponding alternate directors for each current director. Our current
Board of Directors has seven directors and two alternate directors. Directors
and alternate directors are elected for one-year terms by our shareholders at
each annual shareholders' meeting, and each serves until a successor is elected
and takes office. In order to have a quorum for a meeting of the Board of
Directors, a majority of the directors must be present. All of the current
members of our Board of Directors were elected by our shareholders at the annual
shareholders' meeting, which was held on April 22, 2003. In accordance with the
Mexican Securities Law as amended on June 1, 2001, we have amended our bylaws to
reflect the changes in such law, and as a result of such amendments, 25% of the
members of our Board of Directors qualify as "independent directors". Under
Mexican law, a person will not qualify as an "independent director" if he or she
is, among others:

         o    one of our employees or managers;

         o    a controlling shareholder;

         o    a director, executive officer or relative of a controlling
              shareholder, or entities controlled or managed by a controlling
              shareholder; or

         o    a significant client, supplier, debtor or creditor, or member of
              the Board or executive officer of any of these entities.

         Our bylaws, as amended, also provide that the Chairman of the Board
shall have the casting vote in the event of a tie. The Board of Directors shall
meet at least once a quarter. The Chairman, 25% of the Board or any examiner may
call for a Board meeting. Also, our amended bylaws provide that the Board of
Directors must approve all transactions that deviate from our ordinary course of
business and that are to be entered into between us and any of our shareholders,
our managers or other related individuals as set forth in the amendments to the
Mexican Securities Market Law. Likewise, the Board of Directors must approve any
purchase or sale that represents 10% or more of our assets, the grant by us of
guarantees exceeding thirty percent of our assets and other transactions
representing more than 1% of our assets, in addition to any shareholder approval
required by our bylaws or otherwise.

         In addition, each holder or group of holders representing at least 10%
of a series of shares has the right to appoint one director and a corresponding
alternate director. 10% holders of limited voting stock are also entitled to
appoint a director and a corresponding alternate director.

COMMITTEES OF OUR BOARD OF DIRECTORS

         We currently have an Executive Committee in place that was appointed by
the Shareholders' meeting held on April 22, 2003 and is composed by Messrs.
Manuel, Alberto and Moises Saba Ades. Under our bylaws, the Executive Committee
is permitted to act on matters that are not legally reserved to the Board of
Directors.

         In accordance with the Mexican Securities Market Law, as amended, we
have also created an Audit Committee integrated by Mr. Agustin Rodriguez
Legorreta, Raul Fernandez Diaque and Mr. Manuel Saba Ades, who are Board
members. Both the Chairman and a majority of the members of the Audit Committee
are independent directors. Our examiners (comisarios) must be invited to attend
all Audit Committee meetings. Among other duties and responsibilities, the Audit
Committee must:

         o    prepare an annual report regarding its activities for submission
              to the Board and to our shareholders at our annual shareholders'
              meeting;

         o    prepare and render statements to the Board as to the fairness of
              transactions and arrangements with related parties; and

         o    retain independent experts to render fairness opinions in
              connection with material transactions and arrangements with
              related parties.

EXECUTIVE OFFICERS

         The following table sets forth the names of our executive officers,
their dates of birth, their current position, their prior business experience,
and the year in which they were first appointed to their current position.


<TABLE>
<CAPTION>
   NAME AND DATE OF
         BIRTH                      CURRENT POSITION              BUSINESS EXPERIENCE      FIRST APPOINTED
---------------------    ----------------------------------      -----------------------  --------------------------
<S>                     <C>                                      <C>                       <C>
   Manuel Saba Ades      Chief Executive Officer and Vice          President and            February 2000
      (11/03/67)         Chairman of the Board                     Director
                                                                   -Xtra  Inmuebles,
                                                                   S.A. de C.V.

 Gabriel Saba D'jamus    Assistant Chief Executive Officer        Executive Director -      February 2000
      (07/27/69)                                                    Grupo Industrial
                                                                 Imperium, S.A. de C.V.

Alejandro Sadurni Gomez  Chief Financial Officer                      Former Chief          February 2000
      (10/08/59)                                                  Financial Officer of
                                                                    Administration -
                                                                  INMAS, S.A. de C.V.

 Ricardo Rios Cardenas   North Region Operations and Sales          Deputy Personal         December 2000
                         Director                                   Assistant of the
      (01/02/55)                                                    President of the
                                                                 United Mexican States

Oscar Gutierrez Melgar   South Region Operations and Sales         Former Manager of        November 1985
      (17/04/67)         Director                                  Drogueros, S.A. de
                                                                         C.V.

 Jesus Guerra de Luna    General Counsel                         Legal Manager - Grupo        June 1995
      (05/29/61)                                                  Casa Autrey, S.A. de
                                                                          C.V.

 Jose Norberto Mouret    Human Resources Director                   Human Resources          October 1999
      (03/30/52)                                                    Director - Taesa

Fernando Torres Suarez   Purchasing Director                        Sales Director -          April 2001
      (09/21/64)                                                  Farmacias Benavides

   Jorge Luis Garcia     Chief Information Officer                  Former Manager -           May 1992
      (09/12/61)                                                   Grupo Casa Autrey,
                                                                      S.A. de C.V.
</TABLE>

EXAMINER

         Pursuant to the Mexican Securities Market Law, as amended, we must have
at least one comisario, or examiner, who is elected by our shareholders at our
annual general ordinary shareholders' meeting. In accordance with the amendments
to the Securities Market Law, every 10% holder, or group of holders, of a series
of our shares may elect an examiner (comisario) and a corresponding alternate
examiner at the annual ordinary shareholders' meeting. The primary role of the
examiners is to report to our shareholders at the annual ordinary general
meeting the accuracy of the financial information presented to such holders by
the Board of Directors. In accordance with Mexican law, the examiners receive
monthly reports from the Board of Directors regarding material aspects of our
affairs, including our financial condition and are invited to attend any meeting
of the Board of Directors and the Audit Committee. The examiners are also
authorized to:

         o    call ordinary or extraordinary general meetings;

         o    place items on the agenda for meetings of shareholders or the
              Board of Directors;

         o    attend meetings of shareholders, the Board of Directors, or the
              Audit Committee; and

         o    generally monitor our affairs.

         Our current examiner is Manuel Sainz Meixueiro and our current
alternate examiner is Jose Antonio Guzman Duran.

COMPENSATION:

         For the year ended December 31, 2002, the aggregate compensation paid
by us to our directors and executive officers for services rendered in all
capacities was approximately Ps.32.1 million (or approximately US $3.1
million). See "Item 7 -- Major Shareholders and Related Party
Transactions--Related Party Transactions."

SHARE OWNERSHIP OF DIRECTORS AND OFFICERS

         Share ownership of our directors and executive officers is set forth in
the table under the caption "Major Shareholders and Related Party Transactions."
Except as set forth in this table, none of our directors or executive officers
is the beneficial owner of more than 1% any class of our capital stock or
options representing the right to purchase more than 1% of any class of our
capital stock.

EMPLOYEES

         As of December 31, 2002, we had 5,176 employees, 2,074 of which were
sales representatives for pharmaceutical and HBA/other products, 866 of which
were administrative employees and 2,236 of which were operational employees. The
significant majority of our employees are represented by unions. We believe that
our relations with our employees are good. In 2002 the number of employees
increased 2.8% compared to 2001, mainly due to the restructuring of some of our
divisions, as well as to the implementation of our commercial strategies.

         In 2000, we continued to implement our cost-cutting programs, further
reducing the number of our employees by 502, or approximately 8.9%, to 5,107
employees as of December 31, 2000. The reduction in employees in 2000 was due
primarily to the termination of employees relation resulting from
discontinuation of the businesses formerly run through uno@uno and the sale of
Papelera General. See "Major Shareholders and Related Party
Transactions--Related Party Transactions." In 2001 we slightly reduced our
employees headcount in 1.4% with respect to 2000.

         In the past, we managed our pharmaceutical products sales
representatives on a regional basis, and managed those for HBA/Other products,
General Merchandise and Other products and Publications on either a product line
or store basis, depending on a specific store's sales volume. We have organized
our sales efforts with specialized teams of sales representatives, promoters,
merchandisers, product demonstration and sampling personnel. We believe that
each team possessed the characteristics necessary to satisfy the needs of the
distribution channel that it serves.

         To improve the quality and commitment of our existing sales force,
effective March 2000 we reorganized our existing sales force into two divisions,
one of which deals with traditional pharmacy clients, and the other of which
deals with other key clients (including supermarkets, government contracts and
others). We believe that this reorganization of our sales force enhances the
ability of our sales force to provide our clients with quality service.

         During 2001 and pursuing an increase in the quality of our service as
well as an improvement in our internal operations, we reorganized our
distribution centers in two divisions. Through this restructure our distribution
centers are organized and measured by region, allowing us to identify more
clearly the needs of our clients as well as the performance of its operations.
To manage the new structure two new directors were appointed, one for the north
region and a second for the south region.

EMPLOYEE PROFIT SHARING

         Under Mexican law, we are required to contribute 10% of our yearly
taxable profits, as adjusted, to our employees. This contribution is distributed
in May of each year. In addition, in the past we have customarily paid an annual
Christmas bonus to our employees in an amount equal to between two (the minimum
required by law) and five weeks' salary, depending on seniority.

THE PENSION FUND

         We have established trusts to administer our pension and retirement
plan, in which all of our employees participate and to which we contribute an
amount determined annually by an actuarial calculation prepared by an actuarial
firm and approved by our Board of Directors. We believe that obligations under
these trusts are closely monitored.

ITEM 7.  MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

         We are not directly or indirectly owned or controlled by another
corporation or by any foreign government.

PRINCIPAL SHAREHOLDERS

         All information presented in this section regarding beneficial
ownership of our capital stock is based on the number of Ordinary Shares
outstanding as of May 31, 2003, which was 265,419,360. As required by Mexican
law, the number of Ordinary Shares outstanding is presented net of the number of
repurchased Ordinary Shares held in our treasury as of May 31, 2003, which was
14,729,720. We repurchased these Ordinary Shares in the open market pursuant to
our share repurchase program, as described under the caption "Offer and Listing
Details--Share Repurchases."

         As of April 22, 2003, our controlling shareholder directly and
beneficially owned 225,606,456 Ordinary Shares, representing 85% of our issued
and outstanding capital stock. The following table shows some information, as of
April 22, 2003, regarding the ownership of our capital stock by each person
known by us to own or beneficially own more than 5% of our outstanding capital
stock and by each of our directors, executive officers and key employees.

<TABLE>
                                                           NUMBER OF ORDINARY       PERCENTAGE
NAME                                                         SHARES OWNED(1)          STAKE
---------------------------------------------------------  ------------------       -----------
<S>                                                            <C>                     <C>
Isaac Saba Raffoul.......................................      225,606,456             85%
Directors, executive officers and key employees(2).......      225,606,456             85%
Total....................................................      225,606,456             85%

________________________
<FN>
(1)   Does not include Ordinary Shares directly held by funds advised by
      Internacional de Capitales, S.A. de C.V., an investment advisory firm
      that renders investment advisory services to funds that invest in
      securities of Latin American and emerging market issuers. Shares held
      directly by these funds as of June 13, 2003 represented less than 3% of
      our issued and outstanding capital stock as of that date. Agustin
      Rodriguez Legorreta and Raul Fernandez Diaque, two members of our Board,
      render investment advisory services to these funds in their capacity as
      investment advisors of Internacional de Capitales, S.A. de C.V.

(2)   The only director, executive officer and/or key employee who owns Ordinary
      Shares or ADSs is Isaac Saba Raffoul, our controlling shareholder. This
      information is based on information provided by Mr. Saba.
</FN>
</TABLE>


ACQUISITION OF OUR COMPANY

         On January 19, 2000, Xtra Inmuebles, an entity beneficially owned and
controlled by our controlling shareholder, commenced a tender offer for up to
85% of our then outstanding Ordinary Shares on the Mexican Stock Exchange. This
tender offer expired on February 1, 2000, upon which Xtra Inmuebles acquired
225,606,456 Ordinary Shares, representing 85% of our then outstanding capital
stock. Immediately thereafter, all of these Ordinary Shares were acquired from
Xtra Inmuebles by our controlling shareholder. The completion of this tender
offer was subject to the completion of our financial restructuring, which is
briefly described under Item 4- "Information on the Company - History and
Development of the Company."

         Following the completion of the tender offer, our controlling
shareholder, by means of a shareholder vote, amended our bylaws, replaced our
incumbent Board of Directors with nine of his appointees, appointed new
management, including a new Chief Executive Officer and Chief Financial Officer,
among others, and changed the name of our company from Grupo Casa Autrey, S.A.
de C.V. to Grupo Casa Saba, S.A. de C.V. As part of our financial restructuring,
the net proceeds received by certain members of the Autrey family from the
tender offer were deposited into a special purpose trust in benefit of our
creditors in order to repay a substantial portion of our restructured
indebtedness. See "Information on the Company--History and Development of the
Company" and "Operating and Financial Review and Prospects--Indebtedness."

RELATED PARTY TRANSACTIONS

         In 2002 and 2001 we engaged in, and we may continue to engage in,
transactions with related parties, including, without limitation, the
transactions described below. Exclusively for purposes of this discussion, the
term "related party" includes our affiliates, associates, directors, officers
and principal shareholders, as well as affiliates of our directors, officers and
principal shareholders, but does not include our consolidated subsidiaries.
Conflicts of interest are inherent in transactions with related parties. See
Note 7 to our audited consolidated financial statements for all of the
information that we must make publicly available in Mexico regarding related
party transactions.

RELATED PARTY TRANSACTIONS PRIOR TO THE ACQUISITION OF OUR COMPANY

         Prior to the acquisition of our company by our controlling shareholder
in February 2000, we conducted a substantial number of transactions with, and
had several other arrangements with, entities owned and controlled by the
members of the Autrey family. See "--Acquisition of Our Company." These
transactions and arrangements included financing transactions with Debir and
Principia and payments made to some of our former directors and officers
pursuant to management services contracts with Ejecutivos y Asesores
Profesionales, S.C. We believe these transactions and arrangements were
conducted in the ordinary course of business, at arm's length and on terms no
less favorable than those that could have been obtained from unaffiliated third
parties.

RELATED PARTY TRANSACTIONS WITH MEMBERS OF THE AUTREY FAMILY IN 2000

         SALE OF PAPELERA GENERAL. In August 2000, we sold all of the
outstanding capital stock of Papelera General and assets related to its
business, including two warehouses in Mexico City, to Mr. Adolfo I. Autrey, a
former controlling shareholder, director and officer, for a purchase price of
Ps.37.5 million (the equivalent of approximately U.S.$3.9 million).

         As a condition to the completion of the sale, Papelera General entered
into a distribution agreement, service agreement and lease with us, each of
which is for a two-year term. These agreements allowed Papelera General to
maintain its current office space, as well as to provide uninterrupted services
to its clients. We do not intend to renew these agreements upon their
expiration, nor do we have any obligation to do so. As a condition to the
completion of the sale, we also entered into a trademark assignment agreement
with Papelera General, pursuant to which we assigned the trademark "Papelera
General," which was held through another of our consolidated subsidiaries, to
Papelera General.

TRANSACTIONS AND ARRANGEMENTS WITH AFFILIATES AND RELATED PARTIES OF OUR
DIRECTORS, OFFICERS AND PRINCIPAL SHAREHOLDERS IN 2002 AND 2001

         LEASES. During 2001, we entered into a lease for office space with Xtra
Inmuebles, an entity owned and controlled by our controlling shareholder. We
believe that this lease was entered into in the ordinary course of business, was
made at arm's length and is on terms no less favorable than those that could
have been obtained from unaffiliated third parties. See Note 7 to our audited
consolidated financial statements. During 2002 we maintained our lease for
office space with Xtra Inmuebles and do not have plans to terminate this
agreement.

         LEGAL AND ADVISORY SERVICES. During 2001 and 2002, Mijares, Angoitia,
Cortes y Fuentes, S.C., a Mexican law firm, provided us with legal and advisory
services, and we expect that this will continue to be the case in the future.
Francisco Fuentes Ostos, a partner from the law firm of Mijares, Angoitia,
Cortes y Fuentes, S.C., is the secretary of our Board of Directors. We believe
that the fees we paid for these services were comparable to those that we would
have had to pay a third party law firm for similar services.

         TAX ADVISORY SERVICES. During 2001 and 2002, Chevez, Ruiz, Zamarripa y
Cia, S.C., a tax advisory firm, provided us with tax advisory services, and we
expect that this will continue to be the case in the future. Ivan Moguel Kuri, a
partner from the tax advisory firm of Chevez, Ruiz, Zamarripa y Cia, S.C., is
one of our directors. We believe that the fees we paid for these services were
comparable to those that we would have had to pay a third party for similar
services.

ITEM 8.   FINANCIAL INFORMATION

         See "Item 18--Financial Statements" and "Index to Consolidated
Financial Statements", which are incorporated herein by reference.

ITEM 9.   OFFER AND LISTING DETAILS

                   TRADING HISTORY OF ORDINARY SHARES AND ADSS

         Since December 7, 1993, our Ordinary Shares have been listed and traded
on the Mexican Stock Exchange and our American Depositary Shares, or ADSs, have
been listed and traded on the New York Stock Exchange. The ADSs were issued
pursuant to a Deposit Agreement, dated December 1, 1993, as amended, among us,
Morgan Guaranty Trust Company of New York, as depositary, and the holders from
time to time of our ADSs. Each ADS represents ten Ordinary Shares. On December
11, 2002, we entered into an Amended and Restated Deposit Agreement pursuant to
which The Bank of New York was appointed as successor depositary to Morgan
Guaranty Trust Company of New York.

<PAGE>


         The table below shows, for the periods indicated, the high and low
sales prices in nominal Pesos for the Ordinary Shares on the Mexican Stock
Exchange.

                                                PESOS PER ORDINARY SHARE(1)
                                         --------------------------------------
                                                 HIGH                    LOW
                                         --------------------------------------


   1998...............................    Ps.    17.00            Ps.    4.00

   1999...............................    Ps.     8.50            Ps.    2.80
       First Quarter..................            7.40                   5.00
       Second Quarter.................            6.00                   3.33
       Third Quarter..................            3.80                   2.80
       Fourth Quarter.................            8.50                   3.80

   2000...............................    Ps.     10.10           Ps.    6.50
       First Quarter..................            9.48                   6.80
       Second Quarter.................            9.00                   6.50
       Third Quarter..................            10.10                  8.78
       Fourth Quarter.................            10.10                  8.00

   2001...............................    Ps.     8.99            Ps.    3.69
       First Quarter..................            8.10                   6.00
       Second Quarter.................            8.99                   4.73
       Third Quarter..................            6.00                   4.70
       Fourth Quarter.................            5.80                   3.69

   2002...............................    Ps.    12.40            Ps.    6.52
       First Quarter..................            7.75                   6.52
       Second Quarter.................            10.30                  7.20
       Third Quarter..................            9.03                   7.00
       Fourth Quarter.................            12.40                  7.40

   2003:
       First Quarter..................    Ps.     12.09           Ps.    10.50
       January........................            12.09                  11.00
       February.......................            12.01                  12.00
       March..........................            11.00                  10.50
   Second Quarter (through
   June 13, 2003)
       April..........................    Ps.     10.50           Ps.    10.00
       May ...........................            10.50                  10.00
       June (through June 13,
       2003...........................            12.50                  11.00


_____________________

(1) Source: Infosel, S.A. de C.V. or Infosel


<PAGE>


The table below shows, for the periods indicated, the high and low sales prices
in U.S. Dollars for our ADSs on the NYSE.

<TABLE>
<CAPTION>
                                                             U.S. DOLLARS PER ADS(1)
                                                    ---------------------------------------
                                                           HIGH                     LOW
                                                    ---------------------------------------

<S> <C>                                                 <C>                    <C>
    1998.....................................       U.S.$   $21.63         U.S.$    $4.19

    1999.....................................       U.S.$    $9.13         U.S.$    $2.81
        First Quarter........................                 6.88                   5.13
        Second Quarter.......................                 6.25                   3.63
        Third Quarter........................                 4.06                   2.81
        Fourth Quarter.......................                 9.13                   4.00

    2000.....................................       U.S.$   $11.00         U.S.$    $6.38
        First Quarter........................                10.00                   7.13
        Second Quarter.......................                 9.19                   6.38
        Third Quarter........................                11.00                   9.50
        Fourth Quarter.......................                10.06                   8.13

    2001                                            U.S.$     8.35         U.S.$     5.05
        First Quarter........................                 8.35                   6.85
        Second Quarter.......................                 7.35                   5.20
        Third Quarter........................                 6.20                   5.05
        Fourth Quarter.......................                 6.50                   5.50

    2002                                            U.S.$    12.51         U.S.$     6.60
        First Quarter........................                 8.75                   6.60
        Second Quarter.......................                10.95                   7.90
        Third Quarter........................                 9.45                   7.20
        Fourth Quarter.......................                12.51                   7.05

    2003
        First Quarter........................       U.S.$    11.65         U.S.     $9.70
          January............................                11.65                  10.60
          February...........................                11.45                  10.10
          March..............................                10.15                   9.70
        Second Quarter (through June 13, 2003)
          April  ............................       U.S.$    10.00         U.S.$     9.40
          May................................                10.49                   9.95
          June (through June 13, 2003).......                11.59                  10.47

_____________________

<FN>
(1)   Source:  Bloomberg, Infosel
</FN>
</TABLE>


         Trading prices of our Ordinary Shares and our ADSs will be influenced
by our results of operations, financial condition, cash requirements, future
prospects and by economic, financial and other factors and market conditions.
See "Key Information--Risk Factors--Risk Factors Relating to Developments in
Mexico--Economic and Political Developments in Mexico and Elsewhere May
Adversely Affect Our Business." There can be no assurance that prices of our
Ordinary Shares and our ADSs will, in future, be within the ranges set forth
above. As of December 31, 2002, there were 265,419,360 Ordinary Shares issued
and outstanding, approximately 9.5% of which were held in the form of ADSs.

         Our ticker symbols on both the New York Stock Exchange and the Bolsa
Mexicana de Valores is "SAB".

<PAGE>

                      TRADING ON THE MEXICAN STOCK EXCHANGE

OVERVIEW

         The Mexican Stock Exchange, located in Mexico City, is the only stock
exchange in Mexico. Operating continuously since 1907, the Mexican Stock
Exchange is organized as a corporation with variable capital, or sociedad
anonima de capital variable. Securities trading on the Mexican Stock Exchange
occurs from 8:30 am to 3:00 pm Mexico City time, each business day. Since
January 1999, all trading on the Mexican Stock Exchange has been effected
electronically. 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 or volume volatility. Under current regulations, this system may
apply to the ADSs. However, the Mexican Stock Exchange may take into account any
suspension measures that may or may not have been taken by the New York Stock
Exchange in respect of the ADSs, and may resolve not to impose a suspension of
trading of our shares.

