|
|



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



|FORM 20-F
|---------



|ANNUAL REPORT PURSUANT TO
SECTION 13  OF THE SECURITIES EXCHANGE ACT OF 1934
|----------------------------------------------------------------------------



|For the fiscal year ended
December 31, 2002
|-------------------------------------------



|Commission file number 1-12260
|------------------------------



|Coca-Cola FEMSA, S.A. de C.V. (Exact
name of registrant as specified in its charter)
|------------------------------------------------------------------------------------



|Not Applicable
      (Translation of registrants name into English)
|--------------------------------------------------------------------



|United Mexican States (Jurisdiction of incorporation or organization)
|---------------------------------------------------------------------



|Guillermo González
Camarena No. 600  Centro de Ciudad Santa Fé 01210 México, D.F., México
(Address of principal executive offices)
|----------------------------------------------------------------------------------------------------------------------------------



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

|Title of Each Class                                                                                   |  | Name of Each Exchange 
      on Which Registered                                
|----------------------------------------------------------------------------------------------------- |  | --------------------------------------------------------------------------------
|American Depositary Shares, each representing
      
           10 Series L Shares, without par value |  | New York Stock Exchange, Inc.                                                   
|                                                                                                      |  |                                                                                 
|Series L Shares, without par value                                                                    |  | New York Stock Exchange, Inc. (not for trading,
      for listing purposes only)
|                                                                                                      |  |                                                                                 
|8.95% Notes due November 1, 2006                                                                      |  | New York Stock Exchange, Inc.                                                   



|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:
|-------------------------------------------------------------------------------------------------------

| | 726,750,000 | Series A Shares, without par value
| | ----------- | ----------------------------------
| | 427,500,000 | Series D Shares, without par value
| | 270,750,000 | Series L 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.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | |X|    Yes |  |  | ||   No
| | ---------- |  |  | -------



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

| | ||
         Item 17 |  |  | |X|   Item 18
| | ------------------- |  |  | -------------

|
|



| |  | 
| |  | 



---





|TABLE OF CONTENTS
|-----------------

|             |                                                                  |  | Page
|------------ | ---------------------------------------------------------------- |  | ----
|             | Introduction                                                     |  |     
|Item 1.      | Not Applicable                                                   |  | 3   
|Item 2.      | Not Applicable                                                   |  | 3   
|Item 3.      | Key Information                                                  |  | 4   
|             | Selected Financial Data                                          |  | 4   
|             | Dividends and Dividend Policy                                    |  | 6   
|             | Exchange Rate Information                                        |  | 6   
|             | Risk Factors                                                     |  | 8   
|Item 4.      | Information on the Company                                       |  | 15  
|             | The Company                                                      |  | 15  
|             | Regulation                                                       |  | 32  
|             | Bottler Agreements                                               |  | 34  
|             | Description of Property, Plant and Equipment                     |  | 36  
|             | Significant Subsidiaries                                         |  | 37  
|Item 5.      | Operating and Financial Review and Prospects                     |  | 39  
|Item 6.      | Directors, Senior Management and Employees                       |  | 57  
|Item 7.      | Major Shareholders and Related Party Transactions                |  | 66  
|             | Major Shareholders                                               |  | 66  
|             | Related Party Transactions                                       |  | 69  
|Item 8.      | Financial Information                                            |  | 71  
|             | Consolidated Statements and Other Financial Information          |  | 71  
|Item 9.      | The Offer and Listing                                            |  | 72  
|             | Trading Markets                                                  |  | 72  
|             | Trading on the Mexican Stock Exchange                            |  | 74  
|Item 10.     | Additional Information                                           |  | 75  
|             | Bylaws                                                           |  | 75  
|             | Material Contracts                                               |  | 81  
|             | Exchange Controls                                                |  | 82  
|             | Taxation                                                         |  | 83  
|             | Documents on Display                                             |  | 88  
|Item 11.     | Quantitative and Qualitative Disclosures about
      Market Risk |  | 89  
|Items 12-14. | Not Applicable                                                   |  | 91  
|Item 15.     | Controls and Procedures                                          |  | 91  
|Items 16-17. | Not Applicable                                                   |  | 91  
|Item 18.     | Financial Statements                                             |  | 91  
|Item 19.     | Exhibits                                                         |  | 91  



| | i | 
| | - | 



---





|INTRODUCTION
|------------



|References
|----------



|Unless the context
otherwise requires, the terms Coca-Cola FEMSA,  our company,
we, us and our are used in this annual report to
refer to  Coca-Cola FEMSA, S.A. de C.V. and our subsidiaries on a consolidated basis. We
acquired Panamerican Beverages, Inc., referred to in this annual report as  Panamco, on
May 6, 2003. Unless otherwise specified, Panamco is not reflected in  the financial or
other information presented in this annual report, as it will  only be reflected in our
consolidated financial statements for periods ending  after May 1, 2003.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|References herein to U.S.
      dollars, U.S.$, dollars or $ are
      to the lawful currency of the United States. References herein to Mexican
      pesos, pesos or Ps. are to the lawful currency
      of Mexico. References herein to Argentine pesos or A$
      are to the lawful currency of Argentina. References herein to Colombian
      pesos or Cps. are to the lawful currency of Colombia.
      The term billion as used in this annual report means one thousand
      million. Certain amounts in this annual report may not total due to rounding.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Soft
drink as used in this annual report refers generally to  non-alcoholic beverages,
including those carbonated or containing natural or  artificial flavored soft drinks and
sweeteners. The term unit case refers to  192 ounces of finished beverage
product (24 eight-ounce servings) and, when  applied to fountain syrup, powders and
concentrate, refers to the volume of  fountain syrup, powders and concentrate that is
required to produce 192 ounces  of finished beverage product.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Financial Statements and U.S. GAAP
|----------------------------------



|This annual report
includes (under Item 18) our audited consolidated  balance sheets as of December 31, 2002
and 2001 and the related consolidated  statements of income, changes in stockholders
equity and changes in financial  position for the years ended December 31, 2002, 2001 and
2000. We publish our  financial statements in Mexican pesos and prepare such financial
statements in  accordance with Mexican GAAP. Mexican GAAP differs in certain significant
respects from U.S. GAAP. Notes 22 and 23 to our consolidated financial  statements
provide a description of the principal differences between Mexican  GAAP and U.S. GAAP as
they relate to our company and a reconciliation to U.S.  GAAP of net income and
stockholders equity.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Pursuant to
Mexican GAAP, in our financial statements and the selected  financial information set
forth in this annual report:
|------------------------------------------------------------------------------------------------------------------------------

| |  |  | nonmonetary
assets (including property, plant and equipment of local origin)  and stockholders
equity are restated for inflation based on the  local consumer price index; property,
plant and equipment of  foreign origin are restated based on the exchange rate and
inflation in the country of origin and converted into Mexican  pesos using the prevailing
exchange rate at the balance sheet  date;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | gains
and  losses in purchasing power from holding monetary liabilities or assets are
recognized in income; and
| | - |  | ---------------------------------------------------------------------------------------------------------------

| |  |  | all
financial statements are restated in constant pesos as of December 31, 2002.
| | - |  | --------------------------------------------------------------------------------



|The effect of inflation accounting under Mexican
GAAP has not been reversed in  the reconciliation to U.S. GAAP of net income and
stockholders equity.
|-------------------------------------------------------------------------------------------------------------------------------------------------------



|Coca-Cola FEMSA de
Buenos Aires S.A., referred to in this annual report  as Coca-Cola FEMSA de Buenos Aires
or KOFBA, our wholly owned Argentine  subsidiary, maintains its financial records in
Argentine pesos, which are  translated into Mexican pesos for purposes of consolidation.
In order to  consolidate financial information for Coca-Cola FEMSA de Buenos Aires with
our  other financial information for a particular period, we translate such  subsidiarys
information using the product of the U.S. dollar/Argentine peso  exchange rate and the
Mexican peso/U.S. dollar exchange rate, in each case as in  effect at the end of such
period. We restate KOFBAs financial information for  prior periods by applying the
Argentine consumer price index and
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | 
| |  | 



---





|then translate  such restated information using
the exchange rate in effect at the end of the  most recent completed period for which
financial results are being reported.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Currency Translations
|---------------------



|This annual report
contains translations of certain peso amounts into  U.S. dollars at specified rates
solely for the convenience of the reader. These  translations should not be construed as
representations that the peso amounts  actually represent such U.S. dollar amounts or
could be converted into U.S.  dollars at the rate indicated. Unless otherwise indicated,
such U.S. dollar  amounts have been translated from pesos at an exchange rate of
Ps.10.459 to  U.S.$1.00, the exchange rate quoted by dealers to us for the settlement of
obligations in foreign currencies on December 31, 2002. On December 31, 2002 and  on June
13, 2003, the noon buying rates for pesos as published by the Federal  Reserve Bank of
New York were Ps.10.43 to U.S.$1.00 and Ps. 10.60 to U.S.$1.00,  respectively. See
Item 3. Key InformationExchange Rate Information for  information regarding
exchange rates since January 1, 1998.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Sources
|-------



|Certain
information contained in this annual report has been computed based upon statistics
prepared by Mexicos Instituto Nacional de Estadística, Geografía e Informática
(the National Institute of Statistics, Geography and Information), Instituto Nacional de
Estadísticas y Censos de Argentina (the National Institute of Statistics and
Census of Argentina), the Federal Reserve Bank of New York, Banco de México,
Comisión Nacional Bancaria y de Valores (the National Banking and Securities
Commission or the CNBV), and upon our estimates.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Forward-Looking Information
|---------------------------



|This annual report
contains words such as believe, expect,  anticipate
and similar expressions that identify forward-looking statements.  Use of such words
reflects our views about future events and financial  performance. Actual results could
differ materially from those projected in such  forward-looking statements as a result of
various factors that may be beyond our  control, including, but not limited to, effects
on our company from changes in  our relationship with The Coca-Cola Company, movements in
the prices of raw  materials, competition, significant developments in the economic or
political  conditions in Latin America, particularly in Mexico, or changes in our
regulatory environment. We have recently consummated the acquisition of, and are
beginning the process of integrating, Panamco, which exposes us to a variety of  new
risks and challenges. Accordingly, we caution readers not to place undue  reliance on
these forward-looking statements. In any event, these statements  speak only as of their
respective dates, and we undertake no obligation to  update or revise any of them,
whether as a result of new information, future  events or otherwise.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 2 | 
| | - | 



---





|Item 1.  Not Applicable
|-----------------------



|Item 2.  Not Applicable
|-----------------------



| | 3 | 
| | - | 



---





|Item 3.  Key Information
|------------------------



|SELECTED FINANCIAL DATA
|-----------------------



|This annual report
includes (under Item 18) our audited consolidated  balance sheets as of December 31, 2002
and 2001 and the related consolidated  statements of income, changes in stockholders
equity and changes in financial  position for the years ended December 31, 2002, 2001 and
2000. Our consolidated  financial statements are prepared in accordance with Mexican
GAAP. Mexican GAAP  differs in certain significant respects from U.S. GAAP. Notes 22 and
23 to our  consolidated financial statements provide a description of the principal
differences between Mexican GAAP and U.S. GAAP as they relate to us, together  with a
reconciliation to U.S. GAAP of net income, shareholders equity and  certain other
selected financial data.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Pursuant to
Mexican GAAP, in our financial statements and the selected  financial information set
forth below:
|--------------------------------------------------------------------------------------------------------------

| |  |  | nonmonetary
assets (including plant, property and equipment of  local origin) and stockholders
equity are restated for inflation  based on the local consumer price index; property,
plant and  equipment of foreign origin are restated based on the exchange  rate and
inflation in the country of origin and converted into  Mexican pesos using the prevailing
exchange rate at the balance  sheet date;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | gains
and  losses in purchasing power from holding monetary liabilities or assets are
recognized in income; and
| | - |  | ---------------------------------------------------------------------------------------------------------------

| |  |  | all
financial statements are restated in constant pesos as of December 31, 2002.
| | - |  | --------------------------------------------------------------------------------



|The effect of inflation accounting under Mexican
GAAP has not been reversed in  the reconciliation to U.S. GAAP of net income and
stockholders equity. See Note  22 to the consolidated financial statements.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|In order to
consolidate financial information for Coca-Cola FEMSA de  Buenos Aires with our other
financial information for a particular period, we  translate such subsidiarys
information using the product of the U.S.  dollar/Argentine peso exchange rate and the
Mexican peso/U.S. dollar exchange  rate, in each case as in effect at the end of such
period. We restate Coca-Cola  FEMSA de Buenos Aires financial information for prior
periods by applying the  Argentine consumer price index and then translate such restated
information  using the exchange rate in effect at the end of the most recent completed
period  for which financial results are being reported.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|On May 6, 2003, we
acquired Panamco. Panamco is not reflected in our  consolidated financial statements
presented in this annual report.
|----------------------------------------------------------------------------------------------------------------------------------------



| | 4 | 
| | - | 



---





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

|                                 | At or for the Year ended
      December 31,                                                            
|-------------------------------- | -------------------------------------------------------------------------------------------------------
|                                 |                                                                                                        
|                                 | 2002(1)                                                                                                
|                                 | (millions of U.S. dollars or constant Mexican pesos 
      at December 31, 2002, except per share data)
|Income Statement
      Data:     |                                                                                                        
|Mexican GAAP                     |                                                                                                        
|Net sales                        | $1,672.4                                                                                               
|Total revenues                   | 1,684.7                                                                                                
|Cost of sales                    | 777.4                                                                                                  
|Gross profit                     | 907.3                                                                                                  
|Operating expenses               | 479.2                                                                                                  
|Goodwill amortization            | 3.6                                                                                                    
|Income from operations           | 424.5                                                                                                  
|Net income                       | 245.2                                                                                                  
|                                 |                                                                                                        
|Income
      per share(2)        | 0.17                                                                                                   
|                                 |                                                                                                        
|U.S. GAAP                        |                                                                                                        
|Net sales                        | $1,672.4                                                                                               
|Total revenues                   | 1,684.7                                                                                                
|Income from operations
      (3) | 403.5                                                                                                  
|Net income                       | 241.3                                                                                                  
|Income per share                 | 0.17                                                                                                   
|                                 |                                                                                                        
|Balance Sheet
      Data:        |                                                                                                        
|Mexican GAAP                     |                                                                                                        
|Total assets                     | $1,546.3                                                                                               
|Long-term debt                   | 303.1                                                                                                  
|Capital stock                    | 226.6                                                                                                  
|Total stockholders
      equity | 872.3                                                                                                  
|U.S. GAAP                        |                                                                                                        
|Total assets                     | $1,577.4                                                                                               
|Long-term debt                   | 303.1                                                                                                  
|Total stockholders
      equity | 854.7                                                                                                  
|                                 |                                                                                                        
|Other Data:                      |                                                                                                        
|Mexican GAAP                     |                                                                                                        
|Depreciation(4)                  | $    49.8                                                                                              
|Capital expenditures(5)          | 128.2                                                                                                  
|                                 |                                                                                                        
|U.S. GAAP                        |                                                                                                        
|Depreciation(4)                  | $    51.1                                                                                              
|Capital expenditures(5)          | 128.2                                                                                                  

|
|

|(1) |  | Translation to U.S. dollar amounts at an exchange
      rate of Ps.10.459 to U.S.$1.00 solely for the convenience of the reader.                
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------
|(2) |  | Computed on the basis of 1,425 million shares
      outstanding after giving effect to the 3 to 1 stock split effected on January
      9, 1998.

|(3) |  | We
include employee profit sharing as part of income from operations for  purposes of U.S.
GAAP.
|--- |  | ------------------------------------------------------------------------------------------------

|(4) |  | Excludes
breakage of bottles and cases (Ps.192.1  million in 2002), goodwill amortization and
impairment  (Ps.439.2 million in 2002) and amortization of deferred charges and pension
and seniority premiums (Ps.287.9 million in 2002). See the consolidated  statements of
changes in financial position included in our consolidated  financial statements.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(5) |  | Includes
retirements of property, plant and equipment.
|--- |  | ------------------------------------------------------



| | 5 | 
| | - | 



---





|Dividends and Dividend Policy
|-----------------------------



|The table below
sets forth the nominal amount of dividends declared and  paid per share each year in
pesos and translated into U.S. dollars at the  indicated exchange rate on each of the
respective payment dates.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Year |  | Pesos per Share 
      (nominal) |  | U.S. dollars per 
      Share
| | ---- |  | -------------------------------- |  | -----------------------------
| | 1998 |  | 0.096                            |  | 0.011                        
| | 1999 |  | 0.123                            |  | 0.013                        
| | 2000 |  | 0.153                            |  | 0.015                        
| | 2001 |  | 0.212                            |  | 0.023                        
| | 2002 |  | 0.394                            |  | 0.042                        



|
|



|In March 2003, the
holders of our Series A Shares and our Series D  Shares decided that we will not
distribute dividends in 2003.
|---------------------------------------------------------------------------------------------------------------------------------



|The declaration,
amount and payment of dividends are subject to  approval by holders of all series of our
stock voting as a single class,  excluding the Series L Shares, generally upon the
recommendation of our board of  directors, and will depend upon our operating results,
financial condition,  capital requirements, general business conditions and the
requirements of  Mexican law. Accordingly, our historical dividend payments are not
necessarily  indicative of our future dividends.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



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

|                   | Exchange Rate
|------------------ | -------------
|                   |              
|                   | High         
|                   |              
|1998               | 10.63        
|1999               | 10.60        
|2000               | 10.09        
|2001               | 9.97         
|2002               | 10.43        
|First Quarter 2003 | 11.24        

|
|

|(1) |  | Average
month-end rates.
|--- |  | ------------------------



| | 6 | 
| | - | 



---



|      |  |           | Exchange Rate
|----- |  | --------- | -------------
|      |  |           |              
|      |  |           | High         
|      | 
|2002: |  |           |              
|      |  | January   | 9.25         
|      |  | February  | 9.17         
|      |  | March     | 9.11         
|      |  | April     | 9.37         
|      |  | May       | 9.71         
|      |  | June      | 9.98         
|      |  | July      | 9.97         
|      |  | August    | 9.96         
|      |  | September | 10.35        
|      |  | October   | 10.22        
|      |  | November  | 10.34        
|      |  | December  | 10.43        
|      |  |           |              
|2003: |  |           |              
|      |  | January   | 10.98        
|      |  | February  | 11.06        
|      |  | March     | 11.24        
|      |  | April     | 10.77        
|      |  | May       | 10.42        
|      |  | June(1)   | 10.74        

|
|

|(1) |  | From
the period beginning June 1, 2003 until June 13, 2003.
|--- |  | -----------------------------------------------------------



|Mexico has a free
foreign exchange market and, since December 1994, the  Mexican government has not
intervened to maintain value of the peso against the  U.S. dollar. The peso declined in
1998 as the foreign exchange markets  experienced volatility as a result of the financial
crises in Asia and Russia  and the financial turmoil in countries such as Brazil and
Venezuela. The peso  remained relatively stable from 1999 until the fall of 2001. In late
2001 and  early 2002, the peso appreciated considerably against the U.S. dollar and, more
strongly, against other foreign currencies. From the second quarter of 2002 and  until
March 2003, however, the peso depreciated in value. We can make no  assurance that the
Mexican government will maintain its current policies with  regard to the peso or that
the peso will not further depreciate significantly in  the future.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|We pay all cash
dividends in pesos. As a result, exchange rate  fluctuations will affect the U.S. dollar
amounts received by holders of our  American Depository Shares, which represent 10 Series
L Shares, on conversion by  the depositary for our ADSs of cash dividends on the shares
represented by such  ADSs. Fluctuations in the exchange rate between the peso and the
U.S. dollar  have affected the U.S. dollar equivalent of the peso price of our shares on
the  Mexican Stock Exchange and, consequently, have also affected the market price of
our ADSs.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 7 | 
| | - | 



---





|RISK FACTORS
|------------



|Risks Related to our Company
|----------------------------



|Our business depends significantly on our
relationship with The Coca-Cola  Company.
|-----------------------------------------------------------------------------------



|Approximately 98%
of our net sales in 2002 were derived from the  distribution of Coca-Cola trademark
beverages. We produce, market and distribute  Coca-Cola trademark beverages through
standard bottler agreements. These bottler  agreements with The Coca-Cola Company cover
all of our present territories.  Through its rights under the bottler agreements, The
Coca-Cola Company has the  ability to exercise substantial influence over the conduct of
our business. See  Item 4. Information on the CompanyBottler Agreements.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



|We are dependent
on The Coca-Cola Company to renew our bottler  agreements. The two bottler agreements
that cover our Mexican territories (other  than those acquired from Panamco) will each
expire in 2013 and the Buenos Aires  bottler agreement will expire in 2004. These bottler
agreements are  automatically renewable for additional ten-year terms, unless either
party gives  notice of its intention not to renew the agreement within a specified time
period. The bottler agreements covering Panamcos Mexican subsidiaries have a  ten-year
term ending in 2005, while the Panamco bottler agreements in Guatemala,  Nicaragua, Costa
Rica, Panama, Colombia, Venezuela and Brazil have five-year  terms. Our bottler
agreements, and therefore our right to distribute Coca-Cola  trademark beverages, are
subject to termination by The Coca-Cola Company in the  event of default by us or upon
expiration. No assurance can be given that our  bottler agreements will be renewed upon
the expiration of their respective  terms. Non-renewal of the bottler agreements would
have a material adverse  effect on our business, financial condition, prospects and
results of  operations. See Item 4. Information on the CompanyBottler
Agreements.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|The Coca-Cola Company and FEMSA have
substantial influence on the conduct of our  business.
|-------------------------------------------------------------------------------------------



|The cumulative
effect of our relationships with The Coca-Cola Company  and Fomento Económico
Mexicano, S.A. de C.V., a Mexican beverage company  commonly known as FEMSA, gives each
of these corporations significant influence  on the conduct of our business and gives
them, together, the ability to control  our company. The Coca-Cola Company indirectly
owns 39.6% of our outstanding  capital stock, representing 46.4% of the voting rights in
our company. The  Coca-Cola Company is entitled to appoint four of our 18 directors and
certain of  our executive officers and, except under limited circumstances, has the power
to  veto significant decisions of our board of directors. FEMSA indirectly owns  45.7% of
our outstanding capital stock, representing 53.6% of the voting rights  in our company.
FEMSA is entitled to appoint 11 members of our board of  directors and certain of our
executive officers. The Coca-Cola Company and FEMSA  together, or FEMSA acting alone in
certain limited circumstances, thus have the  power to determine the outcome of all
actions requiring approval by our board of  directors, and FEMSA and The Coca-Cola
Company together, except in certain  limited situations, have the power to determine the
outcome of all actions  requiring approval of our shareholders. See Item 7. Major
Shareholders and  Related Party TransactionsMajor ShareholdersThe Shareholders
Agreement.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|We have incurred significant new indebtedness
as a result of the Panamco  acquisition.
|--------------------------------------------------------------------------------------



|In connection with the acquisition
      of Panamco, we incurred approximately U.S.$2.5 billion of debt (including
      existing debt of Panamco). This new debt includes a bridge facility due
      in April 2004 in the amount of approximately U.S.$833 million. We now have
      significantly more indebtedness than we have had historically, and
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 8 | 
| | - | 



---





|we have agreed to certain covenants that impose
restrictions on the conduct of our business. In connection with the refinancing  of the
bridge facility, we may be required to agree to additional restrictions  or less
favorable terms than we have obtained to date. The increase in debt may  reduce the
amount of cash otherwise available to us to invest in our business or  meet our
obligations and may prevent us in the future from obtaining additional  financing or
completing refinancings on terms favorable to us. Because we have  significant
indebtedness in U.S. dollars and our sales are in a number of  currencies other than U.S.
dollars, our ability to service our indebtedness may  be adversely affected by changes in
exchange rates or interest rates or in  economic conditions in the different countries in
which we now operate,  particularly Mexico.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|We may fail to realize the contemplated
benefits from integrating Panamcos  Mexican operations.
|------------------------------------------------------------------------------------------------



|We expect to
realize benefits from the Panamco acquisition by  integrating the Mexican operations of
both companies. Our ability to realize any  benefits, however, depends on our success in
applying our operational practices  and integrating the organizational structures of the
two operations. We may fail  or be delayed in realizing any operational benefit from this
integration, and we  may need to invest significant capital and resources in the acquired
business or  incur other costs in order to achieve this integration.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Taxes on soft drinks could adversely affect
our business.
|---------------------------------------------------------



|Our products are
subject to excise and value-added taxes in many of the  countries in which we operate.
The imposition of new taxes or increases in taxes  on our products may have a material
adverse effect on our business, prospects,  financial conditions and results of
operations. We can give no assurance that  any governmental authority in any country
where we operate will not impose or  increase any such taxes in the future.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Voluntary price restraints or statutory price
controls would limit our ability  to increase prices and may have an adverse effect on
our results.
|-------------------------------------------------------------------------------------------------------------------------------------------------



|Voluntary price
restraints or statutory price controls in any of the  countries in which we operate may
have a material adverse effect on our  business, prospects, financial conditions and
results of operations. Although  Mexican bottlers have been free to set prices for
carbonated soft drinks without  governmental intervention since January 1996, such prices
were once subject to  statutory price controls and, later, to voluntary price restraints,
which  effectively limited our ability to increase prices in the Mexican market without
governmental consent. See Item 4. Information on the CompanyRegulationPrice
Controls. We can give no assurance that governmental authorities in any country
where we operate will not impose voluntary price restraints or statutory price  controls.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Increases in the price of raw materials may
increase our cost of sales and may  adversely affect our results of operations.
|---------------------------------------------------------------------------------------------------------------------------



|We use high
fructose corn syrup, referred to in this annual report as  HFCS, and sugar as sweeteners
in our products. In 2002, we converted our Mexican  bottling facilities to sugar-cane
based production following the imposition of a  20% excise tax on carbonated soft drinks
sweetened with HFCS. In addition, the  prices of certain materials used in the bottling
of our products, including  aluminum cans, plastic bottles, bottle closures (both steel
and plastic), other  packaging materials and HFCS, are quoted in U.S. dollars and
therefore may  increase if the U.S. dollar appreciates against the currency of any
country in  which we operate, particularly against the Mexican peso. See Item 4.
Information on the CompanyThe CompanyRaw Materials.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Increases in the
price of raw materials, including increases that may  occur as a result of import duties,
import restrictions or fluctuations in  exchange rates, will increase our cost of sales
and adversely affect net  earnings to the extent we are unable to increase our sales
prices. We cannot  assure you that our raw materials prices will not increase in the
future.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|A water shortage could adversely affect our
business.
|-----------------------------------------------------



|Water is an
essential component of soft drinks. We obtain water from  various sources in our
territories, including springs, wells, rivers and  municipal water companies.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 9 | 
| | - | 



---





|In Mexico, we
purchase water from municipal water companies and pump  water from our own wells pursuant
to concessions granted by the Mexican  government. We obtain approximately 90% and 100%,
respectively, of the water  used in our soft drink production in the Valley of Mexico and
the Southeast of  Mexico Territory pursuant to these concessions, which the Mexican
government  granted based on studies of the existing and projected groundwater supply.
Our  existing water concessions may be terminated by the Mexican government under
certain circumstances. See Item 4. Information on the  CompanyRegulationWater
Supply Law.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|We cannot assure
you that water will be available in sufficient  quantities to meet our future production
needs, or that our concessions and  permits will not be terminated by governments in any
such territory or prove  sufficient to meet our water supply needs.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|A shortage of key materials used in the
production of our products could  adversely affect our business.
|--------------------------------------------------------------------------------------------------------



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



|Competition from other bottlers could
adversely affect our business.
|--------------------------------------------------------------------



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



|We now conduct business in countries
throughout Latin America in which we have  not previously operated and that present
different or greater country risk than  Mexico or Argentina.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



| | 10 | 
| | -- | 



---





|Our compliance with environmental regulations
could result in material adverse  effects on our results of operations or financial
condition.
|--------------------------------------------------------------------------------------------------------------------------------------------



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



|Risks Related to Our Controlling Shareholders
and Capital Structure
|-------------------------------------------------------------------



|A significant percentage of our outstanding
capital stock and all of the voting  rights are held by FEMSA and The Coca-Cola Company,
which effectively control  the management of our company and whose interests may differ
from those of our  other shareholders.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|The Coca-Cola
Company indirectly owns 39.6% of our outstanding capital  stock, representing 46.4% of
the voting rights in our company, and FEMSA  indirectly owns 45.7% of our outstanding
capital stock, representing 53.6% of  the voting rights in our company. Consequently,
FEMSA acting alone or both The  Coca-Cola Company and FEMSA acting together have the
power to elect a majority  of the members of our board of directors and play a
significant or controlling  role in the outcome of substantially all matters to be
decided by our  shareholders. The interests of The Coca-Cola Company and FEMSA may differ
from  those of our other shareholders. See Item 7. Major Shareholders and Related
Party TransactionsMajor Shareholders and Item 10. Additional
InformationBylawsVoting Rights.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Holders of our Series L Shares have limited
voting rights.
|----------------------------------------------------------



|Holders of our Series L Shares
      are entitled to vote only in limited circumstances. They generally may elect
      three of our 18 directors and are only entitled to vote on specific matters,
      such as changes in our corporate form, certain mergers involving our company
      and the cancellation of the registration of our shares. See Item 7.
      Major Shareholders and Related Party TransactionsMajor Shareholders
      and Item 10. Additional InformationBylawsVoting Rights.
      In addition, we can give no assurance that holders of our ADSs will receive
      notices of shareholder meetings from The Bank of New York, the depositary
      for our ADSs, with sufficient time to enable such holders to return voting
      instructions to the depositary in a timely manner. Holders of our ADSs may not be able to participate in any future preemptive
      rights offerings and as a result may be subject to a dilution of equity
      interest.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Our shares are
traded on the New York Stock Exchange in the form of  ADSs. Under Mexican law, if we
issue new shares for cash as a part of a capital  increase, we must generally grant our
shareholders the right to purchase a  sufficient number of shares to maintain their
existing ownership percentage.  Rights to purchase shares in these circumstances are
known as preemptive rights.  We may not legally offer or sell shares to holders of our
ADSs in the United  States pursuant to any preemptive rights offering (or otherwise)
unless (i) we  file a registration statement with the U.S. Securities and Exchange
Commission,  with respect to that future issuance of shares or (ii) the offering
qualifies  for an exemption from the registration requirements of the U.S. Securities Act
of 1933. In addition, under current Mexican law, sales by the depositary of  preemptive
rights and distribution of the proceeds from such sales to ADS  holders are not possible.
See Item 10. Additional  InformationBylawsPreemptive Rights.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|At the time of any
future capital increase, we will evaluate the costs  and potential liabilities associated
with filing a registration statement with  the SEC, as well as the benefits of preemptive
rights to holders of our ADSs in  the United States and any other factors that we
consider important in  determining whether to file a registration statement. If we do not
file a  registration statement with the SEC, our ADS holders in the United States may
not be able to participate in any preemptive rights offering and their equity  interest
would be diluted proportionately.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 11 | 
| | -- | 



---





|It may be difficult to enforce civil
liabilities against us or our directors,  officers and controlling persons.
|----------------------------------------------------------------------------------------------------------------



|We are organized
under the laws of Mexico, and most of our directors,  officers and controlling persons
reside outside the United States. In addition,  a substantial portion of our assets and
their assets are located in Mexico. As a  result, it may be difficult for investors to
effect service of process within  the United States on such persons or to enforce
judgments against them,  including in any action based on civil liabilities under the
U.S. federal  securities laws. There is doubt as to the enforceability against such
persons in  Mexico, whether in original actions or in actions to enforce judgments of
U.S.  courts, of liabilities based solely on the U.S. federal securities laws.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|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 well
developed, there is no procedure for  class actions or shareholder derivative actions,
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 shareholders than it would be
for shareholders of a U.S. company.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|We have significant transactions with
affiliates, particularly The Coca-Cola  Company and FEMSA, that create potential
conflicts of interest.
|---------------------------------------------------------------------------------------------------------------------------------------------



|We engage in
transactions with subsidiaries of both FEMSA and The  Coca-Cola Company. Our transactions
with FEMSA include supply agreements under  which we purchase certain supplies and
equipment, a service agreement under  which a FEMSA subsidiary transports finished
products from our production  facilities to our distribution facilities in Mexico, and a
service agreement  under which a FEMSA subsidiary provides administrative services to our
company.  In addition, we have entered into cooperative marketing arrangements with The
Coca-Cola Company and FEMSA. See Item 7. Major Shareholders and Related Party
TransactionsRelated Party Transactions. Transactions with affiliates may  create
the potential for conflicts of interest.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Holders of ADSs are not entitled to attend
shareholders meetings, and they may  only vote through the depositary.
|------------------------------------------------------------------------------------------------------------------



|Under Mexican law,
a shareholder is required to deposit its shares with  a Mexican custodian in order to
attend a shareholders meeting. A holder of ADSs  will not be able to meet this
requirement, and accordingly is not entitled to  attend shareholders meetings. A holder
of ADSs is entitled to instruct the  depositary as to how to vote the shares represented
by ADSs, in accordance with  procedures provided for in the deposit agreement, but a
holder of ADSs will not  be able to vote its shares directly at a shareholders meeting
or to appoint a  proxy to do so.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Our bylaws restrict the ability of
non-Mexican shareholders to invoke the  protection of their governments with respect to
their rights as shareholders.
|--------------------------------------------------------------------------------------------------------------------------------------------------------



|As required by
Mexican law, our bylaws provide that non-Mexican  shareholders shall be considered as
Mexican in respect of their ownership  interests in our company and shall be deemed to
have agreed not to invoke the  protection of their governments in certain circumstances.
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 U.S. securities laws, with respect to its  investment in our
company. If you invoke such governmental protection in  violation of this agreement, your
shares could be forfeited to the Mexican  government.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Developments in other emerging market
countries may affect prices of our ADSs.
|------------------------------------------------------------------------------



|As is the case
with respect to securities of issuers from other  emerging markets, the market value of
securities of Mexican companies is, to  varying degrees, affected by economic and market
conditions in other emerging  market countries. Although economic conditions in such
countries may differ  significantly from economic conditions in Mexico, investors
reactions to  developments in any of these other countries may have an
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 12 | 
| | -- | 



---





|adverse effect on the  market value of
securities of Mexican issuers. In recent years, prices of both  Mexican debt securities
and Mexican equity securities dropped substantially as a  result of developments in
Russia, Asia and Brazil. There can be no assurance  that the market value of the ADSs and
Series L Shares would not be adversely  affected by events elsewhere, especially in
emerging market countries.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Exchange rate fluctuations may affect the
value of our securities.
|------------------------------------------------------------------



|Fluctuations in
the exchange rate between the peso and the U.S. dollar  will affect the U.S. dollar value
of an investment in our equity securities and  of dividend and other distribution
payments on those securities. See Key  InformationExchange Rates.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Risks Related to Mexico and other Countries
in which We Operate
|---------------------------------------------------------------



|Adverse economic conditions in Mexico may
adversely affect our financial  condition and results of operations.
|--------------------------------------------------------------------------------------------------------------



|We are a Mexican
corporation, and our Mexican operations are our single  most important geographic
division. As a result, our business may be  significantly affected by the general
condition of the Mexican economy and/or  the rate of inflation.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Mexico has
experienced a prolonged period of slow growth since 2001  primarily as a result of the
downturn in the U.S. economy. In 2001, Mexicos  gross domestic product, or GDP,
contracted by 0.3%, while inflation reached  4.4%. In 2002, GDP grew by 0.9% and
inflation reached 5.7%. For 2003, the  Mexican government has estimated that GDP growth
will be 3.0% and inflation is  expected to be 3.0%, though these estimates may not prove
to be accurate.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|If the Mexican
economy falls into a recession or if inflation and  interest rates increase
significantly, demand for soft drink beverages may  decrease as consumers find it more
difficult to pay for our products or demand  may shift to lower margin products or lower
margin presentations. Because a  large percentage of our costs are fixed costs, we may
not be able to preserve  our profit margins by reducing costs and expenses and our
profits margins may  suffer as a result. This could have a material adverse effect on our
financial  condition and results of operations.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Depreciation of the peso relative to the U.S.
dollar could adversely affect our financial condition and results  of operations.
|-------------------------------------------------------------------------------------------------------------------------------



|Declines in the
value of the peso relative to other currencies, in  particular the U.S. dollar, increase
our interest costs in pesos relative to our  indebtedness and result in foreign exchange
losses that could adversely affect  our ability to meet our interest and principal
obligations under our  indebtedness. As of December 31, 2002, all of our indebtedness was
denominated  in U.S. dollars, and we may in the future incur additional
non-peso-denominated  indebtedness. The value of the peso has been subject to significant
fluctuations  with respect to the U.S. dollar in the past and may be subject to
significant  fluctuations in the future. For example, from January 1, 1995 to March 31,
1996,  the Mexican peso depreciated 50.8% to Ps.7.5375 per U.S. dollar and fluctuated
from a high, relative to the U.S. dollar, of Ps.5.00 to a low, relative to the  U.S.
dollar, of Ps.8.14. In 2002 and the beginning of 2003, the peso  significantly fluctuated
in value relative to the U.S. dollar from Ps.9.0 to  Ps.11.24.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



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



| | 13 | 
| | -- | 



---





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



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



|President Fox
assumed office on December 1, 2000. While the transition  from the previous
administration was smooth, President Fox has since encountered  strong opposition to some
of his proposed reforms in both Congress and the  Senate, where opposition parties such
as the PRI and the Partido de la  Revolución Democratica (Democratic Revolution
Party), or PRD, have  frequently joined forces to block PAN initiatives. Such legislative
gridlock  could slow down the progress of reforms in Mexico and could have a material
adverse effect on our business, financial condition, prospects and results of  operations.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Developments in Argentina may adversely
affect our business.
|------------------------------------------------------------