         Settlement is effected two trading days after a share transaction on
the Mexican Stock Exchange. Deferred settlement, even by mutual agreement, is
not permitted without the approval of the CNBV. Most securities traded on the
Mexican Stock Exchange are on deposit with S.D. Indeval, S.A. de C.V.,
Institucion para el Deposito de Valores, S.A. de C.V., or Indeval, a privately
owned securities depositary that acts as a clearinghouse, depositary and
custodian, as well as a settlement, transfer and registration agent for Mexican
Stock Exchange transactions, eliminating the need for physical transfer of
securities.

         Although the Mexican Securities Market Law provides for the existence
of an over-the-counter market, no such market for securities in Mexico currently
exists.

MARKET REGULATION AND REGISTRATION STANDARDS

                  In 1946, the Comision Nacional de Valores, or the National
Securities Commission, commonly known as the CNV, was established to regulate
stock market activity. In 1995, the CNV and the Comision Nacional Bancaria, or
the National Banking Commission, were merged to form the CNBV. The Mexican
Securities Market Law, which took effect in 1975, introduced important
structural changes to the Mexican financial system, including the organization
of brokerage firms as corporations with variable capital, or sociedades anonimas
de capital variable. The Mexican Securities Market Law also sets standards for
the registration of brokerage firms, which authorization is granted at the
discretion of the Ministry of Finance upon the recommendation of the CNBV. In
addition to setting standards for brokerage firms, the Mexican Securities Market
Law empowers the CNBV to regulate the public offering and trading of securities
and to impose sanctions for the illegal use of insider information. The CNBV
regulates the Mexican securities market, the Mexican Stock Exchange and
brokerage firms through a board of governors composed of thirteen members, five
of which are appointed by the Ministry of Finance.

         As of June 1, 2001, the Mexican Securities Market Law requires issuers
to increase the protections offered to minority shareholders and to impose
corporate governance controls on Mexican listed companies in line with
international standards. The Mexican Securities Market Law expressly permits
Mexican listed companies, with prior authorization from the CNBV, to include in
their bylaws anti-takeover defenses such as shareholder rights plans, or poison
pills.

         To offer securities to the public in Mexico, an issuer must meet
specific qualitative and quantitative requirements, and generally only
securities for which an application for registration in the National Registry of
Securities maintained by the CNBV has been approved by the CNBV may be listed on
the Mexican Stock Exchange. This approval does not imply any kind of
certification or assurance related to the merits or the quality of the
securities or the solvency of the issuer.

         In March 2003, the CNBV issued general rules, or General CNBV Rules,
applicable to issuers and other securities market participants. The General CNBV
Rules, which repealed several previously enacted rules, or circulares, of the
CNBV, now provide a single set of rules governing issuers and issuer activity,
among other things.

         The General CNBV Rules have mandated that the Mexican Stock Exchange
adopt minimum requirements for issuers to be registered with the CNBV and have
their securities listed on the Mexican Stock Exchange. To be registered, issuers
will be required to have, among other things:

         o    a minimum number of years of operating history;

         o    a minimum financial condition;

         o    a minimum number of shares to be publicly offered to public
              investors;

         o    a minimum price for the securities to be offered;

         o    a minimum of 15% of the capital stock placed among public
              investors;

         o    a minimum of 200 holders of shares, who are deemed to be public
              investors under the General CNBV Rules, upon the completion of
              the offering;

         o    the following distribution of the securities offered pursuant to
              an offering in Mexico: (i) at least 50% of the total number of
              securities offered must be placed among investors who acquire
              less than 5% of the total number of securities offered; and (ii)
              no investor may acquire more than 40% of the total number of
              securities offered; and

         o    complied with certain corporate governance requirements.

         To maintain its registration, an issuer will be required to have, among
other things:

         o    a minimum financial condition;

         o    minimum operating conditions, including a minimum number of
              trades;

         o    a minimum trading price of its securities;

         o    minimum of 12% of the capital stock held by public investors;

         o    a minimum of 100 holders of shares who are deemed to be public
              investors under the General CNBV Rules; and

         o    complied with certain corporate governance requirements.

         The CNBV has the authority to exempt from some of these requirements in
certain circumstances. Also, some of these requirements are applicable for each
series of shares of the relevant issuer.

         The Mexican Stock Exchange will review annually compliance with the
foregoing and other requirements, some of which may be further reviewed on a
quarterly or semi-annual basis. The Mexican Stock Exchange must inform the CNBV
of the results of its review and this information must, in turn, be disclosed to
investors. If an issuer fails to comply with any of the foregoing requirements,
the Mexican Stock Exchange will request that the issuer propose a plan to cure
the violation. If the issuer fails to propose such plan, if the plan is not
satisfactory to the Mexican Stock Exchange or if the issuer does not make
substantial progress with respect to the corrective measures, trading of the
relevant series of shares on the Mexican Stock Exchange will be temporarily
suspended until the situation is corrected. In addition, if the issuer fails to
propose the plan or ceases to follow such plan once proposed, the CNBV may
suspend or cancel the registration of the shares. In such event, the issuer must
evidence the mechanisms to protect the rights of public investors and market in
general.

         Issuers of listed securities are required to file unaudited quarterly
financial statements and audited annual financial statements as well as various
periodic reports with the CNBV and the Mexican Stock Exchange. Pursuant to the
General CNBV Rules, the internal regulations of the Mexican Stock Exchange must
be amended to include, among other things, the implementation of the Sistema
Electronico de Envio y Difusion de Informacion, or the SEDI, an automated system
for the electronic transfer of the information required to be filed with the
Mexican Stock Exchange, which will be similar to, but will replace, the existing
EMISNET. Issuers of listed securities must prepare and disclose their financial
information by a Mexican Stock Exchange approved system known as the Sistema de
Informacion Financiera Computarizada, or Computerized Financial Information
System, commonly known as the SIFIC. Immediately upon its receipt, the Mexican
Stock Exchange makes that information available to the public.

         The General CNBV Rules and the internal regulations of the Mexican
Stock Exchange require issuers of listed securities to file through the SEDI
information on the occurrence of material events affecting the relevant issuer.
Material events include, but are not limited to:

         o    the entering into or termination of joint venture agreements or
              agreements with key suppliers;

         o    the creation of new lines of businesses or services;

         o    significant deviations in expected or projected operating
              performance;

         o    the restructuring or payment of significant indebtedness;

         o    material litigation or labor conflicts;

         o    changes in dividend policy;

         o    the commencement of any insolvency, suspension or bankruptcy
              proceedings;

         o    changes in the directors; and

         o    any other event that may have a material adverse effect on the
              results, financial condition or operations of the relevant
              issuer.

         If there is unusual price volatility of the securities listed, the
Mexican Stock Exchange must immediately request that the issuer inform the
public as to the causes of such volatility or, if the issuer is unaware of such
causes, make a statement to that effect. In addition, the Mexican Stock Exchange
must immediately request that issuers disclose any information relating to
relevant material events, when it deems the information currently disclosed to
be insufficient, as well as instruct issuers to clarify such information when it
deems the information to be confusing. The Mexican Stock Exchange may request
issuers to confirm or deny any material events that have been disclosed to the
public by third parties when it deems that the material event may affect or
influence the securities being traded. The Mexican Stock Exchange must
immediately inform the CNBV of any requests made to issuers. The CNBV may also
make any of these requests directly to issuers. An issuer may delay the
disclosure of material events under some circumstances, including where the
information being offered is not related to transactions that have been
completed.

         The CNBV and the Mexican Stock Exchange may suspend the dealing in
securities of an issuer:

         o    if the issuer does not adequately disclose a material event; or

         o    upon price or volume volatility or changes in the offer or
              demand in respect of the relevant securities, which are not
              consistent with the historic performance of the securities and
              could not be explained solely by the information made publicly
              available under the General CNBV Rules.

         The Mexican Stock Exchange must immediately inform the CNBV and the
general public of any such suspension. An issuer may request that the CNBV or
the Mexican Stock Exchange resume trading, provided it demonstrates that the
causes triggering the suspension have been resolved and that it is in full
compliance with the periodic reporting requirements under the applicable law. If
its request has been granted, the Mexican Stock Exchange will determine the
appropriate mechanism to resume trading in its securities. If trading of an
issuer is suspended for more than twenty business days and the issuer is
authorized to resume trading without conducting a public offering, the issuer
must disclose through the SEDI, before trading resumes, a description of the
causes that resulted in the suspension and reasons why it is now authorized to
resume trading.

         Likewise, if the securities of an issuer are traded on both the Mexican
Stock Exchange and a foreign securities market, that issuer must file with the
CNBV and the Mexican Stock Exchange on a simultaneous basis, the information
that it is required to file pursuant to the laws and regulations of the relevant
other jurisdiction.

         Pursuant to the Mexican Securities Market Law, shareholders of issuers
listed on the Mexican Stock Exchange must notify the CNBV before effecting
transactions outside of the Mexican Stock Exchange that result in a transfer of
10% or more of an issuer's capital stock. These shareholders must also inform
the CNBV of the results of these transactions within three days of their
completion, or, in the alternative, that these transactions have not been
consummated. The CNBV will notify the Mexican Stock Exchange of these
transactions, without specifying the names of the parties involved. In addition,
the Mexican Securities Market Law provides that the CNBV also has the ability to
determine whether purchasers in these types of transactions must effect these
transactions through a tender offer, as well as the minimum and maximum
percentages of capital stock that may be purchased through any such tender
offer. See "Other Information--Amendments to Mexican Securities Market Law."

         In addition, the Mexican Securities Market Law requires shareholders
holding 10% or more of the capital stock of companies listed in the registry, to
notify the CNBV of any ownership changes in shares of the company that results
in a transfer of shares representing a beneficial ownership interest of 10% or
more, within ten business days following the transaction in question.

                                SHARE REPURCHASES

         In April 1998 and April 1999, our shareholders approved the allocation
of retained earnings form a reserve amounting to Ps.200.0 million and Ps.500.0
million (Ps.269.2 million and Ps.635.4 million in constant Pesos as of December
31, 2002) to repurchase our Ordinary Shares on the Mexican Stock Exchange at the
discretion of our Board of Directors. At our annual shareholders' meeting, which
was held on April 22, 2003, our shareholders did not approve the allocation of
any amounts from retained earnings for share repurchases. Our share repurchase
program has been authorized by the CNBV and all repurchases have been conducted
in full compliance with Mexican law and the rules and regulations of the CNBV.

         Pursuant to our share repurchase program, we may repurchase Ordinary
Shares on the Mexican Stock Exchange at the prevailing market price. Upon the
repurchase of Ordinary Shares, we must reduce the number of Ordinary Shares
outstanding by the number of Ordinary Shares repurchased. Pursuant to our share
repurchase program, we repurchased 13,433,000 Ordinary Shares during 1998 and
3,003,720 Ordinary Shares during 1999. As of December 31, 2000, 14,729,720
repurchased Ordinary Shares were held in our treasury.

         When we resell repurchased Ordinary Shares on the Mexican Stock
Exchange, we must increase the number of Ordinary Shares outstanding by the
corresponding number of Ordinary Shares sold. We resold 1,438,000 Ordinary
Shares during 1998 and 269,000 Ordinary Shares in 1999. Therefore, the total
amount of Ordinary Shares outstanding was not altered. We are currently in the
process of evaluating various alternatives regarding the resale or redemption of
these Ordinary Shares.

         We have amended our bylaws to reflect certain changes to the Mexican
Securities Market Law affecting share repurchases. For a description of the
amendments relating to share repurchases, see "Other Information--Bylaws--Other
Provisions--Share Repurchases."

ITEM 10.   OTHER INFORMATION

                   AMENDMENTS TO MEXICAN SECURITIES MARKET LAW

         The Mexican Congress approved amendments to the Mexican Securities
Market Law, which became effective on June 2, 2001. Some of these amendments
have not yet been implemented by governmental regulations. Regardless, we have
amended our bylaws in order to reflect certain of these amendments. See "Key
Information--Risk Factors--Risk Relating to Our Securities--The Protections
Afforded to Minority Shareholders Under Mexican Law Are Different From Those in
the United States."

         Among other changes, our bylaws state that we must:

         o    establish a Board with at least five and not more than twenty
              members and alternate members, of which 25% must qualify as
              "independent directors" as defined under Mexican law;

         o    adopt specified corporate governance measures, which require us
              to establish, among other things, an audit committee, as well as
              more stringent procedures for the approval of transactions and
              arrangements with related parties and extraordinary corporate
              transactions; and

         o    provide additional protections for minority shareholders.

         In addition, the Mexican Securities Market Law now permits issuers to
include anti-takeover defenses in their bylaws, provided that their bylaws also
include specified minority rights and protections, among other things, and we
have included such provisions in our bylaws. See "--Bylaws--Other
Provisions--Appraisal Rights and Other Minority Protections" Under the new law,
issuers are also not permitted to implement mechanisms where common shares and
limited or non-voting shares are jointly traded or offered to public investors,
unless the limited or non-voting shares are converted into common shares within
a term of up to five years, or when as a result of the nationality of a given
holder, the shares or the securities representing the shares limit the right to
vote in order to comply with applicable foreign investment regulations.

         The Mexican Securities Market Law imposes some restrictions on
shareholders of issuers listed on the Mexican Stock Exchange. Shareholders of
issuers listed on the Mexican Stock Exchange must notify the CNBV before
effecting transactions outside of the Mexican Stock Exchange that result in a
transfer of 10% or more of an issuer's capital stock. These shareholders must
also inform the CNBV of the results of these transactions within three days of
their completion, or, in the alternative, that these transactions have not been
consummated. The CNBV will notify the Mexican Stock Exchange of these
transactions, without specifying the names of the parties involved. The CNBV
also has the ability to determine whether purchasers in these types of
transactions must effect these transactions through a tender offer, as well as
the minimum and maximum percentages of capital stock that may be purchased
through any such tender offer.

         On April 25, 2002, the CNBV issued general rules to regulate public
tender offers and the obligation to disclose share acquisitions above certain
thresholds. Subject to certain exceptions, any acquisition of shares of a public
company which increases the acquiror's ownership to 10% or more, but no more
than 30%, of the company's outstanding capital stock must be disclosed to the
CNBV and the Mexican Stock Exchange no later than the day following the
acquisition. In addition, any intended acquisition of shares of a public company
which increases the potential acquiror's ownership to 30% or more, but no more
than 50%, of the company's voting shares requires the potential acquiror to make
a tender offer for the greater of (i) the percentage of the capital stock
intended to be acquired or (ii) 10% of the outstanding capital stock. Finally,
any intended acquisition of shares of a public company which increases the
potential acquiror's ownership to more than 50% of the company's voting shares
requires the potential acquiror to make a tender offer for 100% of the
outstanding capital stock.

                                     BYLAWS

         Set forth below is a brief summary of some significant provisions of
our bylaws and Mexican law. This description does not purport to be complete,
and is qualified by reference in its entirety to our bylaws, which have been
filed as an exhibit to this annual report and Mexican law. For a description of
the provisions of our bylaws relating to our Board of Directors, Executive
Committee and statutory auditors, see "Directors, Senior Management and
Employees."

ORGANIZATION AND REGISTER

         Grupo Casa Saba, S.A. de C.V., is a sociedad anonima de capital
variable, or limited liability stock corporation with variable capital, which
was organized under the laws of the United Mexican States in accordance with the
Mexican Companies Law on November 11, 1982. Our deed of incorporation was
registered with the Public Registry of Commerce of Mexico City, D.F., under
Commercial Page (folio mercantil) Number 55,635. We have a general corporate
purpose, the specifics of which can be found in Article Four of our bylaws.

VOTING RIGHTS AND SHAREHOLDERS' MEETINGS

         Holders of Ordinary Shares have the right to vote on all matters
subject to shareholder approval at any general meeting of shareholders and have
the right to appoint our Board of Directors.

         General shareholders' meetings may be ordinary general meetings or
extraordinary general meetings. Extraordinary general meetings are those called
to consider specific matters specified in Article 182 of the Mexican Companies
Law and our bylaws, including amendments to our bylaws, our dissolution,
liquidation or split-up, our merger and transformation from one form of company
to another and increases and reductions in our capital stock. In addition, our
bylaws require an extraordinary general meeting to consider the cancellation
from registration of our Ordinary Shares with the securities and/or special
sections of the NRFI, as the case may be, and with any other Mexican or foreign
stock exchange in which our Ordinary Shares or securities represented our
Ordinary Shares, such as our ADSs, are registered. General meetings called to
consider all other matters are ordinary meetings that are held at least once
each year within four months following the end of each year.

DIVIDEND RIGHTS

         At our annual ordinary general shareholders' meeting, our Board of
Directors submits our financial statements from the previous year to the holders
of our Ordinary Shares for their approval. Once our shareholders approve these
financial statements, they must then allocate our net profits for the previous
year. Under Mexican law, at least 5% of our net profits must be allocated to a
legal reserve, until the amount of this reserve equals 20% of our paid-in
capital stock. Thereafter, our shareholders may allocate our net profits to any
special reserve. After this allocation, the remainder of our net profits will be
available for distribution as dividends.

         Decisions regarding the payment and amount of dividends are subject to
approval by the holders of our Ordinary Shares, generally, but not necessarily,
on the recommendation of our Board of Directors. Our controlling shareholder
owns 85% of the authorized, issued and outstanding Ordinary Shares, and for so
long as it continues to do so, it will have, as a result of such ownership, the
ability to determine whether dividends are to be paid and the amount of such
dividends. See "Key Information--Dividends" and "--Risk Factors--Risk Factors
Relating to Our Securities--Our Controlling Shareholder Has the Ability to
Restrict the Payment and Amount of Dividends and the Terms of Our Indebtedness
Also Restrict the Declaration and Payment of Dividends."

LIMITATION ON CAPITAL INCREASES

         Our bylaws require that any capital increase is represented by new
shares of each series of our capital stock in proportion to the number of each
series outstanding shares.

PREEMPTIVE RIGHTS

         In the event of a capital increase, a holder of Ordinary Shares has a
preferential right to subscribe to a sufficient number of Ordinary Shares in
order to maintain its existing proportionate holdings of Ordinary Shares.
Shareholders must exercise their preemptive rights within the time period fixed
by our shareholders at the meeting approving the issuance of additional Ordinary
Shares. This period must continue for at least fifteen days following the
publication of notice of the issuance in the Diario Oficial de la Federacion and
in a newspaper of general circulation in Mexico City. Under Mexican law,
shareholders cannot waive their preemptive rights in advance or be represented
by an instrument that is negotiable separately from the corresponding Ordinary
Share. U.S. holders of ADSs may exercise preemptive rights only if we register
any newly issued Ordinary Shares under the Securities Act of 1933 or qualify for
an exemption from registration. We intend to evaluate at the time of any
offering of preemptive rights the costs and potential liabilities associated
with registering additional Ordinary Shares. See "Key Information--Risk
Factors--Risk Factors Relating to Our Securities--Preemptive Rights May Be
Unavailable to Holders of Our ADSs."

OTHER PROVISIONS

         FORFEITURE OF SHARES. As required by Mexican law, our bylaws provide
that for Ordinary Shares, our non-Mexican shareholders formally agree with the
Foreign Affairs Ministry:

         o    to be considered as Mexicans with respect to Ordinary Shares
              that they acquire or hold as well as to the property, rights,
              concessions, participations or interests owned by us or to the
              rights and obligations derived from any agreements we have with
              the Mexican government; and

         o    not to invoke the protection of their own governments. Failure
              to comply is subject to a penalty of forfeiture of such a
              shareholder's capital interests in favor of Mexico.

         In the opinion of Mijares, Angoitia, Cortes y Fuentes, S.C., our
Mexican counsel, under this provision a non-Mexican shareholder is deemed to
have agreed not to invoke the protection of his own government by asking such
government to interpose a diplomatic claim against the Mexican government with
respect to the shareholder's 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 us. If the shareholder
should invoke governmental protection in violation of this agreement, its shares
could be forfeited to the Mexican government.

         EXCLUSIVE JURISDICTION. Our bylaws provide that legal action relating
to the execution, interpretation or performance of the bylaws shall be brought
only in courts located in Mexico City.

         DURATION. Our corporate existence under our bylaws continues until
2089.

         DISSOLUTION OR LIQUIDATION. Upon any dissolution, liquidation or
split-up of our company, our shareholders will appoint one or more liquidators
at an extraordinary general shareholders' meeting to wind up our affairs. Upon a
dissolution, liquidation or split-up, a pro rata payment per Ordinary Share will
be made to each holder of Ordinary Shares.

         REDEMPTION. Our bylaws provide that we may redeem our Ordinary Shares
with distributable profits without reducing our capital stock by shareholder
resolution at an extraordinary shareholders' meeting. In accordance with Mexican
law:

         o    any redemption shall be made on a pro-rata basis among all of
              our shareholders;

         o    to the extent that a redemption is effected through a public
              tender offer on the Mexican Stock Exchange, the shareholders'
              resolution approving the redemption may empower the Board to
              specify the number of shares to be redeemed and appoint the
              related intermediary or purchase agent; and

         o    any redeemed shares must be cancelled.

         SHARE REPURCHASES. As required by Mexican law, our bylaws provide that
we may repurchase our shares on the Mexican Stock Exchange at the prevailing
market prices. We do not require to create a special reserve for the repurchase
of shares, nor do we need the approval of our Board to effect share repurchases,
however, we must appoint a person or individuals responsible for effecting share
repurchases. The amount of capital stock allocated to share repurchases is
determined by our shareholders at a general ordinary shareholders' meeting.
Share repurchases must be charged to our net worth if the repurchased shares
remain in our possession and to our capital stock if the repurchased shares are
converted into treasury shares. The aggregate amount of resources allocated to
share repurchases in any given year cannot exceed the total amount of our net
profits in any given year. Our capital stock is reduced automatically in an
amount equal to the theoretical value of any repurchased shares. If the purchase
price of the shares is less than the theoretical value of the repurchased
shares, our capital stock account will be affected by an amount equal to the
theoretical value of the repurchased shares.

         CONFLICTS OF INTEREST. Under the Mexican Securities Market Law, any
shareholder or director that votes on a transaction in which his interests
conflict with our interests may be liable for damages, but only if the
transaction would not have been approved without its vote. In addition, any
member of our Board that votes on a transaction in which his interest conflict
with our interests may be liable for damages. Our existing bylaws do not contain
any provisions that govern or limit the ability of our directors or shareholders
to vote on transactions in which their interests conflict with our interests. In
addition, our existing bylaws do not contain any provisions that govern or limit
the ability of our directors, in the absence of an independent quorum, to borrow
from us or to vote compensation to themselves or any other member of our Board
or any committee of our Board. We have amended our bylaws to require the Board's
approval for certain related party transactions. Members of our Board, members
of our Audit Committee and our Statutory Auditor will be liable to our
stockholders for breaching their duty of loyalty to the corporation to the
extent that these individuals approve transactions in which they have a conflict
of interest.

         APPRAISAL RIGHTS AND OTHER MINORITY PROTECTIONS. Whenever our
shareholders approve to amend our corporate purpose, jurisdiction of
organization or capital structure, any shareholder entitled to vote that did not
vote in favor of these matters has the right to receive a payment for its
Ordinary Shares in an amount calculated in accordance with Mexican law. However,
shareholders must exercise their appraisal rights within fifteen days after the
shareholders' meeting at which the matter was approved.

         The protections afforded to minority shareholders under Mexican law are
generally different from those in the United States and many other
jurisdictions. Substantive Mexican law concerning fiduciary duties of directors
has not been the subject to extensive judicial interpretation in Mexico, unlike
many states in the United States where duties of care and loyalty elaborated by
judicial decisions helped to shape the rights of minority shareholders. Mexican
civil procedure does not contemplate class actions or shareholder derivative
actions, which permit shareholders in U.S. courts to file actions on behalf of
other shareholders or to enforce rights of the corporation itself. Shareholders
cannot challenge corporate actions taken at shareholders' meetings unless they
meet stringent procedural requirements.

         As a result of these factors, it is generally more difficult for our
minority shareholders to enforce rights against us or our directors or principal
shareholders, than it is for shareholders of a U.S. issuer.

         In addition, under U.S. securities laws, as a foreign private issuer we
are exempt from certain rules that apply to domestic U.S. issuers with equity
securities registered under the U.S. Securities Exchange Act of 1934, including
the proxy solicitation rules. We are also exempt from some of the corporate
governance requirements of the New York Stock Exchange, including the
requirements concerning audit committees and independent directors.

         Under our current bylaws, if we decide to cancel, or the CNBV requires
us to cancel, the registration of our Ordinary Shares in the NRFI, our
controlling shareholder will be required to initiate a tender offer for all
Ordinary Shares held by minority stockholders at a price equal to the higher of
the average trading price of the Ordinary Shares on the Mexican Stock Exchange
during the 30 day period prior to the commencement of the tender offer or the
book value of the Ordinary Shares. If any Ordinary Shares held by minority
shareholders are not tendered pursuant to the tender offer, a trust will be
established, into which our controlling shareholder would be required to
contribute cash in an amount equal to the consideration for these remaining
Ordinary Shares. Those minority shareholders who did not tender their Ordinary
Shares in the tender offer have the right to tender their Ordinary Shares to the
trust at the tender offer price for up to two years following the completion of
the tender offer.

         In addition, as described above under the caption "--Recent Amendments
to Mexican Securities Market Law," as of June 1, 2001, the Mexican Securities
Market Law was amended to heighten to the protections afforded to minority
shareholders under Mexican law. In accordance with these amendments, we have
amended our bylaws to include a number of minority protections. These minority
protections include provisions that permit:

         o    holders of at least 10% of our outstanding capital stock to call
              a shareholders' meeting;

         o    holders of at least 15% of our outstanding capital stock to
              bring a derivative suit against any member of our Board of
              Directors for breach of fiduciary duties;

         o    holders of at least 10% of our shares represented at a
              shareholders' meeting to request that resolutions with respect
              to any matter on which they were not sufficiently informed to be
              postponed; and

         o    subject to the satisfaction of certain requirements under
              Mexican law, holders of at least 20% of our outstanding capital
              stock to contest any shareholder resolution.

         While these amendments have not yet been implemented by governmental
regulations, upon their implementation, the protections afforded to our minority
shareholders will be much more stringent than in the past.

ENFORCEABILITY OF CIVIL LIABILITIES

         We are organized under the laws of Mexico. Substantially all of our
directors and executive officers reside outside of the United States, all or a
significant portion of the assets of our directors and executive officers reside
outside of the United States and substantially all of our assets are located
outside of the United States. As a result, it may be difficult for investors to
effect service of process within the United States upon these individuals. It
may also be difficult for investors to enforce against these individuals, either
inside or outside the United States, judgments obtained against them in U.S.
courts, or to enforce in U.S. courts judgments obtained against them in courts
in jurisdictions outside the United States, in any action based on civil
liabilities under the U.S. federal securities laws. There is doubt as to the
enforceability against these individuals in Mexico, whether in original actions
or in actions to enforce judgments of U.S. courts, of liabilities predicated
solely on U.S. federal securities laws. We have been advised by our Mexican
counsel, Mijares, Angoitia, Cortes y Fuentes, S.C., that there is doubt as to
the enforceability, in original actions in Mexican courts, of liabilities
predicated solely on U.S. federal securities laws and as to the enforceability
in Mexican courts of judgments of U.S. courts obtained in actions predicated
upon the civil liability provisions of the U.S. federal securities laws.

                               MATERIAL CONTRACTS

         We refinanced all of our indebtedness on June 29, 2001 through a
Ps.645.0 million term loan facility with Scotiabank Inverlat. For a description
of the material terms of this facility, see "Operating and Financial Review and
Prospects --Liquidity, Foreign Exchange and Capital
Resources--Indebtedness--Scotiabank Inverlat Credit Facility." A summary of the
material terms of this facility has been enclosed as an exhibit to this annual
report.

         Our transactions and arrangements with related parties are described
under the caption "Major Shareholders and Related Party Transactions--Related
Party Transactions."

                                LEGAL PROCEEDINGS

         Neither we nor any of our subsidiaries is a party to any material
litigation or arbitration, and we are not aware of any material litigation,
claim or assessments currently pending or threatened against us or any of its
subsidiaries.

            EXCHANGE CONTROLS AND RESTRICTIONS ON FOREIGN INVESTMENT

         For a description of exchange rate information, see "Key
Information--Exchange Rate Information."

         Since November 1991, Mexico has had a free market for foreign exchange.
Prior to December 21, 1994, the Mexican Central Bank, Banco de Mexico, kept the
Peso-U.S. Dollar exchange rate within a range prescribed by the Mexican
government through intervention in the foreign exchange market. Within this
range, Banco de Mexico generally intervened to reduce day-to-day fluctuations in
the exchange rate. In December 1994, the Mexican government suspended
intervention by Banco de Mexico and allowed the Peso to float freely against the
U.S. Dollar. Factors contributing to this decision included the size of Mexico's
then current account deficit, the level of Banco de Mexico's foreign exchange
reserves, rising interest rates for other currencies, especially the U.S.
Dollar, and reduced confidence in the Mexican economy on the part of
international investors. The Peso declined sharply in December 1994 and
continued to fall under conditions of high volatility in 1995. In 1996 and most
of 1997, the Peso fell more slowly and was less volatile. The fall of the Hang
Seng Index of the Hong Kong Stock Exchange on October 24, 1997 marked the
beginning of a period of increased volatility in the foreign exchange markets,
with the Peso falling over 10% in just a few days. During 1998, the foreign
exchange markets experienced volatility as a result of the financial crisis in
Asia and Russia and financial turmoil in countries such as Brazil and Venezuela.
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 or
appreciate significantly in the future.

         Ownership by non-Mexicans of securities issued by Mexican companies is
regulated by the Ley de Inversion Extranjera, or the Foreign Investment Law, and
the Reglamento de la Ley de Inversion Extranjera y del Registro Nacional de
Inversiones Extranjeras, or the Foreign Investment Regulations.

         The Comision Nacional de Inversiones Extranjeras, or the Foreign
Investment Commission, is responsible for the administration of the Foreign
Investment Law and the Foreign Investment Regulations.

         The Foreign Investment Law, as amended, provides that foreign investors
may own up to 100% of the capital stock of Mexican companies, without the
approval of the foreign investment authorities, if various requirements are met.

         The Foreign Investment Law also requires us to register any foreign
owner of our Ordinary Shares, including the depositary for our ADSs, with the
National Registry of Foreign Investment or the NRFI. We have registered Morgan
Guaranty Trust Co., the depositary for our ADSs, for this purpose.

         In addition, as required by Mexican law, our bylaws provide that
non-Mexican holders of our Ordinary Shares, including those held in the form of
ADSs, formally agree with the Foreign Affairs Ministry:

         o    to be considered as Mexicans with respect to the Ordinary Shares
              that they acquire or hold, as well as to the property, rights,
              concessions, participation or interests owned by us or to the
              rights and obligations derived from any agreements we have with
              the Mexican government; and

         o    not to invoke the protection of their own governments. If a
              holder of our Ordinary Shares invokes the protection of its own
              government, its Ordinary Shares will be forfeited to the Mexican
              government.

                                    TAXATION

MEXICAN TAX CONSIDERATIONS

         GENERAL. The following is a summary of the anticipated material Mexican
tax consequences of the purchase, ownership and disposition of ADSs or Ordinary
Shares by a person that is not a resident of Mexico, as defined below. The term
"U.S. Holder" shall have the meaning ascribed below under the section "- U.S.
Federal Income Tax Considerations".

         U.S. Holders should consult with their own tax advisors to as to their
entitlement to benefits afforded by the tax treaty between the United States and
Mexico. Mexico has also entered into and is negotiating with various countries
regarding other tax treaties that may have an effect on the tax treatment of
ADSs or Ordinary Shares. Holders should consult with their tax advisors as to
their entitlement to the benefits afforded by these treaties.

         This discussion does not constitute, and shall not be considered as,
legal or tax advice to holders. This discussion is for general information
purposes only and is based upon the tax laws of Mexico as in effect on the date
of this annual report, which are subject to change, including:

         o    the Income Tax Law, Federal Tax Code, and

         o    the tax treaty.

         Holders should consult their own tax advisors as to U.S., Mexican or
other tax consequences of the purchase, ownership and disposition of ADSs or
Ordinary Shares.

         For Mexican income tax purposes, the following principles apply
regarding residency:

         o    a natural person may be treated as a resident of Mexico if he or
              she has established his or her home in Mexico, unless he or she
              resided in another country for more than 183 calendar days
              during a year and can demonstrate that he or she had become a
              resident of that country for tax purposes;

         o    a legal entity is a resident of Mexico if it is established
              under Mexican law, or it has established in Mexico its main
              place of management;

         o    a Mexican citizen is presumed to be a resident of Mexico unless
              he or she can demonstrate otherwise; and

         o    a legal entity that has a permanent establishment or fixed base
              in Mexico shall be required to pay taxes in accordance with
              relevant tax provisions.

         On April 3, 2001, a bill was introduced in the Mexican Congress
involving a proposal to substantially reform the Mexican tax laws. Certain of
such reforms have already been passed by the Mexican Congress and involve, among
others, the corporate income tax rate will be gradually reduced to 32%. For 2002
the applicable corporate income tax rate is 35% and will be reduced by 1% in
each year until reaching 32% in 2005.

         DIVIDENDS. Dividends, either in cash or in any other form, paid with
respect to the Ordinary Shares underlying the ADSs, are no longer subject to a
Mexican withholding tax, so long that certain requirements are met.

         SALES OR OTHER DISPOSITIONS. The sale or other disposition of ADSs will
not be subject to Mexican taxation. Deposits and withdrawals of Ordinary Shares
for ADSs will not give rise to Mexican tax or transfer duties.

         The sale or other disposition of Ordinary Shares will not be subject to
any Mexican tax if:

         o    the sale is carried out through the Mexican Stock Exchange, or
              other recognized securities market approved by the Mexican tax
              authorities through general rules; and

         o    the Ministry of Finance and Public Credit considers such
              Ordinary Shares to be publicly held.

         Sales or other dispositions of Ordinary Shares made in other
circumstances would be subject to Mexican income tax. However, under the tax
treaty, any U.S. Holder that is eligible to claim the benefits of the tax treaty
may be exempt from Mexican tax on gains realized on a sale or other disposition
of Ordinary Shares in a transaction that is not carried out through the Mexican
Stock Exchange or such other approved securities markets. The U.S. Holder will
be exempt under the tax treaty if the U.S. Holder did not own directly or
indirectly 25% or more of the our outstanding shares within the 12-month period
preceding such sale or disposition. Gains realized by other Holders that are
eligible to receive benefits pursuant to other income tax treaties to which
Mexico is a party may be exempt from Mexican income tax in whole or in part.
Non-U.S. Holders should consult their own tax advisors as to their possible
eligibility under such other income tax treaties.

         OTHER MEXICAN TAXES. There are no estate, gift, or succession taxes
applicable to the ownership, transfer or disposition of ADSs or Ordinary Shares.
However, a gratuitous transfer of ADSs or Ordinary Shares may, in some
circumstances, result in the imposition of a Mexican federal tax upon the
recipient. There are no Mexican stamp, issuer, registration or similar taxes or
duties payable by holders of ADSs or Ordinary Shares.

U.S. FEDERAL INCOME TAX CONSIDERATIONS

         GENERAL. The following is a summary of the material U.S. federal income
tax consequences relating to the ownership and disposition of ADSs or Ordinary
Shares by U.S. Holders, as defined below.

         This summary is based on provisions of the U.S. Internal Revenue Code
of 1986, as amended (the "Code"), U.S. Treasury regulations promulgated under
the Code, and administrative rulings, and judicial interpretations of the Code,
all as in effect on the date of this annual report and all of which are subject
to change, possibly retroactively. This summary is limited to U.S. Holders who
hold ADSs or Ordinary Shares as capital assets within the meaning of section
1221 of the Code. This summary does not discuss all aspects of U.S. federal
income taxation which may be important to an investor in light of its individual
circumstances, for example, an investor subject to special tax rules (e.g.,
banks, thrifts, real estate investment trusts, regulated investment companies,
insurance companies, dealers in securities or currencies, U.S. expatriates,
tax-exempt investors, or holders whose functional currency is not the U.S.
Dollar or U.S. Holders who hold ADSs or Ordinary Shares as a position in a
"straddle," as part of a "synthetic security" or "hedge," as part of a
"conversion transaction" or other integrated investment, persons that own (or
are deemed to own) 10% or more (by voting power) of our capital stock or as
other than a capital asset). In addition, this summary does not address any
aspect of state, local or foreign taxation.

         For purposes of this summary, a "U.S. Holder" means a beneficial owner
of ADSs or Ordinary Shares that is for U.S. federal income tax purposes:

         o    an individual who is a citizen or resident of the United States
              for U.S. federal income tax purposes;

         o    a corporation or other entity taxable as a corporation or a
              partnership that is created or organized in the United States or
              under the laws of the United States or any state thereof
              (including the District of Columbia);

         o    an estate the income of which is includible in gross income for
              U.S. federal income tax purposes regardless of its source; or

         o    a trust if a court within the United States is able to exercise
              primary supervision over the administration of such trust and
              one or more United States persons have the authority to control
              all substantial decisions of such trust;

and that is entitled to the benefits of the covention between the United States
and Mexico for Avoidance of Double Taxation and Prevention of Evasion with
respect to Income Taxes (the "tax treaty").

         If a partnership (including any entity treated as a partnership for
U.S. federal income tax purposes) is the beneficial owner of ADSs or Ordinary
Shares, the U.S. federal income tax treatment of a partner in such partnership
will generally depend upon the status of the partner and the activities of the
partnership.

         OWNERSHIP OF ADSS IN GENERAL. In general, for U.S. federal income tax
purposes, U.S. Holders that own ADSs will be treated as the beneficial owners of
the underlying Ordinary Shares represented by the ADSs.

         DIVIDENDS. Distributions of cash or property with respect to the
Ordinary Shares, including Ordinary Shares represented by ADSs, generally will
be includible in the gross income of a U.S. Holder as foreign source dividend
income on the date the distributions are received by the depositary or the U.S.
Holder, as the case may be, to the extent paid out of our current or accumulated
earnings and profits, as determined under U.S. federal income tax principles.
These dividends will not be eligible for the dividends-received deduction. To
the extent, if any, that the amount of any distribution by us exceeds our
current and accumulated earnings and profits as determined under U.S. federal
income tax principles, it will be treated first as a tax-free return of the U.S.
Holder's adjusted tax basis in the ADSs or Ordinary Shares and thereafter as
capital gain.

         Dividends paid in Pesos should be includible in the income of a U.S.
Holder in a U.S. Dollar amount calculated by reference to the exchange rate in
effect the day the Pesos are received by the depositary or the U.S. Holder, as
the case may be, including the amount deducted to pay expenses of the
depositary, whether or not they are converted into U.S. Dollars on that day.
Generally, any gain or loss resulting from currency exchange fluctuations during
the period from the date the dividend payment is includible in income to the
date such payment is converted into U.S. Dollars will be treated as ordinary
income or loss. Such gain or loss will generally be income from sources within
the United States for foreign tax credit limitation purposes.

         CAPITAL GAINS. The sale or exchange of ADSs or Ordinary Shares will
result in the recognition of gain or loss by a U.S. Holder for U.S. federal
income tax purposes in an amount equal to the difference between the amount
realized and the U.S. Holder's tax basis therein. That gain or loss recognized
by a U.S. Holder will be long-term capital gain or loss if the U.S. Holder's
holding period for the ADSs or Ordinary Shares exceeds one year at the time of
disposition.

         Deposits and withdrawals of Ordinary Shares by U.S. Holders in exchange
for ADSs will not result in the realization of gain or loss for U.S. federal
income tax purposes.

         RECENT TAX LEGISLATION. The Jobs and Growth Tax Relief Reconciliation
Act of 2003 (the "Act"), enacted on May 28, 2003, reduces the maximum rate of
tax imposed on certain dividends received by U.S. Holders that are individuals
to 15 percent (5 percent for individuals in the lower tax brackets and 0 percent
for these taxpayers in 2008) (the "Reduced Rate"), so long as certain holding
period requirements are met. The Reduced Rate applies to dividends received
after December 31, 2002 and before January 1, 2009. In order for dividends paid
by a foreign corporation to be eligible for the Reduced Rate, the foreign
corporation must be a "qualified foreign corporation" within the meaning of the
Act and must not be a foreign investment company (a "FIC"), a passive foreign
investment company (a "PFIC"), or a foreign personal holding company (a "FPHC")
in either the taxable year of the distribution or the preceding taxable year. We
believe that we will be considered a "qualified foreign corporation" within the
meaning of the Act because our ADSs are listed on the New York Stock Exchange.
We further believe that we are not currently a FIC, a PFIC, or a FPHC.
Accordingly, any distributions we make that are treated as taxable dividends
should qualify for the Reduced Rate. There can be no assurance, however, that we
will continue to be considered a "qualified foreign corporation" or that we will
not be classified as a FIC, a PFIC or a FPHC in the future. Thus, there can be
no assurance that our dividends will continue to be eligible for the Reduced
Rate. Special rules apply for purposes of determining the recipient's investment
income (which limits deductions for investment interest) and foreign income
(which may affect the amount of foreign tax credit) and to certain extraordinary
dividends. Each U.S. Holder that is an individual is urged to consult his or her
tax advisor regarding the possible applicability of the Reduced Rate under the
Act and the related restrictions and special rules.

         The Act also reduces the top individual tax rate on adjusted net
capital gains for sales and exchanges of capital assets on or after May 6, 2003
and before January 1, 2009 from 20 percent (10 percent for individuals in the
lower tax brackets) to 15 percent (5 percent for individuals in the lower tax
brackets and 0 percent for these taxpayers in 2008).

         TAX STATUS OF THE COMPANY FOR U.S. FEDERAL INCOME TAX PURPOSES

         PERSONAL HOLDING COMPANIES. A non-U.S. corporation may be classified as
a personal holding company (a "PHC") for U.S. federal income tax purposes if (i)
five or fewer individuals (without regard to their citizenship or residency) own
or are deemed to own (under certain attribution rules) more than 50 percent of
the stock of the corporation by value (the "PHC Ownership Test") and (ii) such
non-U.S. corporation receives 60 percent or more of its U.S. related gross
income, as specifically adjusted, from certain passive sources (the "PHC Income
Test"). Such corporation is taxed on certain of its undistributed U.S. source
income (including certain types of foreign source income which are effectively
connected with the conduct of a U.S. trade or business) to the extent amounts at
least equal to such income are not distributed to shareholders (the "PHC Tax").

         We currently satisfy the PHC Ownership Test, and it is possible that we
could satisfy the PHC Income Test. However, we do not currently anticipate
having any significant amounts of U.S. source income. Since the PHC Tax is
imposed solely on undistributed U.S. source income, we do not expect the
imposition of the PHC Tax to result in us having any significant tax liability.
U.S. Holders should consult their tax advisors as to the likelihood of our being
classified as a PHC and the consequences of our being so classified under these
rules.

         FOREIGN PERSONAL HOLDING COMPANIES. A non-U.S. corporation will be
classified as a FPHC for U.S. federal income tax purposes if (i) at any time
during the corporation's taxable year, five or fewer individuals who are United
States citizens or residents own or are deemed to own (under certain attribution
rules) more than 50 percent of all classes of the corporation's stock measured
by voting power or value (the "FPHC Ownership Test") and (ii) the corporation
receives at least 60 percent (50 percent in later years) of its gross income
(regardless of source), as specifically adjusted from certain passive sources
(the "FPHC Income Test").

         We do not believe that we currently satisfy the FPHC Ownership Test.
Due to a number of factors (including FPHC stock attribution rules, possible
changes in residence by current shareholders, and possible acquisition of shares
by purchase, gift or bequest by individuals related to or partners of current
indirect shareholders), however, there can be no assurance that we are not
currently or will not become a FPHC in the future.

         If we were classified as a FPHC, a portion of our "undistributed
foreign personal holding company income" (as defined for U.S. federal income tax
purposes) would be imputed to all of our shareholders who are U.S. Holders on
the last taxable day of our taxable year, or, if earlier, the last day on which
we were classified as a FPHC. Such income would be taxable as a dividend, even
if no cash dividend is actually paid. U.S. Holders who dispose of their ADSs or
Ordinary Shares prior to such date would not be subject to tax under these
rules. In addition, as described previously under "Recent Tax Legislation" if we
were classified as a FPHC, our dividends would no longer be eligible for the
Reduced Rate. U.S. Holders should consult their tax advisors as to the
likelihood of our being classified as a FPHC and the consequences of our being
so classified under these rules.

         BACKUP WITHHOLDING. A U.S. Holder may, under certain circumstances, be
subject to "backup withholding" with respect to some payments to that U.S.
Holder such as dividends or the proceeds of a sale or other disposition of ADSs
or Ordinary Shares, 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 and otherwise complies with
applicable requirements of the backup withholding rules. Any amount withheld
under these rules will be creditable against the U.S. Holder's federal income
tax liability.

                              DOCUMENTS ON DISPLAY

         For further information pertaining to us and our Ordinary Shares and
ADSs, we refer you to the filings we have made with the SEC. Statements
contained in this annual report concerning the contents of any contract or any
other document are not necessarily complete. If a contract or document has been
filed as an exhibit to any filing we have made with the SEC, we refer you to the
copy of the contract or document that has been filed. Each statement in this
annual report relating to a contract or document filed as an exhibit to any
filing we have made with the SEC is qualified in its entirety by the filed
exhibit.