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



|We now conduct business in countries
throughout Latin America in which we have  not previously operated and that present
different or greater country risk than  Mexico or Argentina.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|As a result of the
Panamco acquisition, we have expanded our geographic  reach from Mexico and Argentina to
include Guatemala, Nicaragua, Costa Rica,  Panama, Colombia, Venezuela and Brazil. Many
of these countries present  different or greater country risk than Mexico or Argentina.
Panamcos operating  results in recent years have been adversely affected by
deteriorating  macroeconomic and political conditions in some of these countries,
particularly  in Venezuela where a national labor strike effectively halted production
and  distribution during the months of December 2002 and January 2003. Our future
results may be significantly affected by the general economic and financial  conditions
in the countries where we operate, by the devaluation of the local  currency, inflation
and high interest rates, or by political developments or  changes in law. In addition,
some of these countries may impose exchange  controls that could impact our ability to
purchase raw materials in foreign  currencies and the ability of the subsidiaries in
these countries to remit  dividends abroad or make payments other than in local
currencies, as is  currently the case in Venezuela under regulations imposed in January
2003.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 14 | 
| | -- | 



---





|Item 4.  Information on the Company
|-----------------------------------



|THE COMPANY
|-----------



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





|Our principal
shareholder is Compañía Internacional de  Bebidas, S.A. de C.V., referred
to in this annual report as CIBSA, a wholly  owned subsidiary of FEMSA. FEMSA traces its
origins to Cervecería  Cuauhtémoc, Mexicos first brewery, which was
founded in 1890 by four  Monterrey businessmen, Isaac Garza, Francisco G. Sada, José A.
Muguerza,  and José M. Schneider. FEMSA is still controlled by descendants of the
founders of Cervecería Cuauhtémoc.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|We were established in October
      30, 1991 as a sociedad anónima de capital variable organized
      under the laws of Mexico. Our principal executive offices are located at
      Guillermo González Camarena No. 600, Col. Centro de Ciudad Santa
      Fé, Delegación Álvaro Obregón, México,
      D.F., 01210, México. Our telephone number at this location is (52-55)
      5081-5100. Our website is http://www.cocacola-femsa.com.mx.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Corporate History
|-----------------



|In 1979, Grupo
Industrial Emprex, S.A. de C.V., referred to in this  annual report as Emprex, acquired
certain soft drink bottling subsidiaries that  are now a part of our company. At that
time, the acquired subsidiaries had  thirteen Mexican distribution centers operating 701
distribution routes, and  production capacity of the acquired subsidiaries was 83 million
physical cases.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|In October 1991,
Emprex transferred the shares of its operating  subsidiaries engaged in the soft drink
business, not including sparkling water  operations, to FEMSA Refrescos, S.A. de C.V.,
the subholding company that became  our company. A portion of Emprexs shares was
contributed to the sub-holding  company and the remaining shares were sold to the
sub-holding company in  exchange for a note payable to Emprex.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Effective May
1993, Impulsora de Mercados, S.A. de C.V., referred to in  this annual report as
Impulsora, a wholly owned subsidiary of Emprex, made a  contribution of capital of
Ps.645.7 million (in nominal 1993 pesos,  approximately U.S.$206.5 million) to our
company in return for 90,250,000 Series  L Shares (before the 3 to 1 split effected on
January 9, 1998). Emprex made an  additional contribution of capital in the amount of
Ps.11.6 million (in nominal  1993 pesos, approximately U.S.$3.7 million) in exchange for
11,128,980 Series A  Shares (before the 3 to 1 split effected on January 9, 1998) as of
that date. We  used the proceeds of these transactions to retire a portion of our
outstanding  debt obligations to Emprex, as well as the debt owed by our subsidiaries to
Emprex.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Consistent with
our goals of maximizing long-term profitability and  growth and enhancing our competitive
position, Emprex agreed to the subscription  of 30% of our capital stock by The Inmex
Corporation, referred to in this annual  report as Inmex, an indirect subsidiary of The
Coca-Cola Company. In June, 1993,  Inmex subscribed to 142,500,000 Series D Shares
(before the 3 to 1 split  effected on January 9, 1998) for $195 million. We repaid the
remainder of our  debt obligations to Emprex in June 1993 with the proceeds of this
transaction.  See Item 7. Major Shareholders and Related Party TransactionsMajor
ShareholdersThe Shareholders Agreement.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|In September 1993,
we listed our Series L Shares on the Mexican Stock  Exchange and our ADSs on The New York
Stock Exchange, Inc. and Impulsora sold  its Series L shares to the public.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|In a series of
transactions between 1994 and 1997, we acquired 100% of  KOFBA from The Coca-Cola Export
Corporation, a subsidiary of The Coca-Cola  Company. We expanded our Argentine operations
in
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 15 | 
| | -- | 



---





|February 1996 when we acquired  the former San
Isidro Refrescos S.A. territories, including certain properties  of Refrescos del Norte
S.A. In 1998, in conjunction with this transaction, we  began servicing all the accounts
of Refrescos del Norte. Through these  transactions, we expanded our Argentine operations
to include the San Isidro and  Pilar areas in a region contiguous to our Buenos Aires
Territory.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





|We expanded our
Mexican operations in November 1997 by acquiring 100%  of the capital stock of
Embotelladora de Soconusco, S.A. de C.V., known as the  Tapachula Franchise, a bottler in
the Tapachula area of the state of Chiapas in  Southern Mexico. With this acquisition, we
service the entire state of Chiapas.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|CIBSA was created in July 2002
      as a result of a spin-off (an escisión under Mexican law)
      of Emprex, in which CIBSA was created as a new company whose sole asset
      is Emprexs equity interest in Coca-Cola FEMSA.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|On December 22,
2002, we signed an agreement to acquire Panamco and the  acquisition was completed on May
6, 2003.
|------------------------------------------------------------------------------------------------------------------



|Unless otherwise
specified, Panamco is not reflected in the financial  or other information presented in
this annual report as it will only be  reflected in our financial statements for periods
ending after May 1, 2003.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|The Panamco Acquisition
|-----------------------



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



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



|Integration. We
are currently planning and taking certain initial steps towards the integration of
Panamcos operations with ours. Our primary objective is to achieve complete integration
in the operations and management of the two companies Mexican operations, which we
believe complement each other in numerous areas, with the goal of realizing important
synergies in distribution, back-office operations, manufacturing and procurement,
including through the closure and integration of facilities and headcount reductions. We
have begun the process of closing Panamcos executive offices in Miami, Florida. We will
maintain our corporate headquarters in Mexico City, and will have divisional
headquarters in the following three regions:
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | Mexico
with divisional headquarters in Mexico City,
| | - |  | ---------------------------------------------------

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

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



| | 16 | 
| | -- | 



---





|We are in the process of evaluating the
operations and strategies of our new  businesses outside Mexico, and we have begun to
replicate some of our management  practices and systems throughout our new territories.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Acquisition Cost.
The cost of the acquisition was approximately U.S.$3.7 billion. The acquisition was
financed as follows:
|--------------------------------------------------------------------------------------------------------------------------

| |  |  | U.S.$1,978
million of new debt (including approximately  U.S.$373 million used to refinance existing
Panamco  indebtedness),
| | - |  | ----------------------------------------------------------------------------------------------------------------------------

| |  |  | U.S.$260
million from a capital investment by FEMSA through CIBSA,
| | - |  | ------------------------------------------------------------------

| |  |  | U.S.$674
million notional amount of our Series D shares issued to subsidiaries of The Coca-Cola
Company,
| | - |  | --------------------------------------------------------------------------------------------------------

| |  |  | U.S.$285
million in cash, and
| | - |  | -----------------------------

| |  |  | U.S.$512
million of assumed debt.
| | - |  | ---------------------------------



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



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



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

| |  |  | The
current stockholder arrangements between FEMSA and The Coca-Cola Company will continue in
place.  See  Item 7. Major Shareholders and Related Party TransactionsThe
Shareholders Agreement.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | FEMSA
will continue to consolidate our financial results.
| | - |  | ---------------------------------------------------------

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

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

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

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



| | 17 | 
| | -- | 



---





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

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

| |  |  |  | the prevailing market price per share at the time
      of the sale, and          
| |  | - |  | ----------------------------------------------------------------------------------
| |  |  |  | the sum of U.S.$2.216 per share plus The Coca-Cola
      Companys carrying costs.

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

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



|Business Strategy
|-----------------



|With the
acquisition of Panamco, we are now the largest bottler of  Coca-Cola trademark beverages
in Latin America.
|-------------------------------------------------------------------------------------------------------------------



|We seek to provide
our shareholders with an attractive return on their  investment by increasing our
profitability. The key factors in achieving  profitability are increasing the sales
volume of our products at a competitive  price while improving operational efficiencies
by implementing the best  practices throughout our company. To achieve these goals we
continue our efforts  in:
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | implementing
marketing strategies and programs designed to increase consumer demand for our products,
| | - |  | -----------------------------------------------------------------------------------------------------

| |  |  | replicating
our successful practices throughout the whole value chain within the territories
recently acquired,
| | - |  | ---------------------------------------------------------------------------------------------------------------

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

| |  |  | rationalizing
bottling capacity to increase the utilization of existing assets,
| | - |  | -------------------------------------------------------------------------------

| |  |  | streamlining
production and distribution processes for improved operating efficiencies,
| | - |  | ---------------------------------------------------------------------------------------

| |  |  | integrating
operations through advanced information technology, and
| | - |  | -------------------------------------------------------------------

| |  |  | enhancing
the quality of management at all levels.
| | - |  | --------------------------------------------------



|We seek to
increase per capita consumption of soft drinks in the  territories in which we operate.
To that end, our marketing teams continuously  develop sales strategies tailored to the
different characteristics of our  various territories and channels. We continue to
develop our product portfolio  to better meet market demand and maintain our overall
profitability. To  stimulate and respond to consumer demand, we continue to introduce new
products  and
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 18 | 
| | -- | 



---





|new presentations. See The CompanyOur
Products. We also seek to  increase placement of refrigeration equipment, including
promotional displays,  through the strategic placement of such equipment in retail
outlets in order to  showcase and promote our products. In addition, because we view our
relationship  with The Coca-Cola Company as integral to our business strategy, we use
market  information systems and strategies developed with The Coca-Cola Company to
improve our coordination with the worldwide marketing efforts of The Coca-Cola  Company.
See MarketingChannel Marketing.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|We seek to
rationalize our distribution capacity to improve the  efficiency of our operations. We
have closed several under-utilized centers and  shifted distribution activities to other
existing facilities. See Description  of Property, Plant and Equipment.
Our capital expenditure program includes  investments in production and distribution
facilities, information systems,  bottles, cases and coolers. We believe that this
program will allow us to  maintain the capacity and flexibility to create and respond to
consumer demand  for non-alcoholic beverages. In 2002, our capital expenditure program
reached  Ps.1,340.9 million (approximately U.S.$128.2 million), a 28.7% increase over
2001. See Item 5Capital Expenditures. In each of our facilities, we
seek to  increase productivity through infrastructure and process reengineering for
improved asset utilization.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|As part of our
plan to increase sales volume, we acquired Panamco on  May 6, 2003. Panamco produces and
distributes trademark beverages of The  Coca-Cola Company in its bottling territories in
Mexico, Guatemala, Nicaragua,  Costa Rica, Panama, Colombia, Venezuela and Brazil, along
with bottled water,  beer and other beverages in some of these territories. We are in the
process of  integrating Panamcos operations with ours and evaluating the operations and
strategies of Panamcos businesses. See The Panamco Acquisition.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Finally, we focus
on management quality as a key element of our growth  strategies and remain committed to
fostering the development of quality  management at all levels. Both FEMSA and The
Coca-Cola Company provide us with  managerial experience and depth. To build upon these
skills, we also offer  management training programs and programs designed to enhance our
executives  abilities.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Our Markets
|-----------



|As of December 31,
2002, our subsidiaries operated in three  geographically defined territories:
|------------------------------------------------------------------------------------------------

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

| |  |  | Southeast of Mexico Territory: Comprised
      of the States of Tabasco and Chiapas and portions of the States of Oaxaca
      and Veracruz.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------

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



| | 19 | 
| | -- | 



---





|The Valley of
Mexico Territory and the Southeast of Mexico Territory  together compose our Mexican
Territories. The following maps show the locations  of our territories at December 31,
2002.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Mexican Territories
|-------------------





|                         | 
|------------------------ | 
|Valley of Mexico         | 
|                         | 
|Production Assets        | 
|Production Plants        | 
|Production Lines         | 
|Distribution Routes      | 
|Distribution Centers     | 
|                         | 
|Capacity (MM Unit Cases) | 
|Installed                | 
|% Utilized               | 
|                         | 
|Mix of Presentation (%)  | 
|Returnable               | 
|Non Returnable           | 
|Fountain syrup           | 
|                         | 
|Southeast of Mexico      | 
|                         | 
|Production Assets        | 
|Production Plants        | 
|Production Lines         | 
|Distribution Routes      | 
|Distribution Centers     | 
|                         | 
|Capacity (MM Unit Cases) | 
|Installed                | 
|% Utilized               | 
|                         | 
|Mix of Presentation (%)  | 
|Returnable               | 
|Non Returnable           | 
|Fountain syrup           | 



| | 20 | 
| | -- | 



---





|Buenos Aires Territory
|----------------------

|                         | 
|------------------------ | 
|Buenos Aires             | 
|                         | 
|Production Assets        | 
|Production Plants        | 
|Production Lines         | 
|Distribution Routes      | 
|Distribution Centers     | 
|                         | 
|Capacity (MM Unit Cases) | 
|Installed                | 
|% Utilized               | 
|                         | 
|Mix of Presentation (%)  | 
|Returnable               | 
|Non Returnable           | 
|Fountain syrup           | 



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



|With the
acquisition of Panamco, we have extended our geographic reach  to include markets in
Guatemala, Nicaragua, Costa Rica, Panama, Colombia,  Venezuela and Brazil and have
further expanded our current market presence in  Mexico.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 21 | 
| | -- | 



---





|Our Products
|------------



|As of December 31,
2002, our subsidiaries produced, marketed and  distributed the following Coca-Cola and
Mundet trademark beverages:
|-------------------------------------------------------------------------------------------------------------------------------------

|Mexican Territories     | Buenos Aires Territory
|----------------------- | ----------------------
|Coca-Cola               | Coca-Cola             
|Coca-Cola light(1)      | Coca-Cola light(1)    
|Sprite                  | Sprite                
|Sprite light(2)         | Sprite light(2)       
|Fanta                   | Fanta                 
|Fresca(3)               | Quatro(4)             
|Lift(5)                 | Kin                   
|Delaware Punch(6)       | Taí(8)                
|Ciel(7)                 | Schweppes(9)          
|Beat(9)                 | Hi-C(10)              
|Senzao(12)              | Crush(11)             
|Ciel Mineralizada(13)   | Black Fire(13)        
|Powerade(14)            |                       
|Sidral Mundet(15)       |                       
|Sidral Mundet light(15) |                       
|Prisco(15)              |                       
|Mickey Aventuras(16)    |                       
|Kin Light(17)           |                       
|Nestea(18)              |                       

|
|

|(1) |  | Introduced
in October 1997 as a replacement for diet Coke.
|--- |  | ----------------------------------------------------------

|(2) |  | Introduced
in February 1999 as a replacement for diet Sprite.
|--- |  | -------------------------------------------------------------

|(3) |  | Introduced
in September 1994.
|--- |  | -----------------------------

|(4) |  | Introduced
in December 1994.
|--- |  | ----------------------------

|(5) |  | Introduced
in May 1995; a new flavor Green Apple was launched in  December 2002.
|--- |  | ----------------------------------------------------------------------------------

|(6) |  | Introduced
in March 1996.
|--- |  | -------------------------

|(7) |  | Introduced
in 1997.
|--- |  | -------------------

|(8) |  | Introduced
in June 2000.
|--- |  | ------------------------

|(9) |  | Introduced
in November 2000 as an energetic drink and re-launched  as a CSD with a new flavor in
September 2002.
|--- |  | ----------------------------------------------------------------------------------------------------------------

|(10) |  | Introduced
in December 2000.
|---- |  | ----------------------------

|(11) |  | Introduced
in February 2001.
|---- |  | ----------------------------

|(12) |  | Introduced
in April 2001.
|---- |  | -------------------------

|(13) |  | Introduced
in March 2001.
|---- |  | -------------------------

|(14) |  | Introduced
in September 2001.
|---- |  | -----------------------------

|(15) |  | Incorporated
into our brand portfolio in December 2001.
|---- |  | -------------------------------------------------------

|(16) |  | Introduced
in April 2002.
|---- |  | -------------------------

|(17) |  | Introduced
in June 2002.
|---- |  | ------------------------

|(18) |  | Introduced
in August 2002.
|---- |  | --------------------------



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



|We sell Coca-Cola
trademark beverages in containers authorized by The  Coca-Cola Company, which consist of
a variety of returnable and non-returnable  presentations in the forms of glass bottles,
cans, and plastic bottles made of  polyethylene terephtalate, referred to in this annual
report as PET. In  addition, we sell some Coca-Cola trademark beverage syrups in
containers  designed for soda fountain use, which we refer to as fountain containers.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 22 | 
| | -- | 



---





|Pursuant to an
agreement between The Coca-Cola Company and Cadbury,  Schweppes PLC, referred to in this
annual report as Cadbury, The Coca-Cola  Company acquired Cadburys beverage brands in
Argentina in July 1999, allowing  us to distribute Cadbury beverages in our Buenos Aires
Territory. In 2001, we  suspended the sale and distribution of Cadbury beverages in our
Mexican  Territories.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Sales
|-----



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



|Total unit case
sales volume of our products increased 2.1% in 2002  compared to 2001. See Item 5.
Operating and Financial Review and  ProspectsResults of Operations.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|The following
table illustrates the historical sales volume for the  Valley of Mexico Territory, the
Southeast of Mexico Territory and the Buenos  Aires Territory:
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |               | Combined Sales Volume 
        Year ended December 31,
| | ------------- | ------------------------------------------------------
| |               |                                                       
| |               | 2002                                                  
| |               |                                                       
| |               | (millions
      of unit cases, except percentages)    
| | Company Total | 620.3                                                 
| | % Growth      | 2.1                                                   



|Product and Packaging Mix
Summary
|---------------------------------



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



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



| | 23 | 
| | -- | 



---





|The following
tables highlight historical sales volume mix and total  sales volumes in the Mexican
Territories for our products:
|--------------------------------------------------------------------------------------------------------------------------------



|Valley of Mexico Territory
|--------------------------

|                                   | Year ended December 31,
|---------------------------------- | -----------------------
|                                   |                        
|                                   | 2002                   
|                                   |                        
|Unit Case Volume Mix by Category   | (in percentages)       
|Colas                              | 71.9                   
|Flavored Soft Drinks               | 22.2                   
|Total
      Carbonated Soft Drinks | 94.1                   
|Water                              | 4.2                    
|Other Categories(1)                | 1.7                    
|                                   |                        
|Total                              | 100.0                  
|                                   |                        

|
|

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

|                              |                         
|----------------------------- | ------------------------
|Unit Case Volume              | (millions of unit cases)
|Coca-Cola trademark beverages | 366.5                   
|Other Beverages               | 11.8                    
|                              |                         
|Total                         | 378.3                   
|                              |                         
|% Growth                      | 6.2                     



|Southeast of Mexico Territory
|-----------------------------

|                                       | Year ended December
        31,
|-------------------------------------- | -------------------------------
|                                       |                                
|                                       | 2002                           
|                                       |                                
|Unit Case Volume
      Mix by Category | (in percentages)               
|Colas                                  | 71.5                           
|Flavored Soft Drinks                   | 21.3                           
|Total
      Carbonated Soft Drinks     | 92.8                           
|Water                                  | 6.3                            
|Other Categories(1)                    | 0.9                            
|                                       |                                
|Total                                  | 100.0                          
|                                       |                                

|
|

|(1) |  | IncludesPowerade, Nestea, Kin Light and
      Mickey Aventuras.
|--- |  | ---------------------------------------------------------------

|                              |                         
|----------------------------- | ------------------------
|Unit Case Volume              | (millions of unit cases)
|Coca-Cola trademark beverages | 124.4                   
|Other Beverages               | 2.0                     
|                              |                         
|Total                         | 126.4                   
|                              |                         
|% Growth                      | 3.9                     



|Combined Mexican Territories
Sales Volume
|-----------------------------------------

|                 | Year ended December 31, 
|---------------- | ------------------------
|                 |                         
|                 | 2002                    
|                 |                         
|Unit Case Volume | (millions of unit cases)
|Total            | 504.7                   
|% Growth         | 5.6                     



| | 24 | 
| | -- | 



---





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



|Since 1995, we
have introduced a number of new presentations in the  Mexican Territories. These include
2.5 and 2.0-liter returnable plastic bottles,  1.0-liter non-returnable plastic bottles,
8-ounce non-returnable glass bottles,  0.25-liter non-returnable plastic bottles, and
0.6-liter plastic contour bottles  to replace the 0.5-liter non-returnable glass and
plastic presentations.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



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



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



|The following
table sets forth our unit case volume mix by presentation  in the Mexican Territories:
|----------------------------------------------------------------------------------------------------

|                                           | Year ended
      December 31,
|------------------------------------------ | -----------------------------
|                                           |                              
|                                           | 2002                         
|                                           |                              
|Unit Case Volume Mix by
      Presentation | (in percentages)             
|Valley of Mexico                           |                              
|Returnable                                 | 33.7                         
|Non-returnable(1)                          | 64.0                         
|Fountain                                   | 2.3                          
|Southeast of Mexico                        |                              
|Returnable                                 | 43.7                         
|Non-returnable(1)                          | 55.6                         
|Fountain                                   | 0.7                          

|
|

|(1) | Includes powders for 2002.
|--- | --------------------------



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



| | 25 | 
| | -- | 



---





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



|The following
tables highlight historical sales volume mix and total  sales volumes in the Buenos Aires
territory:
|------------------------------------------------------------------------------------------------------------------



|Buenos Aires Territory
|----------------------

|                                 | Year ended December 31, 
|-------------------------------- | ------------------------
|                                 |                         
|                                 | 2002                    
|                                 |                         
|Unit Case Volume Mix by Category | (in percentages)        
|Colas                            | 68.3                    
|Flavored Soft Drinks             | 30.4                    
|Total Carbonated Soft Drinks     | 98.7                    
|Water                            | 0.8                     
|Other Categories(1)              | 0.5                     
|                                 |                         
|Total                            | 100.0                   
|                                 |                         
|                                 |                         
|Unit Case Volume                 | (millions of unit cases)
|Total                            | 115.6                   
|% Growth                         | (11.0                   

|
|

|(1) |  | Including
HiC.
|--- |  | --------------



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



|The following
table sets forth our unit case volume mix by presentation  in the Buenos Aires Territory:
|-------------------------------------------------------------------------------------------------------

|                                     | Year ended December 31,
|------------------------------------ | -----------------------
|                                     |                        
|                                     | 2002                   
|                                     |                        
|Unit Case Volume Mix by Presentation | (in percentages)       
|Buenos Aires                         |                        
|Returnable                           | 12.4                   
|Non-returnable                       | 82.9                   
|Fountain                             | 4.7                    



|Seasonality
|-----------



|Sales of our
products are seasonal, as our sales levels generally  increase during the summer and the
Christmas holiday season. In the Mexican  Territories, we typically achieve our highest
sales during the summer months  (April through September) as well as during the Christmas
holidays in December.  In the Buenos Aires Territory, our highest sales levels occur
during the summer  months (October through March) and the Christmas holidays.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Marketing
|---------



|We rely
extensively on advertising, sales promotions and non-price  related retailer incentive
programs designed by local affiliates of The  Coca-Cola Company to target the particular
preferences of our soft drink  consumers. Our company, in conjunction with The Coca-Cola
Company, has developed  a sophisticated marketing strategy to promote the sale and
consumption of our  products. Through the use of advanced information technology,
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 26 | 
| | -- | 



---





|we have gained  customer and consumer
information that allows us to tailor our marketing  strategies to the types of customers
located in each of our territories and to  meet the specific needs of the various market
segments we serve.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



|Advertising. In
addition, we advertise in all major communications media. We also focus attention on
increasing brand recognition by consumers and improving our customer relations. National
advertising campaigns are designed and proposed by The Coca-Cola Companys local
affiliates, with our input at the local or regional level.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



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



|Cooperative
Marketing Budget. Our total marketing expenditures made in the Mexican Territories
increased 8.3% to Ps.667.6 million in 2002 from Ps.616.0 million in 2001. In the Buenos
Aires Territory, our marketing expenditures decreased 38.5% to approximately A$15.2
million (Ps.47.2 million) from A$24.7 million (Ps.70.2 million) in 2001. Under the 2002
and 2001 cooperative marketing budgets, The Coca-Cola Company contributed to our
marketing expenditures by approximately matching the amount we spent on these marketing
efforts in each respective year. See Bottler Agreements.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Product Distribution
|--------------------



|The following
table provides an overview of our product distribution  infrastructure and retail network
as of December 31, 2002.
|--------------------------------------------------------------------------------------------------------------------------------



|Product Distribution Summary
|----------------------------

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



|Mexican Territories.
      We subcontract to our affiliate, FEMSA Logística, S.A. de C.V., referred
      to in this annual report as FEMSA Logística, a subsidiary of FEMSA,
      the transportation of finished products to our distribution centers from
      our Mexican production facilities. From the distribution centers, we then
      distribute our
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 27 | 
| | -- | 



---





|finished products to retailers through our own
fleet of trucks.  See Item 7.  Major Shareholders and Related  Party TransactionsRelated
Party Transactions.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------



|Our distribution
centers range from large warehousing facilities and  re-loading centers to small deposit
centers. In addition to our fleet of trucks,  we distribute our products in certain
locations through a fleet of electric  carts and hand-trucks in order to comply with
local environmental and traffic  regulations.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



|Buenos Aires
Territory. At December 31, 2002, we operated three distribution centers in the Buenos
Aires Territory. We also utilize the pre-sale system in the Buenos Aires Territory and
distribute our products (1) by means of our own fleet of trucks and non-affiliate
transportation subcontractors and (2) through independent wholesalers. In addition, in
designated zones independent wholesalers purchase our products at a discount from the
wholesale price and resell the products to retailers. Independent wholesalers
distributed approximately 6% of our products in Argentina in 2002.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|At December 31,
2002, we made approximately 92% and 94% of our sales  through the pre-sale system in our
Mexican and Buenos Aires Territories,  respectively.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------



|Competition
|-----------



|Although we
believe that our products enjoy wider recognition and  greater consumer loyalty than
those of our principal competitors, the soft drink  segments of the Mexican and Argentine
beverage markets are highly competitive.  The beverage industry in many of our new
territories acquired from Panamco is  also highly competitive. Our principal competitors
are local bottlers of  PepsiCo., beverage brands and other bottlers and distributors of
national and  regional soft drink brands. PBG recently bought our main competitor in
Mexico.  We face increased competition in many of our territories from producers of low
cost beverages, commonly referred to as B brands.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



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



|Mexico. Our
principal competitors in the Mexican Territories are bottlers of PepsiCo. products,
whose territories overlap but are not co-extensive with our own. These competitors
include Pepsi Gemex in the Valley of
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 28 | 
| | -- | 



---





|Mexico Territory, recently acquired by PBG, the
largest bottler of PepsiCo  globally, and several other PepsiCo. bottlers in the
Southeast of Mexico  Territory. In addition, we compete with Cadbury and with national
and regional  brands in our Mexican Territories.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



|Raw Materials
|-------------



|Pursuant to the
bottler agreements with The Coca-Cola Company, we are  required to purchase concentrate
for all Coca-Cola trademark beverages from  companies designated by The Coca-Cola
Company. The price of concentrate for all  Coca-Cola trademark beverages is a percentage
of the average price we charge to  our retailers. This percentage is set pursuant to
periodic negotiations with The  Coca-Cola Company. Historically, concentrate has been
purchased in the local  currency of the territory. In addition to concentrates, we
purchase sweeteners,  carbon dioxide, glass and plastic bottles, cans, closures and
fountain  containers, as well as other packaging materials. The bottler agreements
provide  that, with respect to Coca-Cola trademark beverages, all containers, closures,
cases, cartons, and other packages and labels may be purchased only from  manufacturers
approved by The Coca-Cola Company, including manufacturing  subsidiaries of FEMSA
Empaques, S.A. de C.V., referred to in this annual report  as FEMSA Empaques, an indirect
subsidiary of FEMSA.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|None of the
materials or supplies that we use is presently in short  supply, although the supply of
specific materials could be adversely affected by  strikes, weather conditions,
governmental controls or national emergency  situations.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



|We purchase some
can presentations from Industria Envasadora de  Querétaro, S.A. de C.V., known as
IEQSA, a bottler cooperative in which  we hold an approximate 19.6% interest. Both we and
IEQSA purchase a portion of  our empty can supply requirements from Fábricas
Monterrey, S.A. de C.V.,  known as Famosa, a subsidiary of FEMSA Empaques.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|We obtain water
from ground water sources under concessions obtained  from the Mexican government and
held by our various subsidiaries. We also obtain  water from the municipalities where
bottling plants are located. See  RegulationWater Supply Law. We
believe that such sources provide an  adequate supply of water to meet our current and
projected requirements in  Mexico. In addition, we obtain carbon dioxide gas from
domestic sources.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



| | 29 | 
| | -- | 



---





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



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



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



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



|The following
table sets forth the average real price increase or  decrease of sugar as purchased from
our suppliers over the course of each year:
|--------------------------------------------------------------------------------------------------------------------------------------------------



|Average Real Price increase
(decrease) of Sugar in the Mexican Territories
|--------------------------------------------------------------------------

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

|
|

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



|Of the raw
materials required in the bottling of our products, the  prices of aluminum cans, plastic
bottles, bottle closures (both steel and  plastic), other packaging materials and HFCS
are quoted in U.S. dollars and  therefore are affected by the fluctuation of the Mexican
peso against the U.S.  dollar. We have historically passed on increases in these costs to
our customers  in the form of price increases. During 2002, the average real unit price
in  Mexican pesos of these dollar-denominated costs increased as a result of the
appreciation of the Mexican peso against the U.S. dollar. Except for those  discussed in
this paragraph, we purchase all of our raw materials for our  Mexican territories in
pesos, including soft drink concentrate.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Buenos Aires
Territory. We purchase glass bottles, plastic trays and other raw materials from several
domestic sources. We purchase pre-formed plastic ingots, as well as returnable plastic
bottles, at competitive prices from Complejo Industrial PET S.A., referred to in this
annual report as CIPET, a local subsidiary of Embotelladora Andina S.A., a Coca-Cola
bottler with operations in Argentina, Chile and Brazil and other international
suppliers. We purchase crown caps from local and international suppliers.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|We purchase our
can presentations for distribution to its customers in  Buenos Aires from Complejo
Industrial CAN S.A., referred to in this annual  report as CICAN. In December 1996, The
Coca-Cola Company sold CICAN to a group  of bottlers that included Coca-Cola FEMSA de
Buenos Aires. Under the terms of  the shareholders agreement among these bottlers, CICAN
is managed as a joint  venture. As of December 31, 2002, Coca-Cola FEMSA de Buenos Aires
owned a 48.1%  equity in CICAN.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 30 | 
| | -- | 



---





|We obtain water
for our plant in Buenos Aires from Aguas Argentinas  S.A., a private company responsible
for managing the public water supply. We  believe that this source provides an adequate
supply of water to meet the needs  for our Argentine operations. Praxair Argentina S.A.
provides our requirements  of carbon dioxide gas.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|In Argentina, we principally
      use HFCS as sweetener in our products, although we may use sugar in the
      future. Aspartame, an artificial sweetener for diet sodas, is included in
      the concentrate of Coca-Cola light and Sprite light, which
      we purchase from The Coca-Cola Company.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|The following
table sets forth the average real price increase or  decrease of HFCS as purchased from
our suppliers over the course of each year:
|-------------------------------------------------------------------------------------------------------------------------------------------------



|Average Real Price increase
(decrease) of HFCS in the Buenos Aires Territory
|----------------------------------------------------------------------------

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



| | 31 | 
| | -- | 



---





|REGULATION
|----------



|Price Controls.
Prices of our products have been regulated by the Mexican government in the past. Prior
to 1992, prices of carbonated soft drinks were regulated by the Mexican government. From
1992 to 1995, the industry was subject to voluntary price restraints. However, in
response to the devaluation of the peso relative to the U.S. dollar in 1994 and 1995,
the Mexican government adopted an economic recovery plan to control inflationary
pressures in 1995. As part of this plan, the Mexican government encouraged the Asociación
Nacional de Productores de Refrescos y Aguas Carbonatadas, A.C. (National Association of
Bottlers) to engage in voluntary consultations with the Mexican government with respect
to price increases for returnable presentations, limiting our ability to pass on
increases in the prices of raw materials. Such voluntary consultations were terminated
in 1996. We implemented strategic price increases during 2001 and 2002, and at the
beginning of 2003 in the Mexican and Argentine territories.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Taxation of Soft
Drinks. Taxation of soft drinks differs in Mexico and Argentina. In January 2002, the
Mexican government imposed a 20% excise tax on soft drinks produced with HFCS that was
suspended until September 2002. In January 1, 2003 the Mexican Government implemented a
20% excise tax on sparkling water and on carbonated soft drinks produced with non-sugar
sweeteners. Moreover, soft drinks are subject to an economy-wide value-added tax of 15%.
In Argentina, soft drinks are subject to an economy-wide value-added tax of 21%. Prior
to 1996, cola soft drinks in Argentina were subject to an excise tax of 24%, which was
lowered in April 1996 to 4.0%. From 1996 to December 31, 1999, the cola tax remained at
4%. On January 1, 2001, the Argentine government implemented a tax bill mandating that
the cola tax be increased to 8% and that other flavored soft drinks and bottled water be
taxed at 4%.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Water Supply Law.
In Mexico, we purchase water directly from municipal water companies and pump water from
our own wells pursuant to concessions obtained from the Mexican government on a
plant-by-plant basis. Water use in Mexico is regulated primarily by the Ley de Aguas
Nacionales de 1992 (the 1992 Water Law), and regulations issued thereunder, which
created the Comisión Nacional del Agua (the National Water Commission). The
National Water Commission is charged with overseeing the national system of water use.
Under the 1992 Water Law, concessions for the use of a specific volume of ground or
surface water generally run for five-, ten- or fifteen-year terms, depending on the
supply of groundwater in each region as projected by the National Water Commission.
Concessionaires may request concession terms to be extended upon termination. The
Mexican government is authorized to reduce the volume of ground or surface water granted
for use by a concession by whatever volume of water is not used by the concessionaire
for three consecutive years. However, because the current concessions for each of our
plants in Mexico do not match each plants projected needs for water in future
years, we successfully negotiated with the Mexican government for the right to transfer
the unneeded portion of rights under concessions from certain plants to other plants
anticipating greater water usage in the future. Our concessions may be terminated if,
among other things we use more water than permitted or we fail to pay required
concession-related fees. We believe that we are in compliance with the terms of our
existing concessions.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Although we have
not undertaken independent studies to confirm the  sufficiency of the existing or future
groundwater supply, we believe that our  existing concessions satisfy our current water
requirements in Mexico. We can  give no assurances, however, that groundwater will be
available in sufficient  quantities to meet our future production needs.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



|Environmental
Matters. Our operations in Mexico are subject to Mexican federal and state laws and
regulations relating to the protection of the environment. The principal legislation is
the federal Ley General de Equilibrio Ecológico y Protección al Ambiente
(the General Law for Ecological Equilibrium and Environmental Protection, or the
Environmental Law), which is enforced by the Secretaría del Medio Ambiente,
Recursos Naturales y Pesca (the Ministry of the Environment, Natural Resources and
Fisheries, or SEMARNAP). SEMARNAP can bring administrative and criminal proceedings
against companies that violate environmental laws, and it also has the power to close
non-complying facilities. Under the Environmental Law, rules have been
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 32 | 
| | -- | 



---





|promulgated concerning water, air and noise
pollution and hazardous substances.  In particular, Mexican environmental laws and
regulations require that we file  periodic reports with respect to air and water
emissions and hazardous wastes  and set forth standards for waste water discharge that
apply to our operations.  We are also subject to certain minimal restrictions on the
operation of delivery  trucks in Mexico City. We have implemented several programs
designed to  facilitate compliance with air, waste, noise, and energy standards
established  by current Mexican federal and state environmental laws, including a program
that installs catalytic converters and liquid petroleum gas in delivery trucks  for our
operations in Mexico City. See The CompanyProduct Distribution.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|In addition, we
are subject to the Ley Federal de Derechos (the Federal Law of Governmental Fees).
Adopted in January 1993, the law provides that plants located in Mexico City that use
deep water wells to supply their water requirements must pay a fee to the city for the
discharge of residual waste water to drainage. In 1995, municipal authorities began to
test the quality of the waste water discharge and charge plants an additional fee for
measurements that exceed certain standards published by SEMARNAP. All of our bottling
plants located in the Valley of Mexico Territory, as well as the Toluca plant, met
these new standards in 2001, and as a result, we were not subject to additional fees.
See Description of PropertyProduction Facilities.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



|We have expended,
and may be required to expend in the future, funds  for compliance with and remediation
under local environmental laws and  regulations. We do not believe that such costs will
have a material adverse  effect on our results of operations or financial condition.
However, since  environmental laws and regulations and their enforcement are becoming
increasingly more stringent in both Mexico and Argentina as well as in the new  Panamco
territories, to the extent that we cannot pass on to our customers the  increased costs
of compliance and remediation, such costs may have a material  adverse effect on our
future results of operations or financial condition.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Our acquisition of
Panamco will subject us to a variety of regulations  and taxes in countries where we have
not historically conducted operations. See  Item 4. Information on the CompanyThe
CompanyThe Panamco Acquisition.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 33 | 
| | -- | 