         We are subject to the informational requirements of the Securities
Exchange Act of 1934 and, in accordance with these requirements, we file reports
and other information with the SEC. These reports and other information, as well
as any related exhibits and schedules, may be inspected, without charge, at the
public reference facility maintained by the SEC at Room 1024, Judiciary Plaza,
450 Fifth Street, N.W., Washington, D.C. 20549, and at the SEC's regional
offices located at Seven World Trade Center, New York, New York 10048 and
Northwestern Atrium Center, 500 West Madison Street, Suite 1400 Chicago,
Illinois 60661-2511. Copies of these reports and other information may also be
obtained from the Public Reference Section of the SEC at 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. These reports and other information
may also be inspected at the offices of the New York Stock Exchange, 20 Broad
Street, New York, New York 10005.

         We furnish The Bank of New York, the depositary for our ADSs, with
annual reports in English. These reports contain audited consolidated financial
statements that have been prepared in accordance with Mexican GAAP, and include
reconciliations of net income and stockholders' equity to U.S. GAAP. These
reports have been examined and reported on, with an opinion expressed by, an
independent auditor. The depositary is required to mail our annual reports to
all holders of record of our ADSs. The deposit agreement for the ADSs also
requires us to furnish the depositary with English translations of all notices
of shareholders' meetings and other reports and communications that we send to
holders of our Ordinary Shares. The depositary is required to mail these
notices, reports and communications to holders of record of our ADSs.

         As a foreign private issuer, we are not required to furnish proxy
statements to holders of our ADSs in the United States.

ITEM 11.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         We are exposed to a number of different market risks arising from our
normal business activities and risk management activities. We do not enter into
or hold any market risk sensitive instruments for trading purposes. Market risks
arise from the possibility that changes in interest rates or currency exchange
rates will adversely affect the value of our financial assets, liabilities or
expected future cash flows.

                               INTEREST RATE RISK

         We are subject to market risks due to interest fluctuations in Mexico.
In addition, in the past, we have occasionally entered into swap arrangements
and other hedge transactions, and will continue to consider to do so in the
future, to reduce our exposure to interest rate risks. We currently are not a
party to any arrangements to reduce our exposure to interest rate risk.

                           FOREIGN EXCHANGE RATE RISK

         As of December 31, 2002 all of our indebtedness was Peso-denominated,
and given this fact, we currently do not have a net monetary position in U.S.
Dollars. As a result, we are not currently subject to foreign exchange rate risk
fluctuations. To the extent that we incur U.S. Dollar-denominated indebtedness
in the future, we would be subject to foreign exchange rate risk.

ITEM 12.   DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

         Not applicable.

PART II

ITEM 13.   DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

         Not applicable.

ITEM 14.   MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND
           USE OF PROCEEDS

         Not applicable.

ITEM 15.   CONTROLS AND PROCEDURES

(a) Evaluation of Disclosure Controls and Procedures. The company's Chief
Executive Officer and Chief Financial Officer have evaluated the effectiveness
of the company's disclosure controls and procedures (as such term is defined in
Rules 13a-14(c) and 15d-14(c) under the Securities Exchange Act of 1934, as
amended (the "Exchange Act") as of a date within 90 days prior to the filing
date of this annual report (the "Evaluation Date"). Based on such evaluation,
such officers have concluded that, as of alerting them on a timely basis to
material information relating to the company (including its consolidated
subsidiaries) required to be included in the company's periodic filings under
the Exchange Act.

(b) Changes in Internal Controls. Since the Evaluation Date, there have not been
any significant changes in the company's internal controls or in other factors
that could significantly affect such controls.

ITEM 16.   RESERVED

         Not applicable.

PART III

ITEM 17.   FINANCIAL STATEMENTS

         Grupo Casa Saba has responded to Item 18 in lieu of Item 17.

ITEM 18.   FINANCIAL STATEMENTS

The following financial statements, together with the report of Salles
Sainz-Grant Thornton, S.C. thereon, are filed as part of this Annual Report.

                                                                           Page
                                                                           ----
Index to Consolidated Financial Statements                                  F-1

Report of Independent Certified Public Accountants                          F-2

Consolidated Balance Sheets as of December 31, 2001 and 2002                F-4

Consolidated Statements of Income for each of the years ended               F-5
December 31, 2000, 2001 and 2002

Consolidated Statements of Stockholders' Equity for the years ended         F-6
December 31, 2000, 2001 and 2002

Consolidated Statements of Changes in Financial Position for the            F-7
years ended December 31, 2000, 2001 and 2002

Notes to Consolidated Financial Statements                                  F-8


All supplementary schedules relating to the Registrant are omitted because they
are not required or because the required information, where material, is
contained in the audited consolidated financial statements or notes thereto.

ITEM 19.   EXHIBITS

         Documents filed as an exhibit to this annual report are as follows:


Exhibit
Number                         Description of Exhibits
------                         -----------------------

   1.1         Amended and Restated Bylaws (estatutos sociales) of the
               Registrant, dated as of April 25, 2002 in Spanish, together
               with an English translation(1)

   4.1         Summary of the Material Terms of Credit Agreement and Guaranty,
               dated as of June 29, 2001, among Casa Saba, S.A. de C.V., as
               Borrower, the Registrant, as Guarantor, Scotiabank Inverlat,
               S.A., Institucion de Banco Multiple, Grupo Financiero
               Scotiabank Inverlat, as Lender, and Certain Legal
               Representatives(2)

   8.1         List of Subsidiaries of the Registrant

   10.1        Certification of Principal Executive and Financial Officers of
               Grupo Casa Saba, S.A. de C.V. pursuant to 18 U.S.C. Section
               1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
               Act of 2002.

_________________

       (1)  Previously submitted to the Securities and Exchange Commission
            as an Exhibit to the Registrant's Annual Report on Form 20-F
            for the year ended December 31, 2001 and incorporated herein
            by reference.

       (2)  Previously submitted to the Securities and Exchange Commission
            as an Exhibit to the Registrant's Annual Report on Form 20-F
            for the year ended December 31, 2000 and incorporated herein
            by reference.



<PAGE>


                                    SIGNATURE


         The Registrant hereby certifies that it meets all of the requirements
for filing on Form 20-F and that it has duly caused and authorized the
undersigned to sign this annual report on its behalf.


Dated:  June 27, 2003                         GRUPO CASA SABA, S.A. DE C.V.



                                              By: /s/ Manuel Saba Ades
                                                  -----------------------
                                              Name:  Manuel Saba Ades
                                              Title: Chief Executive Officer



<PAGE>

                                  CERTIFICATION

I, Manuel Saba Ades, certify that:

1.   I have reviewed this annual report on Form 20-F of Grupo Casa Saba, S.A.
     de C.V. (the "Registrant");

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-14 and 15d-14) for the Registrant and
     we 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 function):

     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 or not 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.


Dated:  June 27, 2003                          /s/  Manuel Saba Ades
                                               -------------------------------
                                                Name:  Manuel Saba Ades
                                                Title: Chief Executive Officer



<PAGE>


                                  CERTIFICATION

I, Alejandro Sadurni Gomez, certify that:

1.   I have reviewed this annual report on Form 20-F of Grupo Casa Saba, S.A.
     de C.V. (the "Registrant");

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-14 and 15d-14) for the Registrant and
     we 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 function):

     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 or not 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.



Dated:  June 27, 2003                          /s/ Alejandro Sadurni Gomez
                                               ---------------------------
                                               Name:  Alejandro Sadurni Gomez
                                               Title: Chief Financial Officer


<PAGE>


                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

                                                                         Page
                                                                         -----
CONSOLIDATED FINANCIAL STATEMENTS OF GRUPO CASA SABA, S.A. DE C.V.
Report of Independent Certified Public Accountants......................   F-2

Consolidated Balance Sheets as of December 31, 2001 and 2002............   F-4

Consolidated Statement of Income for each of the years ended
December 31, 2000, 2001 and 2002........................................   F-5

Consolidated Statements of Stockholders' Equity for the years
ended December 31, 2000, 2001 and 2002..................................   F-6

Consolidated Statement of Changes in Financial Position for
the years ended December31, 2000, 2001 and 2002.........................   F-7

Notes to Consolidated Financial Statements..............................   F-8




                                     F-1


<PAGE>


              Report of Independent Certified Public Accountants
              --------------------------------------------------



To the Stockholders of
Grupo Casa Saba, S.A. de C.V.:


         We have audited the accompanying consolidated balance sheets of GRUPO
CASA SABA, S. A. DE C. V. AND SUBSIDIARIES (all incorporated in Mexico and
collectively referred to as the "Group") as of December 31, 2001 and 2002, and
the related consolidated statements of income, stockholders' equity, and
changes in financial position for each of the years in the three-year period
ended December 31, 2002, all stated in thousands of 2002 year-end constant
Mexican pesos. These financial statements are the responsibility of the
Group'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 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 provide a reasonable basis for our opinion.

         In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Grupo
Casa Saba, S.A. de C.V. and Subsidiaries as of December 31, 2001 and 2002, and
the consolidated results of their operations, stockholders' equity, and the
changes in their consolidated financial position for each of the years in the
three-year period ended December 31, 2002, in conformity with accounting
principles generally accepted in Mexico.

         Also, in our opinion, the amounts in U.S. dollars included in the
accompanying financial statements have been translated on the basis discussed
in Note 2) for the convenience of the reader.


                                     F-2
<PAGE>

         The accounting practices used by the Group in preparing the
accompanying consolidated financial statements conform with accounting
principles generally accepted in Mexico, which differ in certain material
respects with accounting principles generally accepted in the United States of
America ("U.S. GAAP"). A description of these differences and a partial
reconciliation of the consolidated net income for each of the years in the
three-year period ended December 31, 2002 and the stockholders' equity as of
December 31, 2001 and 2002 to U.S. GAAP, as permitted by Form 20-F of the
Securities and Exchange Commission of the United States of America, are set
forth in Notes 15) and 16). That Form permits waiving the requirement to
quantify the differences in the U.S. GAAP reconciliation, attributable to the
adjustments recorded locally to comprehensively recognize the effect of price
level changes for each line item of the financial statements.




Salles Sainz - Grant Thornton, S.C.







Mexico City, Mexico
    February 19, 2003


                                     F-3


<PAGE>
insert excel


<TABLE>
                                   GRUPO CASA SABA, S.A. DE C.V. AND SUBSIDIARIES

                                            CONSOLIDATED BALANCE SHEETS

                                          As of December 31, 2001 and 2002
<CAPTION>

   (Amounts stated in thousands of 2002 year-end constant Mexican pesos (Ps.) and thousands of U.S. dollars ($))


                                                                                       Convenience
                                                      2001              2002          translation 2002
                                                  ---------------   ---------------   ----------------
A S S E T S
CURRENT
<S>                                                        <C>               <C>         <C>
     Cash and cash equivalents (Note 3.d)         Ps.      95,412     Ps.    61,648      $   5,978
     Accounts receivable, net (Notes 3.e and 4)         2,847,563         3,235,346        313,731
     Inventories, net (Notes 3.c and 5)                 2,818,754         2,934,244        284,533
     Prepaid expenses                                      10,581            13,718          1,330
                                                  ---------------     -------------     -------------
                   Total current assets                 5,772,310         6,244,956        605,572



PROPERTY AND EQUIPMENT, net (Notes 3.c and 6)           1,004,396           974,580         94,505


OTHER ASSETS, net                                          62,102            51,389          4,983


GOODWILL, net (Note 3.f)                                  256,185           234,117         22,702
                                                  ---------------     -------------     -------------
         Total assets                             Ps.   7,094,993     Ps. 7,505,042      $ 727,762
                                                  ===============     =============     =============

[table continued]
<CAPTION>

                                                                                             Convenience
                                                              2001              2002         translation 2002
                                                         ---------------   ---------------   ----------====--
L I A B I L I T I E S
CURRENT
<S>                                                         <C>               <C>           <C>
     Current maturities of long-term debt (Note 8)        Ps.   321,330     Ps.   355,004      $  34,425
     Trade accounts payable                                   3,294,863         3,554,618        344,691
     Other payables and accrued liabilities                      45,500            75,541          7,325
     Employee profit sharing (Notes 3.i and 12.d)                   228             3,443            334
                                                         ---------------   ---------------   ----------------
             Total current liabilities                        3,661,921         3,988,606        386,775



LONG-TERM DEBT (Note 8)                                         400,605            42,996          4,169
RESERVE FOR RETIREMENT  PENSIONS AND
SENIORITY PREMIUM (Note 3.g)                                          -            18,542          1,798
DEFERRED INCOME TAX (Notes 3.i and 9)                           258,975           473,925         45,956
                                                         ---------------   ---------------   ----------------
             Total liabilities                                4,321,501         4,524,069        438,698


STOCKHOLDERS' EQUITY
     Capital stock (Note 11)                                    920,963           920,963         89,306
     Premium on stock sold                                      712,895           712,895         69,129
     Reserve for share repurchases (Note 11)                    870,510           870,510         84,413
     Retained earnings                                        1,409,683         1,953,613        189,441
     Deficit on restatement (Note 3.c)                       (1,107,208)       (1,443,657)      (139,991)
     Accrued deferred income tax effect                         (33,351)          (33,351)        (3,234)
                                                         ---------------   ---------------   ----------------
            Total stockholders' equity                        2,773,492         2,980,973        289,064
                                                         ---------------   ---------------   ----------------
            Total liabilities and stockholders' equity    Ps. 7,094,993     Ps. 7,505,042      $ 727,762
                                                         ===============   ===============   ================




              The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>



                                                        F-4

<PAGE>
<TABLE>

                                  GRUPO CASA SABA, S. A. DE C. V. AND SUBSIDIARIES

                                         CONSOLIDATED STATEMENTS OF INCOME

                                For the years ended December 31, 2000, 2001 and 2002

                    (Amounts stated in thousands of 2002 year-end constant Mexican pesos (Ps.)
                                         and thousands of U.S. dollars ($))
<CAPTION>

                                                                                                                     Convenience
                                                                  2000              2001              2002        translation 2002
                                                            ---------------   ---------------   ---------------   -------------

<S>             <C>                                            <C>               <C>               <C>             <C>
Net sales (Note 3.l)                                         Ps.17,190,744     Ps.17,162,248     Ps.18,207,422     $ 1,765,572
Cost of sales                                                   15,403,595        15,324,493        16,286,541       1,579,304
                                                            ---------------   ---------------   ---------------   -------------
                     Gross profit                                1,787,149         1,837,755         1,920,881         186,268

Operating expenses:
    Selling                                                        472,787           474,747           536,492          52,024
    Administrative                                                 680,646           692,150           682,362          66,169
    Severance payments to personnel                                  9,427                 -                 -               -
                                                            ---------------   ---------------   ---------------   -------------
                                                                 1,162,860         1,166,897         1,218,854         118,193
                                                            ---------------   ---------------   ---------------   -------------
                     Operating income                              624,289           670,858           702,027          68,075

Comprehensive cost of financing, net:
    Interest income                                                 (8,669)           (2,607)           (7,669)           (744)
    Interest expense                                               227,582           186,320            71,602           6,943
    Exchange gain, net (Note 3.j)                                      (73)             (922)           (2,701)           (262)
    Gain on monetary position (Note 3.c)                          (133,261)          (32,991)          (45,706)         (4,432)
                                                            ---------------   ---------------   ---------------   -------------
                                                                    85,579           149,800            15,526           1,505
                                                            ---------------   ---------------   ---------------   -------------
Other income, net                                                  (18,225)          (31,978)           (5,928)           (575)
                                                            ---------------   ---------------   ---------------   -------------
                     Income before provisions                      556,935           553,036           692,429          67,145

Provisions for:
    Income tax (Notes 3.i, 12.a and 12 .e)                               -            36,790           166,601          16,155
    Income tax offset by prior year tax loss
    carryforwards                                                        -                 -          (125,660)        (12,185)
    Asset tax (Note 12.b)                                            9,772                 -             8,617             836
    Recovery of asset tax paid in prior years (Note 12.b)                -                 -           (40,596)         (3,937)
    Deferred income tax (Notes 3.i and 9)                          101,963            87,461           136,366          13,223
                                                            ---------------   ---------------   ---------------   -------------
                                                                   111,735           124,251           145,328          14,092
    Employee profit sharing (Notes 3.i and 12.d)                     5,834               122             3,171             307
                                                            ---------------   ---------------   ---------------   -------------
                                                                   117,569           124,373           148,499          14,399
                                                            ---------------   ---------------   ---------------   -------------
                     Net income                              Ps.   439,366     Ps.   428,663     Ps.   543,930     $    52,746
                                                            ===============   ===============   ===============   =============

                     Net income per share (Note 3.k)         Ps.     1.655     Ps.     1.615     Ps.     2.049     $     0.199
                                                            ===============   ===============   ===============   =============
                     Weighted average shares
                        outstanding  (in thousands)                265,419           265,419           265,419
                                                            ===============   ===============   ===============   =============



            The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>

                                                        F-5


<PAGE>
<TABLE>

                                   GRUPO CASA SABA, S.A. DE C.V. AND SUBSIDIARIES

                                  CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

                                For the years ended December 31, 2000, 2001 AND 2002

                    (Amounts stated in thousands of 2002 year-end constant Mexican pesos (Ps.))
<CAPTION>



                                                Capital stock
                                        ---------------------------------                      Reserve for
                                                                             Premium on          share
                                          Historical       Restatement       stock sold       repurchases
                                        ---------------   ---------------   -------------   ----------------

<S>                                            <C>               <C>             <C>                <C>
Balances as of January 1, 2000          Ps.    167,903    Ps.    753,060    Ps.  712,895    Ps.     870,510

    Comprehensive income                             -                 -               -                  -

                                        ---------------   ---------------   -------------   ----------------
Balances as of December 31, 2000               167,903           753,060         712,895            870,510

    Comprehensive income                             -                 -               -                  -

                                         ---------------   ---------------   -------------   ---------------
Balances as of December 31, 2001               167,903           753,060         712,895            870,510

    Comprehensive income                             -                 -               -                  -

                                        ---------------   ---------------   -------------   ----------------
Balances as of December 31, 2002        Ps.    167,903    Ps.    753,060    Ps.  712,895    Ps.     870,510
                                        ===============   ===============   =============   ================

[table continued]
<CAPTION>

                                                                                Accrued
                                                                               deferred
                                             Retained         Deficit on       income tax
                                             earnings        restatement         effect              Total
                                          ----------------  ---------------  ----------------     ------------

<S>                                               <C>             <C>                                 <C>
Balances as of January 1, 2000            Ps.     541,654   Ps.   (778,801)  Ps.          -      Ps. 2,267,221

    Comprehensive income                          439,366         (120,390)         (33,351)           285,625

                                          ----------------  ---------------  ----------------     ------------
Balances as of December 31, 2000                  981,020         (899,191)         (33,351)         2,552,846

    Comprehensive income                          428,663         (208,017)               -            220,646

                                        -  ----------------  ---------------  ----------------    -------------
Balances as of December 31, 2001                1,409,683       (1,107,208)         (33,351)         2,773,492

    Comprehensive income                          543,930         (336,449)               -            207,481

                                          ----------------  ---------------  ----------------     ------------
Balances as of December 31, 2002          Ps.   1,953,613   Ps. (1,443,657)  Ps.    (33,351)     Ps. 2,980,973
                                          ================  ===============  ================     ===========-




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


</TABLE>


                                                        F-6


<PAGE>
<TABLE>


                                   GRUPO CASA SABA, S.A. DE C.V. AND SUBSIDIARIES

                              CONSOLIDATED STATEMENTS OF CHANGES IN FINANCIAL POSITION

                               For the years ended December 31, 2000, 2001 AND 2002
<CAPTION>

   (Amounts stated in thousands of 2002 year-end constant Mexican pesos (Ps.) and thousands of U.S. dollars ($))


                                                                                                                    Convenience
                                                                2000               2001               2002          translation 2002
                                                           ---------------    ----------------    --------------    ---------------
<S>                                                               <C>                 <C>               <C>            <C>
   Operating activities:
   Net income                                                 Ps. 439,366       Ps.   428,663     Ps.   543,930        $ 52,746

   Add - Non cash items:
       Depreciation and amortization                              110,927             105,843            97,576           9,462
       Allowance for doubtful accounts                             22,199              32,011            93,022           9,020
       Loss on sale of property and equipment                       4,440              12,066             5,887             571
       Provision for retirement pensions and
         seniority premium                                              -                   -            15,025           1,457
       Deferred income tax                                        101,963              87,461           136,366          13,223
                                                           ---------------    ----------------    --------------    ---------------
                                                                  678,895             666,044           891,806          86,479

   Changes in assets and liabilities:
   (Increase) decrease in:
       Accounts receivable                                       (538,478)           (437,876)         (480,805)        (46,624)
       Inventories                                               (749,234)           (543,733)         (451,939)        (43,824)
       Prepaid expenses                                            14,812               2,126            (3,137)           (304)
       Trade accounts payable                                     944,738             113,933           259,755          25,188
       Other payables and accrued liabilities                     (87,614)              1,544            30,041           2,913
       Income tax                                                  (1,275)                  -                 -               -
       Employee profit sharing                                      5,835              (5,607)            3,215             312
                                                           ---------------    ----------------    --------------    ---------------
                                                                 (411,216)           (869,613)         (642,870)        (62,339)
                                                           ---------------    ----------------    --------------    ---------------
        Net cash  provided by (used in)
           operating activities                                   267,679            (203,569)          248,936          24,140
                                                           ---------------    ----------------    --------------    ---------------

   Investing activities:
       Additions of property and equipment,
         net of retirements                                       (20,766)              9,435            37,661           3,652
       Increase (decrease) in other assets                         30,865              (5,199)            3,205             311
       Reserve for retirement pensions and
         seniority premium                                              -                   -            (3,517)           (341)
                                                           ---------------    ----------------    --------------    ---------------

       Net cash used in investing
          activities                                               10,099               4,236            37,349           3,622
                                                           ---------------    ----------------    --------------    ---------------

   Financing activities:
     Bank loans, net of payments made                            (101,303)              2,308          (285,000)        (27,636)
     Effect in change of bank loans due to the
       restatement                                                (81,231)            (31,525)          (38,935)         (3,776)
     Initial accrued effect of deferred
       income tax                                                 (39,929)                  -                 -               -
     Deferred income tax                                                -              76,131            78,584           7,620
                                                           ---------------    ----------------    --------------    ---------------
       Net cash  (used in) provided by
          financing activities                                   (222,463)             46,914          (245,351)        (23,792)
                                                           ---------------    ----------------    --------------    ---------------


                                                        -2-

                                                                                                                    Convenience
                                                                2000               2001               2002          translation 2002
                                                           ---------------    ----------------    --------------    ---------------

          Net increase (decrease) in cash and
              cash equivalents                             Ps.     35,117       Ps.  (160,891)     Ps.  (33,764)      $ (3,274)

          Cash and cash equivalents
              at beginning of year                                221,186             256,303            95,412          9,252
                                                          ---------------    ----------------    ---------------   ---------------
          Cash and cash equivalents
              at end of year                               Ps.    256,303       Ps.    95,412      Ps.   61,648        $ 5,978
                                                          ===============    =================   ===============   ===============



          Supplementary information:
              Income tax and asset tax paid                Ps.     24,639        Ps.    39,937      Ps.  101,508        $ 9,843
                                                          ===============    =================   ===============   ===============

          Employee profit sharing paid                     Ps.          -        Ps.     6,092      Ps.      119           $ 12
                                                          ===============    =================   ===============   ===============

          Interest paid                                    Ps.    221,880        Ps.   190,087      Ps.   60,684        $ 5,885
                                                          ===============    =================   ===============   ===============




              The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>


                                      F-7



<PAGE>



                GRUPO CASA SABA, S.A. DE C.V. AND SUBSIDIARIES

                NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

                    AS OF DECEMBER 31, 2000, 2001 AND 2002

    (Monetary amounts stated in thousands of 2002 year-end constant Mexican
                          pesos (Ps.) and thousands
              of U.S. dollars ($), except as indicated otherwise)



1.       Description of business:

        Grupo Casa Saba, S.A. de C.V. (the "Company"), through its
           consolidated subsidiaries (collectively referred to as the
           "Group"), is engaged in the distribution of pharmaceutical
           products, as well as health-and-beauty/other products,
           entertainment products (including magazines and books), food
           /non-perishable products, and office/ electronic products. The
           Group distributes these five product lines through its distribution
           network to supermarket chains, pharmacies, both private and
           governmental, and retail customers throughout Mexico. The Group
           does not maintain separate operating results for each of its five
           product lines, and as a result it considers all of its operations
           and reports the results of all of its operations to management as a
           single business segment. Revenue attributable to each of the five
           product lines is shown in Note 13).