---





|BOTTLER AGREEMENTS
|------------------



|Coca-Cola Bottler Agreements
|----------------------------



|Bottler agreements
are the standard contracts that The Coca-Cola  Company enters into with bottlers outside
the United States for the sale of  concentrates for certain Coca-Cola trademark
beverages. We manufacture, package,  distribute, and sell soft drink beverages and
bottled water in our Mexican  Territories under two Mexican bottler agreements we entered
into with The  Coca-Cola Company. We also manufacture, package, distribute, and sell soft
drink  beverages and bottled water in our Buenos Aires Territory under our Buenos Aires
bottler agreement.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|These bottler
agreements provide that we will purchase our entire  requirement of concentrates for
Coca-Cola trademark beverages from The Coca-Cola  Company and other authorized suppliers
at prices, with terms of payment, and on  other terms and conditions of supply as
determined from time to time by The  Coca-Cola Company at its sole discretion. Although
the price multipliers used to  calculate the cost of concentrate and the currency of
payment, among other  terms, are set by The Coca-Cola Company at its sole discretion, we
set the price  of products sold to retailers at our discretion, subject to the
applicability of  price restraints. We have the exclusive right to distribute Coca-Cola
trademark  beverages for sale in our territories in authorized containers of the nature
prescribed by the bottler agreements and currently used by our company. These  containers
include various configurations of cans and returnable and  non-returnable bottles made of
glass and plastic and fountain containers. See  The CompanySales.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|The bottler
agreements include an acknowledgment by us that The  Coca-Cola Company is the sole owner
of the trademarks that identify the  Coca-Cola trademark beverages and of the secret
formulas with which The  Coca-Cola Companys concentrates are made. Subject to our
exclusive right to  distribute Coca-Cola trademark beverages in our territories, The
Coca-Cola  Company reserves the right to import and export Coca-Cola trademark beverages
to  and from Mexico and Argentina. Our bottler agreements do not contain  restrictions on
The Coca-Cola Companys ability to set the price of concentrates  charged to
bottlers and do not impose minimum marketing obligations on The  Coca-Cola Company. The
prices at which we purchase concentrates under the  bottler agreements may vary
materially from the prices we have historically  paid, including during the periods
covered by our financial information attached  to this annual report. Under our bylaws
and the shareholders agreement, however,  an adverse action by The Coca-Cola Company
under any of the bottler agreements  may result in a suspension of certain veto rights of
the directors, referred to  in this annual report as Series D Directors, appointed by The
Coca-Cola Company.  This provides us with limited protection against The Coca-Cola Companys
ability  to raise concentrate prices. See Item 7. Major Shareholders and Related
Party  TransactionsMajor ShareholdersThe Shareholders Agreement.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|The Coca-Cola
Company has the ability, at its sole discretion, to  reformulate any of the Coca-Cola
trademark beverages and to discontinue any of  the Coca-Cola trademark beverages, subject
to certain limitations, so long as  all Coca-Cola trademark beverages are not
discontinued. The Coca-Cola Company  may also introduce new beverages in our territories;
in that event, we will  have, under the supplemental agreements discussed below, the
right of first  refusal with respect to the manufacturing, packaging, distribution, and
sale of  such new beverages subject to the same obligations as then exist with respect to
the Coca-Cola trademark beverages under the bottler agreements. The bottler  agreements
prohibit us from producing or handling cola products other than those  of The Coca-Cola
Company, or other products or packages that would imitate,  infringe upon, or cause
confusion with the products, trade dress, containers or  trademarks of The Coca-Cola
Company, or from acquiring or holding an interest in  a party that engages in such
activities. The bottler agreements also prohibit us  from bottling any soft drink product
except under the authority of, or with the  consent of, The Coca-Cola Company. The
bottler agreements also impose  restrictions concerning the use of certain trademarks,
authorized containers,  packaging, and labeling of The Coca-Cola Company so as to conform
to policies  prescribed by The Coca-Cola Company. In particular, we are obligated to:
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | Maintain
such plant and equipment, staff, and distribution  facilities as are capable of
manufacturing, packaging, and  distributing the Coca-Cola trademark beverages in
authorized  containers in accordance with our bottler agreements and in  sufficient
quantities to satisfy fully the demand for these  beverages in our territories;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 34 | 
| | -- | 



---



| |  |  | Undertake
adequate quality control measures prescribed by The Coca-Cola Company;
| | - |  | --------------------------------------------------------------------------------

| |  |  | Develop,
stimulate, and satisfy fully the demand for Coca-Cola  trademark beverages using all
approved means, which include the  spending of advertising and other marketing funds;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | Maintain
such sound financial capacity as may be reasonably necessary to assure performance by us
and our  affiliates of our obligations to The Coca-Cola Company; and
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | Submit
annually to The Coca-Cola Company our marketing, management, promotional and advertising
plans for  the ensuing year.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------



|In each of the
past five years, The Coca-Cola Company has contributed  approximately half of our
advertising and marketing budget in the Mexican  Territories and, since September 1994,
approximately half of such budget in the  Buenos Aires Territory. Although we believe
that The Coca-Cola Company intends  to continue to provide funds for advertising and
marketing, it is not obligated  to do so under the bottler agreements. Consequently,
future levels of  advertising and marketing support provided by The Coca-Cola Company may
vary  materially from the levels historically provided. See Item 7. Major
Shareholders and Related Party TransactionsMajor Shareholders The
Shareholders Agreement.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Our two bottler
agreements covering the Mexican Territories have terms  of ten years and will each expire
in June, 2013. The Buenos Aires bottler  agreement has a term of ten years and will
expire in September, 2004. The  bottler agreements are automatically renewable for
ten-year terms, subject to  non-renewal by either party (with notice to the other party).
The bottler  agreements are subject to termination by The Coca-Cola Company in the event
of  default by us. The event of default provisions limiting the change in ownership  or
control of our company and the assignment or transfer of the bottler  agreements are
designed to preclude any person not acceptable to The Coca-Cola  Company from obtaining
an assignment of a bottler agreement or from acquiring  our company, and are independent
of similar rights set forth in the shareholders  agreement. These provisions may prevent
changes in our principal shareholders  (as discussed below), including mergers or
acquisitions involving sales or  dispositions of our capital stock, without the consent
of The Coca-Cola Company.  See Item 7. Major Shareholders and Related Party
TransactionsMajor  Shareholders The Shareholders Agreement.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|In connection with
our bottler agreements, we also entered into a  tradename licensing agreement with the
Coca-Cola Company on June 21, 1993,  pursuant to which we are authorized to use certain
trademark names of the  Coca-Cola Company. The agreement has an indefinite term, but is
terminated if we  cease to manufacture, market, sell and distribute Coca-Cola products
pursuant to  the bottler agreements or if the shareholders agreement is terminated. The
Coca-Cola Company also has the right to terminate the license agreement if we  use its
trademark names in a manner not authorized by the bottler agreements.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|We entered into
two supplemental agreements with The Coca-Cola Company  on June 21, 1993 and September 1,
1994, which together clarify and expand  certain provisions of our bottler agreements.
Among other things, the  supplemental agreements:
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | Specify
that we have a right of first refusal with respect to the  production and distribution of
certain new trademark products of  The Coca-Cola Company in the territories;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | Detail
the calculation of certain payments upon the occurrence of certain breaches;
| | - |  | -----------------------------------------------------------------------------------

| |  |  | Describe
certain rights of first negotiation and first refusal of The Coca-Cola Company upon
termination of  any of the bottler agreements;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | Set
forth  procedural details for notification and communication relating to specific
provisions of the bottler  agreements; and
| | - |  | --------------------------------------------------------------------------------------------------------------------------------

| |  |  | Provide
that The Coca-Cola Company may authorize other  distributors of fountain within the
territories and will reimburse  us for documented costs relating to enforcement actions
to protect  certain trademarks of The Coca-Cola Company.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|The arrangements
between The Coca-Cola Company and the Panamco bottling  territories are also governed by
bottler agreements. These agreements have  different expiration dates and provide The
Coca-Cola Company with rights and  protections that are similar to those provided to it
under our bottler  agreements. The bottler agreements
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 35 | 
| | -- | 



---





|covering Panamcos Mexican territories have
ten-year terms ending in 2005. The Panamco bottler agreements in Guatemala,  Nicaragua,
Costa Rica, Panama, Colombia, Venezuela and Brazil have five-year  terms.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Mundet Bottler Agreements
|-------------------------



|On November 2,
2001, we entered into two franchise bottling agreements  with Promotora de Marcas
Nacionales, an indirect subsidiary of FEMSA, under  which we became the sole franchisee
for the production, bottling, distribution  and sale of Mundet brands in the Valley of
Mexico and most of our Southeast of  Mexico Territory. Each franchise agreement has a
term of ten years and will  expire in November, 2011. Both agreements are renewable for
ten-year terms,  subject to non-renewal by either party with notice to the other party.
Other  terms and conditions of the franchise agreements are similar to the current
arrangements that we have entered into with The Coca-Cola Company for the  bottling and
distribution of Coca-Cola trademark soft drink beverages.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|DESCRIPTION OF PROPERTY, PLANT
AND EQUIPMENT
|--------------------------------------------



|The following
tables summarize the value of our properties at December  31, 2002.
|---------------------------------------------------------------------------------



|Total Asset Value Summary  At
December 31, 2002
|-----------------------------------------------

|                       | Book Value
|---------------------- | ----------
|
|Mexican Territorios    |           
|Buenos Aires Territory |           
|                       |           
|Total                  |           



|Property, Plant and Equipment
Summary  At December 31, 2002
|-----------------------------------------------------------

|                              |  | Book Value         
|----------------------------- |  | -------------------
|                              |  | (millions of pesos)
|Valley of Mexico Territory    |  | Ps. 4,385.3        
|Southeast of Mexico Territory |  | 1,803.5            
|Buenos Aires Territory        |  | 780.0              
|                              |  |                    
|Total                         |  | Ps. 6,969.1        



|Production Facilities
|---------------------



|Over the past
several years, we made significant capital improvements  to modernize our facilities and
improve operating efficiency and productivity,  including:
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | Increasing
the annual capacity of our bottling plants;
| | - |  | ------------------------------------------------------

| |  |  | Installing
clarification facilities to process different types of sweeteners;
| | - |  | -----------------------------------------------------------------------------

| |  |  | Installing
plastic bottle-blowing equipment and can presentation capacity;
| | - |  | --------------------------------------------------------------------------

| |  |  | Modifying
equipment to increase flexibility to produce different  presentations, including swing
lines that can bottle both  non-returnable and returnable presentations; and
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | Closing
obsolete production facilities.
| | - |  | ---------------------------------------



|Mexican
Territories. As of December 31, 2002, we owned four bottling plants in the Valley of
Mexico Territory with a combined total installed annual capacity of 598.0 million unit
cases and a capacity utilization of
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 36 | 
| | -- | 



---





|63%. In the  Southeast of Mexico Territory, we
operated four bottling plants with a combined  total installed annual capacity of 142.3
million unit cases and with capacity  utilization of 73%.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|As part of our
objective to rationalize bottling capacity, we closed  four plants in the Mexican
Territories during 2000 and 2001. We have compensated  for the installed capacity of the
closed plants by increasing production at our  other bottling facilities in the Mexican
Territories. In November 2001, we  completed the second phase of our project to increase
the installed capacity of  our Toluca plant. The total installed annual capacity of this
facility totals  approximately 208 million unit cases.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|As of December 31,
2002 we operated fifteen distribution centers in the  Valley of Mexico and 38
distribution centers in the Southeast of Mexico. We own  the majority of our distribution
centers in Mexico and we rent the remainder.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Buenos Aires
Territory. As of December 31, 2002, we owned one bottling plant in the Buenos Aires
Territory with a total installed annual capacity of 207 million unit cases and a
capacity utilization of 56%.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|As of December 31,
2002, we owned and operated three distribution  centers in the Buenos Aires territory.
|---------------------------------------------------------------------------------------------------------



|Production Facility Summary  As
of December 31, 2002
|----------------------------------------------------

|Territory                    | Location                            | Principal 
      Use | Facility Area 
      (thousands of 
      sq meters) | Installed 
      Capacity 
      (millions of 
      unit cases) | % 
      Utilization
|---------------------------- | ----------------------------------- | -------------------- | ---------------------------------------------------- | ---------------------------------------------------------------- | --------------------
|                            
|Valley of Mexico             |                                     | Bottling Facility    |                                                      |                                                                  |                     
|                             | Cedro, Distrito Federal             |                      | 31.5                                                 | 81.5                                                             | 59                  
|                             | Toluca, Estado de México            |                      | 240.0                                                | 206.0                                                            | 62                  
|                             | Los Reyes la Paz, Estado de México  |                      | 28.4                                                 | 114.5                                                            | 45                  
|                             | Cuautitlán, Estado de México        |                      | 35.0                                                 | 195.9                                                            | 76                  
|                             |                                     |                      |                                                      |                                                                  |                     
|Southeast of 
        Mexico |                                     | Bottling Facility    |                                                      |                                                                  |                     
|                             | Ixtacomitán, Tabasco                |                      | 90.0                                                 | 82.4                                                             | 77                  
|                             | San Cristobal de las Casas, Chiapas |                      | 24.3                                                 | 26.6                                                             | 61                  
|                             | Oaxaca, Oaxaca                      |                      | 9.6                                                  | 15.1                                                             | 71                  
|                             | Juchitán, Oaxaca                    |                      | 26.7                                                 | 18.2                                                             | 70                  
|                             |                                     |                      |                                                      |                                                                  |                     
|Buenos Aires                 |                                     | Bottling Facility    |                                                      |                                                                  |                     
|                             | Buenos Aires, Argentina             |                      | 74.2                                                 | 206.7                                                            | 56                  



|SIGNIFICANT SUBSIDIARIES
|------------------------



|The table below
sets forth all of our direct and indirect significant  subsidiaries and the percentage of
equity of each subsidiary we owned directly  or indirectly as of December 31, 2002.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Name of Company                                                        | Percentage
|---------------------------------------------------------------------- | ----------
|Propimex, S.A. de C.V., a Mexican
      corporation                    |           
|Inmuebles del Golfo, S.A. de C.V., a Mexican
      corporation         |           
|Refrescos y Aguas Minerales, S.A. de C.V.,
      a Mexican corporation |           
|Coca-Cola FEMSA de Buenos Aires S.A., an Argentine
      corporation   |           



| | 37 | 
| | -- | 



---





|On May 6, 2003, we
completed the acquisition of Panamco and as a result  we acquired subsidiaries with
operations in Mexico, Guatemala, Nicaragua, Costa  Rica, Panama, Colombia, Venezuela and
Brazil. Panamco and its subsidiaries are  not reflected in the financial and other
information presented in this annual  report as they will only be reflected in our
financial statements for periods  ending after May 1, 2003.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 38 | 
| | -- | 



---





|Item 5.  Operating and Financial Review and
Prospects
|-----------------------------------------------------



|General
|-------



|The following
discussion should be read in conjunction with, and is  qualified in its entirety by
reference to, our consolidated financial statements  including the notes thereto. Our
consolidated financial statements were prepared  in accordance with Mexican GAAP, which
differ in certain significant respects  from U.S. GAAP. Notes 22 and 23 to our
consolidated financial statements provide  a description of the principal differences
between Mexican GAAP and U.S. GAAP as  they relate to us, and a reconciliation to U.S.
GAAP of net income,  stockholders equity and certain other selected financial data.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Pursuant to
Mexican GAAP, in our financial statements and the financial  information set forth below:
|-----------------------------------------------------------------------------------------------------

| |  |  | nonmonetary
assets (including plant, property and equipment of  local origin) and stockholders equity
are restated for inflation  based on the local consumer price index; property, plant and
equipment of foreign origin are restated based on the exchange  rate and inflation in the
country of origin and converted into  Mexican pesos using the prevailing exchange rate at
the balance  sheet date;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | gains
and  losses in purchasing power from holding monetary liabilities or assets are
recognized in income; and
| | - |  | ---------------------------------------------------------------------------------------------------------------

| |  |  | all
financial statements are restated in constant pesos as of December 31, 2002.
| | - |  | --------------------------------------------------------------------------------



|The effect of inflation accounting under Mexican
GAAP has not been reversed in  the reconciliation to U.S. GAAP of net income and
stockholders equity.
|-------------------------------------------------------------------------------------------------------------------------------------------------------



|In order to
consolidate financial information for Coca-Cola FEMSA de  Buenos Aires with our other
financial information for a particular period, we  translate such subsidiarys
information using the product of the U.S.  dollar/Argentine peso exchange rate and the
Mexican peso/U.S. dollar exchange  rate, in each case as in effect at the end of such
period. We restate Coca-Cola  FEMSA de Buenos Aires financial information for prior
periods by applying the  Argentine consumer price index and then translate such restated
information  using the exchange rate in effect at the end of the most recent completed
period  for which financial results are being reported.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|In the following
discussion, certain references are made to nominal  price changes. Nominal prices refer
to the actual stated price charged for a  product at a particular point in time and,
therefore, nominal prices are not  restated to adjust for inflation. Real price
increases, which eliminate the  effects of inflation or deflation, are lower or higher
than nominal price  increases, as the case may be. Unless otherwise specified, all growth
rates in  the following discussion are stated in real terms.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|The Panamco Acquisition
|-----------------------



|On May 6, 2003, we
completed the acquisition of Panamco, the largest  soft drink bottler in Latin America
and one of the three largest bottlers of  Coca-Cola products in the world, as measured by
sales volume in unit cases sold  in 2002. As a result of this acquisition, we are the
largest Coca-Cola bottler  in Latin America, representing approximately 40% of Coca-Cola
volumes in Latin  America and the second largest bottler of Coca-Cola products in the
world, as  measured by sales volume in unit cases sold in 2002. In 2002, Panamco reported
net sales of U.S.$2,357.9 million, operating income of U.S.$131.2 million and  net income
of U.S.$33.2 million, under U.S. GAAP. Panamco sold approximately  1,228 million unit
cases in 2002. Additional information regarding Panamcos  historical performance
can be found in its annual report filed with the SEC on  Form 10-K on March 28, 2003.
Such report does not constitute part of this annual  report and is not incorporated by
reference into this annual report.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|We will begin
consolidating the results of Panamco during the second  quarter of 2003 and, under
Mexican GAAP, Panamcos results will be reflected in  our financial statements
starting on May 1, 2003. Panamco has historically  prepared its financial statements in
accordance with U.S. GAAP in U.S. dollars.  We have historically
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 39 | 
| | -- | 



---





|and will continue to prepare our financial
statements in  accordance with Mexican GAAP in Mexican pesos. When presented in Mexican
GAAP  and in Mexican pesos as part of our consolidated results, the results of Panamco
may be significantly different from and may not be comparable to those reported  by
Panamco for prior periods. We may not provide separate financial statements  for Panamco
for future periods. In addition, because Panamco will not be  included in our financial
statements for periods prior to the second quarter of  2003, our future quarterly results
will be comparable starting with the third  quarter of 2004 as compared to the third of
2003 and our future annual results  will be comparable starting with the full year of
2005 as compared to the full  year of 2004.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Panamco has
recorded significantly lower operating margins than us in  recent years, reflecting in
part deterioration of macroeconomic and political  conditions in some of the countries in
which it operates and competitive  pressures. Our ability to maintain our margins will
depend on our ability to  generate synergies from the combination of the Mexican
operations and to put in  place new strategies in some of our new territories, as well as
on macroeconomic  conditions and competitive pressures throughout Latin America.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|The Panamco
acquisition significantly increases the geographic  diversity of our operations, although
the Mexican operations of both companies  represent the single largest portion of the
business, representing 53% of the  combined volume for the two businesses in 2002. We now
operate in a number of  countries throughout Latin America in which we have not
previously operated and  that present different or greater country risk than Mexico.
Since 2002,  Panamcos results have been adversely impacted by events in Venezuela.
We also  now operate in Brazil, Colombia and other countries in Latin America, which have
experienced political or economic difficulties in recent periods. Our future  results may
be significantly affected by the general economic and financial  conditions in the
countries where we operate, particularly in Mexico, and by the  devaluation of the local
currency in those countries, by inflation and high  interest rates in those countries, or
by political developments or changes in  law in those countries. See Item 4.
Information on the CompanyThe Panamco  Acquisition.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|We are currently
planning and taking certain initial steps towards the  integration of our new operations.
Our primary objective is to achieve complete  integration in the operations and
management of the two companies Mexican  operations, which we believe complement
each other in numerous areas, with the  goal of realizing important synergies in
distribution, back-office operations,  manufacturing and procurement, including through
the closure and integration of  facilities and headcount reductions. We have begun the
process of closing  Panamcos executive offices in Miami, Florida. We are in the
process of  evaluating the operations and strategies of our new businesses outside
Mexico,  and we have begun to replicate some of our management practices and systems
throughout our new territories.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|We have not yet concluded our
      valuation of Panamcos assets and liabilities, but have preliminarily
      determined that the excess purchase price over the fair value of Panamcos
      tangible assets and liabilities will be primarily recorded as identifiable
      intangible assets with indefinite lives, consisting principally of our rights
      under our bottler agreements. Starting in January 2003, consistent with
      U.S. GAAP, intangible assets with indefinite lives will not be subject to
      amortization under Mexican GAAP, but will be subject to annual impairment
      tests. We can give no assurance that our preliminary conclusions will not
      change as a result of new information or developments.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|We anticipate
investing significant amounts over the next few years in  connection with the integration
and for modernizing certain of our recently  acquired facilities. We do not currently
have an estimate of all amounts  required, but plan to finance any such costs and
investments with cash flow from  operations. We expect that these investments will
improve our operations and  profitability in these new territories.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|We have incurred the following
      new indebtedness, totaling approximately U.S.$1,978 million (including approximately
      U.S.$373 million used to refinance existing Panamco indebtedness), in connection
      with the acquisition of Panamco:
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | Bridge
Loans in the amount of Ps.1,006.2 million and U.S.$739 million, each of which matures in
April 2004;
| | - |  | -----------------------------------------------------------------------------------------------------------

| |  |  | Term
Loans in the amount of Ps.2,741.3 million (maturing in five  years, with semi-annual
installments beginning in 30 months),  U.S.$286.5 million (maturing in three years) and
U.S.$208.5  million (maturing in five years, with semi-annual installments  beginning in
30 months); and
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 40 | 
| | -- | 



---



| |  |  | MexicanCertificados Bursátiles
      in the amount of Ps.2,000 million (maturing in four years), Ps.1,250 million
      (maturing in five years) and Ps.1,000 million (maturing in seven years).
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|We have also
acquired approximately U.S.$512.1 million of existing indebtedness of Panamco, which is
denominated in U.S. dollars, Mexican pesos and Colombian pesos. The Bridge Loans and, to
a lesser extent the Term Loans and the  Certificados Bursátiles, contain
restrictions on the conduct of our business. Specifically, the Bridge Loans
significantly restrict our ability and the ability of our subsidiaries to incur
additional indebtedness, to make investments or acquisitions, to dispose of assets or to
engage in certain other fundamental transactions and require us to maintain certain
financial ratios.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Effects of Economic Conditions
|------------------------------



|Our results of
operations are affected by economic conditions in Mexico  and in the other countries in
which we operate. In periods of slow economic  growth and high inflation, demand for soft
drinks tends to be adversely  affected, decreasing our sales volumes. Because a large
percentage of our costs  are fixed costs our profits margins may suffer from reduced
demand.  Alternatively, demand may shift to lower margin products or lower margin
presentations. We may not be able to preserve our profit margins by reducing  costs and
expenses.  See Item 3.  Key InformationRisk Factors.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Our results of
operations are also affected by changes in currency  exchange rates. Devaluation of the
peso against the U.S. dollar, such as  occurred in the second half of 2002, may result in
exchange losses on our net  U.S. dollar-denominated indebtedness. In addition, currency
fluctuations between  the Mexican peso and the currencies of our non-Mexican subsidiaries
affect our  results as reported in Mexican pesos. Our ability to pay U.S.
dollar-denominated  debt or other costs and expenses denominated or determined by
reference to the  U.S. dollar may be adversely affected by devaluations of currencies in
any of  the countries in which we operate, particularly the Mexican peso, against the
U.S. dollar.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Operating Leverage
|------------------



|We are engaged in
capital intensive activities. The high utilization of  the installed capacity of our
production facilities results in better fixed cost  absorption, as increased output
results in higher revenues without additional  fixed costs. Absent significant increases
in variable costs, gross profit  margins will expand when production facilities are
operated at higher  utilization rates. Alternatively, higher fixed costs will result in
lower gross  profit margins in periods of lower output.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



|Revenue Recognition
|-------------------



|We recognize
revenues when title transfers or services are rendered to  customers. We consider the
title transferred when products are shipped to  independent wholesalers and/or retail
customers.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Critical Accounting Estimates
|-----------------------------



|The preparation of
our consolidated financial statements requires that  we make estimates and assumptions
that affect the reported amounts of assets and  liabilities and the disclosure of
contingent assets and liabilities at the date  of the financial statements and the
reported amounts of revenues and expenses  during the reporting period. We base our
estimates and judgments on historical  experience and on various other factors that we
believe to be reasonable under  the circumstances, the results of which form the basis
for making judgments  about the carrying values of assets and liabilities. Actual results
may differ  from these estimates under different assumptions or
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 41 | 
| | -- | 



---





|conditions. Our significant  accounting policies
are described in Notes 3 and 4 to our consolidated financial  statements. On an on-going
basis, we evaluate our estimates and judgments, and  we believe our most critical
accounting policies that imply the application of  estimates and/or judgments are:
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Property, plant
and equipment. Our depreciation expense was Ps.520.9 million in 2002, as compared to
Ps.594.6 million in 2001 and Ps.650.7 million in 2000. Property, plant and equipment are
depreciated over their useful lives. The estimated useful life of such assets represents
the period that they remain in service and generate revenues. We base our estimates on
independent appraisals and the experience of our technical personnel. We are currently
conducting appraisals of the assets acquired in connection with the Panamco acquisition,
in order to present their value in accordance with Mexican GAAP. We are considering
making new investments to upgrade and modernize certain of Panamcos plant and
equipment and retiring or closing other. These actions may result in a decrease in the
average life of our consolidated assets.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



|Bottles and cases.
We classify returnable bottles and cases as fixed assets, in accordance with industry
practices. Breakage is accounted as an expense when it is incurred, and returnable
bottles and cases are not depreciated. Non-returnable presentations are expensed as part
of goods sold. Breakage expense for returnable presentations was Ps.192.1 million,
Ps.198.8 million and Ps.279.1 million in 2002, 2001 and 2000, respectively.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|As a significant
amount of bottles and cases are held by customers and  not by us at any given time,
calculating breakage expense requires us to  estimate the breakage that will result from
returnable presentations held by  customers at period end. Our estimates vary primarily
based on the mix of  returnable presentations in the market and the quality of materials
used for the  presentation.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Valuation of
goodwill and long-lived assets. We carry substantial amounts on our balance sheet for
property, plant and equipment net of accumulated depreciation and amortization. As a
result of the Panamco acquisition, we will also carry significant amounts of intangible
assets with indefinite lives. We annually review the carrying value of our goodwill and
long-lived assets for recoverability. We also review for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may not be
recoverable. If they are impaired, we are required to recognize a loss by writing off
part of their value. The analysis we perform requires that we estimate the future cash
flows attributable to these assets, and these estimates require us to make a variety of
judgments about our future operations, including, without limitation, volume, prices,
costs, inflation, exchange rates and interest rates. While we believe that our estimates
of future cash flows are reasonable, different assumptions regarding such cash flows
could materially affect our evaluations.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



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



|As we discuss in
Note 4 i) to our consolidated financial statements,  goodwill is the difference between
the price paid and book value (substantially  equal to fair value as a result of
restatement for the effects of inflation  under Mexican GAAP) of the net assets acquired.
For Mexican GAAP purposes, this  difference must be amortized over a
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 42 | 
| | -- | 



---





|period of 20 years and is recorded in the
currency of the country in which the assets are located. We calculate the  restatement by
applying the inflation rate of the country of origin, then  translating it into Mexican
pesos at the year-end exchange rate.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



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



|Labor liabilities.
Our labor liabilities are comprised of pension plans and seniority premiums. Seniority
premiums are amounts required to be paid by Mexican law to employees who work for 15
years or more with us, at the time the employee leaves the company. Amounts payable vary
depending on the employees years of service and salary. Determining our
obligations and expenses for these labor obligations depends on certain assumptions used
by actuaries in calculating such amounts. We evaluate our assumptions at least annually.
Those assumptions are described in Note 13 to our consolidated financial statements and
include, among others, the discount rate, expected long-term rate of return on plan
assets and rates of increase in compensation costs and certain employee-related factors,
such as turnover, retirement age and mortality. In accordance with Mexican and U.S.
GAAP, actual results that differ from our assumptions are accumulated and amortized over
future periods and, therefore, generally affect our recognized expenses and recorded
obligations in such future periods. While we believe that our assumptions are
appropriate, significant differences in our actual experience or significant changes in
our assumptions may materially affect our labor obligations and our future expense. The
following table is a summary of the three key assumptions to be used in determining 2003
annual pension and seniority premium expense, along with the impact on these expenses of
a 1% change in each assumed rate.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Assumption             |  | 2003 rate
      (in real terms) |  | Impact of 1% change
      (millions of Mexican
      pesos)(1)(2) | 
|---------------------- |  | ------------------------------- |  | ----------------------------------------------------------------- | 
|                      
|Discount rate          |  | 6.00%                           |  | +179.8                                                            | 
|                       |  |                                 |  | -209.4                                                            | 
|Salary growth rate     |  | 2.00%                           |  | +201.4                                                            | 
|                       |  |                                 |  | -156.1                                                            | 
|Long-term asset return |  | 6.00%                           |  | +179.8                                                            | 
|                       |  |                                 |  | -209.4                                                            | 

|
|

|(1) |  | The
impact is not the same for an increase of 1% as for a  decrease of 1% because the rates
are not linear.
|--- |  | -----------------------------------------------------------------------------------------------------------

|(2) |  | "+" refers
to  an increase of 1% - indicates a decrease of 1%.
|--- |  | ----------------------------------------------------------------



| | 43 | 
| | -- | 



---





|Results of Operations
|---------------------



|The following
table sets forth our consolidated income statement for  the years ended December 31,
2002, 2001, and 2000:
|------------------------------------------------------------------------------------------------------------------------

|                                                        | Year ended December 31,
|------------------------------------------------------- | -----------------------
|
|
|Revenues:                                              
|Net sales                                               | $1,672.4               
|Other operating revenues                                | 12.3                   
|                                                        |                        
|Total revenues                                          | 1,684.7                
|Cost of sales                                           | 777.4                  
|                                                        |                        
|Gross profit                                            | 907.3                  
|Operating expenses:                                    
|Administrative                                          | 133.5                  
|Selling                                                 | 345.7                  
|                                                        |                        
|                                                        | 479.2                  
|Goodwill amortization                                   | 3.6                    
|                                                        |                        
|Income from operations                                  | 424.5                  
|Integral cost of financing :                           
|Interest expense                                        | (31.9                  
|Interest income                                         | 24.2                   
|Foreign exchange gain (loss),
      net                 | 18.9                   
|Gain (loss) from monetary position                      | 36.9                   
|                                                        |                        
|Total integral cost of financing                        | 47.9                   
|Other expenses, net                                     | 51.1                   
|                                                        |                        
|Income for the year before income                       | 421.4                  
|taxes, employee profit sharing
      and               
|change in accounting principles                        
|Income taxes and employee profit
      
      sharing . | 176.2                  
|Change in accounting principles                         | -                      
|                                                        |                        
|Net income                                              | $245.2                 
|                                                        |                        

|(1) |  | Translation
to U.S. dollar amounts at an exchange rate of Ps.10.459 to  U.S.$1.00, solely for the
convenience of the reader.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------



|Results of Operations for the Year Ended
December 31, 2002; Compared to the Year  Ended December 31, 2001.
|----------------------------------------------------------------------------------------------------------

|                         | Year ended December 31,
|------------------------ | -----------------------
|
|
|
|Revenues:                |                        
|Net sales                |                        
|Other operating revenues |                        
|                         |                        
|Total
      revenues     |                        
|                         |                        
|Cost of sales            |                        
|                         |                        
|Gross
      profit       |                        
|Operating expenses:      |                        
|Administrative           |                        
|Selling                  |                        
|                         |                        
|                         |                        
|Goodwill amortization    |                        
|                         |                        
|Income from operations   |                        
|                         |                        



| | 44 | 
| | -- | 



---





|Net Sales.
Consolidated net sales grew by 5.3% in 2002, principally reflecting growth in the
Mexican territories which more than offset a decrease in net sales in Argentina.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Net sales grew by
6.7% in the Mexican territories. During 2002, our  average real price per unit case
increased by 1.1%, mainly due to price  increases implemented in the Valley of Mexico
during February 2002. Sales volume  in the Mexican territories grew by 5.6% to 504.7
million unit cases during 2002  and represented 81.3% of our consolidated sales volume.
During 2002, as compared  to 2001, sales volume in the Mexican territories:
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | in
colas,  increased 0.8%, to 362.2 million unit cases.
| | - |  | -------------------------------------------------------

| |  |  | in
flavored soft drinks, increased 12.9%, to 110.9 million unit cases.
| | - |  | ----------------------------------------------------------------------

| |  |  | in
Ciel,  still and sparkling water, increased 27.4%, to 23.9 million unit cases.
| | - |  | ---------------------------------------------------------------------------------



|The following
chart sets forth sales volume and average unit price per  case for 2002, as well as
percent growth over 2001 in our Mexican territories.
|------------------------------------------------------------------------------------------------------------------------------------------------------

|                | Excluding Kin light(1) | Including Kin light(1)
|--------------- | ---------------------- | ----------------------
|
|Sales volume(2) |                        | 498.4                 
|Avg. unit price |                        | Ps.32.37              

|
|

|(1) |  | We
distributed our Kin light brand on a complimentary basis  powdered beverage during the
year in order to better examine this  categorys potential and evaluate consumption
patterns and price  strategies.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) |  | Millions
of unit cases.
|--- |  | -----------------------



|We believe that
the principal volume drivers in the Mexican territories  in 2002 were:
|--------------------------------------------------------------------------------------

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

| |  |  | continued
expansion in the flavor and new categories segments with the introduction of
new products, such as Beat, Mickey Aventuras, Kin Light and Nestea; and
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | modest
volume growth in the core cola portfolio.
| | - |  | ------------------------------------------------



|Net sales in the
Buenos Aires territory decreased by 8.2% in 2002,  despite an 11% decline in sales
volume. In Buenos Aires, our average real price  per unit case increased by 2.2% in 2002,
as a result of a 67% weighted average  price increase implemented during the year that
offset the effect of inflation  and a change in mix to returnable packages which generate
a lower price per  unit. The 11% decline in sales volume reflects continued economic
uncertainty in  Argentina.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|We responded to
the challenges presented by the Argentine market in  2002 with the objective of defending
the equity of our brands, regaining market  presence from B brands,
extracting positive cash flow, and reducing our cost  structure. As the year progressed,
our commercial strategies yielded a more  favorable outcome, closing the year with volume
growth of 3.0% in the fourth  quarter of 2002. Our principal commercial strategy was
shifting the mix towards  returnable packages, which increased from 5.8% of the mix in
2001 to 12.4% in  2002. The shift was led by the 1.25-liter glass returnable presentation
of  Coca-Cola, Fanta and Sprite, which was introduced in the second quarter of 2002  and
represented 16.6% of our sales volume in Argentina during the fourth quarter  of 2002.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Other Operating
Revenues.Other operating revenues increased by 9.6% in 2002, to Ps.128.5 million. The
increase primarily reflects revenues obtained from toll production agreements in
Argentina with neighboring Coca-Cola bottlers, whereby we have been toll producing
beverages for sales in their territories.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Cost of Sales. The
components of cost of sales include raw materials (principally sweeteners, soft drink
concentrate, packaging materials and water), depreciation expenses attributable to the
Companys production facilities, wages and other employment expenses associated
with the labor force employed at our production facilities and certain overhead
expenses. Concentrate prices, which are payable in local currency, are determined as
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 45 | 
| | -- | 