        The Company holds substantially all of the issued and outstanding
           capital stock of the following subsidiaries that are members of the
           Group:
<TABLE>
<CAPTION>
                                                                                        Economic interest
                                                                                       (Direct or indirect)
                                                                                    ---------------------------
                                                                                        2001         2002
                                                                                    ----------    ------------
<S>                                                                                     <C>          <C>
         Casa Saba, S.A. de C.V.                           (Casa Saba)                 99.9%         99.9%
         Drogueros , S.A. de C.V.                          (Drogueros)                 99.9%         99.9%
         Grupo Mexatar , S.A. de C.V.                      (Mexatar)                   99.9%         99.9%
         Centennial, S.A. de C.V.                          (Centennial)                99.9%         99.9%
         Publicaciones Citem, S.A. de C.V.                 (Citem)                     99.9%         99.9%
         Transportes Marproa, S.A. de C.V.                 (Marproa)                   99.9%         99.9%
         Servicios Corporativos Saba, S.A. de  C.V.        (Servicios                  99.9%         99.9%
                                                            Corporativos Saba)
         Distribuidora Casa Saba, S.A. de C.V.             (Distribuidora Saba)        99.9%         99.9%
         Other companies (real estate and services
            companies)                                                                 99.9%         99.9%
</TABLE>


       During 2001 and 2002, the Group established the following negotiating,
           diversification, and sales strategies to strengthen its
           consolidated operations. The Group's management constantly reviews
           these strategies to adapt to any economic changes that arise.

           a) In December 2001, as a part of an internal reorganization of
               the Group's operations, management entered into the agreements
               discussed below to strengthen its corporate structure, as well
               as to facilitate the transactions carried out by some of the
               consolidated subsidiaries that comprise it. Those agreements
               did not change the Group's consolidated financial position in
               any way at that date.

               o  Through an assignment of rights agreement dated July 1,
                  2001, Casa Saba ("assignor") assigned the balance of its
                  accounts receivable owed by the Company at that date. That
                  assignment was made to another consolidated subsidiary of
                  the Group denominated Inmuebles Visosil, S.A. de C.V.
                  ("Visosil" and/or the "assignee") in the amount of Ps.


                                     F-8
<PAGE>

                  850,000 (Ps. 917,476 at fiscal year-end constant Mexican
                  pesos). This receivable applied to certain amounts lent to
                  the Company in cash by Casa Saba. At the General Ordinary
                  Stockholders' Meeting held on July 2, 2001, the stockholders
                  of Visosil resolved a capital stock increase in the amount
                  referred to above, paid in full by Casa Saba by capitalizing
                  the liability derived from the assignment of rights
                  agreement. As a result, Casa Saba obtained 79.2% of the
                  issued and outstanding capital stock of Visosil.

               o  In order to have absolute control of Visosil through Casa
                  Saba, the Company sold the remaining 20.7% of its ownership
                  stake in Visosil to Casa Saba, through a stock purchase
                  agreement dated December 17, 2001. The aggregate purchase
                  price amounted to Ps. 274,000 (Ps. 289,619 at year-end
                  constant Mexican pesos). That amount reduced the payable
                  that the Company had with Casa Saba. That transaction
                  generated a loss that amounted to Ps. 6,798 (Ps. 7,186 at
                  fiscal year-end constant Mexican pesos), which was
                  eliminated in the consolidated statement of income, in
                  accordance with accounting principles generally accepted in
                  Mexico or "Mexican GAAP". This provision is virtually
                  identical to accounting principles generally accepted in
                  United States of America or "U.S. GAAP".

               o  Through a stock purchase agreement dated December 17, 2001,
                  the Company sold 100% of its equity stake in Drogueros. This
                  equity stake represented 99.9% of the issued and outstanding
                  capital stock of Drogueros. That sale was made to Visosil in
                  order to have absolute control of Drogueros concentrated in
                  Visosil. The aggregate purchase price amounted to Ps.
                  300,000 (Ps. 317,100 at fiscal year-end constant Mexican
                  pesos). That amount reduced the payable that the Company had
                  with Visosil. That transaction generated a loss in the
                  amount of Ps. 8,323 (Ps. 8,797 at fiscal year-end constant
                  Mexican pesos), which was eliminated in the consolidated
                  statement of income, in accordance with Mexican GAAP. This
                  provision is virtually identical to U.S. GAAP.

           b) Effective July 2, 2002, through a unanimous resolution adopted
               by its stockholders, the subsidiaries Inmobiliaria Dejanira,
               S.A. de C.V. and Uno a Uno, S.A. de C.V. changed their
               corporate name to Servicios Corporativos Drogueros, S.A. de
               C.V. and Distribuidora Drogueros, S.A. de C.V., respectively.
               These consolidated subsidiaries render some specialized
               personnel services mainly to Drogueros. These services consist
               of administrative, legal, accounting, tax, finance, treasury,
               and electronic data processing services.

           c) At the General Ordinary and Extraordinary Stockholders' Meeting
               held on April 25, 2002, the stockholders approved the amendment
               to the Company's bylaws to adapt them to the most recent
               amendments enacted to the Securities Market Law, published in
               the Official Daily Gazette on June 1, 2001. Those amendments
               further strengthen the transparency of basic information for
               the operation of the stock exchange and financial market, and
               an appropriate governance in the business corporate
               administration.


     2. Basis of presentation:

    These financial statements are prepared based on the Mexican GAAP, which
           are described in Note 3) hereinbelow. Certain accounting practices
           applied by the Group in accordance with Mexican GAAP differ from
           U.S. GAAP. The principal differences between Mexican GAAP and U.S.
           GAAP are described in Note 15). A partial reconciliation of the
           reported net income and stockholders' equity from Mexican GAAP to
           U.S. GAAP is included in Note 16).


       Convenience translation

       The accompanying consolidated financial statements have been translated
           from Spanish into English for the convenience of readers outside of
           Mexico. The consolidated financial statements are stated in Mexican
           pesos. U.S. dollar amounts shown in the accompanying financial
           statements were calculated based on the amounts in constant Mexican


                                      F-9
<PAGE>

           pesos as of December 31, 2002. They have been included solely for
           the convenience of the reader and are translated from constant
           Mexican pesos, as a matter of arithmetic computation only by using
           the rate of Ps.10.312479 (pesos) per U.S. dollar quoted by Banco de
           Mexico in the Official Daily Gazette as of December 31, 2002. The
           convenience translation should not be construed as a representation
           that the Mexican peso amounts have been, could have been, or could
           in the future be translated into U.S. dollars at this or any other
           exchange rate.


    3. Significant accounting
           policies:

       a)  Use of estimates

           Preparing the accompanying financial statements requires the
              Group's management to make certain estimates and use certain
              assumptions to determine the reported amount of some assets and
              liabilities, and disclose contingent assets and liabilities at
              the date of the financial statements, and the reported amount of
              revenues and expenses incurred during the periods. Actual
              results can differ from these estimates.

       b)  Basis of consolidation

           The Group's financial statements are presented on a consolidated
              basis under Mexican GAAP. The Group's consolidated financial
              statements include the results of operation of the Company and
              those of all of its subsidiaries (controlled directly or
              indirectly, acquired, newly incorporated or disposed of) from
              the date on which they were acquired and/or incorporated up to
              the date when they were sold and/or at the year-end of the last
              year reported. The consolidated financial statements have been
              prepared at the same date and for the same period. All
              significant intercompany balances and transactions have been
              eliminated from the Group's consolidated financial statements.
              The Group holds substantially all of the issued and outstanding
              capital stock of each of its consolidated subsidiaries referred
              to in Note 1) above.

       c)  Recognition of the impact of inflation on the financial information

           In accordance with Bulletin B-10, "Recognition of the Impact of
              Inflation on the Financial Information", as amended ("Bulletin
              B-10"), the Group restates its consolidated financial statements
              in terms of the purchasing power of the currency as of the year
              -end of the last period reported, thereby comprehensively
              recognizing the impact of inflation. Consequently, the amounts
              of the financial statements for both the current year and prior
              years are comparable among them, since all amounts are stated in
              terms of Mexican pesos of the same purchasing power.
              Accordingly, all prior year financial statement amounts
              presented herein differ from those originally reported due to
              restated changes in Mexican pesos of prior year purchasing
              power.

           The impact of inflation on the financial information is recognized
              in accordance with Bulletin B-10 by applying the following
              procedures:

           i)    The amounts of the accompanying consolidated financial
                  statements and the accompanying notes are presented for
                  comparative purposes in Mexican pesos of purchasing power as
                  of December 31, 2002, by applying the inflation factor
                  derived from the National Consumer Price Index (the "NCPI").

           ii)   Revenues and expenses related to monetary items are restated
                  from the month in which they occur up to year-end, by
                  applying the NCPI. Expenses related to nonmonetary items
                  such a cost of sales and depreciation are restated as of the
                  date on which inventories are sold, and/or at the time when
                  property and equipment are depreciated based on the restated
                  value of those assets, and from the date when they were
                  expensed up to fiscal year-end, based on the applicable NCPI
                  factor.

                                     F-10
<PAGE>

           iii)  The gain or loss on monetary position represents the gain or
                  loss of holding monetary assets and monetary liabilities
                  whose purchasing power is affected by inflation. The gain or
                  loss on monetary position is determined by applying the NCPI
                  to the consolidated average net monetary position at
                  beginning of each month, which amount is subsequently
                  restated in terms of the purchasing power of the Mexican
                  peso at fiscal year-end by applying the relevant restatement
                  factor. As of December 31, 2000, 2001, and 2002, the Group's
                  consolidated monetary position represented a gain in the
                  amounts of Ps. 126,074, Ps. 31,212 and Ps. 45,706,
                  respectively (Ps. 133,261, Ps. 32,991 and Ps. 45,706, at
                  fiscal year-end constant Mexican pesos, respectively). The
                  effect of that gain was included in the statement of income
                  in the line item "Comprehensive cost of financing".

           iv)   Inventories are initially recorded at acquisition cost. They
                  are subsequently restated to their replacement cost.
                  Restated inventory values do not exceed their net realizable
                  values.

           v)    Property and equipment are initially recorded at acquisition
                  cost. Effective 1997, those fixed assets along with their
                  depreciation are restated based on the "adjustments due to
                  changes in the general price level method" by applying the
                  NCPI to the value of those assets determined by an appraisal
                  performed by independent experts as of December 31, 1996
                  (except for Drogueros, as discussed in Note 6) hereinbelow),
                  as well as to the original cost of acquisitions made
                  subsequent to that date.

                Depreciation is calculated on the restated value of fixed
                  assets, by using the straight-line method based on the
                  remaining economic useful lives thereof. The remaining
                  economic useful lives were estimated by independent experts
                  as of December 31, 1996, as well as by the Group's
                  management for acquisitions made subsequent to that date.

           vi)   Goodwill is restated based on the NCPI.

           vii)  Stockholders' equity is restated based on the NCPI by
                  considering the age of the contributions and that of
                  earnings or losses generated. The restatement of
                  stockholders' equity represents the amount necessary to
                  maintain shareholders' investment in terms of the purchasing
                  power of the currency at fiscal year-end of the last year
                  reported.

           viii) Deficit on restatement (restated to 2002 fiscal year-end
                  constant Mexican pesos) represents the accumulated monetary
                  effect at the date on which the financial statements were
                  adjusted for the first time, plus (less) the deficit
                  (surplus) generated from comparing the restatement of
                  nonmonetary assets based on the replacement costs and/or
                  specific costs and the restatement thereof made by applying
                  the NCPI. Effective 1997, that deficit or surplus is only
                  generated by restating inventories to replacement costs and
                  by restating permanent investment in stock of subsidiaries
                  to specific costs above or below the NCPI. As of December
                  31, 2000, 2001, and 2002, a loss was generated in the
                  amounts of Ps. 113,897, Ps. 196,799 and Ps. 336,449,
                  respectively (Ps. 120,390, Ps. 208,017 and Ps. 336,449 at
                  fiscal year-end constant Mexican pesos, respectively). The
                  effect of that loss was included in the statement of
                  stockholders' equity.

        d) Cash and cash
             equivalents

           Cash consists basically of non-interest bearing bank deposits. Cash
              equivalents are comprised mainly of short-term investments
              (highly liquid investments that have a ninety day term of
              maturity or less when acquired) in banking institutions, payable
              on demand at variable interest rates. Investments are valued at
              market value (cost plus accrued interest).


                                     F-11
<PAGE>

       e)  Allowance for doubtful accounts

           The allowance for doubtful accounts represents the Group's estimate
              of the probable loss inherent in all receivables considering:
              (i) the general historical trend of payment performance of
              customers, and (ii) factors surrounding the credit risk of
              specific customers.

       f)  Goodwill

           Goodwill is derived from acquiring shares of capital stock of
              subsidiary companies at a price exceeding the fair value of the
              net assets acquired and is amortized over the term during which
              the Group's management estimates that the additional benefits of
              such investments will be generated, which management estimates
              as twenty years. Book value is substantially equal to the fair
              value of the net assets acquired as a result of their
              restatement through the acquisition date. The unamortized
              portion of goodwill applicable to each acquired subsidiary is
              periodically reviewed, decreasing the remaining amortization
              period if economic and circumstantial factors surrounding the
              Group suggest that goodwill might be impaired. As of December
              31, 2000 and 2001, the amortization of goodwill expensed
              amounted to Ps. 21,453 (Ps. 22,675 at fiscal year-end constant
              Mexican pesos). In 2002, amortization amounted to Ps. 22,068.

       g)  Labor obligations

           i) Members of the Group that have personnel recognize the labor
                  obligations for retirement pensions and seniority premiums
                  derived from defined benefit plans for all their employees
                  in accordance with the Federal Labor Law, as well as the
                  schemes that have been established for each plan. Seniority
                  premiums are granted for a voluntary separation of
                  personnel, after completing fifteen years of service, and
                  calculated based on the number of years worked. Retirement
                  pensions are granted to all personnel having completed at
                  least ten years of service and have reached sixty-five years
                  of age. Members of the Group are required to pay certain
                  severance benefits only to employees that are dismissed
                  without proper cause. These payments (which are made to
                  employees during the normal course of operations), for
                  non-substitute indemnification of a retirement pension, are
                  expensed when paid, in that it is impracticable to estimate
                  the number of employees that will be dismissed during the
                  normal course of operations. This provision is virtually
                  identical to the U.S. GAAP provision.

              Projected benefit obligations, unamortized items, and the net
                  periodic cost applicable to retirement pensions and
                  seniority premiums are determined by using the "projected
                  unit credit method", in conformity with Bulletin D-3, "Labor
                  obligations". This method is virtually identical to the
                  method under U.S. GAAP.

              Members of the Group with employees have created a fund placed
                  in an irrevocable trust in a financial institution. The
                  purpose of this fund is to meet the labor obligations
                  referred to above. During 2000, 2001, and 2002,
                  contributions to the fund based on actuarial computations
                  amounted to Ps. 3,219, Ps. 8,000, and Ps. 4,279 (Ps. 3,529,
                  Ps. 8,400 and Ps. 4,279 at fiscal year-end constant Mexican
                  pesos, respectively). As of December 31,2000, 2001, and
                  2002, fund assets consisted primarily of investments in
                  equity securities, as well as investments in fixed income
                  securities issued by Mexican companies that are traded on
                  the Mexican Stock Market.

           ii)  The relevant information of the study performed by independent
                  actuaries, with regard to the retirement pension and
                  seniority premiums of the Members of the Group that have
                  employees, is summarized below. The rates referred to below
                  with regard to the actuarial assumptions are stated in real
                  terms (nominal rates at market discounted for inflation).
                  The amounts referred to in the tables below have been
                  restated to Mexican pesos of purchasing power as of December
                  31, 2002.

                                     F-12
<PAGE>
<TABLE>
<CAPTION>

                                                                                     December 31,
                                                                  ----------------------------------------------------
                                                                        2000                 2001           2002
                                                                  -----------------------------------  ---------------
              Labor liability                                              Adjusted by NCPI
                                                                  -----------------------------------
<S>                                                                     <C>                <C>              <C>
              Vested benefit obligation                             Ps. 71,071         Ps. 73,922       Ps. 77,344
              Non-vested benefit obligation                              4,175              7,779           13,109
                                                                   -----------------  ----------------  ---------------

              Accumulated benefit obligation                            75,246             81,701           90,453
              Additional benefit related to future
              compensation increases                                    44,294             32,936           37,053
                                                                  -----------------  ----------------  ---------------

              Projected benefit obligation                             119,540            114,637          127,506
              Fair value of plan assets                                (51,437)           (45,172)         (40,321)
                                                                  -----------------  ----------------  ---------------

              Unfunded projected benefit obligation                     68,103             69,465           87,185
              Unrecognized net transition obligation                   (45,420)           (44,540)         (43,214)
              Negative amendments                                       16,503             15,349           14,433
              Unrecognized net loss                                    (40,965)           (40,972)         (39,862)
                                                                  -----------------  ----------------  ---------------
              (Prepaid) unfunded accrued pension cost
              and seniority premiums to be recognized
              under U.S. GAAP and Mexican GAAP                      Ps. (1,779)          Ps. (698)      Ps. 18,542
                                                                  =================  ================  ===============


              Components of the net periodic cost
              Service cost                                         Ps.   4,314         Ps.  3,842        Ps. 5,445
              Interest on projected benefit obligation                   6,858              6,384            7,263
              Expected return on plan assets                            (4,502)            (4,351)          (4,087)
              Amortization of unrecognized obligations                   3,250              3,151            3,290
              Amortization of amendments                                  (848)              (815)            (816)
              Amortization of losses                                       782                977            1,869
              SFAS 88 Cost                                                   -                  -            2,061
                                                                  -----------------  ----------------  ---------------
              Net periodic cost under U.S. GAAP
              and Mexican GAAP                                     Ps.   9,854         Ps.  9,188        Ps. 15,025
                                                                  =================  ================  ===============


              Assumptions (real rates)
              Discount rate                                                 6%                 6%               6%
              Salary increase rate                                          2%                 2%               2%
              Return on plan assets                                         8%                 8%               8%
</TABLE>



                                     F-13
<PAGE>

<TABLE>
<CAPTION>
                                                                                     December 31,
                                                                  ----------------------------------------------------
                                                                       2000                 2001            2002
                                                                  -----------------------------------  ---------------
              Change in projected benefit obligation                       Adjusted by NCPI
                                                                  -----------------------------------
<S>                                                                       <C>               <C>               <C>
              Expected projected benefit obligation at beginning
              of year                                               Ps. 111,912       Ps. 114,502       Ps. 114,637
              Service cost                                                4,314             3,842             5,445
              Interest cost                                               6,858             6,384             7,263
              Actuarial loss                                              6,281             2,819            13,420
              Benefits paid                                              (4,677)          (12,910)          (13,259)
              Effect of curtailment on benefit obligation                (5,148)                -                 -
                                                                  ----------------  -----------------  ---------------
              Projected benefit obligation at end of year           Ps. 119,540       Ps. 114,637       Ps. 127,506
                                                                  ================  =================  ===============


              Change in plan assets
              Fair value of plan assets at beginning of year        Ps. 62,828         Ps. 49,270        Ps. 45,172
              Actual return on plan assets                             (10,243)               412             4,129
              Employer contributions                                     3,529              8,400             4,279
              Benefits paid                                             (4,677)           (12,910)          (13,259)
                                                                  ----------------  -----------------  ---------------
              Fair value of plan assets at end of year              Ps. 51,437         Ps. 45,172        Ps. 40,321
                                                                  ================  =================  ===============


              Funded status                                         Ps. 68,103         Ps. 69,465        Ps. 87,185
              Unrecognized net transition obligation                   (45,420)           (44,540)          (43,214)
              Negative amendments                                       16,503             15,349            14,433
              Unrecognized net loss                                    (40,965)           (40,972)          (39,862)
                                                                  ----------------  -----------------  ---------------
              (Prepaid) unfunded accrued pension cost and
              seniority premiums to be recognized under U.S.
              GAAP and Mexican GAAP                                 Ps. (1,779)        Ps.   (698)       Ps. 18,542
                                                                  ================  =================  ===============


              Amounts recognized in the statement
              of financial position consist of:
              (Prepaid) unfunded accrued pension cost and Ps.
              seniority premiums to be recognized                       (1,779)        Ps.   (698)       Ps. 18,542
              Accrued benefit liability                                 21,239            (37,985)          (34,812)
              Intangible asset                                         (18,341)            34,103            31,708
              Accumulated other comprehensive                           (2,898)             3,882             3,104
              Income
                                                                  ----------------  ---------------    ---------------
              Net amount recognized                                 Ps. (1,779)        Ps.   (698)       Ps. 18,542
                                                                  ==============    ===============    ================
</TABLE>



       h)  Comprehensive income

           Comprehensive income consists of the net income (loss) for the
              period presented in the income statement, plus other results
              (i.e gain or loss on restatement, and/or the deferred income tax
              effect), for the same period reflected directly in the statement
              of stockholders' equity pursuant to specific regulatory
              provisions. The accounting criterion requires disclosing in the
              stockholders' equity the components of comprehensive income
              (loss), which does not include capital contributions or
              reductions.

i) Income tax and employee profit sharing

             i) The Group records the provision for both income tax and
                  employee profit sharing based on the amount payable
                  determined based on taxable income applicable to both items.
                  Income (loss) for tax purposes differs from income (loss)
                  for book purposes, due to the temporary and permanent items
                  that apply to revenues and expenses recognized for tax and
                  book purposes in different periods.