---





|a percentage of the wholesale  price of our
products net of any value-added or similar taxes. See Item 4. Information on the
CompanyThe CompanyRaw Materials.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------



|As a percentage of
net sales, cost of sales remained substantially  unchanged during 2002 as compared to
2001 (46.48%, as compared to 46.58%). In  Mexico, the cost of sales as a percentage of
sales declined by 0.9 percentage  points (to 44.61%) due to a greater absorption of fixed
costs driven by sales  volume growth. In Buenos Aires, cost of sales as a percentage of
net sales  during 2002 increased 9.8 percentage points (to 64.0%) as a result of lower
absorption of fixed costs driven by volume decline, higher prices for raw  materials
particularly those with prices quoted in U.S. dollars, and higher  depreciation resulting
from the restatement to year-end values of foreign  currency denominated assets following
the significant devaluation of the  Argentine peso.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Operating
Expenses. Consolidated operating expenses decreased by 0.1% in 2002 as compared to 2001,
by 1.6 percentage points if compared as a percent of total revenues (to 28.4% from
30.0%). The decrease, in absolute terms, resulted from a 3.1% decline in selling
expenses, which offset an 8.5% increase in administrative expenses. The increase in
administrative expenses was due in part to increases in payroll taxes in Mexico
following new legislation adopted at the beginning of the year.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|In Mexico,
operating expenses decreased slightly as a percentage of  total revenues (by 120 basis
points to 28.2%). This reflects primarily a  decrease of 130 basis points in selling
expenses as a percentage of total  revenues. Administrative expenses remained unchanged
as a percentage of total  revenues.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|In Buenos Aires,
selling expenses decreased by 25.8%, a reduction of  580 basis points as a percentage of
total revenues resulting from lower  marketing expenses and headcount reduction combined
with adjustments in  salaries. Administrative expenses in Argentina increased by 17.6% as
a result of  higher depreciation resulting mostly from the restatement to year-end values
of  the leases of our computer equipment recorded in foreign currencies, following  the
significant devaluation of the Argentine peso.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|We incur various
expenses related to the distribution of our products.  We include these types of costs in
the selling expenses line of our income  statement. During 2002 and 2001, our
distribution costs amounted to Ps.1,990.8  million and Ps.2,112.8 million, respectively.
The exclusion of these charges  from our cost of sales line may result in the amounts
reported as gross profit  not being comparable to other companies, who may include all
expenses related to  their distribution network in cost of sales when computing gross
profit (or an  equivalent measure).
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Goodwill. Goodwill
amortization for 2002 was Ps.37.3 million, compared to Ps.100.7 million for 2001. Due to
the uncertainty and instability of the economic environment in Argentina, during the
third quarter of 2002, we wrote down Ps.401.8 million (A$129.5 million) of the goodwill
generated by the acquisition of the territories served by our wholly owned subsidiary
Coca-Cola FEMSA de Buenos Aires. This non-cash impairment charge was recorded under
other expense, net, in our consolidated income statement. Given the present
economic situation in Argentina, we believe that the current net asset value (A$288.6
million, or approximately U.S.$85.6 million) of our foreign subsidiary is fairly valued,
and although we can give you no assurance, we do not expect to recognize additional
impairments in the future. Under Mexican GAAP, the remaining value of goodwill will
continue to be amortized in the income statement. Changes in economic or political
conditions in Argentina or in our business, however, may cause us to change our current
assessment. Consolidated goodwill related to Argentina as of December 31, 2002 amounted
to A$49.0 million.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Operating Income.
Consolidated income from operations after amortization of goodwill grew by 14.6% to
Ps.4,440.2 million in 2002. Operating income as a percentage of total revenues increased
by 200 basis points in 2002, from 29.5% to 30.7%. This increase primarily reflects (i) a
decrease in operating expenses, (ii) a 3.2% increase in the average price per unit case,
(iii) a slight reduction in cost of sales per unit case and (iv) lower goodwill
amortization expenses because of a non-cash impairment charge to goodwill relating to
our Argentine operations in July 2002.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Integral Cost of
Financing. The term integral cost of financing refers to the combined
financial effects of net interest expense or interest income, net foreign exchange gains
or losses and net gains or losses on monetary position. Net foreign exchange gains or
losses represent the impact of changes in foreign exchange rates on assets or
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 46 | 
| | -- | 



---





|liabilities denominated in currencies  other
than pesos. A foreign exchange loss arises if a liability is denominated  in a foreign
currency that appreciates relative to the peso between the date the  liability is
incurred or the beginning of the period, whichever comes first, and  the date it is
repaid or the end of the period, whichever comes first, as the  appreciation of the
foreign currency results in an increase in the amount of  pesos which must be exchanged
to repay the specified amount of the foreign  currency liability. The gain or loss on
monetary position refers to the impact  of inflation on monetary assets and liabilities.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|In 2002, we
reported income of Ps.501.2 million from integral cost of  financing, as compared to a
loss of Ps.143.2 million in 2001. This improvement  principally reflects:
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | A
net  foreign exchange gain of Ps.197.2 million in 2002, as compared to a loss of Ps.6.3
million in  2001.  In 2002, both the Mexican peso and the Argentine peso depreciated in
value against the U.S.  dollar, resulting in foreign exchange gains on our U.S.
dollar-denominated cash positions in Mexico  and Argentina.  In 2001, the Mexican peso
appreciated in value against the U.S. dollar.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | A
gain on monetary position of Ps.385.5 million in 2002, as  compared to a loss on monetary
position of Ps.81.0 million in  2001. This improvement primarily reflects the effect of
inflation  on our net monetary liability position in Argentina. Argentina  experienced
significant inflation in 2002 as opposed to deflation  in 2001, resulting in a monetary
gain on our Argentine peso  liabilities in 2002 and a loss in 2001.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|These factors more
than offset an increase in net interest expenses of  Ps.25.6 million, which reflects
primarily a slight increase in interest expenses  generated by the devaluation of the
Mexican peso against the U.S. dollar and a  decrease in interest income generated by a
reduction in interest rates as  applied to our cash balances.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Until June 30,
2002, we calculated foreign exchanges losses or gains on  the U.S. dollar liabilities
incurred in connection with the acquisition of  Coca-Cola FEMSA de Buenos Aires, or
KOFBA, only with respect to the un-hedged  portion of such liabilities. According to
Mexican GAAP, the investment in KOFBA  was designated as a hedge to the indebtedness
incurred. As of June 30, 2002, the  dollar-denominated outstanding liabilities relating
to the acquisition of KOFBA  amounted to U.S.$300 million and the net investment in KOFBA
was U.S.$118.1  million, resulting in un-hedged liabilities of U.S.$181.5 million. Since
July  2002, we discontinued using our investment in KOFBA as a hedge. We determined  that
our current operations in Argentina do not represent a natural hedge of  these
liabilities given the current volatility of the exchange rate between the  Argentine peso
and the U.S. dollar and the elimination of the one-to-one parity  between those
currencies. The Audit Committee of our Board of Directors approved  this determination.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Other Expenses.
Other expenses increased significantly from Ps.37.3 million in 2001 to Ps.534.3 million
in 2002, mainly as a result of the Ps.401.8 million impairment recognized during the
third-quarter of 2002 in connection with the goodwill generated by the acquisition of
our Argentine operations and severance payments in connection with the restructuring of
certain of our operations in Mexico and Argentina.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Income Tax, Tax on
Assets and Employee Profit Sharing. Income taxes and employee profit sharing increased
from Ps.1,461.1 million in 2001 to Ps.1,842.9 million in 2002. The Companys
consolidated effective income tax, tax on assets and employee profit sharing rate
increased from 39.6% in 2001 to 41.8% in 2002. In 2002, our effective tax rate increased
because the impairment charge mentioned above is non-deductible for tax purposes.
Excluding that charge, our effective tax rate in 2002 would have been 38.3%.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Net Income.
Consolidated net income increased by 16.4% to Ps.2,564.2 in 2002, resulting in earnings
per share (EPS) of Ps.1.80 (U.S.$ 0.17 per ADR).
|----------------------------------------------------------------------------------------------------------------------------------------------------



| | 47 | 
| | -- | 



---





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

|                               | Year ended December 31,
|------------------------------ | -----------------------
|
|
|
|
|Revenues:                      |                        
|Net sales                      |                        
|Other operating
      revenues |                        
|                               |                        
|Total
      revenues           |                        
|                               |                        
|Cost of sales                  |                        
|                               |                        
|Gross
      profit             |                        
|Operating expenses:            |                        
|Administrative                 |                        
|Selling                        |                        
|                               |                        
|                               |                        
|Goodwill amortization          |                        
|                               |                        
|Income from operations         |                        
|                               |                        



|Net Sales. Net
sales grew by 4.8% in the Mexican Territories. During 2001, there was a 4.0% real price
increase per unit due to a change in the product and packaging mix. Sales volume in the
Mexican Territories grew by 3.6% to 477.9 million unit cases during 2001, representing
78.6% of our total sales volume. As compared to the previous year, 2001 sales volume
increased by 2.4% for colas and 4.2% for flavored soft drinks. Sales volume of Ciel
still water in the same period increased by 31.0% to 14.9 million unit cases.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|The 3.6% sales volume growth
      in the Mexican Territories was the result of new product launches such asSenzao, Ciel Mineralizada (sparkling water), and Powerade and
      packaging such as the new eight-ounce non-returnable glass presentation
      for Coca-Cola and the 250-milliliter PET non-returnable presentation for
      Fanta, Lift, and Delaware Punch.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|In Argentina, average real
      price per unit decreased by 9.3% in 2001, a result of consumer migration
      to lower-price brands and larger presentations with a lower price per ounce.
      Although sales volume increased by 6.9%, lower average price per unit case
      offset this increase, resulting in a 3.0% reduction in net sales during
      2001. Notwithstanding the adverse economic conditions in Argentina, sales
      volume increased as a result of our stronger brand portfolio. The launch
      of Schweppes Ginger Ale, Citrus and Tonic, Hi-C Orange and
      Apple Crush, and Taíwhich resulted in 34.4% growth
      in flavored soft drinks, contributed to increase in sales volume. Total
      cola sales decreased slightly by 1.5%.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Other Operating
Revenues. Other operating revenues increased from Ps.66.9 million in 2000 to Ps.117.2
million in 2001. The growth of these revenues mainly reflected the toll bottling
contracts that we have with other bottlers of the Coca-Cola System in Argentina.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Cost of Sales. As
a percentage of net sales, consolidated cost of sales decreased by 2.1 percentage points
over 2001 as a result of (i) higher fixed-cost absorption driven by sales volume growth,
(ii) lower unit price of certain raw materials due to the appreciation of the Mexican
peso over the U.S. dollar, and (iii) fixed-cost reductions resulting from the closing of
one plant and two distribution facilities in the Valley of Mexico during 2001 and three
plants in Mexico during 2000.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|In Buenos Aires,
cost of sales as a percentage of net sales decreased  by 0.4 percentage points, mainly
due to fixed-cost reductions resulting from  productivity and efficiency initiatives and
the closing of the San Justo plant  in 2000 and the Roca distribution center in 2001.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 48 | 
| | -- | 



---





|Operating
Expenses.Consolidated operating expenses decreased by 1.1% to Ps.5,018.1 million in
2001 from Ps.5,073.6 million in 2000. This slight abatement resulted from a decline of
0.4% and 1.2% in selling and administrative costs, respectively.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|As a percentage of
total revenues, selling and administrative expenses  decreased in Mexico by 1.5
percentage points and 0.4 percentage points,  respectively, reflecting an increase in
sales volumes, a decrease in  distribution costs, and lower bottle and case breakage
costs due to a higher  non-returnable volume mix.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|In Argentina,
selling expenses as a percentage of total revenues  increased by 1.7 percentage points,
representing a 5.1% increase in absolute  terms resulting from higher marketing costs.
Administrative expenses in  Argentina decrease 0.5 percentage points, representing a
decrease of 9.3% in  absolute terms due to savings achieved from headcount reductions and
the  implementation of a seasonal labor program.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|During 2001 and
2000, our distribution costs amounted to Ps.2,112.8  million and Ps.2,186.3 million,
respectively. Distribution costs are included in  the selling expenses line of our income
statement, rather than as cost of sales.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Goodwill. Goodwill
amortization in 2001 totaled Ps.100.7 million, as compared to Ps.108.3 million in 2000,
a reduction of 7.0%. This decrease occurred as a consequence of the effect of Mexican
inflation on goodwill associated with the 1994 acquisition of Coca-Cola FEMSA de Buenos
Aires when restated in 2002 Mexican pesos.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Operating Income.
Consolidated income from operations after goodwill amortization grew by 25.7% to
Ps.3,872.9 million in 2001. Lower cost of sales per average unit case and a slight
decline in operating expenses affected a 4.0 percentage point increase in operating
income as a percentage of total revenues.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Integral Cost of
Financing. The integral cost of financing decreased by 76.1%, from Ps.600.3 million in
2000 to Ps.143.2 million in 2001. The following factors contributed to the net decrease:
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | Net
interest expense in 2001 declined by 75.5% as compared to 2000, due to higher cash
holdings as well  as the appreciation of the Mexican peso against the U.S. dollar.  The
majority of our interest  expenses are denominated in U.S. dollars.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | Monetary
position shifted from a gain of Ps.6.7 million in 2000 to  a loss of Ps.81.0 million in
2001, a result of the Mexican  inflation adjustments applied to the net monetary assets
of our  Mexican operations and the Argentine deflation adjustments applied  to the net
monetary liabilities of our Argentine operations.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | Foreign
exchange loss totaled Ps.6.3 million during 2001, as compared to Ps.378.2 million in
2000.  This  decrease reflected the effect of the depreciation of the Argentine peso
against the U.S. dollar as  applied to our U.S. dollar-denominated asset position
(consisting principally of cash) in Buenos  Aires, which offset the loss generated by the
appreciation of the Mexican peso against the U.S.  dollar as applied to our
dollar-denominated cash position in Mexico.  We applied an exchange rate of  A$1.70 per
U.S. dollar for the period ending December 31, 2001.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Other Expenses.
Other expenses are primarily related to production and distribution rationalization
efforts and headcount reductions. This category of expenses decreased from Ps.96.0
million in 2000 to Ps.37.3 million in 2001.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Income Tax, Asset
Tax and Employee Profit Sharing.Income tax, tax on assets, and employee profit sharing
increased by 42.4%, from Ps.1,025.6 million in 2000 to Ps.1,461.1 million in 2001. Our
consolidated effective income tax, tax on assets, and employee profit sharing rate
decreased from 43.5% in 2000 to 39.6% in 2001, mainly due to the inclusion of deferred
taxes resulting from changes to the Mexican Income Tax Law.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Net Income. Net
income for 2001 increased by 62.1% to Ps.2, 202.3 million from Ps.1, 358.3 million in
2000. This gain resulted principally from a 25.7% increase in operating income and a
decrease of 76.1% in the integral cost of financing.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 49 | 
| | -- | 



---





|Liquidity and Capital Resources
|-------------------------------



|Liquidity. The
      principal source of our liquidity is cash generated from operations. We
      have traditionally been able to rely on cash generated from operations to
      fund our working capital requirements because a significant majority of
      our sales are on a cash or short-term credit basis. We have also been able
      to rely on cash generated by operations to fund our capital expenditures.
      In addition to cash generated from operations, we have used new borrowings
      to fund acquisitions of new territories. We have relied on a combination
      of borrowings from Mexican and international banks, borrowings in the international
      capital markets and, more recently, borrowings in the Mexican capital markets.
      We are in the process of negotiating a stand-by line of credit with The
      Coca-Cola Company in the principal amount of U.S.$250 million to support
      investments that we may need during difficult economic periods prior to
      May 2006. See Item 4. Information on the CompanyThe Panamco
      AcquisitionCoca-Cola Memorandum. Our principal use of cash has
      been for capital expenditure programs, debt servicing and dividend payments.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Principal Sources and Uses of
Cash  Year ended December 31,  (millions of constant pesos at December 31, 2002)
|--------------------------------------------------------------------------------------------------------------

|                                              | 2002 | 2001          | 2000
|--------------------------------------------- | ---- | ------------- | ----
|Net resources generated by operations         |      | Ps.   3,801.0 |     
|Net resources used in investing activities(1) |      | (1,340.9      | )   
|Bank loans, notes and interest payable        |      | (19.7         | )   
|Dividends declared and paid                   |      | (585.0        | )   

|
|

|(1) |  | Includes
property, plant and equipment plus deferred charges and investment  in shares.
|--- |  | ---------------------------------------------------------------------------------------



|We believe that
internal resources will be adequate to meet currently  expected working capital needs and
to meet our capital expenditures in 2003.
|---------------------------------------------------------------------------------------------------------------------------------------------------



|Our ability and
the ability of our subsidiaries to incur additional  indebtedness is restricted by the
terms of the financings obtained to fund the  Panamco acquisition, in particular the
Bridge Loans. These restrictions may  affect our ability to respond to unexpected
significant demands for cash and our  ability to make new acquisitions. We have to repay
or refinance the Bridge Loans  by April 2004. We expect to repay the Bridge Loans
primarily with new financings  on the capital markets. We believe that our ability to
obtain these financings,  at all or on attractive terms, will primarily depend on our
ability to maintain  investment grade ratings for our company, which in turn depends on
many factors  some of which, such as economic and political conditions in our markets are
outside our control. The terms of any new indebtedness used to refinance the  Bridge
Loans may also contain limitations on our ability to incur additional  indebtedness, as
well as other restrictions.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Contractual Obligations
|-----------------------



|The table below
sets forth our long-term contractual obligations as of  December 31, 2002. The table does
not include short-term debt, accounts payable  or pension liabilities.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                            | As of December 31, 2002 
      Amounts in millions of Mexican pesos
|--------------------------- | -------------------------------------------------------------------
|
|Long-Term Debt(2)           |                                                                    
|Capital Lease Obligations   |                                                                    
|Operating Lease Obligations |                                                                    

|
|

|(1) |  | Does not include the obligations incurred on
      December 22, 2002 in connection with the Panamco acquisition, as the acquisition
      was completed on May 6, 2003. See Item 4. Information on the CompanyThe
      CompanyThe Panamco Acquisition. Other than the merger agreement
      for the Panamco acquisition and purchase agreements entered into in the
      ordinary course of business, we had no outstanding material purchase obligations
      at December 31, 2002.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) |  | All of our long-term debt at December 31, 2002
      was denominated in U.S. dollars.                                                                                                                                                                                                                                                                                                                                                                                                       



| | 50 | 
| | -- | 



---





|As of December 31,
2002, we had total consolidated indebtedness of  approximately Ps.7,048.7 million, of
which Ps.3,169.8 million was long term debt  and 100% of our indebtedness was denominated
and payable in U.S. dollars.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Our current
financing policy is to rely primarily on internally  generated resources to fund existing
operations and capital expenditures while  relying on external resources to finance the
acquisition of new bottling  territories, as we recently did for Panamcos
acquisition. Our indebtedness as  of May 31, 2003, is primarily related to:
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | the acquisition of Panamco, for which we incurred
      U.S.$1,978 million of new debt (including amounts used to refinance approximately
      U.S.$373 million of Panamcos existing debt) and additionally acquired
      U.S.$512 million of Panamcos existing debt;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | the
acquisition of a 51% interest in the Buenos Aires Territory  from The Coca-Cola Company,
for which we borrowed approximately  U.S.$100 million under a ten-year private placement
in 1994, and
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | a
U.S.$200 million ten-year Yankee bond issued in October 1996,  the proceeds of which were
primarily used to repay short-term  indebtedness incurred to increase our interest in
Coca-Cola FEMSA  de Buenos Aires to 75% and to fund the purchase of certain  corporate
assets of an Argentine Coca-Cola bottler, SIRSA,  including inventory and the assignment
of certain commercial  contracts.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|The new
indebtedness incurred in connection with the acquisition of  Panamco consists primarily
of:
|---------------------------------------------------------------------------------------------------

| |  |  | Bridge
Loans in the amount of Ps.1,006.2 million and U.S.$739 million, each of which matures in
April 2004;
| | - |  | -----------------------------------------------------------------------------------------------------------

| |  |  | Term
Loans in the amount of Ps.2,741.3 million (maturing in five  years, with semi-annual
installments beginning in 30 months),  U.S.$286.5 million (maturing in three years) and
U.S.$208.5  million (maturing in five years, with semi-annual installments  beginning in
30 months); and
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | MexicanCertificados Bursátiles
      in the amount of Ps.2,000 million (maturing in four years), Ps.1,250 million
      (maturing in five years) and Ps.1,000 million (maturing in seven years).
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|The Bridge Loans
and, to the lesser extent the Term Loans and  Certificados Bursátiles, contain
restrictions on the conduct of our  business. Specifically, the Bridge Loans
significantly restrict our ability and  the ability of our subsidiaries to incur
additional indebtedness, to make  investments or acquisitions, to dispose of assets or to
engage in certain other  fundamental transactions and require us to maintain certain
financial ratios.  The Term Loans also require us to maintain certain financial ratios
and restrict  the ability of our subsidiaries to incur indebtedness. During 2003, the
Bridge  Loans require us to maintain a consolidated ratio of debt to EBITDA not greater
than 3.5 to 1.0 and a consolidated ratio of EBITDA to interest expense not less  than 3.0
to 1.0 (using terms defined in the agreement). The ratios get gradually  stricter with
time. A number of our financing instruments are subject to either  acceleration or
repurchase at the holders option if The Coca-Cola Company fails  to beneficially
own a specified percentage of our voting capital.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|The table below
sets forth our debt amortization schedule (excluding  capital leases) as of May 31, 2003,
after the consummation of Panamcos  acquisition:
|-----------------------------------------------------------------------------------------------------------------------------------------------------------



| | 51 | 
| | -- | 



---



|                    | Debt Amortization Schedule 
      As of May 31, 2003 
      Amounts in millions
|------------------- | -------------------------------------------------------------------------------
|
|2003                |                                                                                
|2004(1)             |                                                                                
|2005                |                                                                                
|2006                |                                                                                
|2007                |                                                                                
|2008 and thereafter |                                                                                

|
|

|(1) |  | Includes the Bridge Loans incurred in connection
      with Panamcos acquisition.
|--- |  | ----------------------------------------------------------------------------------

|(2) |  | As of May 31, 2003, the exchange rate between
      the Colombian peso and the U.S. dollar was Cps.2,816.8 to U.S.$1.00.
|--- |  | ------------------------------------------------------------------------------------------------------------------------



|Approximately 71.4% of our long-term indebtedness at May
      31, 2003 bore interest at floating rates. The weighted average cost of our
      indebtedness at May 31, 2002 was approximately 5.5%. The interest rate on
      our variable rate long-term indebtedness is principally determined with
      reference to LIBOR. We also have variable rate indebtedness that bear interest
      rates determined with reference to Cetes (treasury certificates issued
      by the Mexican government) and the TIIE (the Mexican 28-day interbank deposit
      rate).
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Capital Expenditures
|--------------------



|The following
table sets forth our capital expenditures (before  retirements of property, plant and
equipment) for the periods indicated.
|-----------------------------------------------------------------------------------------------------------------------------------------

|                                       | Year ended December 31,
|-------------------------------------- | -----------------------
|
|
|Mexican Territories                    |                        
|Plants and distribution                |                        
|Bottles                                |                        
|Deferred charges and other investments |                        
|                                       |                        
|Total                                  |                        
|                                       |                        
|Buenos Aires Territory                 |                        
|Plants and distribution                |                        
|Bottles                                |                        
|Deferred charges and other investments |                        
|                                       |                        
|Total                                  |                        
|                                       |                        
|Total Coca-Cola
      FEMSA            |                        
|                                       |                        



|Our capital
expenditures in 2002 focused on increasing plant operating  efficiencies, improving the
efficiency of our distribution infrastructure,  advancing information technology, placing
refrigeration equipment with retailers  and investments in returnable bottles and cases.
Through these measures, we  strive to improve our profit margins and overall
profitability.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|In connection with
the evaluation of our new territories performed at  the beginning of the year, we
estimated that our capital expenditures in 2003  would be approximately U.S.$350 million.
Based on our experience managing soft  drink assets, we do not believe that we will spend
this amount in full. Our  capital expenditures in 2003 are primarily intended for:
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 52 | 
| | -- | 



---



| |  |  | Integration
of operations within our new territories, such as  expenditures required to standardize
our information systems,  replace older distribution vehicles and overhaul plant
facilities  and distribution centers;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | Investments
in returnable bottles and cases; and
| | - |  | ------------------------------------------------

| |  |  | Market
investments (primarily for the placement of refrigeration  equipment).
| | - |  | -----------------------------------------------------------------------------



|We estimate that a
majority of our projected capital expenditures for  2003 will be spent in our Mexican
territories. We believe that internally  generated funds will be sufficient to meet our
budgeted capital expenditure for  2003. Our capital expenditure plan for 2003 may change
based on market and other  conditions and our results of operations and financial
resources. Our ability to  incur new indebtedness is limited. See -Liquidity and
-Contractual  Obligations. We also expect to incur other cash costs in
connection with the  integration of our new territories in order to reduce our overall
costs in the  future. We also expect to finance these costs with cash from operations.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Historically, The
Coca-Cola Company has contributed to our capital  expenditure program. We generally
utilize these contributions for the placement  of refrigeration equipment with customers
and other volume driving initiatives  that promote volume growth of Coca-Cola trademark
beverages. Such payments may  result in a reduction in our selling expenditures.
Contributions by The  Coca-Cola Company are made on a discretionary basis. Although we
believe that  The Coca-Cola Company will make additional contributions in the future to
assist  our capital expenditure program, we can give no assurance that any such
contributions will be made.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Hedging Activities
|------------------



|We hold derivative
instruments that hedge our commodity price risk.  We currently do not hedge our  interest
rate or exchange rate risk with derivative instruments, but may do so in the future.  See
Item 11.  Quantitative and Qualitative Disclosures about Market Risk. We do
not enter into derivative transactions for  speculative purposes.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|U.S. GAAP Reconciliation
|------------------------



|The principal
differences between Mexican GAAP and U.S. GAAP that  affect our net income and
stockholders equity relate to the accounting for:
|-----------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | Deferred
employee profit sharing;
| | - |  | ---------------------------------

| |  |  | Deferred
income taxes;
| | - |  | ----------------------

| |  |  | Goodwill
amortization;
| | - |  | ----------------------

| |  |  | Capitalization
of interest expense;
| | - |  | -----------------------------------

| |  |  | Restatement
of machinery and equipment; and
| | - |  | -------------------------------------------

| |  |  | Promotional
expenses.
| | - |  | ---------------------



|For a more
detailed description of the differences between Mexican GAAP  and U.S. GAAP as they
relate to us and a reconciliation of net majority income  and majority shareholders equity
under Mexican GAAP to net income and  shareholders equity under U.S. GAAP, see
Notes 22 and 23 to our consolidated  financial statements.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Pursuant to
Mexican GAAP, our consolidated financial statements  recognize certain effects of
inflation in accordance with Bulletin B-10 and  B-12. These effects were not reversed in
the reconciliation to U.S. GAAP.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Under U.S. GAAP,
we had net income of Ps.2,524.0 million in 2002 and  Ps.2,300.5 million in 2001 and
Ps.1,543.3 million in 2000. Net income as  reconciled to U.S. GAAP was lower than net
income as reported under Mexican GAAP  by Ps.40.2 million in 2002 and higher by Ps.98.2
million in 2001 and by Ps.185.0  million in 2000.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 53 | 
| | -- | 



---





|Shareholders equity
under U.S. GAAP was Ps.8,939.0 million in 2002,  Ps.7,894.3 million in 2001 and
Ps.7,156.5 million in 2000. Compared to Mexican  GAAP, shareholders equity under
U.S. GAAP was Ps.184.9 million lower in 2002,  Ps.214.3 million higher in 2001 and
Ps.1,740.9 million higher in 2000.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|New Accounting Pronouncements
|-----------------------------



|Mexican GAAP
|------------



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



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



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



|Bulletin C-12,
Instrumentos Financieros con Características de Pasivo, de Capital o de
Ambos (Financial Instruments with Characteristics of Liabilities, Equity or Both):
In May 2003, the IMCP issued Bulletin C-12, whose provisions are mandatory for fiscal
years beginning January 1, 2004, although early application is encouraged. C-12
incorporates the related portions of other bulletins issued by the IMCP with respect to
the issuance of debt, capital or compound financial instruments, as well as those
standards considered necessary for the accounting recognition of such instruments. As a
result, C-12 indicates the basic distinctions between liabilities and equity and
establishes the rules for the initial classification and measurement of the liability
and equity components of compound financial instruments. Subsequent recognition and
measurement of the liability and equity components of financial instruments remains
subject to previously issued applicable standards.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Bulletin C-15, Deterioro
      en el Valor de los Activos de Larga Duración y su Disposición
      (Impairment in the Value of Long-Lived Assets and Their Disposal): In March
      2003, the IMCP issued Bulletin C-15, whose application is mandatory for
      financial statements of periods beginning on or after January 1, 2004, although
      early application is encouraged. C-15 establishes, among others, new principles
      for the calculation and recognition of impairment losses for long-lived
      assets and their reversal. It also provides examples of indicators of possible
      impairment in the carrying amount of tangible and intangible long-lived
      assets in use, including goodwill. The calculation of such loss requires
      the determination of the recoverable value in use, which is the present
      value of discounted future net cash flows. The accounting principles issued
      prior to this new Bulletin used future net cash flows, without requiring
      the discounting of such cash flows.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 54 | 
| | -- | 



---





|U.S. GAAP
|---------



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



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



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



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



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



|EITF Issue 02-16,
Accounting by a Customer (Including a Reseller) for  Certain Consideration Received
from a Vendor (EITF 02-16): In January 2003,  the EITF concluded in
EITF 02-16, whose provisions are required for financial  statements for fiscal years
beginning after December 15, 2002, with pro forma  retroactive disclosure encouraged.
EITF 02-16 addresses the accounting for cash  consideration received from a vendor by a
reseller of a vendors products. The  EITF reached a consensus that cash
consideration represents a reimbursement of  costs incurred by the customer to sell the
vendors products and should be  characterized as a reduction of that cost when
recognized in the customers  income statement if the cash consideration represents
a reimbursement of a  specific, incremental, identifiable cost incurred by the customer
in selling the  vendors products or services.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 55 | 
| | -- | 



---





|Accordingly, the payments received by Coca-Cola
FEMSA from The Coca-Cola Company for cooperative advertising, discussed in note  4(j) to
our consolidated financial statements, are properly classified as a  reduction of selling
expenses. As a result, this new bulletin will have no  impact on our financial statements.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



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



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

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

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

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



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



| | 56 | 
| | -- | 



---





|Item 6.  Directors, Senior Management and
Employees
|---------------------------------------------------



|Directors
|---------



|Management of our business
      is vested in the board of directors. Our bylaws provide that the board of
      directors will consist of at least eighteen directors elected at the annual
      ordinary shareholders meeting for renewable terms of one year. Our
      board of directors currently consists of 18 directors and 18 alternate directors.
      The directors are elected as follows: 11 directors and their respective
      alternate directors are elected by holders of the Series A Shares voting
      as a class; 4 directors and their respective alternate directors are elected
      by holders of the Series D Shares voting as a class; and up to 3 directors
      and their respective alternates director are elected by holders of the Series
      L Shares voting as a class. A director may only be elected by a majority
      of shareholders of the appropriate series, voting as a class, represented
      at the meeting of shareholders, and not by shareholders of all series present
      at the annual ordinary shareholders meeting. Holders of any series
      of our shares who do not vote in favor of the directors elected by the holders
      of a majority of shares of such series are entitled, acting separately or
      in groups of shareholders of any series, to elect one additional director
      and the corresponding alternate director for each 10% of our outstanding
      capital stock held by such dissenting shareholder or group of shareholders.
      These directors and alternate directors will not be counted as part of the
      minimum number of directors set forth in our bylaws and will be in addition
      to those elected by the majority of holders of Series A Shares, Series D
      Shares and Series L Shares.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Our bylaws provide
that the board of directors shall meet at least four  times a year. Actions by the board
of directors must be approved by at least a  majority of the directors present and
voting, which (except under certain  circumstances) must include at least two directors
elected by the Series D  shareholders. See Item 7. Major Shareholders and Related
Party  TransactionsMajor ShareholdersThe Shareholders Agreement.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|None of our
directors has a service contract providing for benefits  upon termination of employment.
|----------------------------------------------------------------------------------------------------



|As of June 13, 2003, our board
      of directors included the following members (including alternate directors):
|-----------------------------------------------------------------------------------------------------------------



| | 57 | 
| | -- | 



---



|Directors                                   | Principal Occupation                                                                                                  |  | Born            | First 
        Elected | TermExpires | Alternate                      
|------------------------------------------- | --------------------------------------------------------------------------------------------------------------------- |  | --------------- | ---------------------- | ----------- | -------------------------------
|                                           
|Series A                                  |                                                                                                                       |  |                 |                        |             |                                
|                                           
|José Antonio 
        Fernández Carbajal(1) | Chief Executive Officer, 
        Fomento Económico 
        Mexicano, S.A. de C.V.                                   |  | February, 1954  | 1993                   | 2004        | Alfredo Livas Cantú            
|                                           
|Alfonso Garza Garza(2)                      | General Director, Grafo 
        Regia, S.A. de C.V.                                                                  |  | July, 1962      | 1996                   | 2004        | Mariana Garza Gonda            
|                                           
|Juan Carlos 
        Braniff Hierro(1)      | Vice Chairman of the Board, 
        Grupo Financiero 
        BBVA Bancomer, S.A. de C.V.                            |  | April, 1957     | 1993                   | 2004        | Francisco J. Fernández Carbajal
|                                           
|Carlos Salazar 
        Lomelín             | Chief Executive Officer, 
        Coca-Cola FEMSA, S.A. de C.V.                                                       |  | April, 1951     | 2001                   | 2004        | Ricardo González Sada          
|                                           
|Ricardo Guajardo 
        Touché            | Chairman of the Board, Grupo 
        Financiero BBVA 
        Bancomer, S.A. de C.V.                                 |  | May, 1948       | 1993                   | 2004        | Max Michel Suberville          
|                                           
|Alfredo Martínez 
        Urdal             | Chief Executive Officer, 
        FEMSA Cerveza                                                                       |  | September, 1931 | 1993                   | 2004        | Gerardo Estrada Attolini       
|                                           
|Federico Reyes 
        García              | Executive Vice President, 
        Planning and Finance 
        of Fomento Económico 
        Mexicano, S.A. de C.V. |  | September, 1945 | 1993                   | 2004        | Alejandro Bailleres Gual       
|                                           
|Eduardo Padilla Silva                       | Chief Executive Officer, 
        FEMSAs Strategic 
        Business Division                                        |  | January, 1955   | 1997                   | 2004        | José Calderón Rojas            
|                                           
|Armando Garza Sada(2)                       | General Director, 
        Versax, S.A. de C.V.                                                                       |  | June, 1957      | 1998                   | 2004        | Francisco Garza Zambrano       
|                                           
|Daniel Servitje Montul                      | Chief Executive Officer, 
        Grupo Industrial Bimbo, 
        S.A. de C.V.                                       |  | April, 1959     | 1998                   | 2004        | Fernando Pardo Ramírez         
|                                           
|Herbert Allen III                           | Investment Banker, Allen 
        & Company Inc. New York, NY                                                         |  | June, 1967      | 2001                   | 2004        | Guillermo Chávez Eckstein      
|                                           
|                                           
|Series D                                  |                                                                                                                       |  |                 |                        |             |                                
|                                           
|Gary Fayard                                 | Chief Financial Officer, 
        The Coca-Cola Company                                                               |  | April, 1952     | 2003                   | 2004        | David Taggart                  
|                                           
|Steven J. Heyer                             | President and Chief Operating 
        Officer of The Coca-Cola Company                                               |  | June, 1952      | 2002                   | 2004        | Patricia Powell                
|                                           
|Charles H. McTier                           | President, Robert W. 
        Woodruff Foundation, Inc.                                                               |  | January, 1939   | 1998                   | 2004        | Larry Cowart                   
|                                           
|Eva Garza Gonda de Fernández(3)             | President, Alternativas Pacíficas, A.C.                                                                               |  | April, 1958     | 2002                   | 2004        | José Octavio Reyes             
|                                           
|                                           
|Series L                                  |                                                                                                                       |  |                 |                        |             |                                
|                                           
|Alexis E. Rovzar de la Torre                | Executive Partner, 
        White & Case S.C.                                                                         |  | July, 1951      | 1993                   | 2004        | Arturo Estrada Treanor         
|                                           
|José Manuel Canal                           | Independent Consultant                                                                                                |  | February, 1940  | 2003                   | 2004        | Helmut Paul                    
|                                           
|Francisco Zambrano 
        Rodríguez       | Vice-President, Desarrollo 
        Inmobiliario y de Valores, S.A. de C.V.                                           |  | January, 1953   | 2003                   | 2004        | Karl Frei                      
|                                           



| | 58 | 
| | -- | 



---



|
|

|(1) |  | Son-in-law
of Eugenio Garza Lagüera.
|--- |  | ------------------------------------

|(2) |  | Nephew
of Eugenio Garza Lagüera.
|--- |  | --------------------------------

|(3) |  | Daughter
of Eugenio Garza Lagüera and wife of José Antonio  Fernández Carbajal.
|--- |  | -------------------------------------------------------------------------------



|Eugenio Garza Lagüera
is the Honorary (Non-Voting) Life Chairman  of our board of directors. The Secretary of
the board is Carlos Eduardo Aldrete  Ancira and the Alternate Secretary of the board is
David A. González  Vessi.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Examiners
|---------



|We currently have two examiners,
      one elected by the Series A shareholders and one by the Series D shareholders,
      and two alternate examiners, one elected by the Series A shareholders and
      one by the Series D shareholders. Mexican law requires that the examiners
      receive periodic reports from our board of directors regarding material
      aspects of our affairs, including our financial condition. The primary role
      of the examiners is to report to our shareholders at the annual ordinary
      shareholders meeting on the accuracy of the financial information
      presented to such examiners by the board of directors. Our Series A examiner
      is Ernesto González Dávila, and our Series D examiner is Fausto
      Sandoval Amaya. Our Alternate Series A examiner is Ernesto Cruz Velázquez,
      and our Alternate Series D examiner is Humberto Ortíz Gutiérrez.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Executive Officers
|------------------



|The following table lists our
      principal executive officers as of June 13, 2003, their current position,
      their date of birth and year of appointment to the current position at our
      company:
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                        
|------------------------
|Executive Officers      
|                        
|Carlos Salazar Lomelín  
|                        
|Ernesto Torres Arriaga  
|                        
|Héctor Treviño Gutiérrez
|                        
|Rafael Suárez Olaguibel 
|                        
|Alejandro Duncan        
|                        
|Eulalio Cerda Delgadillo
|                        
|John Santa María Otazúa 
|                        
|Ernesto Silva Almaguer  
|                        
|Hermilo Zuart Ruíz      
|                        



|Director and Officer Biographies
|--------------------------------



|Eugenio Garza Lagüera, our Honorary Life
Chairman, has served on our board of directors since 1993. He also serves as Honorary
Life Chairman of Instituto Tecnológico de Estudios Superiores de Monterrey (ITESM),
Grupo Financiero BBVA Bancomer, S.A. de C.V. and FEMSA. Mr. Garza Lagüera joined
FEMSA in 1946 in the research department of Cervecería Cuauhtémoc. Mr.
Garza Lagüera holds degrees in Chemical Engineering from the University of Texas
and in Business Administration from ITESM.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|José Antonio Fernández Carbajal
has served as a Series A Director since 1993. He has been the Chief Executive Officer of
FEMSA since 1995 and also serves as Chairman of the Board of FEMSA, Vice-Chairman of the
Board of ITESM, a member of the boards of directors of Grupo Financiero BBVA Bancomer,
S.A. de C.V. and Grupo Industrial Bimbo, S.A. de C.V. He has also held directorships at
FEMSA Cervezas Commercial Division and Oxxo Retail Chain. He joined FEMSA in 1987
in the strategic planning department and has been involved in many
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 59 | 
| | -- | 



---





|managerial and operational aspects of FEMSAs
businesses. Mr. Fernandez holds a  degree in Industrial Engineering and an MBA from ITESM.
|----------------------------------------------------------------------------------------------------------------------------------------



|Alfonso Garza Garza has served as a Series A
Director since 1996. He is General Director of Grafo Regia, S.A. de C.V. Mr. Garza
also serves as an alternate director of FEMSA and Cervecería Cuauhtémoc
Moctezuma, S.A. de C.V., a member of the boards of directors of the Hospital San José,
CAINTRA N.L., COMCE Noreste, Premio Eugenio Garza Sada and CONACEX Noreste. Mr. Garza
joined FEMSA in 1985 and has been involved in several business units and departments,
including Domestic Sales, International Sales, Procurement and Marketing, mainly in
Cervecería Cuauhtémoc Moctezuma, S.A. de C.V. and FEMSAs Packaging
Division. Mr. Garza holds a degree in Industrial Engineering from the ITESM and an MBA
from Instituto Panamericano de Alta Dirección de Empresa (IPADE).
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Juan Carlos Braniff Hierro has served as a
Series A Director since 1993. He is Vice Chairman of the board of Grupo Financiero BBVA
Bancomer, S.A. de C.V. Mr. Braniff also serves on the boards of directors of El Paso
Energy Corp., Maizoro, S.A. de C.V. and FEMSA. Mr. Braniff has extensive experience in
financial services such as capital and patrimonial investments, mortgage banking,
commercial banking, international banking, and e-banking. Mr. Braniff holds a degree in
Industrial Design from Universidad Autónoma de México, Atzcapotzalco.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Carlos Salazar Lomelínhas served as both
our Chief Executive Officer and a Series A Director since 2001. Mr. Salazar also serves
as Member of the Board of Review of Grupo Financiero BBVA Bancomer, S.A. de C.V.,
Operadora Merco, S.A. de C.V., and Cintermex & Apex. In the past, Mr. Salazar has held
general directorships in several business units of FEMSA, including Grafo Regia, Plásticos
Técnicos Mexicanos, FEMSA Cerveza Export, Commercial Planning in Grupo Visa, and
finally, Chief Executive Officer of FEMSA Cerveza. Mr. Salazar received a degree in
Economics from ITESM, a graduate degree in Economic Development in Italy from the
Instituto di Studio per lo Suiluppo and Cassa di Risparino delle Provincie Lambarda and
an MBA from ITESM.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Ricardo Guajardo Touché has served as a
Series A Director since 1993. He is currently the Chairman of the Board of Grupo
Financiero BBVA Bancomer, S.A. de C.V. Mr. Guajardo also serves on the boards of
directors of El Puerto de Liverpool, S. A. de C.V., Transportación Marítima
Mexicana, S.A. de C.V., Grupo Industrial Alfa, S.A. de C.V., Grupo Financiero BBVA
Bancomer, S.A. de C.V., Grupo Aeroportuario del Sureste, S.A. de C.V. and ITESM. Prior
to serving as a director of our company, Mr. Guajardo held managerial positions in Grupo
Visa and executive directorships in the financial divisions of Grupo AXA and Grupo
VAMSA. Mr. Guajardo holds degrees in Electrical Engineering from ITESM and the
University of Wisconsin and a Masters Degree from the University of California at
Berkeley.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Alfredo Martínez Urdal has served as a
Series A Director since 1993. He is the Chief Executive Officer of FEMSA Cerveza. Mr.
Martínez-Urdal also serves on the boards of directors of BBVA Bancomer S.A. and
Grupo Financiero BBVA Bancomer, S.A. de C.V. From 1993 until 1999 he held the position
of Chief Executive Officer of our company, and he has also served as Chief Executive
Officer of many prominent Mexican companies and banks, including Ponderosa Industrial
Accel, Grupo Chihuahua, Multibanco Comermex, Celulosa de Chihuahua, and Banco Comercial
Mexicano. Mr. Martínez-Urdal holds a degree in Economics from the Western Reserve
University, a degree in Law from Universidad Nacional Autónoma de México,
referred to in this annual report as UNAM, and a graduate degree from Harvard Business
School.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Federico Reyes García has served as a
Series A Director since 1993. He is the Executive Vice President of Planning and Finance
of FEMSA. Mr. Reyes also serves as Vice Chairman of the board of directors of Seguros
Monterrey New York Life, Chairman of the Board of Review of Fianzas Monterrey, and a
member of the board of directors of the Universidad de Monterrey, referred to in this
annual report as UDEM. Mr. Reyes has also served as the Director of Corporate
Development of FEMSA. In addition, he acted as Director of Corporate Staff at Grupo AXA,
a major manufacturer of electrical equipment, and has extensive experience in the
insurance sector, serving six years as Chief Executive Officer of Seguros Monterrey and
Fianzas Monterrey. Mr. Reyes holds a degree in Business and Finance from ITESM.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Eduardo Padilla Silva has served as a Series A
Director since 1997. He is Chief Executive Officer of FEMSAs Strategic Business
Division. Mr. Padilla previously served as FEMSAs Director of Planning and
Control, after
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 60 | 
| | -- | 



---





|holding a variety of  positions at Grupo Alfa,
including a ten-year tenure as Chief Executive Officer  of Terza, S.A. de C.V. Mr.
Padilla holds a degree in Mechanical Engineering from  ITESM and an MBA from Cornell
University.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Armando Garza Sada has served as a Series A
Director since 1998. He is General Director of Versax, S.A. de C.V. He serves on the
boards of directors of Alfa, Bain & Company Mexico, Especialidades Cerveceras, S.A. de
C.V., Gigante, Lamosa, Liverpool, MVS, Pyosa and Vitro Plano. Mr. Garza is also
Co-Chairman of Alestra (a joint venture formed by AT&T, Grupo Financiero BBVA Bancomer,
S.A. de C.V. and Alfa). Prior to his current responsibilities, he was President of
Sigma, the food division of Alfa. He has also held other executive positions in Alfa
including Vice President of Corporate Planning and President of Polioles (a
petrochemical joint venture with BASF). Mr. Garza holds a degree in Management from the
Massachusetts Institute of Technology and an MBA from the Stanford Graduate School of
Business.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Daniel Servitje Montul has served as a Series A
Director since 1998. He is Chief Executive Officer of Grupo Industrial Bimbo, S.A. de
C.V. He also serves on the boards of directors of Banco Nacional de Mexico, Grocery
Manufactures of America, and FICSAC (Universidad Iberoamericana). Mr. Servitje joined
Grupo Industrial Bimbo in 1978, and has served as General Director of Marinela and Vice
President of Grupo Bimbo, S.A. de C.V., in the past. Mr. Servitje holds a degree in
Business from the Universidad Iberoamericana in Mexico and an MBA from the Stanford
Graduate School of Business.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Herbert Allen III has served as a Series A
Director since 2001. He is an investment banker at Allen & Company, Inc., in New York
City. Mr. Allen joined Allen and Company in 1993, focusing on the investment business
sector. Prior to 1993, he was employed at T. Rowe Price in Baltimore. From 1990 to 1992,
he worked for Botts & Company, Ltd. in London. Mr. Allen holds a Bachelor of Arts
degree in History from Yale University.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Gary Fayardhas served as a Series D Director
since 2003. Since December, 1999, Mr. Fayard has been Senior Vice-President and Chief
Financial Officer of The Coca-Cola Company. Mr. Fayard joined The Coca-Cola Company in
April 1994. Prior to joining The Coca-Cola Company, Mr. Fayard was a partner in Ernst & Young
LLP.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Steven J. Heyer has served as a Series D
Director since 2002. He is President and Chief Operating Officer of The Coca-Cola
Company. In April 2002, he was granted additional responsibilities to oversee the companys
operating units in Latin America. He joined The Coca-Cola Company in 2001 from AOL Time
Warner, where he served most recently as President and COO of Turner Broadcasting
System. Previously, he was President and COO of Young and Rubicam Advertising Worldwide
and Senior Vice President and Managing Partner at Booz Allen & Hamilton.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Charles H. McTier has served as a Series D
Director since 1998. He is President of the Robert W. Woodruff Foundation, Inc. He
also currently serves as President of Joseph B. Whitehead Foundation, Inc., The Lettie
Pate Evans Foundation, Inc., Lettie Pate Whitehead Foundation, Inc., Robert W. Woodruff
Health Sciences Fund, Inc. and Ichauway Inc. Mr. McTier is also a member of the board
of directors of the SunTrust Bank of Georgia and Vice President of the Commerce Club in
Georgia. Mr. McTier holds a degree in Business Administration from Emory University.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Eva Garza Gonda de Fernández has served
as a Series D Director since 2002. She is Founder and President of Alternativas Pacíficas,
A.C. a non-profit organization. She serves as an advisor to Instituto Tecnológico
y de Estudios Superiores de Monterrey. She holds a degree in Communication Science from
ITESM.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Alexis E. Rovzar de la Torrehas served as a
Series L Director since 1993. He is an Executive Partner at White & Case S.C. Mr. Rovzar
also serves on the boards of directors of FEMSA, Deutsche Bank (México) Grupo
Industrial Bimbo, S.A. de C.V., Grupo ACIR, S.A. de C.V. and Comex, S.A. de C.V. He has
participated in numerous international business transactions, including joint ventures,
debt to capital swaps, and many other financial projects. Mr. Rovzar holds a degree in
Law from UNAM.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|José Manuel Canal Hernando has served as
Series L Director since 2003. Mr. Canal is also a Director of FEMSA. Mr. Canal is an
independent business consultant and was Managing Partner of Ruiz Urquiza y Cía,
S.C. from 1982 to 1999. Mr. Canal served as our examiner from 1993 to 2002.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 61 | 
| | -- | 



---





|Francisco Zambrano Rodríguez was
elected as Series L Director at our annual meeting of shareholders in 2003. Since
1997, Mr. Zambrano has worked in investment banking and private investment services in México.
Mr. Zambrano is a member of the board of several Mexican companies: Desarrollo
Inmobiliario y de Valores, S.A. de C.V., Internacional de Inversiones, S.A. de C.V.
and Recursos Valuables, S.A. de C.V.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Ernesto González Dávila was
      elected Series A examiner at our shareholders meeting in 2003. Mr. González
      Dávila previously served as alternate Series A examiner. He is a
      partner in Ruiz Urquiza y Cía, S.C. since 1978. He is Mexican Operations
      Director of Galaz, Yamazaki, Ruiz Urquiza, S.C. (Deloitte & Touche)
      since September 2002.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Fausto Sandoval Amaya has served as the Series D
examiner since 1993. He started at Ernst & Young L.L.P. in 1965 and has been a partner
since 1978. He currently serves as Director of the Accounting Committee and is a member
of the Board of Directors. He is also a member of the Boards of Black & Decker,
Bombardier and Paccar (Kenworth Mexicana). Fausto Sandoval holds Public Accountant and
Auditing degrees from the Escuela Superior de Administración y Finanzas del
Instituto Politécnico Nacional.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Ernesto Torres Arriaga has served as our
      Vice President since 1995 mainly in charge of procurement and public relations.
      He joined our company in 1974 as a Director of Production for the State
      of Mexico. In 1982, he was appointed Production Manager of IEMSA. Mr. Torres
      began his career in 1958 and initially served at various bottling plants
      in Mexico, where he held several positions in the production, technical,
      and logistics areas, eventually becoming General Manager of Sales, Production
      and Administration. Mr. Torres holds a degree in Food Engineering from Kansas
      State University.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Héctor Treviño Gutiérrez
has served as Chief Financial and Administrative Officer since 1993. He joined FEMSA in
1981 and was in charge of International Financing until 1984. From 1984 to 1986, he
served as General Manager of Financial Planning and as General Manager of Strategic
Planning from 1986 to 1989. From 1989 to 1993, Mr. Treviño headed FEMSAs
Corporate Development department. Mr. Treviño holds a degree in Chemical and
Administrative Engineering from ITESM and an MBA from the Wharton School of Business.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|John Santa María Otazúa was
appointed as Chief Operating Officer in Mexico. He served as our Strategic Planning and
Business Development Officer from 2001 to 2003. From 1995 to 2001, he also served as
Chief Operating Officer of our Mexican operations. From 1991 to 1995, he worked with
different bottling companies in Mexico, gaining expertise in areas such as Strategic
Planning and General Management. Mr. Santa María holds a degree in Business
Administration and an MBA with a major in Finance from Southern Methodist University.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Rafael Suárez Olaguibel was appointed in
2003 as Director of Commercial Planning and Strategic Development. He served as our
Chief Operating Officer in Mexico from 2001 to 2003. He joined FEMSAs soft drink
division in 1986 as Planning and Projects Director. In March 1987, he was appointed
Corporate Marketing Manager for the Valley of Mexico, and from 1987 to 1989, he served
as Director of Marketing. In April 1989, he was appointed Distribution and Marketing
Director of FEMSAs soft drink division, and later served as Chief Operating
Officer of Coca-Cola FEMSA de Buenos Aires until late in 2001. Mr. Suárez began
his career in 1981 at Coca-Cola Export, where he worked in the Administrative,
Distribution and Marketing departments of Cola-Cola Export. Mr. Suárez holds a
degree in Economics from ITESM.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Ernesto Silva Almaguer was appointed in 2003 as
Chief Operating Officer in the Mercosur region. He served as our Chief Operating Officer
in Buenos Aires from 2001 to 2003. He joined FEMSA in 1980 as Strategic Services
Manager. From 1985 to 1988, Mr. Silva assisted the General Director with Special
Projects and Strategic Management. From 1988 to 1994, he worked for Famosa in several
managerial positions. He has also served as Vice President of International Sales of
FEMSA Empaques and as our New Business Development Director from 1997 to 2001. Mr. Silva
holds a degree in Mechanical and Administrative Engineering from ITESM and an MBA from
the University of Texas at Austin.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Eulalio Cerda Delgadillo has served as Human
Resources Officer since 2001. He joined Cervecería Cuauhtémoc in September
1981 as a New Projects Executive. From 1982 to 1988, he served in the Marketing
Department, and from 1988 to 1996, he worked in several departments including
Maintenance, Packaging, Bottling, Human
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 62 | 
| | -- | 



---





|Resources, Technical Development and Projects.
Mr. Cerda holds a  degree in Mechanical Engineering from ITESM.
|--------------------------------------------------------------------------------------------------------------



|Alejandro Duncan was appointed as our Technical
Officer in February 2002. He joined FEMSA in 1980, taking several responsibilities in
different production and manufacturing departments. From 1995 to 1997, he served as
Plant Manager in the Valley of Mexico Territory, and in September 1997, he was
transferred to Buenos Aires, where he served as Manufacturing Director. In 1999, he
returned to Mexico and was appointed Infrastructure Planning Director. Mr. Duncan holds
a degree in Mechanical Engineering from ITESM and an MBA from the Universidad de
Monterrey.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Hermilo Zuart was appointed as our Chief
Operating Officer in Latin Centro in May 2003. He joined FEMSA in 1985, taking several
responsibilities in manufacturing, commercialization, planning and administrative areas.
From 2001 to 2003, he served as FEMSA Franquicias Officer, mainly in charge of Mundet
products. Mr. Zuart worked as Chief Operating Officer in the Valley of Mexico from 1995
to 2000 and as Chief Operating Officer in the Southeast of Mexico Territory from 1994 to
1995. He has more than 20 years of experience in the beverage industry. Mr. Zuart holds
a degree in Public Accounting from the UNAM and completed a graduate course in Business
Management from the IPADE.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Compensation of Directors and Officers
|--------------------------------------



|For the year ended
December 31, 2002 the aggregate compensation of all  of our executive officers paid or
accrued in that year for services in all  capacities was approximately Ps.77.4 million,
of which approximately Ps.34.3  million was paid in the form of cash bonus awards. The
aggregate compensation  amount also includes bonuses paid to certain of our executive
officers pursuant  to the stock incentive plan (as discussed in Stock
Incentive Plan).
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|During 2001 and
2002, we paid Ps.30,000 to each director for each  meeting attended by such director. The
aggregate compensation for directors  during 2002 was Ps.3.8 million.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|In 1997, we
commenced an executive incentive program through which a  one-time cash-settled option
was granted to some of our executive officers.  Under the terms of this program, as
amended, the participant executive officers  were entitled to the cash payment of a
special bonus, on March 2003, based on  the amount of increase in real terms during the
life of the program in the  market value of FEMSA BD Units and Series L shares of our
company. The  conditions for the payment of the special bonus were not met and this
incentive  program was terminated.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Our senior
management participates in our general pension plan, which  is available to all non-union
employees and officers of our company.
|-------------------------------------------------------------------------------------------------------------------------------------------



|Stock Incentive Plan
|--------------------



|Our five-year
stock incentive plan for the benefit of our executive  officers expired in early 2003 and
we are in the process of designing a new  plan. Under the terms of the stock incentive
plan, certain executive officers  may be selected to receive a special cash bonus which
will be used to obtain a  stock grant (as discussed below) or an option right (as
discussed below), as  determined for each individual case. The selection of the executive
officers to  participate in the stock incentive plan, the type of right which will be
obtained with the special cash bonus, and the value of the special cash bonus  will be
determined jointly by the Human Resources and Compensation Committee and  our management,
based on each executive officers level of responsibility and  corporate
achievements during the prior year.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|The stock grants
and the option rights are administered by a trust for  the benefit of the selected
executive officers. Under the terms of the stock  incentive plan, each time a special
cash bonus is assigned by us or any of our  subsidiaries to an executive officer, such
executive officer shall contribute  the bonus to the administrative trust in exchange for
a stock grant or option  right, as determined for each individual case.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 63 | 
| | -- | 



---





|A stock grant will
entitle an executive officer to receive a specified  proportion of FEMSA BD Units and
shares of our company which will be acquired by  the administrative trust in either the
New York Stock Exchange or the Mexican  Stock Exchange, with the executive officers
deposited special cash bonus. Under  the terms of the stock incentive plan, the ownership
of the FEMSA BD Units and  the shares of our company will vest upon the executive
officers on the 28th day  of February over each of the next five years following the date
of assignment of  the stock grant, at a rate per year equivalent to the number of FEMSA
BD Units  and shares of our company that can be acquired with 20% of the total value of
each executive officers special cash bonus.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|An option right is
an option acquired by the administrative trust in  either the New York Stock Exchange or
the Mexican Stock Exchange with an  executive officers deposited special cash
bonus, which shall entitle an  executive officer to either: (a) acquire a certain number
of FEMSA BD Units and  shares of our company, at the exercise price specified in the
option or (b)  receive a cash payment equivalent to the amount of increase in the market
value  of such number of FEMSA BD Units and shares of our company, as compared to the
exercise price specified in the option. Under the terms of the stock incentive  plan, the
option rights shall be exercisable on the 28th day of February and the  31st day of
August over each of the next five years following the date on which  they were granted,
at a yearly rate equivalent to up to 20% of the total number  of FEMSA BD Units and
shares of our company covered by each option right. If an  option right is not exercised
in full during a certain year, any remaining  unexercised part shall be exercisable over
the next year, at the specified  dates. If at the time of expiration of an option right
there are any remaining  FEMSA BD Units and shares of our company over which no option
has been  exercised, the remaining part of the option will be automatically exercised as
specified in (b) above and a cash payment will be made to the executive officer.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|To this date no
option rights have been granted by either us or our  subsidiaries pursuant to the stock
incentive plan. However, as specified above,  if any future option rights are to be
granted, they will be acquired in the  market.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Share Ownership
|---------------



|As of May 31,
2003, certain of our directors and alternate directors  serve on the Technical Committee
as Trust Participants under the Irrevocable  Trust No. F/29487-6 established at BBVA
Bancomer, S.A., as Trustee, which is the  owner of 54.3% of the voting stock of FEMSA,
which in turn owns 45.7% of our  outstanding capital stock through its subsidiary, CIBSA.
These directors and  alternate directors include Eugenio Garza Lagüera, Alfonso
Garza Garza,  Mariana Garza de Treviño and Eva Garza Gonda de Fernández.
See  Item 7. Major Shareholders and Related Party TransactionsMajor
Shareholders. None of our other directors, alternate directors or executive
officers is the  beneficial owner of more than 1% of any class of our capital stock.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Board Practices
|---------------



|Our bylaws state
that the Board of Directors will meet at least once  every three months, following the
end of each quarter, to discuss our operating  results and progress in achieving
strategic objectives. Our Board of Directors  can also hold extraordinary meetings. See
Item 10. Additional  InformationBylaws.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Under our bylaws,
directors serve one-year terms although they continue  in office until successors are
appointed. None of our directors or senior  managers of our subsidiaries has service
contracts providing for benefits upon  termination of employment.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Our Board of
Directors is supported by committees, which are working  groups that analyze issues and
provide recommendations to the Board of Directors  regarding their respective areas of
focus. The executive officers interact  periodically with the committees to address
management issues. The following are  the three committees of the Board of Directors:
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|1. | Finance
Committee, which consists of Armando Garza Sada, Chairman, Steven J. Heyer, Federico
Reyes García, Ricardo Guajardo Touché and Alfredo Martínez Urdal.
This committee evaluates the investment and financing policies proposed by our chief
executive officer, furnishes an opinion with respect to the annual budget and ensures
the implementation of the budget and any proposed
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





| | 64 | 
| | -- | 



---





| | strategic plan, identifies risk factors to which
      we are exposed and evaluates risk management policies.
| | -------------------------------------------------------------------------------------------------------------



|2. | Audit
Committee, which consists of Alexis E. Rovzar de la Torre, Chairman, Charles H. McTier,
José Manuel Canal and Francisco Zambrano Rodríguez. This committee
recommends to our board of directors candidates to serve as our external examiners,
ensures the independence and objectivity of the external examiners, and recommends to
our board of directors procedures for the preparation of financial information. Each
member of the Audit Committee meets the independence requirements under Mexican law.
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





|3. | Human
Resources and Compensation Committee, which consists of Daniel Servitje Montul, Chairman,
Gary Fayard, Juan Carlos Braniff Hierro and Ricardo González Sada. This committee
recommends procedures for the election of our chief executive officer and other senior
executives, proposes to our board of directors criteria for the evaluation of the chief
executive officer and senior executives, and analyzes our chief executive officers
recommendations with respect to the structure and amount of compensation for our key
executives.
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





|Employees
|---------



|As of December 31,
2002, we employed 14,457 employees, including 12,347  employees in Mexico and 2,110
employees in Argentina. The table below sets forth  the number of our employees by
category of employment for the periods indicated.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                    | For the Year Ended December 31,
|------------------- | -------------------------------
|
|Executives          |                                
|Non-Union Employees |                                
|Union Employees     |                                
|                    |                                
|Total               |                                
|                    |                                

|
|

|(1) |  | As
of December 31, 2002, we also employed 550 temporary workers.
|--- |  | ----------------------------------------------------------------



|As of December 31, 2002, approximately
      62% of our employees, most of whom were employed in Mexico, were members
      of labor unions. We had 40 separate collective bargaining agreements with
      six labor unions represented at our Mexican operations and one collective
      bargaining agreement with one labor union in Buenos Aires. In Mexico, wages
      are renegotiated every year while other terms and conditions of employment
      are renegotiated every two years. In Buenos Aires, the collective bargaining
      agreement is negotiated between the Cámara Argentina de la Industria
      de Bebidas sin Alcohol(the Argentine Chamber of the Non-Alcoholic Beverages
      Industry) on behalf of the beverage producers, and theFederación
      Argentina de Trabajadores de Aguas Gaseosas (the Argentine Federation
      of Soft Drink Workers), on behalf of the soft drink industry workers. The
      Argentine government is not involved in these negotiations.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|As of May 31,
2003, after consummation of the Panamco acquisition, we  employed more than 42,000
employees (excluding outsourced labor and independent  distributors). A significant
portion of Panamcos employees are members of labor  unions. Panamcos
subsidiaries in Colombia and Venezuela are the subject of  significant labor-related
litigation. See Item 8. Financial InformationLegal  Proceedings.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Insurance Policies
|------------------



|We maintain
insurance policies for all of our employees. These policies  mitigate the risk of having
to pay death benefits in the event of an industrial  accident. We maintain directors and
officers insurance policies covering all  directors and certain key executive
officers for liabilities incurred in their  capacities as directors and
officers.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 65 | 
| | -- | 



---





|Item 7.  Major Shareholders and Related Party
Transactions
|----------------------------------------------------------



|MAJOR SHAREHOLDERS
|------------------



|As of December 31,
2002, our principal shareholders were  Compañía Internacional de Bebidas,
referred to in this annual  report as CIBSA, a direct subsidiary of FEMSA, a publicly
traded company listed  on the Mexican Stock Exchange and on The New York Stock Exchange,
and Inmex, a  wholly owned subsidiary of The Coca-Cola Export Corporation and an indirect
subsidiary of The Coca-Cola Company. See Item 4. Information on the  CompanyThe
Company.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Our share capital
consists of three classes of securities: Series A  Shares held by CIBSA, Series D Shares
held by Inmex, and Series L Shares, held  by the public. Our capital structure at
December 31, 2002 was as follows:
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Shareholder                 | Outstanding
      Capital Stock | % Ownership of
      Outstanding
      Capital Stock | % of
      Voting Rights
|--------------------------- | ------------------------------- | ---------------------------------------------------- | ------------------------
|CIBSA (Series A shares)(1)  |                                 | 726,750,000                                          |                         
|Inmex (Series D shares)     |                                 | 427,500,000                                          |                         
|Public (Series L shares)(2) |                                 | 270,750,000                                          |                         
|                            |                                 |                                                      |                         
|Total                       |                                 | 1,425,000,000                                        |                         
|                            |                                 |                                                     

|
|

|(1) |  | FEMSA
owns 99.98% of the capital stock of CIBSA, and 54.3% of the voting  stock of FEMSA is
controlled by the Technical Committee and Trust  Participants under Irrevocable Trust No.
F/29487-6 established at BBVA  Bancomer, S.A., as Trustee. As of May 15, 2002, the Trust
Participants  included: Max Michel Suberville, Eugenio Garza Lagüera, Paulina Garza
Gonda de Marroquín, Bárbara Garza Gonda de Braniff, Mariana  Garza Gonda de
Treviño Bryan, Eva Gonda de Garza, Eva Garza Gonda de  Fernández, Consuelo
Garza Lagüera de Garza, Alfonso Garza  Garza, Patricio Garza Garza, Juan Carlos
Garza Garza, Eduardo Garza Garza,  Eugenio Garza Garza, Alberto Bailleres, María
Teresa G. de  Bailleres, Inversiones Bursátiles Industriales, S.A. de C.V.,
Corbal, S.A. de C.V., Magdalena M. de David, Alepage, S.A., Grupo  Financiero BBVA
Bancomer, S.A., as Trustee under Trust No. F/29013-0, Max  David Michel, Juan David
Michel, Monique David de VanLathem, Renee Michel  de Guichard, Magdalena Guichard Michel,
Rene Guichard Michel, Miguel  Guichard Michel, Graciano Guichard Michel, Juan Guichard
Michel,  Inversiones Franca, S.A. de C.V., and BBVA Bancomer, S.A., as Trustee under
Trust No. F/29490-0.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) |  | Holders
of Series L Shares are only entitled to vote in limited  circumstances. See Item
10. Additional InformationBylaws. Holders of  American Depositary Receipts (ADRs)
are entitled to instruct The Bank of  New York, the depositary for the ADSs represented
by the ADRs, as to the  exercise of the limited voting rights pertaining to the Series L
Shares  represented by their ADSs.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(*) |  | Holders
of Series L Shares, and consequently holders of ADSs, are only  entitled to vote in
limited circumstances.
|--- |  | ------------------------------------------------------------------------------------------------------------------



|The Coca-Cola Company was a beneficial owner of
Panamco shares prior to the  acquisition. As a result of the Panamco acquisition, two
wholly owned indirect  subsidiaries of The Coca-Cola Company, which together with Inmex
and another  wholly owned subsidiary of The Coca-Cola Company that controls one of these
two  entities are referred to in this annual report as the TCCC Shareholder Subs,
acquired 304,045,678 of our Series D Shares in exchange for The Coca-Cola  Companys
share interests in Panamco. In connection with the Panamco  acquisition, CIBSA received
117,328,519 of our Series A shares in exchange for  its capital contribution to us.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Due to the acquisition of Panamco, our capital
structure at May 31, 2003 was as  follows:
|-----------------------------------------------------------------------------------------

|Shareholder                             | Outstanding
      Capital Stock | % Ownership of
      Outstanding
      Capital Stock | % of
      Voting Rights
|--------------------------------------- | ------------------------------- | ---------------------------------------------------- | ------------------------
|CIBSA (Series A shares)(1)              |                                 | 844,078,519                                          |                         
|TCCC Shareholder Subs (Series D shares) |                                 | 731,545,678                                          |                         
|Public (Series L shares)(2)             |                                 | 270,750,000                                          |                         
|                                        |                                 |                                                      |                         
|Total                                   |                                 | 1,846,374,197                                        |                         
|                                        |                                 |                                                     



|In addition,
98,840,861 authorized but unissued Series L Shares are  currently held in treasury.
|------------------------------------------------------------------------------------------------



|FEMSA and The
Coca-Cola Company have reached an agreement pursuant to  which, at FEMSAs request,
CIBSA may purchase sufficient shares from The  Coca-Cola Company to increase its
ownership of our capital stock to 51%. See  Item 4. Information on the CompanyThe
Panamco AcquisitionCoca-Cola  Memorandum.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 66 | 
| | -- | 



---





|CIBSA, as the sole
owner of our Series A Shares, has the power to elect  11 of the 18 directors, and the
TCCC Shareholder Subs, as the sole owners of our  Series D Shares, have the power to
elect 4 directors. Accordingly, CIBSA and the  TCCC Shareholder Subs have the power to
determine the outcome of all actions  requiring approval by our board of directors and,
except in certain limited  situations, all actions requiring approval of the
shareholders. See The  Shareholders Agreement.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|As Technical
Committee members, Trust Participants under Irrevocable  Trust No. F/29487-6 established
at BBVA Bancomer, S.A., as Trustee, may be  deemed to be the beneficial owners of 45.7%
of our outstanding capital stock,  because the trust owns 54.3% of the voting stock of
FEMSA, which in turn owns  45.7% of our company through its subsidiary, CIBSA. As a
consequence of the  internal procedures of the trusts Technical Committee, the
Technical Committee,  as a whole, is deemed to have the beneficial ownership with sole
voting power of  all the shares deposited in the Voting Trust and the Trust Participants,
as  Technical Committee members, are deemed to have beneficial ownership with shared
voting power over those same deposited shares. We are not aware of any other  beneficial
owner of more than 5% of any class of our voting shares. See Item 6.  Directors,
Senior Management and EmployeesShare Ownership.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|As of May 31,
2003, there were 24,952,431 of our ADSs outstanding, each  ADS representing ten Series L
Shares. Approximately 92.2% of our outstanding  Series L Shares were represented by ADSs.
As of May 31, 2003, the ADSs were held  by approximately 270 holders, (including The
Depositary Trust Company) with  registered addresses in the United States.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|The Shareholders Agreement
|--------------------------



|In connection with
the subscription by Inmex (an indirect subsidiary of  The Coca-Cola Company) of 30% of
our capital stock, FEMSA and The Coca-Cola  Company agreed that we would be managed as a
joint venture. Accordingly, in June  1993, Emprex (a direct subsidiary of FEMSA), which
was until July 2002 the  direct holder of the Series A Shares, Inmex and The Coca-Cola
Company entered  into a shareholders agreement, which, together with our bylaws, sets
forth the  basic rules under which we operate.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|As a result of the
spin-off of Emprex, CIBSA became our only Series A  shareholder. In July 2002, Emprex,
Inmex and CIBSA executed an amended and  restated shareholders agreement. The
shareholders agreement was further amended  in May 2003 to add as parties, the
subsidiaries of The Coca-Cola Company that  acquired Series D shares in connection with
the acquisition of Panamco. In the  shareholders agreement, the parties confirm their
agreement to the corporate  governance provisions set forth in our bylaws relating to the
composition of our  board of directors and executive officers as well as to the election
of the  members of our board and officers. See Item 6. Directors, Senior Management
and  Employees. In addition, the shareholders agreement embodies the principal
shareholders agreement that we be managed in accordance with one-year and
five-year business plans, although in practice, we are now managed according to  a
three-year plan.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|The shareholders
agreement also sets forth the principal shareholders understanding as to the effect
of adverse actions of The Coca-Cola Company under  the bottler agreements as set forth in
our bylaws. Our bylaws provide that a  majority of the directors appointed by the holders
of Series A Shares (Series A  directors), upon making a reasonable, good faith
determination that any action  of The Coca-Cola Company under any bottler agreement or
supplemental agreement  between The Coca-Cola Company and our company or any of our
subsidiaries is  materially adverse to our business interests and that The Coca-Cola
Company has  failed to cure such action within 60 days of notice, may declare a simple
majority period at any time within 90 days after giving notice. During the  simple
majority period certain decisions, namely the approval and material  changing of our
one-year and five-year business plans and the introduction of a  new, or termination of
an existing, line of business, which would ordinarily  require the presence and approval
by two Series D directors, can be made by a  simple majority vote of our entire board of
directors, without requiring the  presence or approval of any Series D director. A
majority of the Series A  directors may terminate a simple majority period but, once
having done so,  cannot declare another simple majority period during a one-year period
following  a termination. If a simple majority period persists for one year or more, the
provisions of the shareholders agreement for resolution of irreconcilable  differences
may be triggered, with the consequences outlined below.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 67 | 
| | -- | 



---





|In addition to the
rights of first refusal provided for in our bylaws  regarding proposed transfers of
Series A Shares or Series D Shares, the  shareholders agreement contemplates three
circumstances under which one  principal shareholder may purchase the interest of the
other in our company: (i)  a change in control in a principal shareholder; (ii) the
existence of  irreconcilable differences between the principal shareholders; or (iii) the
occurrence of certain specified defaults.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|In the event that
(i) one of the principal shareholders buys the  others interest in our company in
any of these circumstances or (ii) the TCCC  Shareholder Subs, or CIBSAs ownership
of our shares of capital stock other than  the Series L Shares is reduced below 20% of
all such shares and upon the request  of the principal shareholder whose interest is not
so reduced, the shareholders  agreement requires that our bylaws be amended to eliminate
all share transfer  restrictions and all super-majority voting and quorum requirements,
after which  the shareholders agreement would terminate. In the event that the TCCC
Shareholder Subs, or CIBSAs ownership of our shares of capital stock other than
the Series L Shares is reduced below 25% (but not below 20%) of all such shares  and upon
the request of the principal shareholder whose interest is not so  reduced, the
shareholders agreement requires that our bylaws be amended to  eliminate all
super-majority voting and quorum requirements, other than those  relating to the share
transfer restrictions. After the elimination of  super-majority voting and quorum
restrictions upon a reduction of the TCCC  Shareholder Subs, ownership, CIBSA acting
alone could have the power to  determine most actions requiring shareholder or board
approval by virtue of its  ownership of Series A Shares.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|The shareholders
agreement also contains provisions relating to the  principal shareholders understanding
as to our growth. It states that it is The  Coca-Cola Companys intention that we
will be viewed as one of a small number of  its anchor bottlers in Latin
America. In particular, the parties agree that it  is desirable that we expand by
acquiring additional bottler territories in  Mexico and other Latin American countries in
the event any become available  through horizontal growth. In addition, The Coca-Cola
Company has agreed,  subject to a number of conditions, that if it obtains ownership of a
bottler  territory that fits with our operations, it will give us the option to acquire
such territory. The Coca-Cola Company has also agreed to support prudent and  sound
modifications to our capital structure to support horizontal growth. The  Coca-Cola
Companys agreement as to horizontal growth would cease to be in  effect upon (i)
the elimination of certain super-majority voting requirements in  the event that the TCCC
Shareholder Subs or CIBSAs ownership of our shares of  capital stock other
than the Series L Shares is reduced below 25% of all such  shares as described above or
(ii) The Coca-Cola Companys election to terminate  the agreement following a
specified default as described above.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|In connection with
the execution of the acquisition agreement of  Panamco, The Coca-Cola Company and FEMSA
memorialized their understandings  relating to specified operational and business issues
that may affect us  following completion of the acquisition. A summary of these
understandings is  set forth under Item 4. Information on the CompanyThe CompanyThe Panamco Acquisition.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 68 | 
| | -- | 