                                     F-14
<PAGE>

             ii)  Bulletin D-4, "Accounting for Income Tax, Assets Tax and
                  Employees' Profit Sharing", effective on January 1, 2000,
                  and Circular 54, "Bulletin D-4 Interpretations", which
                  clarified a number issues concerning the application of
                  Bulletin D-4 were issued by Mexican Institute of Public
                  Accountants or "MIPA". Bulletin D-4 and Circular 54 require
                  the Group to calculate deferred income tax by using the
                  "comprehensive asset and liability method". Pursuant to this
                  method, the deferred income tax liability is recorded for
                  all temporary differences. On the other hand, the deferred
                  income tax asset is only recorded under certain
                  circumstances. The deferred income tax liability and/or
                  asset is classified as a noncurrent item. The deferred
                  income tax liability and/or asset is calculated by applying
                  the applicable income tax rate to the taxable and/or
                  deductible temporary differences between the accounting and
                  tax values of assets and liabilities as of the date of the
                  relevant financial statements, as well as the amount of tax
                  loss carryforwards. The applicable income tax rate applies
                  to the fiscal year-end tax rate. In the event of any change
                  of the income tax rate, effective subsequent to the fiscal
                  year-end of each year, the income tax rate that will be
                  effect at the time it is estimated that deferred income tax
                  assets and liabilities are realized or paid will be applied.
                  Bulletin D-4 will continue to impact the effective income
                  tax rate in future periods. Asset tax paid in the year and
                  in prior years that is recoverable, as discussed in Note
                  12b) hereinbelow, is only recognized as a deferred income
                  tax asset, under certain circumstances.

             The Group has assessed the need for a valuation allowance to
                  determine (based on the weight of available evidence that
                  includes the evaluation of the benefit of tax loss
                  carryforwards) the amount of deferred income tax asset that
                  will be recorded, in the event that it is more likely that a
                  certain portion or all of the deferred income tax asset may
                  not be realized. Any reduction to the deferred income tax
                  asset amount is recorded in income statement and/or
                  stockholders' equity, by considering the nature of the
                  temporary item. There is no valuation allowance recorded at
                  December 31, 2001 and 2002.

             The deferred employee profit sharing effect is only recorded
                  when it is reasonably presumed that the temporary items
                  (differences between book income and tax income at fiscal
                  year-end) that gave rise thereto are going to result in a
                  future asset or liability, and there is no evidence that
                  such a situation is going to change. At 2001 and 2002 fiscal
                  year-end, the consolidated subsidiaries of the Group (that
                  have personnel) had no temporary items of that nature, in
                  accordance with Mexican GAAP.

             iii) As discussed in Note 12), the Group prepares its income tax
                  returns and asset tax returns on a consolidated basis. The
                  Group's consolidated subsidiaries meet the characteristics
                  set forth in the Income Tax Law for "controlled companies".
                  The tax benefit of consolidation is recognized in the year
                  in which it is generated. The Group recognized the impact of
                  the eliminations that should be recorded. These eliminations
                  are derived from book consolidation and tax consolidation.
                  Consequently, the Group's consolidated financial statements
                  reflect the amount of the provision for income tax (of the
                  Company and each of its consolidated subsidiaries), adjusted
                  for the impact of consolidation.

j)      Foreign currency denominated transactions

    Foreign currency denominated transactions are recorded at the current
       exchange rate at the date on which they are entered into or paid.
       Foreign currency denominated assets and liabilities are translated to
       Mexican pesos by using the exchange rate published by the Central Bank
       of Mexico at month-end. Exchange fluctuations arise between the current
       exchange rate at the date on which the transaction is entered into and
       the current exchange rate at the date when it is paid and/or valued.
       The foregoing effect is included in income statement in the line item
       "Comprehensive cost of financing".

k) Earnings per share

    Earnings per share are determined based on the weighted average common
       shares outstanding during the years and earnings for common
       shareholders, in conformity with Bulletin B-14, "Earnings per share".

                                     F-15
<PAGE>


l)  Revenue recognition

    Revenues are recognized upon total completion of the following: (i)
       persuasive evidence that an arrangement exists (ii) delivery has
       occurred, (iii) the seller's price to the buyer is fixed or
       determinable, and (iv) collectively is reasonable assured.


4.   Accounts receivable:

<TABLE>

                                                                  2001                2002
                                                           -------------------  ------------------

<S>                                                               <C>                 <C>
           Trade receivables                                Ps.   2,807,311     Ps.   3,256,341
           Allowance for doubtful accounts                          (97,574)           (160,115)
                                                           -------------------  ------------------
                                                                  2,709,737           3,096,226
           Value added tax recoverable                               35,416              27,567
           Income tax recoverable                                    70,839              36,948
           Other                                                     31,571              74,605
                                                           -------------------  ------------------
                                                            Ps.   2,847,563     Ps.   3,235,346
                                                           ===================  ==================
</TABLE>



5.   Inventories:

<TABLE>
                                                                   2001                2002
                                                            -------------------  ------------------

<S>                                                                <C>                <C>
           Pharmaceutical products                          Ps.    1,618,203     Ps.  1,955,607
           Beauty care products                                      638,674            446,560
           Books and magazines                                       208,953            254,290
           Stationery                                                    785                  -
           Electric appliances                                        10,213              4,805
           Groceries                                                       -             44,780
           Other                                                      24,438             12,919
                                                            -------------------  ------------------
                                                                   2,501,266          2,718,961
           Estimate for  slow-moving
           magazines                                                 (22,121)           (25,786)
           inventory
                                                            -------------------  ------------------
                                                                   2,479,145          2,693,175
           Merchandise-in-transit                                    339,609            241,069
                                                            -------------------  ------------------
                                                            Ps.    2,818,754     Ps.  2,934,244
                                                            ===================  ==================
</TABLE>


      Merchandise-in-transit applies mainly to pharmaceutical products.
      The title has been transferred to the Group.


                                     F-16
<PAGE>



6.  Property and equipment:
<TABLE>

                                                  2001                                   2002
                                            ------------------ --------------------------------------------------------
                                                   Total               Original        Restatement            Total
                                                                        cost
                                            ------------------ ------------------ ------------------ ------------------

<S>                                                <C>                 <C>               <C>                 <C>
          Building                          Ps.    753,105     Ps.     243,497    Ps.    498,584       Ps.   742,081
          Machinery and equipment                   80,290              37,815            44,426              82,241
          Transportation equipment                 197,103             128,390           100,847             229,237
          Office equipment                         126,404              42,959            83,818             126,777
          Computer equipment                       228,162             119,711           121,834             241,545
                                            ------------------ ------------------ ------------------ ------------------
                                                 1,385,064             572,372           849,509           1,421,881

          Less-accumulated depreciation           (645,890)           (291,850)         (415,014)           (706,864)
                                            ------------------ ------------------ ------------------ ------------------
                                                   739,174             280,522           434,495             715,017
          Land                                     265,190              51,079           208,484             259,563
          Construction-in-progress                      32                   -                 -                   -
                                            ------------------ ------------------ ------------------ ------------------
                                            Ps.  1,004,396     Ps.     331,601    Ps.    642,979       Ps.   974,580
                                            ================== ================== ================== ==================
</TABLE>



      The restatement of property and equipment of the subsidiary Drogueros,
         whose net restated value as of December 31, 2001 and 2002 is included
         in the foregoing summary, amounts to Ps. 109,424 (Ps. 115,662 at
         fiscal year-end constant Mexican pesos) and Ps. 111,840,
         respectively. That restatement was determined by applying the NCPI to
         the original cost of the property and equipment of Drogueros from
         their respective dates of acquisition.

       The average annual depreciation rates for 2001 and 2002 were as
follows:

             Buildings and improvements                               2.10%
             Machinery and equipment                                  6.09%
             Transportation equipment                                10.15%
             Furniture and fixtures                                   6.50%
             Computer equipment                                      11.15%


7.   Related party balances
          and transactions:

       i)  As of December 31, 2001 and 2002, payable balances to related
             parties Xtra Inmuebles, S.A. de C.V. and Pastas Molisaba, S.A. de
             C.V. amounted to Ps. 219 (Ps. 231 at fiscal year-end constant
             Mexican pesos) and Ps. 517, respectively. Those balances derived
             from real property leased and miscellaneous articles purchased
             are included in the balance sheet under the line item "Other
             payables and accrued liabilities". Through 2001 and 2002, leases
             expensed amounted to Ps. 3,720 (Ps. 3,932 at fiscal year-end
             constant Mexican pesos) and Ps. 4,092, respectively. During 2001,
             miscellaneous articles expensed amounted Ps. 201 (Ps. 212 at
             fiscal year-end constant Mexican pesos).

        During 2001 and 2002, the Group had no other related party agreement,
             except for the balances and transactions referred to above. The
             Group's management believes that all related party transactions
             were negotiated and conducted on an arm's length basis.


                                     F-17
<PAGE>

    8.  Bank loans
          and long-term debt:

        a) Through a "mortgage backed clean credit opening contract" with
              Scotiabank Inverlat, S.A. ("Scotiabank") dated June 29, 2001,
              Casa Saba obtained a loan in the amount of Ps. 645,000 (Ps.
              697,091 at fiscal year-end constant Mexican pesos). The proceeds
              from this loan were used to prepay all of the Group's
              outstanding restructured indebtedness derived from a "mortgage
              backed clean credit opening contract" with Banco Nacional de
              Mexico, S.A. dated December 5, 2000.

           Indebtedness outstanding under the Scotiabank loan will be payable
              in fifty-four monthly installments (consisting of principal and
              interest) from July 18, 2001 through December 31, 2005.
              Prepayments on principal in whole or in part are permitted. This
              loan bears interest at a variable rate equal to the Equilibrium
              Interbank Interest Rate published by the Central Bank of Mexico
              in effect from time to time, plus 1.75%. The following table
              sets forth the aggregate amount of payments due under this loan
              on an annual basis through 2005:

                      Year of
                      expiration                                     Amount
                     ---------------                         -----------------
                     2003                                       Ps. 155,004
                     2004                                           180,000
                     2005                                           183,996
                                                             -----------------
                                                                    519,000
                    Less:
                    Prepayments on principal                       (321,000)
                                                             -----------------
                                                                Ps. 198,000
                                                             =================

         In conformity with contract terms, prepayments on principal made
              through 2001 and 2002 in the amount of Ps. 321,000 referred to
              above will be applied to the last installments that will mature
              in 2004 and 2005. Prepayments do not generate any penalty
              payable by Casa Saba.

         The Scotiabank loan is secured by a mortgage that encumbers property
              and equipment, as well as accounts receivable used as
              collateral. In addition, Casa Saba and all of the Group's
              consolidated subsidiaries referred to in Note 1) were
              established as joint and several obligors with regard to the
              credit. At the date of the auditors' report, Casa Saba and the
              joint and several obligors were in compliance with the financial
              ratios, as well as the "affirmative and negative covenants" set
              forth in the loan agreement.

        b)  On December 16, 2002, Casa Saba obtained an unsecured loan in
              the amount of Ps. 200,000. The proceeds from this loan were used
              for the working capital of Casa Saba. This loan was paid in full
              on its due date, February 14, 2003. The loan bore interest at a
              9.3% annual market rate.

        c)  As of December 31, 2001 and 2002, short and long-term bank debt
               in constant Mexican pesos was as discussed in next page.


                                     F-18
<PAGE>
<TABLE>
<CAPTION>

                                                                                      Weighted average
                          Type of loan                      Balance at fiscal         interest rate at
                                                                 year-end              fiscal year-end
             ---------------------------------------        -------------------    ------------------------
<S>                                                         <C>                    <C>
                2001
                ----
             Secured loan - short-term
                   Mexican pesos                            Ps.       321,330              14.94%

             Secured loan - long-term
                    Mexican pesos                                     400,605              14.94%
                                                            -------------------
                                                            Ps.       721,935
                                                            ===================

                2002
                ----
             Secured loan - short-term
                   Mexican pesos                            Ps.       355,004               9.88%

             Secured loan - long-term
                   Mexican pesos                                       42,996               9.88%
                                                            -------------------
                                                            Ps.       398,000
                                                            ===================
</TABLE>


           Applicable interest rates are adjusted monthly, in accordance with
              market rates, hence, the carrying value of the liability
              approximates to its market value as of December 31, 2001 and
              2002.


   9.   Deferred income tax:

        As of December 31, 2001 and 2002, the deferred income tax liability
             effect determined in accordance with Bulletin D-4 issued by MIPA
             was as follows:
<TABLE>

                                                                2001               2002
                                                          -----------------  -----------------
<S>                                                       <C>                <C>
             Excess of book over
             tax value of assets and
             liabilities                                   Ps. 2,179,971       Ps. 2,471,224

             Tax loss carryforwards                           (1,324,171)           (932,264)
                                                          -----------------  -----------------
                                                           Ps.   855,800       Ps. 1,538,960

                                                          -----------------  -----------------
             Deferred income tax liability                 Ps.   299,530       Ps.   538,636

             Less-
             Asset tax recoverable                               (40,555)            (64,711)
                                                          =================  =================

             Deferred income tax liability effect          Ps.   258,975       Ps.   473,925
                                                          =================  =================
</TABLE>


       As of December 31, 2000, 2001 and 2002, the excess of book over tax
          value of assets and liabilities refers mainly to the line items
          of inventories, property and equipment, and certain prepaid
          expenses recorded in the line item "Other assets". At those
          year-ends, the provision for deferred income tax applied to the
          income statement amounted to Ps. 101,963, Ps. 87,461 and Ps.
          136,366 at fiscal year-end constant Mexican pesos, respectively.

                                     F-19
<PAGE>

       As of December 31, 2000, 2001 and 2002, the Group did not have a
          deferred employee profit sharing effect, as there were no
          temporary items that would have generated a future liability or
          asset, as discussed in Note 3i).


  10.  Consolidated foreign
          currency position:

       As of December 31, 2001 and 2002, assets and liabilities denominated
          in U.S. dollars were as follows:

<TABLE>
<CAPTION>

                                                                2001               2002
                                                          -----------------  -----------------

<S>                                                             <C>                <C>
              Current assets                                    $   3,586          $   3,617
              Current liabilities                                     592                104
                                                          -----------------  -----------------

              Net                                               $   2,994          $   3,513
                                                          =================  =================

              Net (at fiscal year-end constant
              Mexican pesos)                               Ps.     29,020     Ps.     36,228
                                                          =================  =================
</TABLE>


         As of December 31, 2001 and 2002, the Group valued its U.S. dollars
            denominated assets and liabilities at the fiscal year-end
            exchange rate of Ps. 9.17 (pesos), and Ps. 10.31 (pesos) per
            dollar, respectively, published by the Central Bank of Mexico in
            the Official Daily Gazette.

         As of February 19, 2003, issue date of the accompanying financial
            statements, the consolidated net U.S. dollar position was
            similar to that of December 31, 2002 and the exchange rate was
            Ps. 10.77 (pesos) per dollar.

  11.  Stockholders' equity:

       Capital structure

       As of December 31, 2001 and 2002, paid-in capital stock was as follows:
<TABLE>
<CAPTION>
                                                    Number                         Par value
                                                                      --------------------------------------
                                                                          2001                  2002
                                                  ---------------     -----------------     ----------------
<S>                                                  <C>                       <C>                  <C>
         Fixed capital shares without                265,149,080        Ps.    167,730        Ps.   167,730
         retirement rights
         Variable capital shares                         270,280                   173                  173
                                                  ---------------     -----------------     ----------------

                                                     265,419,360        Ps.    167,903        Ps.   167,903
                                                  ===============     =================     ================

          At fiscal year-end constant
              Mexican pesos                                             Ps.    920,963        Ps.   920,963
                                                                      =================     ================
</TABLE>

       As  of December 31, 2001 and 2002, capital stock comprised of
           265,419,360 fully paid and non-assessed Ordinary Shares, with no
           par value. Variable capital shares may not exceed ten times the
           amount of fixed minimum capital stock.

       Repurchase and resale
           of own shares

       At the General Ordinary and Extraordinary Stockholders' Meeting held
           on April 25, 2002, the stockholders resolved that maximum amount
           geared toward Company's own share repurchases should be equivalent
           to 15% of the Company's stockholders' equity as of December 31,
           2001, without exceeding retained earnings at that date. The
           amount of the reserve for own share



                                     F-20
<PAGE>

           repurchases shown in the accompanying statements of stockholders'
           equity was appropriated from retained earnings. During 2001 and 2002,
           the shareholders did not approve a specific amount to increase
           this reserve.

        As of December 31, 2001 and 2002, the number of shares available for
           resale was 14,729,720 valued in the amount of Ps. 100,446 (Ps.
           141,070 at fiscal year-end constant Mexican pesos). In accordance
           with the General Corporate Law, the Company should sell its owns
           shares available in the treasury in the three-month period,
           effective the date on which the Company may legally dispose of
           those shares. Those shares can not be represented at the
           stockholders' meeting, as long as the shares belong to the Company.
           During 2001 and 2002, the shareholders did not approve a specific
           number of shares and peso amount for repurchase or resale of own
           shares.

      Legal reserve

       Net income generated by the Company is subject to the legal provision
           that requires appropriating 5% of the Company's income to a legal
           reserve until that reserve equals 20% of the Company's capital
           stock. Amounts from this reserve may not be distributed to the
           Company's stockholders, except as stock dividends. As of December
           31, 2001 and 2002, the Company's legal reserve was Ps. 52,722 at
           fiscal year-end constant Mexican pesos, which is included in the
           balance sheet under the caption "Retained earnings".

        Distribution of earnings and
            capital reductions

       Any dividends distributed to stockholders must first be paid out of the
           consolidated "Reinvested net taxable income account" ("CUFINER").
           Once the CUFINER has been depleted, any dividends may be paid out
           of consolidated "Net taxable income account" ("CUFIN"). Any
           dividends paid out of CUFIN in excess of its balance will be
           subject to a 51.52% in 2003 (53.8% in 2002) tax payable by the
           Group. This income tax may be offset against income tax due in the
           same year and the subsequent two years. Both the CUFINER and CUFIN
           are determined in accordance with currently enacted tax
           legislation. The balance of those accounts can be restated based on
           the NCPI up to the time when the dividend is paid. As of December
           31, 2001 and 2002, the restated balance of the CUFIN was Ps. 7,276.
           There was no balance in the Group's CUFINER as of December 31, 2001
           and 2002.

       By virtue of the "Comprehensive Fiscal Reform" discussed in Note 12),
           the determination of consolidated CUFINER was eliminated.

       The excess of capital reimbursement per share paid to stockholders over
           the balance of the consolidated "Restated contributed capital per
           share account" should be treated as a distributed dividend. The
           excess will be assessable in accordance with the specific procedure
           provided for in the Income Tax Law. Restated contributed capital
           per share account is determined in accordance with currently
           enacted tax legislation.

       In addition, effective 2002, 7.7% income tax withholding rate
           applicable to dividends paid to individuals or foreign residents
           was eliminated, in accordance with the "Comprehensive Fiscal
           Reform", as discussed in Note 12).

      Dividends among companies
          of the Group

       Dividends distributed among consolidating companies that are not paid
           out of the CUFINER and CUFIN will be subject to income tax at the
           time when the shares of the controlled subsidiary distributing them
           are sold either in whole or in part, when the equity stake is
           reduced in the subsidiary or when the Group is dissolved or no
           longer consolidates.

       At the General Ordinary Stockholders' Meeting held on November 29,
           2001, the stockholders of Casa Saba declared a dividend paid in the
           amount of Ps. 520,000 (Ps. 549,640 at fiscal year-end


                                     F-21
<PAGE>

           constant Mexican pesos), payable to the Company. That dividend was
           paid out of the CUFIN of Casa Saba.


  12.  Tax system:

       a)  Consolidated income
             tax due

           i) In 2001 and 2002, the income tax rate was 35%. In accordance
              with the "Comprehensive Fiscal Reform" which provisions became
              effective on January 1, 2002, the income tax rate will be
              reduced gradually, hence, a 34% tax rate will be applied in
              fiscal 2003, 33% in fiscal 2004, and finally 32% in fiscal 2005.
              Consequently, effective 2002: (i) the existing option up to 2001
              to defer 5% of income tax payable was eliminated, and (ii) the
              determination of the consolidated CUFINER referred to above was
              eliminated as well. As of December 31, 2001 and 2002, the
              consolidating companies had no deferred an income tax payment.
              In addition, at those fiscal year-ends, there was no CUFINER
              balance either, as discussed in Note 11),above.

             In 1995, the Group was authorized by the Ministry of Finance and
              Public Credit to determine its income and assets taxes on a
              consolidated basis. Either consolidated taxable income or a
              consolidated tax loss are determined in accordance with the
              "consolidative equity" of the Company, and that of its
              consolidated subsidiaries. "Consolidative equity", as provided
              for in the Income Tax Law, represents 60% of the equity stake
              (economic interest) that the Company holds in all of its
              consolidated subsidiaries. Effective 2002, consolidative equity
              applicable to the Company, in its capacity as a "holding
              company", is 60% instead of 100% of the consolidative equity
              that used to be incorporated up to 2001. Consequently, effective
              2002, taxable income or tax loss reported by the Company, in its
              capacity as a holding company, and for all of its consolidated
              subsidiaries is incorporated in to the Group's consolidated
              taxable income or consolidated tax loss in that proportion. The
              remaining 40% of that taxable income or tax loss is reported
              separately by the Company and by all of its consolidated
              subsidiaries. The Company and each of its consolidated
              subsidiaries determine and record their income tax and asset tax
              as if each of the companies separately filed the total income
              tax and asset tax due in the year, in accordance with Tax
              Legislation.

             Taxes are computed in Mexican pesos as of the date on which the
              transactions occurred. In accordance with Bulletin B-10, they
              are restated to fiscal year-end Mexican pesos by applying the
              NCPI factor.

         ii) One of the Group's consolidated subsidiaries (Transportes
              Marproa, S.A. de C.V., which assets and revenues are not
              material to the Group's consolidated operations), was authorized
              to file a tax return and pay its taxes separately from the Group
              under a special tax regime known as the "Simplified regime".
              Under this special regime, the subsidiary pays and records its
              income tax, based only on cash-in and cash-out with regard to
              all of its transactions carried out during the year.

        iii) In conformity with the tax amendments of the "Rules governing
              tax consolidation" of 1999, published in the Official Daily
              Gazette on December 31, 1998, the consolidated taxable income
              and/or consolidated tax loss includes, the "Consolidative
              equity", as explained in paragraph i) referred to above.

           Notwithstanding that on March 9, 1999, the Group obtained
              constitutional relief and protection from the Federal Courts
              against the amendments provided for in the "Rules governing tax
              consolidation" referred to above, the Group has determined its
              consolidated taxable income and/or consolidated tax loss in
              conformity with those amendments since 1999.

                                     F-22
<PAGE>

       Reconciliation of book
           and taxable income

           Income tax due is determined by taking into account the impact of
              inflation on depreciation of restated fixed assets, the
              deduction and/or accumulation of the annual inflationary
              adjustment of monetary assets and monetary liabilities, which is
              similar in concept to the gain on monetary position discussed in
              Note 3c), as well as the deduction of purchases of inventories
              instead of the book cost of sales.

           As of December 31, 2001, the Group incurred a consolidated tax loss
              in the amount of Ps. 174,530 (Ps. 184,480 at fiscal year-end
              constant Mexican pesos). In 2002, consolidated taxable income in
              the amount of Ps. 359,028 was incurred. Consequently, income tax
              amounted to Ps. 125,660. The effect thereof was fully offset by
              prior year tax loss carryforwards, as provided for in Income Tax
              Law provisions. The foregoing effect is shown in income
              statement. The consolidated tax loss and consolidated taxable
              income incurred in 2001 and 2002, respectively, differ from book
              income due mainly to the annual inflationary adjustment of
              monetary assets and monetary liabilities, as well as excess of
              book over tax depreciation, the deduction of purchases of
              inventories in excess of the book cost of sales, and the effect
              offset by prior year tax loss carryforwards.

       b) Consolidated asset tax due

           Consolidated asset tax due is calculated by applying a 1.8% annual
              rate to the amount resulting from the average restated value of
              the assets less the average nominal value of certain debts. The
              restated value of the assets results from adding the average
              restated value of the assets of the Company to the average
              restated value of the assets of its consolidated subsidiaries in
              the equity stake held by the Company in its consolidated
              subsidiaries. The average nominal value of debts results from
              adding the average nominal value of certain debts of the Company
              to the average nominal value of certain debts of its
              consolidated subsidiaries in the equity stake held by the
              Company in its consolidated subsidiaries.

           Asset tax is only paid in the amount in which it exceeds income tax
              of the year. Income tax paid during the year may be credited
              against asset tax due in the same year. As provided for in
              currently enacted Tax Legislation, asset tax paid in excess of
              income tax due in the same period may be recovered over a ten
              year term, under certain circumstances. On the other hand,
              income tax paid in excess of asset tax due may be credited for
              the immediately foregoing three years, under certain
              circumstances. As of December 31, 2002, consolidated asset tax
              due amounted to Ps. 47,160.

           In accordance with the Asset Tax Law, the amount of debts
              contracted with the financial system or its intermediaries can
              not be reduced from the average restated value of the assets as
              discussed in the first paragraph above. On August 26, 1999,
              Grupo Casa Autrey, S.A. de C.V. (now Grupo Casa Saba, S.A. de
              C.V.), Casa Autrey (now Casa Saba), and Drogueros filed a
              proceeding for annulment with the Federal Tax Court in order to
              make that deduction for the determination of the asset tax due.

           On February 15, May 31, and June 30, 2000, the Federal Tax Court
              handed down a favorable ruling for Grupo Casa Autrey, S.A. de
              C.V., Casa Autrey, and Drogueros, respectively. During 2002,
              Grupo Casa Saba, S.A. de C.V. required the Ministry of Finance
              and Public Credit to refund the asset tax paid derived from the
              favorable ruling issued by the Federal Tax Court in the amount
              of Ps. 40,596. This amount is shown in the income statement.

       c)  Tax loss carryforwards and asset tax recoverable

         i)  As of December 31, 2002, the consolidated Group had incurred
             accrued tax loss carryforwards for income tax purposes and had
             asset tax recoverable. Tax loss carryforwards can be credited
             against taxable income that may be generated in the future
             over a ten year term. Tax loss


                                     F-23
<PAGE>

             carryforwards can be indexed based on the NCPI factor
             from the date incurred up to the sixth month of the
             year in which they can be offset against taxable income. On the
             other hand, asset tax recoverable can be indexed from the date on
             which the recoverable balance is generated up to the date when
             that balance is recovered.

             As of December 31, 2002, the indexed amount of tax loss
             carryforward and asset tax recoverable were as follows:


                  Year            Tax loss            Asset tax        Year of
                incurred        carryforward         recoverable      expiration
             -------------   ----------------    -----------------   -----------

                  1995        Ps.          -     Ps.      3,697          2005
                  1996                     -             13,854          2006
                  1998               706,903                  -          2008
                  2000               174,171                  -          2010
                  2001               189,088                  -          2011
                  2002                    -              47,160          2012
                              ---------------    ----------------
                              Ps.  1,070,162     Ps.     64,711
                              ===============    ================

         ii)  Effective 1999, tax losses of consolidated subsidiaries expire
              individually in the future over a ten year term, effective the
              date on which tax losses are generated. The effect of these tax
              losses restated by applying the NCPI factor should be reversed
              in the tax consolidation in the year that the consolidated
              subsidiary loses the carryforward right.

           Prior to the authorization to consolidate for tax purposes, some
              subsidiaries of the Group incurred losses for income tax
              purposes and had asset tax recoverable. Tax Legislation allows
              tax loss carryforwards to be credited against future taxable
              income in an individual and consolidated manner, as well as the
              recovery of asset taxes. The use thereof depends on the capacity
              of the Group's consolidated subsidiaries to generate taxable
              income individually in the future. As of December 31, 2002, the
              restated balances for those items were as follows:


                  Year          Tax loss            Asset tax          Year of
                Incurred     carryforwards         recoverable       expiration
             -------------  -----------------     ---------------    -----------

                  1993       Ps.          -       Ps.    3,861           2003
                  1994                  234              1,110           2004
                  1995                1,092                  -           2005
                  1996                3,859              2,600           2006
                  1997                    -              4,159           2007
                            -----------------     ---------------
                            Ps.       5,185       Ps.   11,730
                            =================     ===============

           d) Employee profit sharing

                The Federal Labor Law provides that the Group's consolidated
                    subsidiaries that have personnel are obligated to pay
                    profit sharing to their employees. The amount of this
                    profit sharing is calculated by applying a 10% annual rate
                    to taxable income determined for each subsidiary, as
                    provided for in the Income Tax Law. As of December 31,
                    2001 and 2002, no deferred effect was recorded in
                    accordance with Mexican GAAP, as discussed in Note 3i).

                                     F-24
<PAGE>

           e) Provisions for income tax

                In accordance with Mexican GAAP, the following items
                    represent the principal differences between Mexican income
                    tax computed at the statutory tax rate and the Group's
                    provisions for income tax in each year:

<TABLE>
<CAPTION>
                                                               Year ended December, 31
                                                    --------------------------------------------
                                                          2000           2001             2002
                                                    ------------  --------------  --------------

<S>                                                     <C>            <C>               <C>
           Statutory income tax rate                    35%            35%               35%
           Permanent differences:
              Comprehensive financing expense
                 vs. annual inflationary
                 adjustment                             17              6                 -
              Non-deductible items                       8              6               (12)
              Other (including inflation effects)     (146)          (172)               74

           Temporary differences:
              Depreciation                              (2)             1                13
              Book cost of sales vs. purchases,
                labor and overhead                    (161)           (91)               39
              Application of tax loss
                carryforwards                           (7)           (11)               25
              Tax loss of the year                     256            226              (174)
                                                   -------------  --------------  --------------
                                                        0%             0%                0%
                                                   =============  ==============  ==============
</TABLE>


In  2002, the Group had consolidated taxable income. Consequently the income
    tax payable in the amount of Ps. 125,660 was fully offset by prior year
    consolidated tax loss carryforwards. In addition, in 2002 the Group
    obtained a refund of the asset tax from the Ministry of Finance and Public
    Credit, in the amount of Ps. 40,596, as referred to in paragraph b) above.


(13) Segment information:

       Although the Group distributes five product lines, it considers all of
           its operations, and reports the results of all of its operations to
           management as a single business segment, as discussed in Note 1).

       Revenue attributable to each of the five product lines for the years
           ended December 31, 2000, 2001 and 2002, were as follows:

<TABLE>
<CAPTION>
                                                             Millions of Mexican pesos
                                              ---------------------------------------------------------
                                                    2000               2001                 2002
                                              -----------------  -----------------    -----------------
<S>                                                     <C>                <C>                  <C>
             Pharmaceutical products            Ps.     14,250     Ps.     14,478       Ps.     15,573
             Health and beauty aids/other                1,754              1,695                1,738
             Entertainment products                        756                769                  704
             Food/non-perishable products                  207                160                  154
             Office/electronic products                    224                 60                   38
                                              -----------------  -----------------    -----------------
                    Total                       Ps.     17,191     Ps.     17,162       Ps.     18,207
                                              =================  =================    =================
</TABLE>


    14.  New Mexican accounting
              pronouncements:

             (i)  On November 24, 2001, the "MIPA" issued the revised
                    Bulletin C-9, "Liability, Provisions, Contingent Assets
                    and Liabilities and Commitments" ("Bulletin C-9"). This
                    Bulletin supersedes former Bulletin C-9, "Liabilities" and
                    Bulletin C-12, "Contingencies and Commitments". New
                    Bulletin C-9 sets forth a methodology for valuation,
                    presentation and disclosure of liabilities and provisions,
                    as well as for valuation and disclosure of contingent

                                     F-25
<PAGE>

                    assets and liabilities, and for disclosure of commitments.
                    This Bulletin requires that: (a) all contingent assets
                    that have a practical true realization must be accounted
                    for and disclosed in the financial statements; (b)
                    contingent assets that have a probable realization cannot
                    be accounted for in the financial statements, but must be
                    disclosed; and (c) contingent assets that do not have a
                    probable realization and cannot be accounted for in the
                    financial statements are not required to be disclosed.
                    Bulletin C-9 requires disclosure of committed amounts when
                    it represents significant additions of fixed assets. In
                    addition, New Bulletin C-9 establishes new standards for
                    the use of present value techniques to measure
                    liabilities, and the accounting for the early settlement
                    of liabilities and convertible debt. Application of the
                    provisions of Bulletin C-9 is mandatory, effective January
                    1, 2003, although early adoption is recommended. The Group
                    does not believe this provision will have a material
                    effect on its income statement or financial position.

             (ii)  On December 6, 2001, MIPA issued revised Bulletin C-8,
                    "Intangible Assets" ("Bulletin C-8"). This New Bulletin
                    supersedes Bulletin C-8, "Intangibles". New Bulletin
                    defines intangible assets as costs incurred and rights or
                    privileges acquired with intention to generate a specific
                    future economic benefit. Bulletin C-8 sets forth: (i) that
                    development costs should be capitalized as intangible
                    assets considering that costs incurred should be properly
                    identified, that there are expected future benefits, and
                    that the company has control over such a benefits; (ii)
                    that pre-operating costs should be expensed as a period
                    cost. Preoperating cost previously recognized under former
                    Bulletin C-8 will continue to be amortized, subject to
                    periodic impairment evaluations; (iii) that intangible
                    assets acquired in a business combination be accounted for
                    at fair value at the date of the purchase and be
                    separately reported, unless their cost cannot be
                    reasonably determined, in which case they should be
                    reported as goodwill. Intangible assets with finite useful
                    life should be amortized over its useful life. Also if
                    there is no market for these assets, they should be
                    reduced to the amount of goodwill or to zero. These assets
                    are also subject to periodic impairment evaluations.
                    Amortization of goodwill should be reported in operating
                    expenses. Application of the provisions of Bulletin C-8 is
                    mandatory, effective January 1, 2003, although early
                    adoption is recommended. The Group does not believe this
                    provision will have a material effect on its income
                    statement or financial position.


   15.   Differences between Mexican
           and U.S. GAAP:

         The consolidated financial statements of the Group are prepared based
             on Mexican GAAP, which differ in certain material respects from
             U.S. GAAP. A partial reconciliation of the reported net income
             and stockholders' equity to U.S. GAAP is presented in Note 16)
             below. This partial reconciliation to U.S. GAAP does not include
             the reversal of the restatement of the financial statements to
             recognize the impact of inflation, as required under Mexican
             GAAP, Bulletin B-10, as amended. The application of Bulletin B-10
             represents a comprehensive measure of the impact of price-level
             changes in the inflationary Mexican economy and, as such, is
             considered a more meaningful presentation than historical
             cost-based financial reporting for both Mexican and U.S.
             accounting purposes.

         Other than inflation accounting, the principal differences between
             Mexican GAAP and U.S. GAAP that affect the consolidated financial
             statements are described below along with an explanation, where
             appropriate, of the method used to determine the adjustments
             between Mexican and U.S. GAAP.

      a)   Statements of Cash Flows

           Under Mexican GAAP, the Group prepares the consolidated statements
              of changes in financial position in accordance with Bulletin
              B-12, "Statement of Changes in Financial Information". Bulletin
              B-12 specifies the appropriate presentation of this statement
              when the financial statements have been restated to constant
              Mexican pesos in accordance with the Third Amendment (modified)
              to Bulletin B-10. Bulletin B-12 identifies the generation and
              application of resources representing differences between
              beginning and ending balance sheets in constant



                                     F-26
<PAGE>

              Mexican pesos, excluding the effect of the heading "Deficit on
              restatement". The Bulletin also requires treating monetary gains
              and losses and unrealized gains and losses on foreign currency
              transactions as cash items in the determination of resources
              provided by operating activities. Consequently, the changes
              included in this statement constitute cash flow activity stated
              in constant Mexican pesos. In accordance with Mexican GAAP, the
              changes in current and long-term debt related to restatement to
              constant Mexican pesos are presented in the consolidated
              statements of changes in financial position as a resource used
              in financing activities, and the gain or loss on monetary
              position is presented as a component of operating activities.

           Under Statement of Financial Accounting Standard No. 95, "Statement
              of Cash Flows" ("SFAS 95"), a statement of cash flows is
              required, which presents only cash movement and excludes
              non-cash items. SFAS 95 does not provide guidance on
              inflation-adjusted statements of changes in financial position.
              If the gain on monetary position were treated as a component of
              financing activities, resources provided by (used in) operating
              activities would be Ps. 134,418, Ps.(236,560), and Ps.203,230,
              and net cash (used in) provided by financing activities would be
              Ps. (89,202), Ps. 79,905 and Ps. (199,645) in 2000, 2001 and
              2002, respectively.

        b) Deferred income taxes and
              employee profit sharing

         i)  The Group adopted SFAS No. 109, "Accounting for income taxes"
              ("SFAS 109") for U.S. GAAP reconciliation purposes. SFAS 109
              determines the deferred income tax effect by using the
              "comprehensive asset and liability method". Pursuant to this
              method, the deferred income tax effect is recorded for the tax
              future consequences of all temporary differences between book
              and tax values of assets and liabilities, as of the date of the
              relevant financial statements. The main temporary differences,
              which generated deferred income tax under U.S. GAAP, are the
              deduction of purchases of inventories for tax purposes versus
              cost of sales for financial statement purposes, differences in
              depreciation rates applicable to fixed assets for book and tax
              purposes, and the related effects of restatement and tax loss
              carryforwards that reduce future taxes payable. In addition,
              SFAS 109 requires reducing deferred income tax asset by a
              valuation allowance if, based on the weight of available
              evidence (that includes the evaluation of the benefit of tax
              loss carryforwards), it is more likely than not that some
              portion or all of the deferred income tax asset will not be
              realized. As described in Note 12b), Mexican Tax Law requires
              paying 1.8% tax on the Group's net assets which may be used to
              offset future income tax obligations. Under SFAS 109, such an
              amounts are treated as a deferred tax benefit and offset by a
              valuation allowance, if required. These provisions are virtually
              identical to Mexican GAAP effective on January 1, 2000, as
              referred in Note 3i) hereinabove.

              For U.S. GAAP purposes, all of the changes in the required
              deferred income tax effect during the year are allocated
              entirely in the income statement, except for the deferred income
              tax effect derived from temporary differences attributed to
              changes in other stockholders' equity accounts. In that event,
              such an effect is applied directly to the specific stockholders'
              equity account that generate such a changes.

              In addition, under U.S. GAAP the deferred income tax effect
              should be classified as current and noncurrent, based on the
              classification of the asset and liability items that give rise
              to it. As of December 31, 2001 and 2002, the deferred income tax
              effect under Mexican and U.S. GAAP was classified as follows:
<TABLE>
<CAPTION>

                                               CONSTANT MEXICAN PESOS
                         -------------------------------------------------------------------
                                  MEXICAN GAAP                        U.S. GAAP
                         --------------------------------  ---------------------------------
                              2001             2002             2001             2002
                         ---------------  ---------------  ---------------- ----------------
<S>                      <C>              <C>              <C>              <C>
            Current      Ps.          -   Ps.          -   Ps.     653,750   Ps.    627,534

            Noncurrent          258,975          473,925          (394,775)        (153,609)
                         ---------------  ---------------  ---------------- ----------------
                         Ps.    258,975   Ps.    473,925   Ps.     258,975   Ps.    473,925
                         ===============  ===============  ================ ================
</TABLE>


                                     F-27
<PAGE>

        ii) The Group's consolidated subsidiaries that have personnel
              are obligated to pay profit sharing to their employees, which is
              calculated by applying a 10% annual rate to taxable income
              determined for each subsidiary in accordance with the Income Tax
              Law, as explained in Note 12d) above. By virtue thereof,
              employee profit sharing is subject to the future consequences of
              temporary differences in the same manner as income tax.

            UnderMexican GAAP no deferred employee profit sharing was
              recorded in 2000, 2001, and 2002 insofar as the Group's
              consolidated subsidiaries did not have temporary differences
              that had generated future liabilities or benefits, as explained
              in Note 3i) hereinabove. For U.S. GAAP purposes, a deferred
              profit sharing expense and liability have been calculated.
              Therefore, in 2000, 2001, and 2002, the deferred effect not
              recorded under Mexican GAAP amounted to Ps. 146,445, Ps. 24,714,
              and Ps. (48,843), respectively. Accordingly, a reconciling item
              for the deferred effect not recorded under Mexican GAAP is
              included in the reconciliation of Mexican to U.S. GAAP. In
              addition, employee profit sharing is classified as an operating
              expense for U.S. GAAP purposes. The components of the U.S. GAAP
              employee profit sharing liability as of December 31, 2000, 2001,
              and 2002 were as follows:

                       DEFERRED EMPLOYEE PROFIT SHARING
                            CONSTANT MEXICAN PESOS
<TABLE>
<CAPTION>
                                                2000          2001             2002
                                          -------------- -------------- --------------
<S>                                             <C>            <C>           <C>
            Current -
                 Inventories              Ps.   35,405   Ps.   48,946    Ps. 57,240
                 Non-deductible reserves        (6,189)        (4,449)       (5,111)
                                          -------------- -------------- --------------
                                                29,216         44,497        52,129
                                          -------------- -------------- --------------

             Non-current-
                Property and equipment           5,113          3,580         2,741
                Prepaid expenses and
                prepaid pension cost              (216)         1,621         1,505
                Other                                -        (41,736)            -
                                          -------------- -------------- --------------
                                                 4,897        (36,535)        4,246
                                          -------------- -------------- --------------
                                          Ps.   34,113   Ps.    7,962   Ps.  56,375
                                          -------------- -------------- --------------
</TABLE>

       iii) Goodwill

            Goodwill is restated based on NCPI as discussed in Note 3c).
              Under Mexican GAAP and US GAAP, prior to January 1, 2002,
              goodwill was amortized on a straight-line basis over 20 years.

            In June 2001, the Financial Accounting Standards Board approved
              the issuance of SFAS 142, "Goodwill and Other Intangible
              Assets", which establishes new accounting and reporting
              requirements for goodwill and other intangible assets. The new
              standard requires that all intangible assets acquired that are
              obtained through contractual or legal right, or are capable of
              being separately sold, transferred, licensed, rented or
              exchanged must be recognized as an asset apart from goodwill. As
              a result of the statement, under US GAAP, goodwill and
              intangibles with indefinite lives are no longer amortized, but
              are subject to an annual assessment for impairment by applying a
              fair value based test.


                                     F-28
<PAGE>


      16.  Reconciliation of Mexican
             to U.S. GAAP:

           Net income and stockholder's equity adjusted to take into
              account the significant differences between Mexican GAAP and
              U.S. GAAP, except for the comprehensive effects of price-level
              changes as required by Mexican GAAP, were as follows:
<TABLE>
<CAPTION>

                                          Thousands of Mexican pesos (Ps.) and thousands of U.S. dollars ($),
                                                                  except per share
                                         --------------------------------------------------------------------------
      NET INCOME-
                                                                  Year                                 Convenience
                                         --------------------------------------------------------      translation
                                               2000                2001               2002                2002
                                         ------------------  -----------------  -----------------  ----------------
<S>                                               <C>                <C>              <C>             <C>
      Net income under
        Mexican GAAP                     Ps.      439,366    Ps.     428,663   Ps.    543,930         $    52,746
                                         ------------------  -----------------  -----------------  ----------------

      U.S. GAAP adjustments-
      Deferred employee profit sharing            146,445             24,714          (48,843)             (4,736)

      Amortization of goodwill                         -                  -            22,068               2,140

      Impact of inflation accoun-
      ting on U.S. GAAP ad-
      justments                                    16,176              1,437              430                  42
                                         ------------------  -----------------  -----------------  ----------------
                                                  162,621             26,151          (26,345)             (2,554)
                                         ------------------  -----------------  -----------------  ----------------

      Net income under U.S. GAAP         Ps.      601,987    Ps.     454,814    Ps.   517,585         $    50,192
                                         ==================  =================  =================  ================

      Weighted average common
      shares outstanding (thousands)              265,419            265,419          265,419
                                         ==================  =================  =================

      Basic and diluted  earnings  per
      share under U.S. GAAP              Ps.         2.27    Ps.        1.71    Ps.      1.95
                                         ==================  =================  =================
</TABLE>


        Because Mexican GAAP requires using a comprehensive method for
             recognizing the impact of inflation and the financial statements
             are prepared on this basis, the applicable impact of inflation on
             U.S. adjustments was calculated and included in the heading
             "impact of inflation accounting on U.S. GAAP adjustments".