---





|RELATED PARTY TRANSACTIONS
|--------------------------



|We regularly
engage in transactions with FEMSA, The Coca-Cola Company,  and their affiliates. In 2002,
we purchased crown caps, plastic bottle caps,  cans, commercial refrigerators,
lubricants, detergents, plastic cases, and  substantially all of our returnable glass
bottle requirements for our Mexican  operations from FEMSA Empaques, an indirect,
wholly-owned subsidiary of FEMSA,  under several supply agreements. The aggregate amount
of these purchases was  Ps.403.3 million in 2002. In addition, some canned beverages in
the Mexican  Territories are purchased from IEQSA, which in turn purchases a portion of
empty  cans from Famosa, a subsidiary of FEMSA Empaques. In 2002, Coca-Cola FEMSA de
Buenos Aires purchased all of its can presentations from CICAN, a joint venture  between
Coca-Cola FEMSA de Buenos Aires and the Coca-Cola bottlers in Argentina,  Uruguay and
Paraguay. In addition, Coca-Cola FEMSA de Buenos Aires also  purchased a portion of its
plastic ingot requirements for producing plastic  bottles and all of our returnable
bottle requirements from CIPET. CIPET is a  local subsidiary of Embotelladora Andina, a
Coca-Cola bottler with operations in  Argentina, Chile and Brazil in which The Coca-Cola
Company has a substantial  interest. We believe that our purchasing practices result in
prices comparable  to those that would be obtained in arms length negotiations with
unaffiliated  parties. We also sell products to a chain of convenience stores owned by
FEMSA.  These transactions are also conducted on an arms length basis.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|We entered into a
service agreement in June 1993 with FEMSA Servicios,  S.A. de C.V., an indirect
subsidiary of FEMSA, pursuant to which FEMSA Servicios  provides certain administrative
services relating to insurance, legal and tax  advice for a period of at least one year,
cancelable thereafter by either party,  and certain limited administrative and auditing
services for as long as FEMSA  maintains an interest in our company. In each case, these
agreements were made  on terms that we believe to be commercially reasonable.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|In November 2000,
we entered into a service agreement with FEMSA  Logística, an indirect subsidiary
of FEMSA, pursuant to which FEMSA  Logística transports finished products from our
production facilities to  our distribution centers within Mexico. From November 1997
until November 2000,  FEMSA Logística, and previously another FEMSA subsidiary,
provided  similar services pursuant to an informal arrangement with our company. In 2002,
we paid approximately Ps.1,872.3 million pursuant to this agreement.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|We are insured in Mexico
      primarily under FEMSAs umbrella insurance policies with Grupo Nacional
      Provincial S.A., of which the son of the chairman of its board of directors
      is one of our alternate directors. The policies were purchased pursuant
      to a competitive bidding process. Fidelity bonds are purchased from Fianzas
      Monterrey New York Life S.A., of which one of our directors is the chairman
      of the board of review, and financial services are obtained from Grupo Financiero
      BBVA Bancomer, S.A. de C.V., of which two of our directors, Ricardo Guajardo
      Touché and Juan Carlos Braniff Hierro, were the chairman and vice-chairman
      of the board of directors, respectively. Affiliates of Grupo Financiero
      BBVA Bancomer, S.A. de C.V. purchased participations in the loans andcertificados bursátiles incurred to finance the Panamco acquisition
      and acted as agent for the placement of the certificados bursátiles.
      In each case, the transactions were conducted on an arms length basis.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Our company and
The Coca-Cola Company pay and reimburse each other for  marketing expenditures under a
cooperative marketing arrangement. In addition,  The Coca-Cola Company has made payments
to us in connection with cold-drink  equipment investment and other volume driving
investment programs. We purchase  all of our concentrate requirements for Coca-Cola
trademark beverages from The  Coca-Cola Company. Total payments by us to The Coca-Cola
Company for  concentrates were approximately Ps.2,558 million, Ps.2,643 million and
Ps.2,586  million in 2002, 2001 and 2000, respectively. In each of 2002 and 2001, The
Coca-Cola Company contributed approximately 42% of our marketing budget, which  totaled
approximately Ps.714.8 million and Ps.692.6 million. In each of 2002 and  2001, The
Coca-Cola Company also contributed to our refrigerator equipment  investment program.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|In connection with
the acquisition of Panamco, we exchanged 304,045,678  of our Series D Shares with certain
subsidiaries of The Coca-Cola Company for  the shares of Panamco held by them immediately
before the acquisition. See Item  4. Information on the CompanyThe Panamco
Acquisition Cost and Major  Shareholders. The subsidiaries of The
Coca-Cola Company that held Panamco  shares made specified undertakings to support and
facilitate the Panamco  acquisition for the benefit of our company. In consideration for
these  undertakings, we made certain undertakings for the benefit of The Coca-Cola
Company and its subsidiaries,
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 69 | 
| | -- | 



---





|including indemnity obligations with respect to
specified matters relating to the accuracy of disclosure and the compliance with
applicable law by our Board of Directors and the board of directors of Panamco  and
undertakings to take specified actions and refrain from specified others to  facilitate
the ability of The Coca-Cola Company to receive favorable tax  treatment in connection
with its participation in the acquisition. In connection  with the execution of the
acquisition agreement for Panamco, The Coca-Cola  Company and FEMSA memorialized their
understandings relating to specified  operational and business issues that may affect us
following completion of the  acquisition. A summary of these understandings is set forth
under Item 4.  Information on the CompanyThe CompanyThe Panamco
Acquisition.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|José Antonio
Fernández, Eva Garza de Fernández and  Ricardo Guajardo Touche are also
members of the Board of Directors of ITESM, a  prestigious Mexican private university
that routinely receives donations from  us.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|In connection with the acquisition
      of Panamco, we hired Allen & Company LLC to provide advisory services.
      One of our directors, Herbert Allen III, is the President of Allen &
      Company LLC.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 70 | 
| | -- | 



---





|Item 8.  Financial Information
|------------------------------



|CONSOLIDATED STATEMENTS AND
OTHER FINANCIAL INFORMATION
|-------------------------------------------------------



|Consolidated Financial Statements
|---------------------------------



|See Item 18. Financial
      Statements and pages F-1 through F-34.
|---------------------------------------------------------------------



|Dividend Policy
|---------------



|For a discussion
of our dividend policy, see Item 3.  Key InformationDividends and Dividend
Policy.
|------------------------------------------------------------------------------------------------------



|Legal Proceedings
|-----------------



|We are party to
various legal proceedings in the ordinary course of  business. Other than as disclosed in
this annual report, we are not currently  involved in any litigation or arbitration
proceeding that is pending or are  aware of any threatened litigation or arbitration,
which we believe has, or has  had, a material adverse effect on our company.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|In May 2000, the
Comisión Federal de Competencia (the Mexican  Federal Antitrust Commission or
Commission) requested that we provide them  with information relating to
their investigation of the sales practices of The  Coca-Cola Company and the bottlers of
Coca-Cola trademark beverages in Mexico,  including our company. This investigation
focused on monopolistic practices  within the soft drink industry in Mexico. On November
3, 2000, the Commission  notified us of its preliminary findings that the bottlers of
Coca-Cola trademark  beverages engaged in monopolistic practices with respect to
exclusivity  arrangements with retailers. On February 28, 2002, the Commission notified
us of  its decision, in which it found that bottlers of Coca-Cola trademark beverages,
including our company, had committed monopolistic practices with respect to  exclusivity
arrangements with retailers. We appealed the ruling before the  Mexican Antitrust
Commission, and the Commission confirmed its findings on July  11, 2002. On August 21,
2002, we initiated proceedings (amparo) before a  Mexican federal court
challenging the decision of the Mexican Antitrust  Commission. We believe that in the
event that the ruling of the Mexican  Antitrust Commission becomes final, such decision
will not have a material  adverse effect on our financial condition, since no fines have
been imposed  against us by the Mexican Antitrust Commission and the contracts with
retailers  that are subject of the investigations are not material with respect to our
total sales.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|In June 2003, the Mexican
        Antitrust Commission announced that it was launching a separate investigation
        into the soft drink industry practice with respect to exclusivity arrangements
        in general. As of the date of this annual report, we have not received
        any requests for information from the Mexican Antitrust Commission. We
        cannot give any assurances that any action taken as a result of this investigation
        will not negatively affect us in the future.
      During 2002, we presented
        a claim to recover payments of approximately Ps.94 million made with respect
        to the Impuesto Especial Sobre Productos y Servicios (Special
        Tax on Products and Services) applicable to inventories produced
        with HFCS. We obtained a favorable ruling but the Mexican authorities
        have appealed this ruling. As of the date of this annual report, this
        appeal is pending.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|At the time of the
Panamco acquisition, Panamco and its subsidiaries  were, and Panamco and its subsidiaries
are still, subject to a number of  significant and on-going legal proceedings, including
antitrust, tax, labor,  human rights and other claims. A description of the litigation
can be found in  its annual report filed with the SEC on Form 10-K on March 28, 2003 and
its  quarterly report filed with the SEC on Form 10-Q on May 6, 2003. Such reports do
not constitute part of this annual report and are not incorporated by reference  into
this annual report. We are in the process of conducting a review of  litigation pending
against Panamco. Although no assurances can be given, we  believe, based on the
information available to us to date, that claims pending  against Panamco are either
without merit or will not result in a material  adverse effect on our consolidated
financial condition or consolidated results.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 71 | 
| | -- | 



---





|Item 9.  The Offer and Listing
|------------------------------



|TRADING MARKETS
|---------------



|ADRs representing
the ADSs have been issued by the Bank of New York,  the depositary for our ADSs. Our ADSs
have been traded on the New York Stock  Exchange, and our Series L Shares on the Mexican
Stock Exchange, since 1993.  Each ADS represents ten Series L Shares. On December 31,
2002, approximately 94%  of the publicly traded Series L Shares were held in the form of
ADSs.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|The following
table sets forth, for the periods indicated, the reported  high and low sales prices for
the Series L Shares on the Mexican Stock Exchange  and the reported high and low sales
prices for the ADSs on the New York Stock  Exchange. Prices have not been restated in
constant currency units.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|               | Mexican Stock Exchange 
      pesos per L Share | New York Stock Exchange 
      dollars per L ADR
|-------------- | ----------------------------------------------- | ------------------------------------------------
|
|1998:          |                                                
|Full year      |                                                 | Ps.17.72                                        
|1999:          |                                                
|Full year      |                                                 | Ps.20.30                                        
|2000:          |                                                
|Full year      |                                                 | Ps.21.15                                        
|2001:          |                                                
|First quarter  |                                                 | Ps.23.15                                        
|Second quarter |                                                 | 22.18                                           
|Third quarter  |                                                 | 22.18                                           
|Fourth quarter |                                                 | 19.54                                           
|2002:          |                                                
|First quarter  |                                                 | Ps.25.06                                        
|Second quarter |                                                 | 27.60                                           
|Third quarter  |                                                 | 23.80                                           
|Fourth quarter |                                                 | 23.60                                           
|December       |                                                 | 23.30                                           
|2003:          |                                                
|January        |                                                 | Ps.20.90                                        
|February       |                                                 | 20.20                                           
|March          |                                                 | 20.09                                           
|April          |                                                 | 22.00                                           
|May            |                                                 | 23.00                                           
|June(1)        |                                                 | 24.25                                           

|
|

|(1) |  | From the period beginning June 1, 2003 until
      June 13, 2003.
|--- |  | -----------------------------------------------------------------



| | 72 | 
| | -- | 



---





|Since November 1,
1996, our 8.95% Notes due November 1, 2006 have been  listed on the New York Stock
Exchange. The following table sets forth, for the  periods indicated, the reported high
and low sales prices for the notes, as a  percentage of principal amount, on the New York
Stock Exchange.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|               | New York Stock Exchange 
      Percentage of Principal Amount
|-------------- | -------------------------------------------------------------
|
|1998:          |                                                              
|Full year      |                                                              
|1999:          |                                                              
|Full year      |                                                              
|2000:          |                                                              
|Full year      |                                                              
|2001:          |                                                              
|First quarter  |                                                              
|Second quarter |                                                              
|Third quarter  |                                                              
|Fourth quarter |                                                              
|2002:          |                                                              
|First quarter  |                                                              
|Second quarter |                                                              
|Third quarter  |                                                              
|Fourth quarter |                                                              
|December       |                                                              
|2003:          |                                                              
|January        |                                                              
|February       |                                                              
|March          |                                                              
|April          |                                                              
|May            |                                                              
|June(1)        |                                                              

|
|

|(1) |  | From
the period beginning June 1, 2003 until June 13, 2003.
|--- |  | -----------------------------------------------------------



|It is not
practicable for us to determine the portion of the notes beneficially owned by U.S.
persons.
|------------------------------------------------------------------------------------------------------



| | 73 | 
| | -- | 



---





|TRADING ON THE MEXICAN STOCK
EXCHANGE
|-------------------------------------



|The Mexican Stock
Exchange (Bolsa Mexicana de Valores, S.A. de C.V.), located in Mexico City, is the only
stock exchange in Mexico. Founded in 1907, it is organized as a corporation whose shares
are held by 30 brokerage firms, which are exclusively authorized to trade on the
Exchange. Trading on the Mexican Stock Exchange takes place principally through
automated systems, which are open between the hours of 8:30 a.m. and 3:00 p.m. Mexico
City time, each business day. Trades in securities listed on the Mexican Stock Exchange
can also be effected off the Exchange. The Mexican Stock Exchange operates a system of
automatic suspension of trading in shares of a particular issuer as a means of
controlling excessive price volatility, but under current regulations this system does
not apply to securities such as the Series L Shares that are directly or indirectly (for
example, through ADSs) quoted on a stock exchange outside Mexico.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Settlement is
effected two business days after a share transaction on the Mexican Stock Exchange.
Deferred settlement, even by mutual agreement, is not permitted without the approval of
the CNBV. Most securities traded on the Mexican Stock Exchange, including our shares,
are on deposit with  Instituciün para el Depüsito de Valores, S.A. de C.V.,
commonly referred to as Indeval, a privately owned securities depositary that acts as a
clearinghouse for Mexican Stock Exchange transactions.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 74 | 
| | -- | 



---





|Item 10.  Additional Information
|--------------------------------



|BYLAWS
|------



|Set forth below is
a brief summary of certain significant provisions of  our bylaws, as amended, and Mexican
law. This description does not purport to be  complete and is qualified by reference to
our bylaws and Mexican law. For a  description of the provisions of our bylaws relating
to our board of directors,  executive officers and examiners, see Item 6.
Directors, Senior Management and  Employees.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Organization and Register
|-------------------------



|We were incorporated on October
      31, 1991, as a Mexican corporation (sociedad anónima de capital
      variable) in accordance with the Mexican Companies Law. We are registered
      in the Public Registry of Commerce of Mexico City on August 23, 1993 under
      the number 176543.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Purposes
|--------



|The purposes of
our company may be found in Chapter 1, Article 2 of our  bylaws and include the following
general items: (a) to establish, promote and  organize commercial or civil companies of
any type, as well as to acquire and  possess shares or participations in them; (b) to
carry out all types of active  and passive transactions involving bonds, shares,
participations and securities  of any type; (c) to provide or receive advisory,
consulting or other types of  services in business matters; (d) to conduct business with
equipment, raw  materials and any other items necessary to the companies in which we have
an  interest or with which we have commercial relations; (e) to acquire and dispose  of
trademarks, commercial names, copyrights, patents, inventions, franchises,
distributions, concessions and processes; (f) to possess and operate real and  personal
property necessary for our purposes; to subscribe, buy and sell stocks,  bonds and
securities among other things; (g) to draw, accept, make, endorse or  guarantee
negotiable instruments, issue bonds secured with real property or  unsecured, and to make
us jointly liable, to grant security of any type with  regard to obligations entered into
by us or by third parties, and in general, to  perform such acts, enter into such
contracts and carry out such other  transactions as may be necessary or conducive to our
business purpose.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Voting Rights
|-------------



|Series A Shares
and Series D Shares have full voting rights but are  subject to transfer restrictions.
Series B Shares, if subscribed, will have full  voting rights and will be freely
transferable. Series L Shares are freely  transferable but have limited voting rights.
Series L Shares are not  exchangeable for Series A Shares or Series D Shares or vice
versa. Except for  the restrictions on transfer of the Series A and Series D Shares, as
well as  limitations on the voting rights of Series L Shares, the respective rights of
the Series A, Series D and Series L (but not Series B) Shares, voting as  separate
classes, to elect specified numbers of our directors and alternate  directors and
prohibitions on non-Mexican ownership of Series A Shares, the  rights of holders of all
series of capital stock are substantially identical.  See Item 6. Directors, Senior
Management, and Employees, Foreign Investment  Legislation and
Transfer Restrictions.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Under our bylaws, holders of
      Series L Shares are entitled to vote only in limited circumstances. They
      may elect up to three of our eighteen directors and, in certain circumstances
      where holders of Series L Shares have not voted for the director elected
      by holders of the majority of such series of shares, they may be entitled
      to elect one or more additional directors. See Item 6. Directors,
      Senior Management and Employees. In addition, (i) transformation of
      our company from one type of company to another (other than changing from
      a variable capital to fixed-capital corporation and vice versa), (ii) any
      merger where we are not the surviving entity or any merger with an entity
      whose principal corporate purposes are different from those of our company
      or our subsidiaries, and (iii) cancellation of the registration of our shares
      with the National Registry of Securities (Registro Nacional de Valores or
      RNV) by the CNBV or with other foreign stock exchanges on which our shares
      may be listed, require a quorum of 82% of our capital stock (including the
      Series L Shares) and the vote of at least a majority of our capital stock
      voting (and not abstaining). The affirmative vote of 95% of our capital
      stock (including the Series L Shares) and the approval of the CNBV would
      be required to amend the provisions of our bylaws that require our controlling
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 75 | 
| | -- | 



---





|shareholders, in the event  of cancellation of
the registration of any of our shares on RNV, to make a  public offer to acquire such
shares. Except as described above and in the  following paragraph, the holders of Series
L Shares have no voting rights.  Holders of Series L Shares are not entitled to attend or
to address meetings of  shareholders at which they are not entitled to vote.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Holders of ADRs
representing our ADSs are entitled to instruct the  depositary as to the exercise of the
limited voting rights pertaining to the  Series L Shares represented by their ADSs,
subject to the terms of the ADS  deposit agreement.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Under Mexican law,
holders of shares of any series are also entitled to  vote as a class in a special
meeting governed by the same rules that apply to  extraordinary meetings, as described
below, on any action that would prejudice  the rights of holders of shares of such series
but not rights of holders of  shares of other series. In addition, a holder of shares of
the series that might  be prejudiced would be entitled to judicial relief against any
prejudicial  action taken without the required vote. The determination of whether an
action  requires a class vote on these grounds would initially be made by our board of
directors or our examiners. A negative determination would be subject to  judicial
challenge by an affected shareholder, and the necessity for a class  vote would
ultimately be determined by a Mexican court. There are no other  procedures for
determining whether a particular proposed shareholder action  requires a class vote, and
Mexican law does not provide extensive guidance on  the criteria to be applied in making
such a determination.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Shareholders Meetings
|----------------------



|General
shareholders meetings may be ordinary meetings or  extraordinary meetings. General
extraordinary meetings are those called to  consider certain matters specified in Article
182 of the Mexican Companies Law  and the bylaws, including, principally, amendments to
the bylaws, liquidation,  dissolution, merger, transformation from one type of corporate
form to another,  change in nationality, change of corporate purpose, issuance of
convertible  debentures and increases and reductions of the fixed portion of the capital.
In  addition, our bylaws require an extraordinary general meeting to consider the
cancellation of the registration of our shares with the RNV or with other  foreign stock
exchanges on which its shares may be listed. General meetings  called to consider all
other matters are ordinary meetings, which must be held  at least once each year. All
other matters on which holders of Series L Shares  are entitled to vote at a general
shareholders meeting would be considered at an  extraordinary general meeting.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|An ordinary
general meeting of the holders of Series A, Series D and  Series B Shares must be held at
least once each year to consider the approval of  the financial statements of our and
certain of our subsidiaries for the  preceding fiscal year, to elect examiners, to adopt
the designation of directors  determined by the holders of the Series A, Series D and
Series L Shares at their  respective special meetings and to determine the allocation of
the profits of  the preceding year.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|The quorum for
special meetings of any series of shares is a majority  of the holders of such shares,
and action may be taken by holders of a majority  of the shares. The quorum for ordinary
and extraordinary general meetings at  which holders of Series L Shares are not entitled
to vote is 76% of the holders  of our Series A, Series D and Series B Shares, and the
quorum for an  extraordinary general meeting at which holders of Series L Shares are
entitled  to vote is as set forth above.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|The board of
directors, our examiners, or, under certain circumstances,  a Mexican court, may call
shareholders meetings. Holders of 10% or more of our  capital stock may require the
board of directors or the examiners to call a  shareholders meeting at which the holders
of Series L Shares would be entitled  to vote, and holders of 10% or more of the Series
A, Series B and Series D  Shares may require the board of directors or the examiners to
call a meeting at  which the holders of Series L Shares would not be entitled to vote.
Notice of  meetings and the meeting agendas must be published in a newspaper of general
circulation in Mexico City at least 15 days prior to the meeting. In order to  attend a
meeting, shareholders must deposit their shares and receive a  certificate from our
Corporate Secretary (or, in the case of Series A or Series  D Shares, from our transfer
agent) authorizing participation in such meeting at  least 48 hours in advance of the
time set thereof or, in the case of Series B or  Series L Shares held in book-entry form
through Indeval, submit certificates  evidencing a deposit of the shares
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 76 | 
| | -- | 



---





|with Indeval. If so entitled to attend the
meeting, a shareholder may be represented by proxy. Our directors and examiners  may not
act as proxies.
|---------------------------------------------------------------------------------------------------------------------------------------------------



|Under Mexican law,
holders of 20% of our outstanding shares of common  stock entitled to vote on a
particular item may judicially oppose resolutions  adopted at a general meeting if the
following conditions are met: (i) such  holders file a complaint with a Mexican court
within 15 days after the  adjournment of the meeting at which such action was taken; (ii)
such holders complaint details the provisions of the Mexican law or our bylaws that
are  violated and the reason for their claim; and (iii) such holders were represented  at
the meeting when the action was taken or, if represented, voted against such  action.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Dividend Rights
|---------------



|At the annual
ordinary general meeting of holders of Series A, Series D  and Series B Shares, the board
of directors submits our financial statements for  the previous fiscal year, together
with a report thereon by the board. The  holders of Series A, Series D and Series B
Shares, once they have approved the  financial statements, determine the allocation of
our net profits for the  preceding year. They are required by law to allocate at least 5%
of such net  profits to a legal reserve, which is not thereafter available for
distribution  except as a stock dividend, until the amount of the legal reserve equals
20% of  our historical capital stock (before the effect of restatement). The legal
reserve on June 30, 1993 was Ps. 500,000. Thereafter, the shareholders may  determine and
allocate a certain percentage of net profits to any special  reserve, including a reserve
for open-market purchases of our shares. The  remainder of net profits is available for
distribution. All shares outstanding  and fully paid (including Series L Shares) at the
time a dividend or other  distribution is declared are entitled to share equally in such
dividend or other  distribution. Shares which are only partially paid participate in a
dividend or  other distributions in the same proportion that such shares have been paid
at  the time of the dividend or other distributions. Treasury shares are not  entitled to
dividends or other distributions.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Liquidation
|-----------



|Upon our
liquidation, a liquidator may be appointed to wind up its  affairs. All fully paid and
outstanding shares of capital stock (including  Series L Shares) will be entitled to
participate equally in any distribution  upon liquidation. Shares which are only
partially paid participate in such  distribution upon liquidation in the proportion that
they have been paid at the  time of liquidation. There are no liquidation preferences for
any series of our  shares.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Preemptive Rights
|-----------------



|In the event of a capital
      increase, a holder of existing shares (including Series L Shares) has a
      preferential right to subscribe for a sufficient number of shares of the
      same series to maintain the holders existing proportionate holdings
      of shares. Preemptive rights must be exercised within a term of not less
      than 15 days following the publication of notice of the capital increase
      in the Diario Oficial de la Federación and in one of the newspapers
      of general circulation in our corporate domicile. Under Mexican law, preemptive
      rights cannot be waived in advance of the issuance thereof and cannot be
      represented by an instrument that is negotiable separately from the corresponding
      share. As a result, there is no trading market for the rights in connection
      with a capital increase. Holders of ADSs that are U.S. persons or located
      in the United States may be restricted in their ability to participate in
      the exercise of such preemptive rights. See Risk FactorsRisks
      Related to Our Controlling Shareholders and Capital Structure for
      a description of the circumstances under which holders of ADSs may not be
      entitled to exercise such rights.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Foreign Investment Legislation
|------------------------------



|Ownership by non-Mexicans
      of shares of Mexican enterprises is regulated by the 1993 Ley de Inversión
      Extranjera (the Foreign Investment Law) and the 1998 Regulations thereunder
      (the Foreign Investment Regulations). The Comisión Nacional de
      Inversión Extranjera (the National Foreign Investment Commission)
      is responsible for the administration of the Foreign Investment Law and
      its Regulations. In order to comply with restrictions on the percentage
      of their capital stock that may be owned by non-Mexican investors, Mexican
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 77 | 
| | -- | 



---





|companies typically limit particular classes of
their stock to Mexican  ownership. Under the Foreign Investment Law, a trust for the
benefit of one or  more non-Mexican investors may qualify as Mexican if the trust meets
certain  conditions that will generally ensure that the non-Mexican investors do not
determine how the shares are voted.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|The Foreign
Investment Law generally allows foreign holdings of up to  100% of the capital stock of
Mexican companies. However, the Law reserves  certain economic activities exclusively for
the Mexican state and certain other  activities for Mexican individuals or Mexican
corporations, the charters of  which contain a prohibition on ownership by non-Mexicans
of the corporations  capital stock. Although the Foreign Investment Law grants
broad authority to the  Foreign Investment Commission to allow foreign investors to own
more than 49% of  the capital of Mexican enterprises after taking into consideration
public policy  and economic concerns our bylaws provide that Series A Shares shall at all
times  constitute no less than 51% of all outstanding common shares (excluding Series L
Shares) and may only be held by Mexican investors.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Transfer Restrictions
|---------------------



|Our bylaws provide
that no holder of Series A or Series D Shares may  sell its Series A or D Shares unless
it has disclosed the terms of the proposed  sale and the name of the proposed buyer and
has previously offered to sell such  shares to the holders of the other such series for
the same price and terms as  it intended to sell the shares to a third party. If the
shareholders being  offered shares do not choose to purchase such shares within 90 days
of the  offer, the selling shareholder is free to sell the shares to such third party at
the price and under the terms specified in such offer within a specified time.  In
addition, our bylaws impose certain procedures in connection with the pledge  of any
Series A or Series D Shares to any financial institution which are  designed, among other
things, to ensure that such pledged shares will be offered  to the holders of the other
such Series at market value prior to any foreclosure  with respect thereto. Finally, a
proposed transfer of Series A or Series D  Shares other than a proposed sale or such a
pledge, or a change of control of a  holder of Series A or Series D Shares that is a
subsidiary of a principal  shareholder, would trigger rights of first refusal to purchase
the subject  shares at market value. See Item 7. Major Shareholders and Related
Party  TransactionsMajor ShareholdersThe Shareholders Agreement.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Other Provisions
|----------------



|Redemption
|----------



|Our fully paid
shares are subject to redemption in connection with  either (i) a reduction of share
capital or (ii) a redemption with retained  earnings, which, in either case, must be
approved by our shareholders at an  extraordinary shareholders meeting. The shares
subject to any such redemption  would be selected by us by lot or in the case of
redemption with retained  earnings, by purchasing shares by means of a tender offer
conducted on the  Mexican Stock Exchange, in accordance with the Mexican Companies Law.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Capital Variations
|------------------



|Any change in our
authorized capital stock requires a resolution of an  extraordinary general meeting of
shareholders. We are permitted to issue shares  constituting fixed capital and shares
constituting variable capital. At present,  all of the issued shares of our capital
stock, including those Series B and  Series L Shares that remain in our treasury,
constitute fixed capital. See  Voting Rights. The fixed portion of our
capital stock may only be increased  or decreased by amendment of our bylaws upon
resolution of an extraordinary  general meeting of the shareholders. The variable portion
of our capital stock  may be increased or decreased by resolution of an ordinary general
meeting of  the shareholders without amending the by-law. Under Mexican law and our
bylaws,  the outstanding variable portion of our stock may be redeemed at the holders
option at any time at a redemption price equal to the lower of: (i) 95% of the  average
market value of such shares on the Mexican Stock Exchange for 30 trading  days on which
the shares were quoted preceding the date on which the exercise of  the option is
effective and (ii) the book value of such shares at the end of the  fiscal year in which
the exercise of the option is effective. If the option is  exercised during the first
three quarters of a fiscal year, it is effective at  the end of that fiscal year; but if
it is exercised during the fourth quarter,  it is effective at the end of the next
succeeding fiscal year. The redemption  price would be payable following the annual
ordinary general meeting of holders  of Series A, Series D and Series B Shares at which
the relevant annual financial  statements were approved.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 78 | 
| | -- | 



---





|Fixed capital
cannot be redeemed. Requests for redemption are satisfied  only to the extent of
available variable capital and in the order in which the  requests are received. Requests
that are received simultaneously are satisfied  pro rata to the extent of available
capital.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Forfeiture of Shares
|--------------------



|As required by
Mexican law, our bylaws provide that our nonMexican shareholders formally agree
with the Secretaría de Relaciones Exteriores (the Ministry of Foreign Affairs)
to: (i) to be considered as Mexicans with respect to our shares that they acquire or
hold as well as to the property, rights, concessions, participation or interest owned by
us or to the rights and obligations derived from any agreements we have with the Mexican
government and (ii) not to invoke the protection of their own governments in matters
relating to their ownership of our shares. Failure to comply with these provisions is
subject to a penalty of forfeiture of such shareholders capital interests in favor
of Mexico. 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. In the opinion of Lic. Carlos Aldrete Ancira, our General
Counsel, under this provision a nonMexican shareholder is not deemed to have
waived any other rights it may have, including any rights under the United States
securities laws, with respect to its investment in our company. If the shareholder
should invoke such governmental protection in violation of this agreement, its shares
could be forfeited to the Mexican government. Mexican law requires that such a provision
be included in the bylaws of all Mexican corporations unless such bylaws prohibit
ownership of shares by non-Mexican persons.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Duration
|--------



|Our existence
under the bylaws continues until 2090.
|----------------------------------------------------



|Purchase of Our Own Shares
|--------------------------



|According to our
bylaws, we generally may not repurchase our shares,  subject to certain exceptions.
First, we may repurchase fully paid shares for  cancellation with distributable earnings
pursuant to a decision of an  extraordinary general meeting of shareholders. Second,
pursuant to judicial  adjudication, we may acquire the shares of a shareholder in
satisfaction of a  debt owed to us by such shareholder; we must sell any shares so
acquired within  three months, otherwise our capital stock will be reduced and such
shares  cancelled. Third, in accordance with our bylaws, we would also be permitted to
repurchase our own shares on the Mexican Stock Exchange under certain  circumstances,
with funds from a special reserve created for such purpose. We  may hold shares we
repurchase as treasury shares, which would be treated as  authorized and issued but not
outstanding unless and until subsequently  subscribed for and sold.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Conflict of Interest
|--------------------



|A shareholder
voting on a business transaction in which its interests  conflict with our interests may
be liable for damages, but only if the  transaction would not have been approved without
such shareholders vote.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Actions against Directors
|-------------------------



|Action for civil
liabilities against directors may be initiated by  resolution passed at a general
ordinary shareholders meeting. In the event the  shareholders decide to bring such
action, the directors against whom such action  is to be brought immediately cease to be
directors. Additionally, shareholders  (including holders of Series L Shares)
representing, in the aggregate, not less  than 15% of the outstanding shares may directly
bring such action against  directors, provided that (i) such shareholders did not concur
in the decision at  the general shareholders meeting not to take action against the
directors, and  (ii) the claim covers all the damages alleged to have been caused to us
and not  only the portion corresponding to such shareholders. Any recovery of damages
with respect to such action will be for our benefit and not for the shareholders
bringing action.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 79 | 
| | -- | 



---





|Appraisal Rights
|----------------



|Whenever the
shareholders approve a change of corporate purposes,  change of nationality of the
company, or transformation from one form of company  to another, any shareholder entitled
to vote who has voted against the change  may withdraw from our company and receive the
amount attributable to its shares  under Mexican law, provided that the shareholder
exercises its rights within 15  days following the adjournment of the meeting at which
the change was approved.  Because holders of Series L Shares are not entitled to vote on
certain types of  these changes, such withdrawal rights are available to holders of
Series L  Shares in fewer cases than to holders of other series of our capital stock.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Rights of Shareholders
|----------------------



|The protections
afforded to minority shareholders under Mexican law are  different from those in the
United States and many other jurisdictions. The  substantive law concerning fiduciary
duties of directors has not been the  subject of extensive judicial interpretation in
Mexico, unlike many states in  the United States where duties of care and loyalty
elaborated by judicial  decisions help 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 bring actions on behalf of other
shareholders or to enforce rights of the corporation itself. Shareholders cannot
challenge corporate action taken at a shareholders meeting unless they meet
certain procedural requirements, as described above under Shareholders Meetings.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|As a result of
these factors, in practice it may be more difficult for  our minority shareholders to
enforce rights against us or our directors or  controlling shareholders than it would be
for shareholders of a U.S. company.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|In addition, under
the 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, the rules
requiring disclosure of  share ownership by directors, officers and certain shareholders.
We are also  exempt from certain of the corporate governance requirements of the New York
Stock Exchange, Inc., including the requirements concerning audit committees and
independent directors.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Enforceability of Civil Liabilities
|-----------------------------------



|We are organized
under the laws of Mexico, and most of our directors,  officers and controlling persons
reside outside the United States. In addition,  a substantial portion of our assets and
their assets are located in Mexico. As a  result, it may be difficult for investors to
effect service of process within  the United States on such persons. It may also be
difficult to enforce against  them, 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 such persons in Mexico, whether in original  actions or in actions
to enforce judgments of U.S. courts, of liabilities based  solely on the U.S. federal
securities laws.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 80 | 
| | -- | 



---





|MATERIAL CONTRACTS
|------------------



|We manufacture,
package, distribute, and sell soft drink beverages and  bottled water under bottler
agreements with The Coca-Cola Company. For a  discussion of the terms of these contracts,
see Item 4. Information on the  CompanyBottler Agreements and Item
7. Major Shareholders and Related Party  TransactionsRelated Party Transactions. In
addition, pursuant to a tradename  licensing agreement with The Coca-Cola Company, we are
authorized to use certain  trademark names of The Coca-Cola Company. See Item 4.
Information on the CompanyBottler Agreements.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|We are managed as
a joint venture between CIBSA, a subsidiary of FEMSA,  and certain subsidiaries of The
Coca-Cola Company, pursuant to a shareholders  agreement. For a discussion of the terms
of this agreement, see Item 7. Major  Shareholders and Related Party TransactionsMajor
ShareholdersThe  Shareholders Agreement.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Pursuant to
several supply agreements, we purchase crown caps, plastic  bottle caps, cans, commercial
refrigerators, lubricants, detergents, plastic  cases, and substantially all of our
returnable glass bottle requirements for our  Mexican operations from FEMSA Empaques, a
FEMSA subsidiary. Pursuant to a  service agreement between our company and FEMSA Logística,
a FEMSA  subsidiary, FEMSA Logística transports finished products from our
production facilities to our distribution centers in Mexico. See Item 7. Major
Shareholders and Related Party TransactionsRelated Party Transactions for a
discussion of these and other transactions with our affiliates.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|We purchase the
large majority of our non-returnable plastic bottles,  as well as pre-formed plastic
ingots for the production of non-returnable  plastic bottles, from ALPLA, an authorized
provider of PET for the Coca-Cola  Company, pursuant to an agreement we entered into in
April 1998. Under this  agreement, we rent plant space to ALPLA, where it produces PET
bottles and  ingots to certain specifications and quantities for our use.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|On November 2,
2001, we entered into two franchise bottling agreements  with Promotora de Marcas
Nacionales, a subsidiary of Emprex, for the bottling  and distribution of Mundet brands
in most of our Mexican territories. The terms  and conditions of the franchise agreements
are similar to the current  arrangements that we have entered into with The Coca-Cola
Company for the  bottling and distribution of Coca-Cola trademark soft drink beverages.
See Item  4. Information on the CompanyBottler Agreements.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|See Item 5.
Operating and Financial Review and ProspectsContractual  Obligations for a
brief discussion of certain terms of our significant debt  agreements.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 81 | 
| | -- | 



---





|EXCHANGE CONTROLS
|-----------------



|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 persons or entities to  convert pesos to U.S. dollars, no assurance
can be given that the Mexican  government will not institute a restrictive exchange
control policy in the  future.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 82 | 
| | -- | 