<TABLE>
<CAPTION>

                                                                                                        Convenience
    STOCKHOLDERS' EQUITY-                                                                               translation
                                               2000                2001                2002                 2002
                                        -------------------  -----------------  --------------------  --------------
<S>                                            <C>                 <C>                  <C>           <C>
    Stockholders' equity under
    Mexican GAAP                        Ps.    2,552,846     Ps.   2,773,492    Ps.     2,980,973     $    289,064
                                        -------------------  -----------------  --------------------  --------------

    U.S. GAAP adjustments-
    Reversal of the opening
    impact of deferred items
    recorded
    under Mexican GAAP                            33,351              33,351                    -                -

    Deferred employee profit
    sharing                                      (34,113)             (7,962)             (56,375)          (5,467)

    Amortization of goodwill                           -                   -               22,068            2,140
                                        -------------------  -----------------  --------------------  --------------
                                                    (762)             25,389              (34,307)          (3,327)
                                         -------------------  -----------------  --------------------  -------------
    Stockholders' equity under
    U.S. GAAP                           Ps.    2,552,084     Ps.   2,798,881    Ps.     2,946,666     $    285,737
                                        ===================  =================  ====================  ==============

</TABLE>


                                         F-29
<PAGE>


<TABLE>
       Changes in stockholders' equity
               under U.S. GAAP
<CAPTION>
                                                                                                  Convenience
                                                                                                  translation
                                         2000                 2001                2002             2002
                                  -----------------   ------------------   -----------------     ---------------
<S>                                      <C>                 <C>                 <C>                <C>
    Stockholders' equity under
    U.S. GAAP as of beginning of
    the year                        Ps.  1,755,351     Ps.   2,552,084      Ps.  2,798,881          $ 271,407
    Comprehensive income under
    U.S. GAAP                              481,594             246,797             181,136             17,565
    Reversal of the deferred
    income tax                             315,139                  -              (33,351)            (3,234)
                                  -----------------   ------------------   -----------------     ---------------
    Approximate majority of
    stockholders' equity under
    U.S. GAAP as of the end of
    the year                        Ps.  2,552,084     Ps.    2,798,881     Ps.  2,946,666          $ 285,738
                                  =================   ==================   =================     ===============
</TABLE>


<TABLE>
       Comprehensive income under
          U.S. GAAP
<CAPTION>
                                                                                                  Convenience
                                                                                                  translation
                                         2000                 2001                2002             2002
                                  -----------------   ------------------   -----------------     ---------------
<S>                                    <C>                   <C>                 <C>                <C>

    Net income under U.S. GAAP            601,987      Ps.   454,814        Ps.  517,585            $  50,190
    Deficit on holding
    nonmonetary assets                   (120,393)          (208,017)           (336,449)             (32,625)
                                  -----------------   ------------------   -----------------     ---------------
    Comprehensive income under      Ps.   481,594      Ps.   246,797        Ps.  181,136            $  17,565
    U.S. GAAP
                                  =================   ==================   =================     ===============
</TABLE>



 17.    Supplementary U.S. GAAP disclosures:

        a) Financial instruments with off-balance-sheet risk

       Under the provisions of SFAS No. 105, "Disclosure of information about
             financial instruments with off-balance-sheet risk and financial
             instruments with concentrations of credit risk", the Group's
             accounts receivable, which represent receivables from numerous
             customers including a large retailers, and the Group's cash
             balances do not represent any significant concentration of risk
             to the Group.

       b)  Impairment of long-lived a-(0)ets

       Under U.S. GAAP, an impairment occurs when the total amount of the
             estimated future cash flow that may be reasonably expected to be
             obtained through the use of the asset during its remaining
             economic useful live, reduced by the operating costs and expenses
             associated with such cash flows, is less than the net book value
             of the asset. The impairment of a long-lived asset that must be
             charged to the income statement is that amount by which the net
             book value exceeds its recovery value. If the adjustment is in
             order, it is determined by the difference between "fair value"
             and net book value. SFAS No. 121, "Accounting for the impairment
             of long-lived assets and for long lived assets to be disposed
             of", defines "fair value " as the amount at which the asset could
             be bought or sold in a current transaction between willing
             parties. The write-down for impairment is not allowed to be
             reversed. In addition, U.S. GAAP requires valuing fixed assets
             and some intangibles held for sale at the lower between net book
             value or their realization value. The Group



                                     F-30
<PAGE>

             does not believe existing changes in circumstances indicate that
             the net book value of an asset may not be fully recoverable. In
             addition, the Group does not have any intangible and/or fixed
             assets held for sale.

       In  August 2001, SFAS 144, "Accounting for the impairment or disposal
             of long-lived assets" was issued. This SFAS supersedes SFAS No.
             121, and provide a single accounting model for long-lived assets
             to be disposed of. Although many of the fundamental recognition
             and measurement provisions of SFAS No. 121 are retained, the new
             rules significantly change the criteria that would have to be met
             to classify an asset as held-for-sale. The new rules also
             supersede the provisions of APB Opinion No. 30, "Reporting the
             results of operations-reporting, the effects of disposal of a
             segment of a business, and extraordinary, unusual and
             infrequently occurring events and transactions", with regard to
             reporting the effects of a disposal of a segment of business.
             Those rules further require showing expected future operating
             losses from discontinued operations in discontinued operations in
             the period in which the losses are incurred (rather than as of
             the measurement date presently required by APB No. 30). SFAS 144
             was adopted by the Group on January 1, 2002 and did not have a
             significant impact on the results of operations or financial
             position.

        c) Quantitative and qualitative
             disclosures on market risk

       The Group is subject to market risks due to interest rate
             fluctuations that prevail in the domestic economy. Those
             fluctuations further impact the short and long-term debt
             generated by loans obtained from Mexican banks for financing its
             operations. The Group has managed its interest rate risks.

             d) Fair value of financial instruments

           The carrying amounts for cash and cash equivalents, accounts
              receivable, accounts payable, receivables due from and payable
              to related parties, and accrued liabilities approximate their
              fair value due to their short-term nature.

           Long-term debt bears interest at value rates and, consequently,
              carrying value approximates the fair value.

           e) Derivative instruments and
                 hedging activities

           The provisions of SFAS No. 133, "Accounting for derivative
              instruments and hedging activities", as amended, ("SFAS 133"),
              requires recording all derivative instruments as either assets
              or liabilities on the balance sheet at their fair value. Changes
              in the fair value of derivatives are recorded each period in
              current earnings or other comprehensive income, depending on
              whether or not a derivative is designated as part of a hedge
              transaction, and the type of hedge transaction, if applicable.
              SFAS 133 as amended became effective on January 1, 2001.
              Although, the Group does not currently have derivative
              instruments or engage in any hedging activities, there can be no
              assurance that the Group will not do so in the future. Also,
              Bulletin C-2, "Financial instruments" issued by MIPA, which is
              similar to SFAS No. 133, became effective in 2001.

           f)   Comprehensive income

           SFAS No. 130, "Reporting comprehensive income", requires reporting
              all items required to be recognized under accounting standards
              as components of comprehensive income in a financial statement
              displayed with the same prominence as other financial
              statements. The adoption of SFAS No. 130 does not impact net
              income or shareholders' equity. The Group presents Comprehensive
              income under U.S.GAAP for 2000, 2001, and 2002 in Note 16)
              hereinabove.

                                     F-31
<PAGE>

           g) Segment Information

           The Group adopted SFAS No. 131, "Disclosures about Segments of an
              Enterprise and Related Information". SFAS 131 establishes
              standards for the way that public enterprises must determine and
              report information or operating segments in its annual and
              interim reports. Although the Group distributes five product
              lines, it considers all of their operations, and reports the
              results of all of its operations to management as a single
              business segment. Accordingly, the Group does not maintain
              separate operating results for each of its five product lines.
              Revenue attributable to each of the five product lines for the
              years ended December 31, 2000, 2001 and 2002, is mentioned in
              Note 13) hereinabove.

                                     F-32
<PAGE>

           h) Business combinations

            In June 2001, SFAS 141, "Business combination" superseded SFAS
              38, "Accounting for pre-acquisition contingencies of purchased
              enterprises" and the APB Opinion 16, "Business combination".
              SFAS 141 prohibits using of the "pooling of interest method" and
              requires using the "purchase method" of accounting for business
              combinations. SFAS 141 is effective July 1, 2001. Although the
              Group has not currently carried out business combinations, there
              can be no assurance that the Group will not do so in the future.

           i) Goodwill and other intangible assets

           In June 2001, SFAS 142, "Goodwill and other intangible assets"
              superseded APB Opinion 17, "Intangible assets". Under the new
              rules, goodwill and intangible assets deemed to have indefinite
              lives are not longer be amortized over their remaining economic
              useful lives. Instead they will be subject to annual impairment
              tests in accordance with SFAS 142. Other intangible assets will
              continue to be amortized over their remaining economic useful
              lives.

           The Company applied the provisions of SFAS 142 beginning on
              January 1, 2002. The Company has completed a transitional fair
              value based impairment test on its goodwill as of January 1,
              2002. Based on the results of this test, the fair value of the
              goodwill is equivalent to or greater than the recorded value as
              of January 1, 2002, therefore, no adjustment has been made to
              the carrying value of the goodwill in the Company's financial
              statements.

           As of December 31, 2002, the Company has total consolidated
              goodwill, net of accumulated amortization of Ps 234,117.

           The following table adjusts earnings and earnings per share for
              the adoption of SFAS 142:

<TABLE>
<CAPTION>
                                                                    Year Ended December 31,
                                                                    -----------------------
                                                           2000               2001             2002
                                                      --------------    -------------    ---------------
<S>                                                         <C>              <C>               <C>
       Reported net earnings (US GAAP)                Ps.   601,987     Ps.  454,814      Ps.  517,585

       Add:
           Goodwill amortization, net of tax                 26,789           26,789                 -
                                                      --------------    --------------   ---------------
           Adjusted net earnings                      Ps.   628,776     Ps.  481,603      Ps.  517,585

           Basic and diluted earnings per share:
           Reported net earnings                      Ps.      2.27     Ps.     1.71      Ps.     1.95

       Add:
           Goodwill amortization, net of tax          Ps.      0.10     Ps.     0.10      Ps.        -
                                                      --------------    --------------   ---------------
           Adjusted net earnings                      Ps.      2.37     Ps.     1.81      Ps.    1.95
                                                      ==============    ==============   ===============
</TABLE>


         i)   Recently Issued Accounting Standards

           In August 2001, the Financial Accounting Standards Board (FASB)
              issued Statement of Financial Accounting Standards (SFAS) 143,
              "Accounting for Asset Retirement Obligations". This Statement
              addresses financial accounting and reporting for obligations
              associated with the retirement of tangible long-lived assets and
              the associated asset retirement costs. SFAS 143 requires an
              enterprise to record the fair value of an asset retirement
              obligation as a liability in the period in which it incurs a
              legal obligation associated with the retirement of a tangible
              long-lived asset. SFAS 143 also requires the enterprise to
              record the contra to the initial obligation as an increase to
              the carrying amount of the related long-lived asset (i.e., the
              associated asset retirement costs) and to depreciate that cost
              over the remaining useful life of the asset. The liability is
              adjusted at the end of each period to reflect the passage of
              time (i.e., accretion expense) and changes in the estimated
              future cash flows underlying the initial fair value measurement.
              Enterprises are required to adopt SFAS 143 for fiscal
              years beginning after June


                                     F-33
<PAGE>

              15, 2002. Management does not anticipate a significant impact on
              its financial position or its results of operations, or cash
              flows.

           In April 2002, the FASB issued SFAS 145, "Rescission of FASB
              Statements No. 4, 44, and 64, Amendment of FASB Statement No.
              13, and Technical Corrections". SFAS 145 eliminates
              extraordinary accounting treatment for reporting gain or loss on
              debt extinguishment, and amends other existing authoritative
              pronouncements to make various technical corrections, clarify
              meanings, or describe their applicability under changed
              conditions. The provisions of SFAS 145 related to the rescission
              of FASB Statement No. 4 are applicable in fiscal years beginning
              after May 15, 2002, the provisions related to FASB Statement No.
              13 are effective for transactions occurring after May 15, 2002,
              and all other provisions are effective for financial statements
              issued on or after May 15, 2002; however, early application is
              encouraged. Debt extinguishments reported as extraordinary items
              prior to scheduled or early adoption of SFAS 145 would be
              reclassified in most cases following adoption. Management does
              not expect the adoption of SFAS 145 to have a material effect on
              the Company's financial position, results of operations, or cash
              flows.

           In June 2002, the FASB issued Statement No. 146, "Accounting for
              Costs Associated with Exit or Disposal Activities. ("SFAS 146").
              SFAS 146 applies to costs associated with an exit activity
              (including restructuring) or with a disposal of long-lived
              assets. Those activities can include eliminating or reducing
              product lines, terminating employees and contracts and
              relocating plant facilities or personnel. SFAS 146 is effective
              prospectively for exit or disposal activities initiated after
              December 31, 2002, with earlier adoption encouraged. The Company
              does not believe the adoption of this standard will have a
              material impact on its financial position, results of
              operations, or cash flows.

           In December 2002, the FASB issued Statement No. 148, "Accounting
              for Stock-Based Compensation-Transition and Disclosure", ("SFAS
              148") an amendment of FASB Statement No. 123. SFAS 148 amends
              FASB Statement No. 123, "Accounting for Stock-Based
              Compensation", to provide alternative methods of transition for
              an entity that voluntarily changes to the fair value based
              method of accounting for stock-based employee compensation and
              to require prominent disclosures about the effects on reported
              net income of an entity's accounting policy decisions with
              respect to stock-based employee compensation. SFAS 148 also
              amends APB Opinion No. 28, "Interim Financial Reporting," to
              require disclosures about those effects in interim financial
              information. The Company currently accounts for its stock-based
              compensation awards to employees and directors under the
              accounting prescribed by Accounting Principles Board Opinion No.
              25 and provides the disclosures required by SFAS No. 123. The
              Company does not believe the adoption of this standard will have
              a material impact on its financial position, results of
              operations, or cash flows.

           In November 2002, the FASB issued Interpretation 45 (FIN 45),
              "Guarantor's Accounting and Disclosure Requirements for
              Guarantees, Including Indirect Guarantees of Indebtedness of
              Others". For a guarantee subject to FASB Interpretation 45, a
              guarantor is required to:

         o  measure and recognize the fair value of the guarantee at
            inception (for many guarantees, fair value will be determined
            using a present value method); and

         o  provide new disclosures regarding the nature of any
            guarantees, the maximum potential amount of future guarantee
            payments, the current carrying amount of the guarantee
            liability, and the nature of any recourse provisions or assets
            held as collateral that could be liquidated and allow the
            guarantor to recover all or a portion of its payments in the
            event guarantee payments are required.

           The disclosure requirements of this Interpretation are effective
              for financial statements for fiscal years ending after December
              15, 2002 and did not have a material effect on the Company's
              financial statements. The initial recognition and measurement
              provisions are effective prospectively for guarantees issued or
              modified on or after January 1, 2003, which should not have a
              material effect on the Company's financial statements.

                                     F-34
<PAGE>

           On January 31, 2003, the FASB issued FASB Interpretation No. 46,
              "Consolidation of Variable Interest Entities" ("FIN 46"). FIN 46
              clarifies existing accounting for whether variable interest
              entities should be consolidated in financial statements based
              upon the investees ability to finance its activities without
              additional financial support and whether investors possess
              characteristics of a controlling financial interest. FIN 46
              applies to years or interim periods beginning after June 15,
              2003 with certain disclosure provisions required for financial
              statements issued after January 31, 2003. Management is
              currently evaluating the applicability of FIN 46 to its leases
              with related parties discussed in Note 7i), but does not
              anticipate a material impact on financial position or results of
              operations.

           On April 30, 2003 the FASB issued Statement No. 149, "Amendment
              of Statement 133 on Derivative Instruments and Hedging
              Activities." The Statement amends and clarifies accounting for
              derivative instruments, including certain derivative instruments
              embedded in other contracts, and for hedging activities under
              Statement 133. The amendments set forth in Statement 149 improve
              financial reporting by requiring that contracts with comparable
              characteristics be accounted for similarly. In particular, this
              Statement clarifies under what circumstances a contract with an
              initial net investment meets the characteristic of a derivative
              as discussed in Statement 133. In addition, it clarifies when a
              derivative contains a financing component that warrants special
              reporting in the statement of cash flows. This Statement is
              effective for contracts entered into or modified after June 30,
              2003.

           On May 15, 2003 the FASB issued Statement No. 150, "Accounting
              for Certain Financial Instruments with Characteristics of both
              Liabilities and Equity". The Statement improves the accounting
              for certain financial instruments that, under previous guidance,
              issuers could account for as equity. The new Statement requires
              that those instruments be classified as liabilities in
              statements of financial position. In addition to its
              requirements for the classification and measurement of financial
              instruments in its scope, Statement 150 also requires
              disclosures about alternative ways of settling the instruments
              and the capital structure of entities, all of whose shares are
              mandatorily redeemable. Most of the guidance in Statement 150 is
              effective for all financial instruments entered into or modified
              after May 31, 2003. Management does not anticipate a material
              impact on the Company.


                                     F-35



<PAGE>

                                                 Commision File Number 1-12632

------------------------------------------------------------------------------

                       SECURITIES AND EXCHANGE COMMISION
                            WASHINGTON, D.C. 20549


                           -------------------------


                                   EXHIBITS

                                      TO

                               ANNUAL REPORT ON

                                   FORM 20-F
                    (FOR THE YEAR ENDED DECEMBER 31, 2002)

                                     UNDER

                              THE SECURITIES ACT

                          --------------------------


                         GRUPO CASA SABA, S.A. DE C.V.
            (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)



                                      N/A
                (TRANSLATION OF REGISTRANT'S NAME INTO ENGLISH)



------------------------------------------------------------------------------



<PAGE>


                                  EXHIBIT INDEX


Exhibit No.         Description
-----------         -----------

1.1                 Amended and Restated Bylaws (estatutos sociales) of the
                    Registrant, dated as of April 25, 2002 in Spanish,
                    together with an English translation.(1)

4.1                 Summary of the Material Credit Agreement and Guaranty,
                    dated as of June 29, 2001, among Casa Saba, S.A. de C.V.,
                    as Borrower, the Registrant, as Guarantor, Scotiabank
                    Inverlat, S.A., Institucion de Banco Multiple, Grupo
                    Financiero Scotiabank Inverlat, as Lender, and Certain
                    Legal Representatives.(2)

8.1                 List of Subsidiaries of the Registrant

10.1                Certification of Principal Executive and Financial
                    Officers of Grupo Casa Saba, S.A. de C.V. pursuant to 18
                    U.S.C. Section 1350, as adopted pursuant to Section 906 fo
                    the Sarbanes-Oxley Act of 2002.









______________________

(1)    Previously submitted to the Securities and Exchange Commission as an
       Exhibit to the Registrant's Annual Report on Form 20-F for the year
       ended December 31, 2001 and incorporated herein by reference.

(2)    Previously submitted to the Securities and Exchange Commission as an
       Exhibit to the Registrant's Annual Report on Form 20-F for the year
       ended December 31, 2000 and incorporated herein by reference.



<PAGE>

<TABLE>
<CAPTION>

                          GRUPO CASA SABA, S.A. DE C.V.

                                                                                              EXHIBIT 8.1
                              LIST OF SUBSIDIARIES
<

DIRECT SUBSIDIARIES                                   JURISDICTION OF INCORPORATION      PERCENTAGE STAKE
-------------------                                   -----------------------------      ----------------

<S>                                                                <C>                         <C>
Alta del Centro, S.A. de C.V.....................                  Mexico                      99.50%
Bloques y Ladrillos, S.A. de C.V.................                  Mexico                      99.99%
Capa S.A. de C.V.................................                  Mexico                      99.50%
Casa Saba, S.A. de C.V...........................                  Mexico                      99.99%
Distribuidora Casa Saba, S.A. de C.V.............                  Mexico                      99.99%
Distribuidora Eclipse, S.A. de C.V...............                  Mexico                      99.99%
Estrella del Pacifico, S.A. de C.V...............                  Mexico                      99.99%
Inmobiliaria Iliria, S.A. de C.V.................                  Mexico                      99.99%
Inmobiliaria Perceval, S.A. de C.V. .............                  Mexico                      99.99%
Inmobiliaria Osa Mayor, S.A. de C.V..............                  Mexico                      99.50%
Inmuebles La Laguna, S.A. de C.V.................                  Mexico                      99.50%
Organizacion Sip, S.A. de C.V....................                  Mexico                      99.99%
Publicaciones CITEM, S.A. de C.V.................                  Mexico                      99.99%
Solo S.A. de C.V.................................                  Mexico                      99.99%
Transportes Marproa, S.A. de C.V.................                  Mexico                      99.50%
Ultima del Golfo, S.A. de C.V....................                  Mexico                      99.50%

INDIRECT SUBSIDIARIES
---------------------

Centennial S.A. de C.V. .........................                  Mexico                      99.99%
Drogueros S.A. de C.V............................                  Mexico                      99.99%
Estrella del Este, S.A. de C.V...................                  Mexico                      99.99%
Grupo Mexatar, S.A. de C.V. .....................                  Mexico                      99.99%
Inmobiliaria Dejanira, S.A. de C.V ..............                  Mexico                      99.99%
Inmuebles Visosil, S.A. de C.V...................                  Mexico                      99.99%
Servicios Corporativos Saba, S.A. de C.V.........                  Mexico                      99.99%
Uno @ Uno, S.A. de C.V. .........................                  Mexico                      99.99%

</TABLE>



<PAGE>


                                                                  EXHIBIT 10.1



                         CERTIFICATE OF CEO PURSUANT TO
                             18 U.S.C. SECTION 1350,
                             AS ADOPTED PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002


         In connection with the Annual Report on Form 20-F of Grupo Casa Saba
S.A. de C.V. (the "Company") for the year ended December 31, 2002 as filed with
the Securities and Exchange Commission on the date hereof (the "Report"), Manuel
Saba Ades, as Chief Executive Officer of the Company, and Alejandro Sadurni
Gomez, as Chief Financial Officer of the Company, each hereby certifies,
pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the
Sarbanes-Oxley Act of 2002, that, to the best of his knowledge:

         (1) The Report fully complies with the requirements of Section 13(a)
or 15(d) of the Securities Exchange Act of 1934; and

         (2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations of the
Company.



/s/Manuel Saba Ades
------------------------------
Name:   Manuel Saba Ades
Title:  Chief Executive Officer
Date:   June 27, 2003


/s/ Alejandro Sadurni Gomez
------------------------------
Name:  Alejandro Sadurni Gomez
Title: Chief Financial Officer
Date:  June 27, 2003


This certification accompanies the Report pursuant to ss. 906 of the
Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the
Sarbanes-Oxley Act of 2002, be deemed filed by the Company for purposes of ss.18
of the Securities Exchange Act of 1934, as amended.

A signed original of this written statement required by Section 906 has been
provided to the Company and will be retained by the Company and furnished to the
Securities and Exchange Commission or its staff upon request.