---





|TAXATION
|--------



|The following
summary contains a description of certain U.S. federal  income and Mexican federal tax
consequences of the purchase, ownership and  disposition of the 8.95% Notes due November
1, 2006, referred to in this annual  report as the Notes, Series L Shares or ADSs by a
holder that is a citizen or  resident of the United States, a U.S. domestic corporation
or a person or entity  that otherwise will be subject to U.S. federal income tax on a net
income basis  in respect of the Notes, Series L Shares or ADSs, referred to in this
annual  report as a U.S. holder, but it does not purport to be a description of all of
the possible tax considerations that may be relevant to a decision to purchase  the
Notes, Series L Shares or ADSs. In particular, this discussion does not  address all
Mexican or U.S. federal income tax considerations that may be  relevant to a particular
investor, nor does it address the special tax rules  applicable to certain categories of
investors, such as banks, dealers, traders  who elect to mark to market, tax-exempt
entities, insurance companies, investors  who hold the Notes, Series L Shares or ADSs as
part of a hedge, straddle,  conversion or integrated transaction or investors who have a
functional  currency other than the U.S. dollar. This summary deals only with
U.S. holders  that will hold the Notes, Series L Shares or ADSs as capital assets, but
does  not address the tax treatment of a U.S. holder that owns or is treated as owning
10% or more of the voting shares (including Series L Shares) of our company. Nor  does it
address the situation of holders of Notes who did not acquire the Notes  as part of the
initial distribution.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|This summary is
based upon tax laws of the United States and Mexico as  in effect on the date of this
annual report, including the provisions of the  income tax treaty between the United
States and Mexico, referred in this annual  report as the Tax Treaty, which are subject
to change. The summary does not  address any tax consequences under the laws of any state
or locality of Mexico  or the United States or the laws of any taxing jurisdiction other
than the  federal laws of Mexico and the United States. Holders of the Notes, Series L
Shares or ADSs should consult their tax advisers as to the U.S., Mexican or  other tax
consequences of the purchase, ownership and disposition of Notes,  Series L Shares or
ADSs, including, in particular, the effect of any foreign,  state or local tax laws.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Mexican Taxation
|----------------



|For purposes of
this summary, the term non-resident holder means a  holder that is not a
resident of Mexico and that does not hold the Notes, Series  L Shares, or ADSs in
connection with the conduct of a trade or business through  a permanent establishment or
fixed base in Mexico. For purposes of Mexican  taxation, an individual is a resident of
Mexico if he or she has established his  or her home in Mexico, unless he or she has
resided in another country for more  than 183 days (whether consecutive or not) during a
calendar year, and can  demonstrate that he or she has become a resident of that country
for tax  purposes. A legal entity is a resident of Mexico either if it is organized under
the laws of Mexico or if it has its principal place of business or its place of
effective management in Mexico. A Mexican citizen is presumed to be a resident  of Mexico
unless such a person can demonstrate that the contrary is true. If a  legal entity or an
individual is deemed to have a permanent establishment in  Mexico for tax purposes, all
income attributable to such a permanent  establishment will be subject to Mexican taxes,
in accordance with applicable  tax laws.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Tax Considerations Relating to the Notes
|----------------------------------------



|Taxation of Interest and Principal in Respect of
the Notes. Under Mexican income tax law, payments of interest by a Mexican issuer in
respect of its notes (including payments of principal in excess of the issue price of
such notes, which, under Mexican law, are deemed to be interest) to a non-resident
holder will generally be subject to a Mexican withholding tax assessed at a rate of
4.9% if (i) the relevant notes are registered with the Special Section of the National
Registry of Securities and Intermediaries maintained by the National Banking and
Securities Commission, (ii) the notes are placed, through banks or brokerage houses, in
a country that has entered into a treaty to avoid double taxation with Mexico, and (iii)
no party related to us (defined under the applicable law as parties that are (x)
shareholders of our company that own, directly or indirectly, individually or
collectively, with related persons (within the meaning of the applicable law) more than
ten percent (10%) of our voting stock or (y) corporations more than twenty percent (20%)
of the stock of which is owned, directly or indirectly, individually or
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 83 | 
| | -- | 



---





|collectively, by related  persons of our
company), directly or indirectly, is the effective beneficiary of  five percent (5%) or
more of the aggregate amount of each such interest payment.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Apart from the
Mexican income tax law discussed in the preceding  paragraph, other provisions reducing
the rate of Mexican withholding taxes may  also apply. Under the Tax Treaty, the rate
would be 4.9% for certain holders  that are residents of the United States (within the
meaning of the Tax Treaty).  If the requirements described in the preceding paragraph are
not met and no  other provision reducing the rate of Mexican withholding taxes applies,
such  interest payments will be subject to a Mexican withholding tax assessed at a  rate
of 10%.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Payments of
interest made by us with respect to the Notes to  non-Mexican pension or retirement funds
will be exempt from Mexican withholding  taxes, provided that any such fund (i) is duly
incorporated pursuant to the laws  of its country of origin and is the effective
beneficiary of the interest  accrued, (ii) is exempt from income tax in such country, and
(iii) is registered  with the Ministry of Finance for that purpose.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|We have agreed,
subject to specified exceptions, to pay additional  amounts, referred to in this annual
report as Additional Amounts, to the holders  of the Notes in respect of the Mexican
withholding taxes mentioned above. If we  pay Additional Amounts in respect of such
Mexican withholding taxes, any refunds  received with respect to such Additional Amounts
will be for the account of our  company.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Holders or
beneficial owners of Notes may be requested by us to provide  certain information or
documentation required by applicable law to facilitate  the determination of the
appropriate withholding tax rate applicable to such  holders or beneficial owners. In the
event that the specified information or  documentation concerning the holder or
beneficial owner, if requested, is not  provided on a timely basis, our obligation to pay
Additional Amounts may be  limited.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Under existing
Mexican law and regulations, a non-resident holder will  not be subject to any Mexican
taxes in respect of payments of principal made by  us with respect to the Notes.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Taxation of Dispositions of Notes. Capital gains
resulting from the sale or other disposition of the Notes by a non-resident holder will
not be subject to Mexican income or other taxes.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Tax Considerations Relating to the Series
L Shares and the ADSs
|---------------------------------------------------------------



|Taxation of Dividends. Under Mexican income tax
law, dividends, either in cash or in kind, paid with respect to the Series L Shares
represented by ADSs or the Series L Shares are not subject to Mexican withholding tax.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Taxation of Dispositions of ADSs or Series L
Shares. Gains from the sale or disposition of ADSs by non-resident holders will not be
subject to Mexican withholding tax. Gains from the sale of Series L Shares carried out
by non-resident holders through the Mexican Stock Exchange or other securities markets
approved by the Mexican Ministry of Finance will generally be exempt from Mexican tax
provided certain additional requirements are met. Also, certain restrictions will apply
if the Series L Shares are transferred as a consequence of public offerings.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Gains on the sale
or other disposition of Series L Shares or ADSs made  in other circumstances generally
would be subject to Mexican tax, regardless of  the nationality or residence of the
transferor. However, under the Tax Treaty, a  holder that is eligible to claim the
benefits of the Tax Treaty will be exempt  from Mexican tax on gains realized on a sale
or other disposition of Series L  Shares or ADSs in a transaction that is not carried out
through the Mexican  Stock Exchange or other approved securities markets, so long as the
holder did  not own, directly or indirectly, 25% or more of our total capital stock
(including Series L Shares represented by ADSs) within the 12-month period  preceding
such sale or other disposition. Deposits of Series L Shares in  exchange for ADSs and
withdrawals of Series L Shares in exchange for ADSs will  not give rise to Mexican tax.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Non-resident
holders that do not meet the requirements referred to  above are subject to a 5%
withholding tax on the gross sales price received upon  the sale of Series L Shares
through the Mexican Stock Exchange. Alternatively,  non-resident holders may elect to be
subject to a 20% tax rate on their net  gains from the sale as
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 84 | 
| | -- | 



---





|calculated pursuant to the Mexican Income Tax
Law  provisions. In both cases, the financial institutions involved in the transfers
must withhold the tax.
|---------------------------------------------------------------------------------------------------------------------------------------------------------



|The Mexican tax
rules governing the taxation of gains of nonresident  holders on dispositions of their
Series L Shares or ADSs were amended during  2002. Nonresident holders who disposed of
their Series L Shares or ADSs during  2002 should consult their own Mexican tax advisors
for the Mexican tax treatment  of such dispositions.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Other Mexican Taxes
|-------------------



|There are no
Mexican inheritance, gift, succession or value added taxes  applicable to the ownership,
transfer, exchange or disposition of the Notes,  ADSs or the Series L Shares, although
gratuitous transfers of Series L Shares  may in certain circumstances cause a Mexican
federal tax to be imposed upon the  recipient. There are no Mexican stamp, issue,
registration or similar taxes or  duties payable by holders of the Notes, ADSs or Series
L Shares.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|United States Taxation
|----------------------



|Tax Considerations Relating to the Notes
|----------------------------------------



|Taxation of Interest and Additional Amounts in
Respect of the Notes. A U.S. holder will treat the gross amount of interest and
Additional Amounts (i.e., without reduction for Mexican withholding taxes) as ordinary
interest income in respect of the Notes. Mexican withholding taxes paid at the
appropriate rate applicable to the U.S. holder will be treated as foreign income taxes
eligible for credit against such U.S. holders United States federal income tax
liability, subject to generally applicable limitations and conditions, or, at the
election of such U.S. holder, for deduction in computing such U.S. holders taxable
income. Interest and Additional Amounts constitute income from sources without the
United States for foreign tax credit purposes. During any period where the applicable
withholding rate is 4.9%, such income generally will constitute passive income or,
in the case of certain U.S. holders, financial services income. If the
Mexican withholding tax rate applicable to a U.S. holder is 5% or more, however, such
income generally will constitute high withholding tax interest.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|The calculation of
foreign tax credits and, in the case of a U.S. holder that elects to deduct foreign
taxes, the availability of deductions, involves the application of rules that depend on a
U.S. holders  particular circumstances.  U.S. holders should consult their own tax
advisors regarding the availability of  foreign tax credits and the treatment of
Additional Amounts.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Foreign tax
credits may not be allowed for withholding taxes imposed in respect of certain short-term
or  hedged positions in securities or in respect of arrangements in which a U.S. holders
expected economic profit is  insubstantial.  U.S. holders should consult their own
advisers concerning the implications of these rules in  light of their particular
circumstances.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|A holder or
beneficial owner of Notes that is, with respect to the  United States, a foreign
corporation or a nonresident alien individual, referred  to in this annual report as a
Non-U.S. holder, generally will not be subject to  United States federal income or
withholding tax on interest income or Additional  Amounts earned in respect of Notes,
unless such income is effectively connected  with the conduct by the Non-U.S. holder of a
trade or business in the United  States.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Taxation of Dispositions of Notes. A gain or
loss realized by a U.S. holder on the sale, exchange, redemption or other disposition of
Notes generally will be a long-term capital gain or loss if, at the time of the
disposition, the Notes have been held for more than one year. Long-term capital gain
recognized by a U.S. holder that is an individual is subject to lower rates of federal
income taxation than ordinary income or short-term capital gain. The deduction of
capital loss is subject to limitations for U.S. federal income tax purposes.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 85 | 
| | -- | 



---





|Tax Considerations Relating to the Series
L Shares and the ADSs
|---------------------------------------------------------------



|In general, for
U.S. federal income tax purposes, holders of ADSs will  be treated as the owners of the
Series L Shares represented by those ADSs.
|--------------------------------------------------------------------------------------------------------------------------------------------------



|Taxation of Dividends. The gross amount of any
dividends paid with respect to the Series L Shares represented by ADSs or the Series L
Shares generally will be included in the gross income of a U.S. holder as ordinary
income on the day on which the dividends are received by the U.S. holder, in the case of
the Series L Shares, or by the Depositary, in the case of the Series L Shares
represented by ADSs, and will not be eligible for the dividends received deduction
allowed to corporations under the Internal Revenue Code of 1986, as amended. Dividends,
which will be paid in pesos, will be includible in the income of a U.S. holder in a U.S.
dollar amount calculated, in general, by reference to the exchange rate in effect on the
date that they are received by the U.S. holder, in the case of the Series L Shares, or
by the Depositary, in the case of the Series L Shares represented by the ADSs
(regardless of whether such pesos are in fact converted into U.S. dollars on such date).
If such dividends are converted into U.S. dollars on the date of receipt, a U.S. holder
generally should not be required to recognize foreign currency gain or loss in respect
of the dividends. Subject to certain exceptions for short-term and hedged positions, the
U.S. dollar amount of dividends received by an individual U.S. holder in respect of
Series L Shares or ADSs after December 31, 2002 and before January 1, 2009 is subject to
taxation at a maximum rate of 15%. U.S. holders should consult their own tax advisors
regarding the availability of the reduced dividends tax rate in light of their own
particular circumstances. U.S. holders should consult their tax advisors regarding the
treatment of the foreign currency gain or loss, if any, on any pesos received that are
converted into U.S. dollars on a date subsequent to the date of receipt. Dividends
generally will constitute foreign source passive income or, in the case of
certain U.S. holders, financial services income for U.S. foreign tax credit
purposes.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Distributions to
holders of additional Series L Shares with respect to  their ADSs that are made as part
of a pro rata distribution to all of our  shareholders generally will not be subject to
U.S. federal income tax.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|A holder of Series
L Shares or ADSs that is, with respect to the United  States, a foreign corporation or
Non-U.S. holder generally will not be subject  to U.S. federal income or withholding tax
on dividends received on Series L  Shares or ADSs, unless such income is effectively
connected with the conduct by  the Non-U.S. holder of a trade or business in the United
States.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Taxation of Capital Gains. A gain or loss
realized by a U.S. holder on the sale or other disposition of ADSs or Series L Shares
will be subject to U.S. federal income taxation as capital gain or loss in an amount
equal to the difference between the amount realized on the disposition and such U.S.
holders tax basis in the ADSs or the Series L Shares. Any such gain or loss will
be a long-term capital gain or loss if the ADSs or Series L Shares were held for more
than one year on the date of such sale. Long-term capital gain recognized by a U.S.
holder that is an individual is subject to lower rates of federal income taxation than
ordinary income or short-term capital gain. The deduction of capital loss is subject to
limitations for U.S. federal income tax purposes. Deposits and withdrawals of Series L
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.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Gain, if any,
realized by a U.S. holder on the sale or other  disposition of Series L Shares or ADSs
will be treated as U.S. source income for  U.S. foreign tax credit purposes. Consequently
if a Mexican withholding tax is  imposed on the sale or disposition of Series L Shares, a
U.S. holder that does  not receive significant foreign source income from other sources
may not be able  to derive effective U.S. foreign tax credit benefits in respect of these
Mexican  taxes. U.S. holders should consult their own tax advisors regarding the
application of the foreign tax credit rules to their investment in, and  disposition of,
Series L Shares.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|A Non-U.S. holder
of Series L Shares or ADSs will not be subject to  U.S. federal income or withholding tax
on any gain realized on the sale of  Series L Shares or ADSs, unless (i) such gain is
effectively connected with the  conduct by the Non-U.S. holder of a trade or business in
the United States, or  (ii) in the case of gain realized by an individual Non-U.S.
holder, the Non-U.S.  holder is present in the United States for 183 days or more in the
taxable year  of the sale and certain other conditions are met.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 86 | 
| | -- | 



---





|United States Backup Withholding and
Information Reporting
|----------------------------------------------------------



|A U.S. holder of
Series L Shares, ADSs or notes may, under certain  circumstances, be subject to backup
withholding with respect to certain  payments to such U.S. holder, such as
dividends, interest or the proceeds of a  sale or disposition of Series L Shares, ADSs or
Notes, unless such holder (i) is  a corporation or comes within certain exempt
categories, and demonstrates this  fact when so required, or (ii) provides a correct
taxpayer identification  number, certifies that it is not subject to backup withholding
and otherwise  complies with applicable requirements of the backup withholding rules. Any
amount withheld under these rules does not constitute a separate tax and will be
creditable against the holders U.S. federal income tax liability. While  Non-U.S.
holders generally are exempt from backup withholding, a Non-U.S. holder  may, in certain
circumstances, be required to comply with certain information  and identification
procedures in order to prove this exemption.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 87 | 
| | -- | 



---





|DOCUMENTS ON DISPLAY
|--------------------



|We file reports,
including annual reports on Form 20-F, and other information with the Securities and
Exchange Commission pursuant to the rules and regulations of the SEC that apply to
foreign private issuers. You may read and copy any materials filed with the SEC at its
public reference rooms in Washington, D.C., at 450 Fifth Street, N.W., Washington, D.C.
20549. Please call the SEC at 1-800-SEC-0330 for further information on the public
reference room. As a foreign private issuer, we were not required to make filings with
the SEC by electronic means prior to November 4, 2002, although we were permitted to do
so. Any filings we make electronically will be available to the public over the Internet
at the SECs web site at http://www.sec.gov.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|The annual and
quarterly reports of Panamco referenced in this annual report may be inspected and
copied at the offices of the SEC referenced above. Such information is also available on
the SECs web site at http://www.sec.gov. Such reports do not constitute part of
this annual report and are not incorporated by reference into this annual report.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 88 | 
| | -- | 



---





|Item 11.  Quantitative and Qualitative
Disclosures about Market Risk
|--------------------------------------------------------------------



|In connection with
our business activities, we have issued and hold  financial instruments that currently
expose us to market risks related to  changes in interest rates, foreign currency
exchange rates and commodity prices.  In May 2003, as a result of the Panamco
acquisition, we incurred or acquired  significant new indebtedness, which significantly
increased our exposure to  market risks relating to changes in interest rates and foreign
currency exchange  rates. See Item 5. Operating and Financial Review and
Prospects-Contractual  Obligations. We are also subject to exchange rate risks resulting
from our  subsidiaries outside Mexico that report their results in currencies other than
Mexican pesos.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|We currently do
not hedge our interest rate or exchange rate risks with  derivative instruments, but may
do so in the future.
|-----------------------------------------------------------------------------------------------------------------------------



|Interest Rate Risk
|------------------



|Interest rate risk exists principally
      with respect to our indebtedness that bears interest at floating rates.
      At December 31, 2002, we had outstanding indebtedness of Ps.3,177.4 million,
      of which approximately 99.9% bore interest at fixed interest rates and approximately
      0.1% bore interest at variable interest rates. The interest rate on our
      variable rate debt is determined by reference to the London Interbank Offer
      Rate, or LIBOR, a benchmark rate used for Eurodollar loans. LIBOR increases
      would, consequently, increase our interest payments.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|The table below provides information
      about our financial instruments that are sensitive to changes in interest
      rates, presenting principal payments and related weighted average interest
      rates by expected maturity dates. Weighted average variable rates are based
      on the LIBOR curve on December 31, 2002, plus spread contracted by us. The
      instruments actual payments are denominated in U.S. dollars, which
      are presented in pesos, our reporting currency, in the table below, utilizing
      the December 31, 2002 exchange rate of Ps.10.459 Mexican pesos per dollar.
      The fair value of long-term bank loans and syndicated loans is based on
      the discounted value of contractual cash flows. The discount rate is estimated
      using rates currently offered for debt with similar remaining maturities.
      The fair value of long-term notes payable is based on quoted market prices.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Principal by Year of Maturity
At December 31, 2002  (millions of constant Mexican pesos)
|----------------------------------------------------------------------------------------

|                      |     |      |         |      |     |      |         |       | 2007 |                     | 2008 
        and 
        thereafter | 2002 | 2001               
|--------------------- | --- | ---- | ------- | ---- | --- | ---- | ------- | ----- | ---- | ------------------- | ------------------------------------- | ---- | -------------------
|2003                  |     | 2004 |         | 2005 |     | 2006 |         | Total |      | Fair 
        Value | Total                                 |      | Fair 
        Value
|Fixed Rate Debt       |     |      |         |      |     |      |         |       |      |                     |                                       |      |                    
|Principal             | -   |      | 1,045.9 |      | -   |      | 2,091.8 |       |      |                     | -                                     |      | 3,137.7            
|Weighted average rate | -   |      | 9.4     | %    | -   |      | 9.0     | %     |      |                     | -                                     |      | 9.1                
|                      |     |      |         |      |     |      |         |       |      |                     |                                       |      |                    
|Variable Rate Debt    |     |      |         |      |     |      |         |       |      |                     |                                       |      |                    
|Principal             | 9.3 |      | 9.3     |      | 7.0 |      | 7.0     |       | 7.0  |                     | 1.8                                   |      | 41.4               
|Weighted average rate | 8.7 | %    | 8.7     | %    | 9.4 | %    | 9.4     | %     | 9.4  | %                   | 9.1                                   | %    | 9.1                

|A hypothetical,
instantaneous and unfavorable change of 100 basis  points in the average interest rate
applicable to floating-rate liabilities held  at December 31, 2002 would have increased
our interest expense in 2002 by  approximately Ps.0.4 million, or 0.1%, over a 12-month
period.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Exchange Rate Risk
|------------------



|Our principal
exchange rate risk involves changes in the value of the  peso relative to the U.S.
dollar. In 2002, approximately 92% of our consolidated  total revenues were denominated
in pesos, and 8% were denominated in Argentine  pesos. We estimate that a majority of our
consolidated costs and expenses are  denominated in pesos for Mexican subsidiaries and in
Argentine pesos for  Coca-Cola FEMSA de Buenos Aires. As of December 31,
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 89 | 
| | -- | 



---





|2002, all our indebtedness  was denominated in
U.S. dollars. Decreases in the value of the peso relative to  the U.S. dollar will
increase the cost in pesos of our foreign currency  denominated operating costs and
expenses and of the debt service obligations  with respect to our foreign currency
denominated indebtedness. A depreciation of  the peso relative to the U.S. dollar will
also result in foreign exchange losses  as the peso value of our foreign currency
denominated indebtedness is increased.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Our exposure to
market risk associated with changes in foreign currency  exchange rates relates primarily
to U.S. dollar-denominated debt obligations as  shown in the interest risk table above.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|As of December 31,
2002, we did not have any forward agreements to  hedge our liabilities denominated in US
dollars and we did not have any call  option agreements to buy U.S. dollars. A
hypothetical, instantaneous 10%  devaluation in the value of the peso relative to the
U.S. dollar occurring on  December 31, 2002, would have resulted in a decrease in our net
consolidated  integral cost of financing of approximately Ps.16.9 million over a 12-month
period, reflecting a foreign exchange gain generated by the cash balances held  in U.S.
dollars as of that date, net of the loss based on our U.S.  dollar-denominated
indebtedness at December 31, 2002. However, this result does  not take into account any
gain on monetary position that would be expected to  result from an increase in the
inflation rate generated by a devaluation of the  peso relative to the U.S. dollar, which
gain on monetary position would reduce  the consolidated net integral cost of financing.
After the Panamco acquisition,  we have a net monetary liability position in U.S.
dollars, which could result in  significant increases in the integral costs of financing
in the event of a  devaluation of the Mexican peso.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Commodity Price Risk
|--------------------



|On December 31,
2002 the Company signed various derivative contracts  with different financial
institutions to hedge the cost of aluminum for 2003 and  2004. These contracts vary in
nature, but all settle exclusively in cash.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|    
|----
|
|    
|2003
|    
|    
|2004
|    
|    



|The fair value is
estimated based on quoted market prices to terminate  the contracts at December 31, 2002.
|-----------------------------------------------------------------------------------------------------------



|Equity Risk
|-----------



|In  1997, certain
of our subsidiaries commenced an executive incentive  program, which  expired in
accordance with its terms in March 2003 with no  payments having been done  under the
program. In November 1997, we hedged our  obligations under the executive  incentive
program by investing in options  related to FEMSA BD Units. See Item 6.  Directors,
Senior Management and  EmployeesCompensation of Directors and Officers.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 90 | 
| | -- | 



---





|Items 12-14.  Not Applicable
|----------------------------



|Item 15.  Controls and Procedures
|---------------------------------



|(a) Within the 90
days prior to the date of this report, the Company  carried out an evaluation under the
supervision and with the participation of  the Companys management, including the
Chief Executive Officer and Chief  Financial Officer, of the effectiveness of the design
and operation of the  Companys disclosure controls and procedures. There are
inherent limitations to  the effectiveness of any system of disclosure controls and
procedures, including  the possibility of human error and the circumvention or overriding
of the  controls and procedures. Accordingly, even effective disclosure controls and
procedures can only provide reasonable assurance of achieving their control  objectives.
Based upon and as of the date of the Companys evaluation, the Chief  Executive
Officer and Chief Financial Officer concluded that the disclosure  controls and
procedures are effective to provide reasonable assurance that  information required to be
disclosed in the reports the Company files and  submits under the Exchange Act is
recorded, processed, summarized and reported  as and when required.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(b) There were no
significant changes in our internal controls or in  other factors that could
significantly affect our internal controls subsequent  to the date we carried out our
evaluation.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Items 16-17.  Not Applicable
|----------------------------



|Item 18.  Financial Statements
|------------------------------



|Reference is made
to Item 19(a) for a list of all financial statements  filed as part of this annual report.
|------------------------------------------------------------------------------------------------------------



|Item 19.  Exhibits
|------------------

|                                                                   | 
|------------------------------------------------------------------ | 
|(a) List of Financial Statements Page                              | 
|Report of Independent Public Accountants                           | 
|Consolidated Balance Sheets at December 31,
      2002 and 2001    | 
|Consolidated Income Statements For the Years
      Ended           | 
|December 31, 2002, 2001
      and 2000                             | 
|Consolidated Statements of Changes in Financial
      Position For | 
|the Years Ended December
      31, 2002, 2001 and 2000             | 
|Consolidated Statements of Changes in Stockholders
      Equity   | 
|For the Years Ended December
      31, 2002, 2001 and 2000         | 
|Notes to the Consolidated Financial Statements*                    | 

|
|

|* |  | 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
Financial Statements or Notes thereto.
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(b) List of Exhibits
|--------------------



|Exhibit No: | Description
|----------- | -----------





|Exhibit 1.1 | Bylaws (Estatutos Sociales)
      of Coca-Cola FEMSA, dated May 12, 1993 (incorporated by reference to Exhibit
      3.4 to Coca-Cola FEMSAs Registration Statement on Form F-1 filed on
      August 13, 1993 (File No. 333-67380)).
|----------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





| | 91 | 
| | -- | 



---





|Exhibit No: | Description
|----------- | -----------





|Exhibit 1.2 | Amendment to the Bylaws of Coca-Cola
      FEMSA, dated June 21, 1993 (incorporated by reference to Exhibit 3.5 to
      Coca-Cola FEMSAs Registration Statement on Form F-1 filed on August
      13, 1993 (File No. 333-67380)).
|----------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





|Exhibit 1.3 | Amendment to the Bylaws of Coca-Cola
      FEMSA, dated May 6, 2003 (English translation).
|----------- | ------------------------------------------------------------------------------------------





|Exhibit 2.1 | Deposit Agreement among Coca-Cola FEMSA,
      the Bank of New York as Depositary and Holders and Beneficial Owners of
      American Depository Receipts, dated as of September 1, 1993 (incorporated
      by reference to Exhibit 3.5 to the Registration Statement of FEMSA on Form
      F-4 filed on April 9, 1998 (File No. 333-8618)).
|----------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





|Exhibit 2.2 | Indenture Agreement between Coca-Cola
      FEMSA and Citibank, N.A., as Trustee, dated as of October 28, 1996 (incorporated
      by reference to Exhibit 2.1 to Coca-Cola FEMSAs Annual Report on Form
      20-F filed on June 30, 1997 (File No. 1-12260)).
|----------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





|Exhibit 2.3 | Note Purchase Agreement between Coca-Cola
      FEMSA and the holders specified therein, dated as of August 26, 1994 (incorporated
      by reference to Exhibit 10.4 to Coca-Cola FEMSAs Annual Report on
      Form 20-F filed on June 30, 1995 (File No. 1-12260)).
|----------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





|Exhibit 2.4 | Indenture, dated July 11, 1997, by and
      between Panamco and The Chase Manhattan Bank, as Trustee (incorporated by
      reference to Exhibit 4.1 of Panamcos Registration Statement on Form
      F-4, (File No. 333-7918)).
|----------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





|Exhibit 2.5 | Bridge Loan Agreement, dated as of
      April 23, 2003 by and among Coca-Cola FEMSA, JPMorgan Chase Bank, Banco
      J.P. Morgan, S.A., Morgan Stanley Senior Funding, Inc., J.P. Morgan Securities
      Inc., Banco Nacional de México, S.A., BBVA Bancomer and ING Bank,
      N.V.
|----------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





|Exhibit 2.6 | Term Loan Agreement dated April 23,
      2003 by and among Coca-Cola FEMSA, JPMorgan Chase Bank, Banco J.P. Morgan,
      S.A., Morgan Stanley Senior Funding, Inc., J.P. Morgan Securities Inc.,
      Banco Nacional de México, S.A., BBVA Bancomer and ING Bank, N.V.
|----------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





|Exhibit 4.1 | Bottler Agreement with respect to the
      Valley of Mexico between Coca-Cola FEMSA and The Coca-Cola Company, dated
      June 21, 1993 (incorporated by reference to Exhibit 10.1 to Coca-Cola FEMSAs
      Registration Statement on Form F-1 filed on August 13, 1993 (File No. 333-67380)).
|----------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





|Exhibit 4.2 | Supplemental Agreement with respect
      to the Valley of Mexico between Coca-Cola FEMSA and The Coca-Cola Company,
      dated June 21, 1993 (incorporated by reference to Exhibit 10.3 to Coca-Cola
      FEMSAs Registration Statement on Form F-1 filed on August 13, 1993
      (File No. 333-67380)).
|----------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





|Exhibit 4.3 | Bottler Agreement with respect to the
      Southeast Territory in Mexico between Coca-Cola FEMSA and The Coca-Cola
      Company, dated June 21, 1993 (incorporated by reference to Exhibit 10.2
      to Coca-Cola FEMSAs Registration Statement on Form F-1 filed on August
      13, 1993 (File No. 333-67380)).
|----------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





| | 92 | 
| | -- | 



---





|Exhibit No: | Description
|----------- | -----------





|Exhibit 4.4 | Supplemental Agreement with respect
      to the Southeast Territory in Mexico between Coca-Cola FEMSA and The Coca-Cola
      Company, dated June 21, 1993 (incorporated by reference to Exhibit 10.4
      to Coca-Cola FEMSAs Registration Statement on Form F-1 filed on August
      13, 1993 (File No. 333-67380)).
|----------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





|Exhibit 4.5 | Bottler Agreement with respect to the
      Gran Buenos Aires area between Coca-Cola FEMSA and The Coca-Cola Company,
      dated August 22, 1994 (incorporated by reference to Exhibit 10.1 to Coca-Cola
      FEMSAs Annual Report on Form 20-F filed on June 30, 1995 (File No.
      1-12260)).
|----------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





|Exhibit 4.6 | Supplemental Agreement with respect
      to the Gran Buenos Aires area between Coca-Cola FEMSA and The Coca-Cola
      Company, dated August 22, 1994 (incorporated by reference to Exhibit 10.2
      to Coca-Cola FEMSAs Annual Report on Form 20-F filed on June 30, 1995
      (File No. 1-12260)).
|----------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





|Exhibit 4.7 | Amendment, dated August 4, 1995, to
      Bottler Agreement with respect to the Gran Buenos Aires area, dated August
      22, 1994, between Coca-Cola FEMSA and The Coca-Cola Company (incorporated
      by reference to Exhibit 10.3 to Coca-Cola FEMSAs Annual Report on
      Form 20-F filed on June 28, 1996 (File No. 1-12260)).
|----------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





|Exhibit 4.8 | Bottler Agreement with respect to former
      SIRSA San Isidro Refrescos, S.A. I y C (SIRSA) territory, dated
      December 1, 1995, between Coca-Cola FEMSA and The Coca-Cola Company (incorporated
      by reference to Exhibit 10.4 to Coca-Cola FEMSAs Annual Report on
      Form 20-F filed on June 28, 1996 (File No. 1-12260)).
|----------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





|Exhibit 4.9 | Supplemental Agreement with respect
      to former SIRSA territory between Coca-Cola FEMSA and The Coca-Cola Company,
      dated December 1, 1995 (incorporated by reference to Exhibit 10.6 to Coca-Cola
      FEMSAs Annual Report on Form 20-F filed on June 28, 1996 (File No.
      1-12260)).
|----------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





|Exhibit 4.10 | Amendment, dated February 1, 1996, to
      Bottler Agreement with respect to former SIRSA territory, dated December
      1, 1995, between Coca-Cola FEMSA and The Coca-Cola Company (incorporated
      by reference to Exhibit 10.5 to Coca-Cola FEMSAs Annual Report on
      Form 20-F filed on June 28, 1996 (File No. 1-12260)).
|------------ | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





|Exhibit 4.11 | Amendment, dated October 30, 1997, to
      Bottler Agreement with respect to the Southeast of Mexico Territory and
      the Tapachula area in Mexico, dated June 21, 1993, between Coca-Cola FEMSA
      and The Coca-Cola Company (with an English translation) (incorporated by
      reference to Exhibit 4.11 to Coca-Cola FEMSAs Annual Report on Form
      20-F filed on June 20, 2001 (File No. 1-12260)).
|------------ | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





|Exhibit 4.12 | Amendment, dated May 22, 1998, to Bottler
      Agreement with respect to the former SIRSA territory, dated December 1,
      1995, between Coca-Cola FEMSA and The Coca-Cola Company (with an English
      translation) (incorporated by reference to Exhibit 4.12 to Coca-Cola FEMSAs
      Annual Report on Form 20-F filed on June 20, 2001 (File No. 1-12260)).
|------------ | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





|Exhibit 4.13 | Amended and Restated Shareholders Agreement
      by and among CIBSA, Emprex, The Coca-Cola Company and Inmex, dated as of
      July 6, 2002.
|------------ | ----------------------------------------------------------------------------------------------------------------------------------------------





| | 93 | 
| | -- | 



---





|Exhibit No: | Description
|----------- | -----------





|Exhibit 4.14 | Amendment, dated May 6, 2003, to the
      Amended and Restated Shareholders Agreement, dated July 6, 2002, among CIBSA,
      Emprex, The Coca-Cola Company, Inmex, Atlantic Industries, Dulux CBAI 2003
      B.V. and Dulux CBEXINMX 2003 B.V.
|------------ | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





|Exhibit 4.15 | Services Agreement between Coca-Cola
      FEMSA and FEMSA Logística, dated November 7, 2001 (with an English
      translation) (incorporated by reference to Exhibit 4.15 to Coca-Cola FEMSAs
      Annual Report on Form 20-F filed on June 20, 2001 (File No. 1-12260)).
|------------ | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





|Exhibit 4.16 | Supply Agreement between Coca-Cola FEMSA
      and FEMSA Empaques, dated June 21, 1993 (incorporated by reference to Exhibit
      10.7 to Coca-Cola FEMSAs Registration Statement on Form F-1 filed
      on August 13, 1993 (File No. 333-67380)).
|------------ | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





|Exhibit 4.17 | Coca-Cola Tradename License Agreement
      between Coca-Cola FEMSA and The Coca-Cola Company, dated June 21, 1993 (incorporated
      by reference to Exhibit 10.40 to FEMSAs Registration Statement on
      Form F-4 filed on April 9, 1998 (File No. 333-8618)).
|------------ | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





|Exhibit 4.18 | Supply Agreement between ALPLA Fábrica
      de Plásticos, S.A. de C.V. and Industria Embotelladora de México,
      S.A. de C.V., dated April 3, 1998 (with an English translation) (incorporated
      by reference to Exhibit 4.18 to Coca-Cola FEMSAs Annual Report on
      Form 20-F filed on July 1, 2002 (File No. 1-12260)).*
|------------ | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





|Exhibit 4.19 | Franchise Agreement between Promotora
      de Marcas Nacionales, S.A. de C.V. and Inmuebles del Golfo, S.A. de C.V.,
      dated November 2, 2001 (with an English translation) (incorporated by reference
      to Exhibit 4.19 to Coca-Cola FEMSAs Annual Report on Form 20-F filed
      on July 1, 2002 (File No. 1-12260)).*
|------------ | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





|Exhibit 4.20 | Franchise Agreement between Promotora
      de Marcas Nacionales, S.A. de C.V. and Propimex, S.A. de C.V., dated November
      2, 2001 (with an English translation) (incorporated by reference to Exhibit
      4.20 to Coca-Cola FEMSAs Annual Report on Form 20-F filed on July
      1, 2002 (File No. 1-12260)).*
|------------ | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





|Exhibit 4.21 | Share Subscription Agreement, dated
      as of October 2, 2002, entered by and among Coca Cola de Panama as Seller
      and CA Beverages, Inc. as Buyer (incorporated by reference to Exhibit 10.49
      of Panamcos Annual Report on Form 10-K for the year ended December
      31, 2002 (File No. 1-2290)).
|------------ | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





|Exhibit 4.22 | Coca Cola OPA Trust Agreement, dated
      as of October 2, 2002, entered by and among Coca Cola de Panama Compania
      Embotelladora, S.A. as the Settlor, Banco General, S.A. as the Trustee,
      Fundacion Pro Accionistas Minoritarios de Coca Cola de Panama y Cervecerias
      Baru-Panama as the Representative and CA Beverages, Inc. (incorporated by
      reference to Exhibit 10.50 of Panamcos Annual Report on Form 10-K
      for the year ended December 31, 2002 (File No. 1-2290)).
|------------ | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





|Exhibit 4.23 | Coca Cola Holdback Agreement, dated
      as of October 2, 2002, entered by and among Coca Cola de Panama Compania
      Embotelladora, S.A. as the Settlor, Banco General, S.A. as the Trustee,
      Fundacion Pro Accionistas Minoritarios de Coca Cola de Panama y Cervecerias
      Baru-Panama as the Representative and CA Beverages, Inc. (incorporated by
      reference to Exhibit 10.51 of Panamcos Annual Report on Form 10-K
      for the year ended December 31, 2002 (File No. 1-2290)).
|------------ | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





| | 94 | 
| | -- | 



---





|Exhibit No: | Description
|----------- | -----------





|Exhibit 4.24 | CBP OPA Trust Agreement, dated October
      2, 2002, entered by and among CA Beverages, Inc. as Settlor, Banco General,
      S.A. as Trustee, Fundacion Pro Accionistas Minoritarios de Coca Cola de
      Panama y Cervecerias Baru-Panama as the Representative (incorporated by
      reference to Exhibit 10.52 of Panamcos Annual Report on Form 10-K
      for the year ended December 31, 2002 (File No. 1-2290)).
|------------ | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





|Exhibit 4.25 | Agreement of Merger, dated December
      22, 2002, among the Coca-Cola FEMSA, Midtown Sub, Inc. and Panamco (incorporated
      by reference to the report of Foreign Issuer on Form
      6-K filed by Coca-Cola FEMSA with the SEC on December 26, 2002 (File No.
      1-12260)).
|------------ | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





|Exhibit 4.26 | Amendment to the Trademark License
      Agreement, dated December 1, 2002, entered by and among Administracion de
      Marcas S.A. de C.V., as proprietor, and The Coca-Cola Export Corporation
      Mexico branch, as licensee (incorporated by reference to Exhibit 10.3 of
      Panamcos Quarterly Report on Form 10-Q for the period ended March
      31, 2003 (File No. 
      1-2290)).
|------------ | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





|Exhibit 4.27 | Trademark Sub-License Agreement, dated
      January 4, 2003, entered by and among Panamco Golfo S.A. de C.V., as licensor,
      and The Coca-Cola Company, as licensee (incorporated by reference to Exhibit
      10.6 of Panamcos Quarterly Report on Form 10-Q for the period ended
      March 31, 2003 (File No. 1-2290)).
|------------ | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





|Exhibit 4.28 | Trademark Sub-License Agreement, dated
      January 4, 2003, entered by and among Panamco Bajio S.A. de C.V., as licensor,
      and The Coca-Cola Company, as licensee (incorporated by reference to Exhibit
      10.7 of Panamcos Quarterly Report on Form 10-Q for the period ended
      March 31, 2003 (File No. 1-2290)).
|------------ | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





|Exhibit 4.29 | Promotion and Non-Compete Agreement,
      dated March 11, 2003, entered by and among The Coca-Cola Export Corporation
      Mexico branch and Panamco Bajio S.A. de C.V. (incorporated by reference
      to Exhibit 10.8 of Panamcos Quarterly Report on Form 10-Q for the
      period ended March 31, 2003 (File No. 1-2290)).
|------------ | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





|Exhibit 4.30 | Promotion and Non-Compete Agreement,
      dated March 11, 2003, entered by and among The Coca-Cola Export Corporation
      Mexico branch and Panamco Golfo S.A. de C.V. (incorporated by reference
      to Exhibit 10.9 of Panamcos Quarterly Report on Form 10-Q for the
      period ended March 31, 2003 (File No. 1-2290)).
|------------ | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





|Exhibit 4.31 | Memorandum of Understanding by and among
      Panamco, as seller, and The Coca-Cola Company, as buyer, dated as of May
      11, 2003, (incorporated by reference to Exhibit 10.14 of Panamcos
      Quarterly Report on Form 10-Q for the period ended March 31, 2003 (File
      No. 
      1-2290)).
|------------ | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





|Exhibit 4.32 | Bottler Agreement with respect to the
      Mexican Golfo area between Panamco Golfo, S.A. de C.V. and The Coca-Cola
      Company, dated July 1, 1999 (English Translation).
|------------ | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------





|Exhibit 4.33 | Bottler Agreement with respect to the
      Mexican Bajio area between Panamco Bajio, S.A. de C.V. and The Coca-Cola
      Company, dated July 1, 1999 (English Translation).
|------------ | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------





|Exhibit 4.34 | Form of Bottler Agreement covering
      all territories outside of Mexico that belonged to Panamco, including schedule
      of covered territories (English Translation).
|------------ | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------





|Exhibit 8.1 | List of Coca-Cola FEMSAs Significant
      Subsidiaries.
|----------- | ---------------------------------------------------------





|Exhibit 12.1 | Officer Certifications pursuant to Section
      906 of the Sarbanes-Oxley Act of 2002.
|------------ | ---------------------------------------------------------------------------------------



|
|

|* |  | Portions
of Exhibits 4.18, 4.19, 4.20 and 4.21 have been omitted  pursuant to a request for
confidential treatment. Such omitted portions  have been filed separately with the
Securities and Exchange Commission.
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 95 | 
| | -- | 



---





|Omitted from the
exhibits filed with this annual report are certain  instruments and agreements with
respect to long-term debt of Coca-Cola FEMSA,  none of which authorizes securities in a
total amount that exceeds 10% of the  total assets of Coca-Cola FEMSA. We hereby agree to
furnish to SEC copies of any  such omitted instruments or agreements as the Commission
requests.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 96 | 
| | -- | 



---





|SIGNATURE
|---------



|Pursuant to the
requirements of Section 12 of the Securities Exchange  Act of 1934, the registrant
certifies that it meets all the requirements for  filing on Form 20-F and has duly caused
this Annual Report to be signed on its  behalf by the undersigned, thereunto duly
authorized.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Dated: June 27, 2003
|--------------------



| | COCA-COLA FEMSA, S.A. de C.V. 
      By:   /s/  HÉCTOR TREVIÑO
      GUTIÉRREZ
      Héctor Treviño Gutiérrez
| | -------------------------------------------------------------------------------------------------------------



| | 97 | 
| | -- | 



---





|CERTIFICATIONS
|--------------



|I, CARLOS SALAZAR LOMELIN, certify that:
|----------------------------------------



|1. | I
have reviewed this annual report on Form 20-F of Coca-Cola FEMSA, S.A. de  C.V.;
|-- | ----------------------------------------------------------------------------------





|2. | Based
on my knowledge, this 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  report;
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





|3. | Based
on my knowledge, the financial statements, and other financial  information included in
this 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 report;
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





|4. | The
registrants other certifying officers and I are responsible for  establishing and
maintaining disclosure controls and procedures (as defined  in Exchange Act Rules 13a-15
and 15d-15) for the registrant and have:
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





| | (a) Designed
such disclosure controls and procedures to ensure that  material information relating to
the registrant, including its consolidated  subsidiaries, is made known to us by others
within those entities,  particularly during the period in which this 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  report (the Evaluation Date);
and
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





| | (c) Presented
in this report our conclusions about the effectiveness of the  disclosure controls and
procedures based on our evaluation as of the  Evaluation Date;
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------





|5. | The
registrants other certifying officers and I have disclosed, based on  our most
recent evaluation, to the registrants auditors and the audit  committee of
registrants board of directors (or persons performing the  equivalent functions):
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





| | (a) All
significant deficiencies in the design or operation of internal  controls which could
adversely affect the registrants ability to record,  process, summarize and report
financial data and have identified for the  registrants auditors any material
weaknesses in internal controls; and
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





| | (b) Any fraud,
whether or not material, that involves management or other  employees who have a
significant role in the registrants internal  controls; and
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------





|6. | The
registrants other certifying officers and I have indicated in this  report whether
there were significant changes in internal controls or in  other factors that could
significantly affect internal controls subsequent  to the date of our most recent
evaluation, including any corrective actions  with regard to significant deficiencies and
material weaknesses.
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





|Date: June 27, 2003
|-------------------



| | /s/ Carlos Salazar Lomelín                           
| | -----------------------------------------------------
| | Carlos Salazar Lomelín 
      Chief Executive Officer



| | 98 | 
| | -- | 



---





|CERTIFICATIONS
|--------------



|I, HECTOR J. TREVINO GUTIERREZ, certify that:
|---------------------------------------------



|1. | I
have reviewed this annual report on Form 20-F of Coca-Cola FEMSA, S.A. de  C.V.;
|-- | ----------------------------------------------------------------------------------





|2. | Based
on my knowledge, this 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  report;
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





|3. | Based
on my knowledge, the financial statements, and other financial  information included in
this 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 report;
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





|4. | The
registrants other certifying officers and I are responsible for  establishing and
maintaining disclosure controls and procedures (as defined  in Exchange Act Rules 13a-15
and 15d-15) for the registrant and have:
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





| | (a) Designed
such disclosure controls and procedures to ensure that  material information relating to
the registrant, including its consolidated  subsidiaries, is made known to us by others
within those entities,  particularly during the period in which this 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  report (the Evaluation Date);
and
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





| | (c) Presented
in this report our conclusions about the effectiveness of the  disclosure controls and
procedures based on our evaluation as of the  Evaluation Date;
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------





|5. | The
registrants other certifying officers and I have disclosed, based on  our most
recent evaluation, to the registrants auditors and the audit  committee of
registrants board of directors (or persons performing the  equivalent functions):
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





| | (a) All
significant deficiencies in the design or operation of internal  controls which could
adversely affect the registrants ability to record,  process, summarize and report
financial data and have identified for the  registrants auditors any material
weaknesses in internal controls; and
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





| | (b) Any fraud,
whether or not material, that involves management or other  employees who have a
significant role in the registrants internal  controls; and
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------





|6. | The
registrants other certifying officers and I have indicated in this  report whether
there were significant changes in internal controls or in  other factors that could
significantly affect internal controls subsequent  to the date of our most recent
evaluation, including any corrective actions  with regard to significant deficiencies and
material weaknesses.
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





|Date: June 27, 2003
|-------------------



| | /s/ Héctor J. Treviño Gutiérrez                          
| | ---------------------------------------------------------
| | Héctor J. Treviño Gutiérrez
      Chief Financial Officer



| | 99 | 
| | -- | 



---





|REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
|----------------------------------------



|To the Stockholders ofCoca-Cola FEMSA, S.A.
de C.V.,
|----------------------------------------------------



|We have audited the accompanying consolidated
balance sheets of Coca-Cola FEMSA,  S.A. de C.V. (a Mexican corporation) and Subsidiaries
(collectively referred to  as the Company) as of December 31, 2002 and 2001,
and the related consolidated  statements of income, changes in stockholders equity
and changes in financial  position for each of the three years in the period ended
December 31, 2002, all  expressed in thousands of Mexican pesos of purchasing power as of
December 31,  2002. These financial statements are the responsibility of the Companys
management. Our responsibility is to express an opinion on these financial  statements
based on our audits.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|We conducted our audits in accordance with
auditing standards generally accepted  in Mexico and in the United States of America.
Those standards require that we  plan and perform the audit to obtain reasonable
assurance about whether the  financial statements are free of material misstatement. An
audit includes  examining, on a test basis, evidence supporting the amounts and
disclosures in  the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as  evaluating the
overall financial statement presentation. We believe that our  audits provide a
reasonable basis for our opinion.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



|As mentioned in Note 4:
|-----------------------

|- |  | Effective
January 1, 2000 the new procedures for the recognition of  deferred income taxes as
prescribed by revised Bulletin D-4, Accounting  for Income Taxes, Tax on Assets and
Employee Profit Sharing, were adopted.
|- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|- |  | Effective
January 1, 2001 the new procedures for the recognition of all  financial instruments as
prescribed by Bulletin C-2, Financial  Instruments, were adopted.
|- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Accounting practices used by the Company in
preparing the accompanying  consolidated financial statements conform with accounting
principles generally  accepted in Mexico but do not conform with accounting principles
generally  accepted in the United States of America (U.S. GAAP). A description of these
differences and a reconciliation of consolidated net income and stockholders equity
to U.S. GAAP as permitted by the regulations of the U.S. Securities and  Exchange
Commission, which allow omission of the requirement to quantify, in the  U.S. GAAP
reconciliation, the differences attributable to the effects of  comprehensive inflation
adjustments recorded locally, are set forth in Notes 22  and 23.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Our audits also comprehended the translation of
the Mexican peso amounts into  U.S. dollar amounts and, in our opinion, such translation
has been made in  conformity with the basis stated in Note 2. The translation of the
financial  statement amounts into U.S. dollars and the translation of the financial
statements into English have been made solely for the convenience of readers in  the
United States of America.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Mexico City, MexicoJanuary 21, 2003, except
for Note 25 as to which the date is May 6, 2003
|-------------------------------------------------------------------------------------------



| | F-1 | 
| | --- | 



---





|Coca-Cola FEMSA, S.A. de C.V. and Subsidiaries
|----------------------------------------------

|Consolidated Balance Sheets
|---------------------------

|At December 31, 2002 and 2001Amounts
expressed in thousands of U.S. Dollars ($) and constant Mexican Pesos (Ps.) as of
December 31, 2002
|----------------------------------------------------------------------------------------------------------------------------------------

|                                         |  |            |  | 2002 |             |    | 2001       
|---------------------------------------- |  | ---------- |  | ---- | ----------- | -- | -----------
|                                        
|Assets                                   |  |            |  |      |             |    |            
|Current Assets:                          |  |            |  |      |             |    |            
|Cash and cash equivalents                |  | $590,057   |  | Ps.  | 6,171,394   | Ps | 4,523,063  
|                                        
|Accounts receivable:                     |  |            |  |      |             |    |            
|Trade                                    |  | 52,396     |  |      | 548,010     |    | 587,823    
|Notes                                    |  | 966        |  |      | 10,105      |    | 25,600     
|Other                                    |  | 19,351     |  |      | 202,414     |    | 327,667    
|                                        
|                                         |  | 72,713     |  |      | 760,529     |    | 941,090    
|                                        
|Recoverable taxes                        |  | 23,033     |  |      | 240,905     |    | 2,288      
|Inventories                              |  | 71,401     |  |      | 746,786     |    | 576,525    
|Prepaid expenses                         |  | 6,789      |  |      | 70,994      |    | 28,378     
|                                        
|Total Current Assets                     |  | 763,993    |  |      | 7,990,608   |    | 6,071,344  
|                                        
|Property, Plant and Equipment:           |  |            |  |      |             |    |            
|Land                                     |  | 73,726     |  |      | 771,104     |    | 757,171    
|Buildings                                |  | 236,104    |  |      | 2,469,411   |    | 2,355,133  
|Machinery and equipment                  |  | 592,454    |  |      | 6,196,478   |    | 5,645,105  
|Accumulated depreciation                 |  | (297,615)  |  |      | (3,112,760) |    | (2,637,529)
|Construction in progress                 |  | 34,483     |  |      | 360,655     |    | 305,520    
|Bottles and cases                        |  | 27,174     |  |      | 284,218     |    | 212,308    
|                                        
|Total Property, Plant and Equipment, Net |  | 666,326    |  |      | 6,969,106   |    | 6,637,708  
|                                        
|Investments in Shares                    |  | 11,085     |  |      | 115,941     |    | 128,044    
|Deferred Charges, Net                    |  | 80,163     |  |      | 838,430     |    | 527,334    
|Goodwill, Net                            |  | 24,712     |  |      | 258,459     |    | 895,983    
|                                        
|Total Assets                             |  | $1,546,279 |  | Ps.  | 16,172,544  | Ps | .14,260,413
|                                        



| | F-2 | 
| | --- | 



---



|Liabilities and Stockholders Equity                    |            |     |             |     |            
|------------------------------------------------------- | ---------- | --- | ----------- | --- | -----------
|                                                       
|Current Liabilities:                                    |            |     |             |     |            
|Bank loans and interest                                 | $6,874     | Ps. | 71,900      | Ps. | 66,949     
|Current maturities
        of long-term debt            | 889        |     | 9,294       |     | 13,400     
|Suppliers                                               | 151,661    |     | 1,586,225   |     | 1,511,244  
|Accounts payable                                        | 38,900     |     | 406,872     |     | 348,632    
|Accrued taxes                                           | 21,159     |     | 221,299     |     | 396,829    
|Other liabilities                                       | 23,293     |     | 243,608     |     | 90,176     
|                                                       
|Total Current Liabilities                               | 242,776    |     | 2,539,198   |     | 2,427,230  
|                                                       
|Long-Term Liabilities:                                  |            |     |             |     |            
|Long-term debt                                          | 303,070    |     | 3,169,810   |     | 2,949,391  
|Pension plan                                            | 15,577     |     | 162,923     |     | 154,626    
|Seniority premiums                                      | 2,026      |     | 21,191      |     | 19,124     
|Deferred taxes                                          | 75,283     |     | 787,386     |     | 670,278    
|Other liabilities                                       | 35,200     |     | 368,159     |     | 359,761    
|                                                       
|Total Long-Term Liabilities                             | 431,156    |     | 4,509,469   |     | 4,153,180  
|                                                       
|Total Liabilities                                       | 673,932    |     | 7,048,667   |     | 6,580,410  
|                                                       
|Stockholders Equity:                                   |            |     |             |     |            
|Capital stock                                           | 226,557    |     | 2,369,560   |     | 2,369,560  
|Additional paid-in
        capital                      | 159,397    |     | 1,667,130   |     | 1,667,130  
|Retained earnings
        from prior years              | 636,717    |     | 6,659,422   |     | 5,042,066  
|Net income for the
        year                         | 245,169    |     | 2,564,218   |     | 2,202,334  
|Cumulative translation
        adjustment               | (91,568)   |     | (957,706)   |     | (502,357)  
|Cumulative result
        of holding non-monetaryassets | (303,925)  |     | (3,178,747) |     | (3,098,730)
|                                                       
|Total Stockholders Equity                              | 872,347    |     | 9,123,877   |     | 7,680,003  
|                                                       
|Total Liabilities and Stockholders' Equity              | $1,546,279 | Ps. | 16,172,544  | Ps. | 14,260,413 
|                                                       



|The accompanying notes are an integral part of
these consolidated balance sheets.Mexico, D.F., January 21, 2003
|---------------------------------------------------------------------------------------------------------------

|Carlos Salazar Lomelin
      Chief Executive Officer | Hector Trevino Gutierrez
      Chief Financial and Administrative Officer
|---------------------------------------------------- | -------------------------------------------------------------------------
|                                                     |                                                                          





| | F-3 | 
| | --- | 



---





|Coca-Cola FEMSA, S.A. de C.V. and Subsidiaries
|----------------------------------------------

|Consolidated Income Statements
|------------------------------

|For the years ended December 31, 2002, 2001 and
2000Amounts expressed in thousands of U.S. Dollars ($) and constant Mexican Pesos (Ps.)
as of December 31, 2002
|---------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                                                                                                 |            | 2002 |     |  |            |  | 2001 |  |            |  | 2000
|-------------------------------------------------------------------------------------------------------------------------------- | ---------- | ---- | --- |  | ---------- |  | ---- |  | ---------- |  | ----
|                                                                                                                                
|Net sales                                                                                                                        | $1,672,392 |      | Ps. |  | 17,491,545 |  | Ps.  |  | 16,612,302 |  | Ps. 
|Other operating revenues                                                                                                         | 12,283     |      |     |  | 128,473    |  |      |  | 117,171    |  |     
|Total revenues                                                                                                                   | 1,684,675  |      |     |  | 17,620,018 |  |      |  | 16,729,473 |  |     
|Cost of sales                                                                                                                    | 777,327    |      |     |  | 8,130,063  |  |      |  | 7,737,834  |  |     
|                                                                                                                                 |            |      |     |  |            |  |      |  |            |  |     
|Gross profit                                                                                                                     | 907,348    |      |     |  | 9,489,955  |  |      |  | 8,991,639  |  |     
|                                                                                                                                
|Operating expenses:                                                                                                              |            |      |     |  |            |  |      |  |            |  |     
|Administrative                                                                                                                   | 133,521    |      |     |  | 1,396,501  |  |      |  | 1,287,196  |  |     
|Selling                                                                                                                          | 345,725    |      |     |  | 3,615,952  |  |      |  | 3,730,871  |  |     
|                                                                                                                                 |            |      |     |  |            |  |      |  |            |  |     
|                                                                                                                                 | 479,246    |      |     |  | 5,012,453  |  |      |  | 5,018,067  |  |     
|Goodwill amortization                                                                                                            | 3,569      |      |     |  | 37,335     |  |      |  | 100,671    |  |     
|                                                                                                                                
|Income from operations                                                                                                           | 424,533    |      |     |  | 4,440,167  |  |      |  | 3,872,901  |  |     
|                                                                                                                                
|Integral cost of financing:                                                                                                      |            |      |     |  |            |  |      |  |            |  |     
|Interest
      expense                                                                                                           | (31,946)   |      |     |  | (334,124)  |  |      |  | (329,762)  |  |     
|Interest
      income                                                                                                            | 24,150     |      |     |  | 252,587    |  |      |  | 273,807    |  |     
|Foreign
      exchange gain (loss), net                                                                                          | 18,854     |      |     |  | 197,195    |  |      |  | (6,300)    |  |     
|Gain
      (loss) on monetary position                                                                                           | 36,861     |      |     |  | 385,530    |  |      |  | (80,966)   |  |     
|                                                                                                                                
|                                                                                                                                 | 47,919     |      |     |  | 501,188    |  |      |  | (143,221)  |  |     
|                                                                                                                                
|Other expense, net                                                                                                               | 51,085     |      |     |  | 534,274    |  |      |  | 37,312     |  |     
|                                                                                                                                
|Income for the year before
      income
           taxes, employee profit sharing and
           change in accounting principles | 421,367    |      |     |  | 4,407,081  |  |      |  | 3,692,368  |  |     
|Income taxes and employee profit
           sharing                                                                              | 176,198    |      |     |  | 1,842,863  |  |      |  | 1,461,062  |  |     
|                                                                                                                                
|Income for the year before
      change in
           accounting principles                                                      | 245,169    |      |     |  | 2,564,218  |  |      |  | 2,231,306  |  |     
|Change in accounting principles                                                                                                  | -          |      |     |  | -          |  |      |  | 28,972     |  |     
|Net income for the year                                                                                                          | $245,169   |      | Ps. |  | 2,564,218  |  | Ps.  |  | 2,202,334  |  | Ps. 
|                                                                                                                                
|Weighted average shares outstanding
           (in thousands)                                                                    | 1,425,000  |      |     |  | 1,425,000  |  |      |  | 1,425,000  |  |     
|Income per share before change
      in
           accounting principles                                                         | $0.17      |      | Ps. |  | 1.80       |  | Ps.  |  | 1.57       |  | Ps. 
|                                                                                                                                
|Net income per share                                                                                                             | $0.17      |      | Ps. |  | 1.80       |  | Ps.  |  | 1.55       |  | Ps. 
|                                                                                                                                



|The accompanying notes are an integral part of
these consolidated income statements.
|------------------------------------------------------------------------------------



| | F-4 | 
| | --- | 



---





|Coca-Cola FEMSA, S.A. de C.V. and Subsidiaries
|----------------------------------------------

|Consolidated Statements of Changes in
Financial Position For the years ended
|----------------------------------------------------------------------------

|December 31, 2002, 2001 and 2000Amounts
expressed in thousands of U.S. Dollars ($) and constant Mexican Pesos (Ps.) as of
December 31, 2002
|-------------------------------------------------------------------------------------------------------------------------------------------

|                                                                                                                            |   |           | 2002 |     |             |  | 2001 |           |  | 2000
|--------------------------------------------------------------------------------------------------------------------------- | - | --------- | ---- | --- | ----------- |  | ---- | --------- |  | ----
|                                                                                                                           
|Resources Generated By (Used
      In):                                                                                     |   |           |      |     |             |  |      |           |  |     
|Operating Activities:                                                                                                       |   |           |      |     |             |  |      |           |  |     
|Net
      income for the year                                                                                               | $ | 245,169   |      | Ps. | 2,564,218   |  | Ps.  | 2,202,334 |  | Ps. 
|Depreciation                                                                                                                |   | 49,805    |      |     | 520,909     |  |      | 594,595   |  |     
|Breakage
      of bottles and cases                                                                                         |   | 18,364    |      |     | 192,074     |  |      | 198,837   |  |     
|Goodwill
      amortization and impairment                                                                                  |   | 41,989    |      |     | 439,158     |  |      | 100,671   |  |     
|Amortization
      and other                                                                                                |   | 27,531    |      |     | 287,944     |  |      | 171,839   |  |     
|                                                                                                                           
|                                                                                                                            |   | 382,858   |      |     | 4,004,303   |  |      | 3,268,276 |  |     
|                                                                                                                           
|Working capital:                                                                                                            |   |           |      |     |             |  |      |           |  |     
|Accounts
      receivable                                                                                                   |   | 17,264    |      |     | 180,561     |  |      | (188,685) |  |     
|Inventories                                                                                                                 |   | (20,376)  |      |     | (213,110)   |  |      | (147,599) |  |     
|Prepaid
      expenses and recoverable taxes                                                                                |   | (54,334)  |      |     | (568,284)   |  |      | 14,731    |  |     
|Suppliers                                                                                                                   |   | 7,169     |      |     | 74,981      |  |      | 266,601   |  |     
|Accounts
      payable and other                                                                                            |   | 20,238    |      |     | 211,672     |  |      | (34,171)  |  |     
|Accrued
      taxes                                                                                                         |   | 10,663    |      |     | 111,521     |  |      | 155,520   |  |     
|Interest
      payable                                                                                                      |   | 473       |      |     | 4,947       |  |      | (6,374)   |  |     
|Pension
      plan and seniority premiums                                                                                   |   | (531)     |      |     | (5,553)     |  |      | 14,540    |  |     
|                                                                                                                           
|Resources Generated By Operating
        Activities                                                                         |   | 363,424   |      |     | 3,801,038   |  |      | 3,342,839 |  |     
|                                                                                                                           
|Investing Activities:                                                                                                       |   |           |      |     |             |  |      |           |  |     
|Property,
      plant and equipment                                                                                         |   | (82,795)  |      |     | (865,951)   |  |      | (729,911) |  |     
|Retirements
      of property, plant and
            equipment                                                              |   | -         |      |     | -           |  |      | 129,448   |  |     
|Investments
      in shares and deferred charges                                                                            |   | (45,410)  |      |     | (474,946)   |  |      | (225,695) |  |     
|                                                                                                                           
|Resources Used In Investing
      Activities                                                                                |   | (128,205) |      |     | (1,340,897) |  |      | (826,158) |  |     
|                                                                                                                           
|Financing Activities:                                                                                                       |   |           |      |     |             |  |      |           |  |     
|Amortization in real terms
      of financing
           for the purchase of Coca-Cola
           FEMSA Buenos Aires shares |   | 22,565    |      |     | 236,008     |  |      | (270,440) |  |     
|Translation adjustment in Coca-Cola
          FEMSA Buenos Aires investment                                                 |   | (43,537)  |      |     | (455,349)   |  |      | 719,556   |  |     
|Proceeds form issuance of long-term
      debt                                                                              |   | (1,883)   |      |     | (19,691)    |  |      | (18,066)  |  |     
|Dividends paid                                                                                                              |   | (55,931)  |      |     | (584,978)   |  |      | (318,781) |  |     
|Other liabilities                                                                                                           |   | 1,165     |      |     | 12,200      |  |      | 103,426   |  |     
|                                                                                                                           
|Resources Generated By (Used
      In)
           Financing Activities                                                      |   | (77,620)  |      |     | (811,810)   |  |      | 215,695   |  |     
|                                                                                                                           
|Increase in cash and cash equivalents                                                                                       |   | 157,599   |      |     | 1,648,331   |  |      | 2,732,376 |  |     
|Cash and cash equivalents at
      beginning of
           the year                                                         |   | 432,458   |      |     | 4,523,063   |  |      | 1,790,687 |  |     
|                                                                                                                           
|Cash and Cash Equivalents at
      End of
           the Year                                                               | $ | 590,057   |      | Ps. | 6,171,394   |  | Ps.  | 4,523,063 |  | Ps. 
|                                                                                                                           



|The accompanying notes are an integral part of
these consolidated statements  of changes in financial position.
|---------------------------------------------------------------------------------------------------------------



| | F-5 | 
| | --- | 



---



|Coca-Cola FEMSA, S.A. de C.V. and Subsidiaries
|----------------------------------------------

|Consolidated Statements of Changes in Stockholders
      Equity
|----------------------------------------------------------------

|For the years ended December 31, 2002, 2001 and 2000
      Amounts expressed in thousands of constant Mexican Pesos (Ps.) as of December
      31, 2002
|-------------------------------------------------------------------------------------------------------------------------------------------------------

|Description                                          |     | Capital 
      Stock |  |     | Additional 
      Paid-in 
      Capital |  |     | Retained 
      Earnings 
      from Prior 
      Years |  |     | Net 
      Income 
      for the 
      Year |  |     | Cumulative 
      Translation 
      Adjustment |  |     | Cumulative 
      Result of 
      Holding Non- 
      Monetary 
      Assets |  |     | Total 
      Stock- 
      holders 
      Equity
|---------------------------------------------------- | --- | -------------------- |  | --- | ---------------------------------------- |  | --- | ------------------------------------------------------- |  | --- | -------------------------------------------- |  | --- | ----------------------------------------------- |  | --- | ----------------------------------------------------------------------------- |  | --- | -------------------------------------------------
|                                                    
|Consolidated Balances 
        at December 31, 1999  | Ps. | 2,369,560            |  | Ps. | 1,667,130                                |  | Ps. | 4,002,913                                               |  | Ps. | 1,017,684                                    |  | Ps. | (1,149,734)                                     |  | Ps. | (2,721,187)                                                                   |  | Ps. | 5,186,366                                        
|                                                    
|Transfer of income of 
        prior year            |     |                      |  |     |                                          |  |     | 1,017,684                                               |  |     | (1,017,684)                                  |  |     |                                                 |  |     |                                                                               |  |     |                                                 
|Dividends paid                                       |     |                      |  |     |                                          |  |     | (260,348)                                               |  |     |                                              |  |     |                                                 |  |     |                                                                               |  |     | (260,348)                                        
|Initial effect of deferred 
         income taxes    |     |                      |  |     |                                          |  |     | (757,720)                                               |  |     |                                              |  |     |                                                 |  |     |                                                                               |  |     | (757,720)                                        
|Comprehensive income                                 |     |                      |  |     |                                          |  |     |                                                         |  |     | 1,358,318                                    |  |     | (72,179)                                        |  |     | (38,824)                                                                      |  |     | 1,247,315                                        
|                                                    
|Consolidated Balances 
         at December 31, 2000 | Ps. | 2,369,560            |  | Ps. | 1,667,130                                |  | Ps. | 4,002,529                                               |  | Ps. | 1,358,318                                    |  | Ps. | (1,221,913)                                     |  | Ps. | (2,760,011)                                                                   |  | Ps. | 5,415,613                                        
|                                                    
|Transfer of income of 
         prior year           |     |                      |  |     |                                          |  |     | 1,358,318                                               |  |     | (1,358,318)                                  |  |     |                                                 |  |     |                                                                               |  |     |                                                 
|Dividends paid                                       |     |                      |  |     |                                          |  |     | (318,781)                                               |  |     |                                              |  |     |                                                 |  |     |                                                                               |  |     | (318,781)                                        
|Comprehensive income                                 |     |                      |  |     |                                          |  |     |                                                         |  |     | 2,202,334                                    |  |     | 719,556                                         |  |     | (338,719)                                                                     |  |     | 2,583,171                                        
|                                                    
|Consolidated Balances 
         at December 31, 2001 | Ps. | 2,369,560            |  | Ps. | 1,667,130                                |  | Ps. | 5,042,066                                               |  | Ps. | 2,202,334                                    |  | Ps. | (502,357)                                       |  | Ps. | (3,098,730)                                                                   |  | Ps. | 7,680,003                                        
|                                                    
|Transfer of income of 
         prior year           |     |                      |  |     |                                          |  |     | 2,202,334                                               |  |     | (2,202,334)                                  |  |     |                                                 |  |     |                                                                               |  |     |                                                 
|Dividends paid                                       |     |                      |  |     |                                          |  |     | (584,978)                                               |  |     |                                              |  |     |                                                 |  |     |                                                                               |  |     | (584,978)                                        
|Comprehensive income                                 |     |                      |  |     |                                          |  |     |                                                         |  |     | 2,564,218                                    |  |     | (455,349)                                       |  |     | (80,017)                                                                      |  |     | 2,028,852                                        
|                                                    
|Consolidated Balances 
        at December 31, 2002  | Ps. | 2,369,560            |  | Ps. | 1,667,130                                |  | Ps. | 6,659,422                                               |  | Ps. | 2,564,218                                    |  | Ps. | (957,706)                                       |  | Ps. | (3,178,747)                                                                   |  | Ps. | 9,123,877                                        
|                                                    

|The accompanying notes are an integral part of
these consolidated statements of  changes in stockholders equity.
|-----------------------------------------------------------------------------------------------------------------



| | F-6 | 
| | --- | 



---





|Coca-Cola FEMSA, S.A. de C.V. and Subsidiaries
|----------------------------------------------

|Notes to the Consolidated Financial Statements
|----------------------------------------------

|For the years ended December
      31, 2002, 2001 and 2000.Amounts expressed in thousands of U.S. Dollars ($) and constant Mexican
      Pesos (Ps.) as of December 31, 2002.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Note 1.  Activities of the Company
|----------------------------------



|Coca-Cola  FEMSA,  S.A. de C.V.  (Coca-Cola
FEMSA) is a Mexican  corporation  whose main  activity is the  acquisition,
holding and  transferring of all types of bonds, capital stock, shares and marketable
securities.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Coca-Cola FEMSA is an association  between
Fomento Economico  Mexicano,  S.A de C.V. (FEMSA),  which indirectly owns 51% of the
capital  stock,  and The Coca-Cola  Company that  indirectly  owns 30% of the capital
stock.  The remaining 19% of the shares are quoted on the  Bolsa Mexicana de Valores,
S.A. de C.V. (BMV: KOFL) and the New York Stock Exchange, Inc. (NYSE: KOF).
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Coca-Cola FEMSA and its subsidiaries (the
Company), as an economic unit, are  engaged in the production, distribution and
marketing of certain Coca-Cola  trademark beverages in two territories in Mexico and one
territory in Argentina.  The Valley of Mexico territory includes all of Mexico City and a
substantial  portion of the state of Mexico. The Southeastern Mexican territory covers
the  states of Tabasco, Chiapas and contiguous portions of the state of Oaxaca and  the
southern portion of the state of Veracruz. The Argentine territory includes  Buenos Aires
City and a substantial portion of the Gran Buenos Aires area.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|On November 5, 2001, the Company entered into a
franchise agreement with FEMSA  for the production, distribution and sale of the Mundet
brand beverages  throughout the territories where the Company operates.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Note 2.  Basis of Presentation
|------------------------------



|The consolidated financial statements of the
Company are prepared in accordance  with accounting principles generally accepted in
Mexico (Mexican GAAP), which  differ in certain significant respects from
accounting principles generally  accepted in the United States of America (US GAAP)
as further explained in  Note 22. A reconciliation from Mexican GAAP to US GAAP is
included in Note 23.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|The consolidated financial statements are stated
in thousands of Mexican pesos  (Ps). The translations of Mexican pesos into
US dollars ($) are included  solely for the convenience of the reader, using
the exchange rate as of December  31, 2002 of Ps. 10.459 Mexican pesos to one US dollar.
Such convenience  translations should not be construed as representations that the
Mexican peso  accounts have been, could have been, or could in the future be, converted
into  US dollars at this or any other exchange rate.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|The consolidated financial statements include
the financial statements of  Coca-Cola FEMSA and those of all companies in which it owns
directly a majority  of the outstanding capital stock and/or exercises control. All
intercompany  balances and transactions have been eliminated in such consolidation.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|The subsidiaries of Coca-Cola FEMSA are:
|----------------------------------------



| | Valley of Mexico:
      Propimex, S.A. de C.V. Refrescos y
      Aguas Minerales, S.A. de C.V. 
      Refrescos y Aguas Minerales, S.A. de C.V.
      Administracion y Asesoria Integral, S.A. de C.V.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





| | Southeastern Mexico:
      Inmuebles del Golfo, S.A. de C.V.
| | ------------------------------------------------------------





| | Argentina:
      Coca-Cola FEMSA de Buenos Aires S.A.
| | -----------------------------------------------------





| | F-7 | 
| | --- | 



---





|Note 3.  Foreign Subsidiary Incorporation
|-----------------------------------------



|The accounting records of the foreign
subsidiaries are maintained in the  currency of the country where they are located.
|-------------------------------------------------------------------------------------------------------------------------



|The financial statements of the foreign
subsidiaries are restated to the  purchasing power of the local currency at the end of
the year applying the  inflation rate of the country of origin and are subsequently
translated into  Mexican pesos using the year-end exchange rate for their inclusion in
the  consolidated financial statements.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|The variation in a net investment in foreign
subsidiaries generated by exchange  rate fluctuations is included in the cumulative
translation adjustment and is  recorded directly in stockholders equity.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|The foreign exchange gain or loss generated from
the financing obtained to  acquire foreign subsidiaries, net of the related tax effect,
is included in the  cumulative translation adjustment, since the net investment in the
foreign  subsidiary is considered to be an economic hedge of such debt. Although, if the
financing obtained is higher than the investment made to acquire the foreign  subsidiary,
the foreign exchange gain or loss of the difference between that  financing and the
economic hedge is recorded in the results of the year.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|The gain or loss on monetary position resulting
from the financing designated to  an economic hedge is computed using the inflation rate
of the country in which  the acquired subsidiary is located, because it is considered an
integral part of  the investment in such subsidiary, and is included in the integral
result of  financing.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|The goodwill resulting from the acquisition of
foreign subsidiaries is  maintained in the functional currency of the foreign subsidiary,
since such  investment will be recovered in such currency, and is restated applying the
inflation factor of the country of origin and using the year-end exchange rate.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|In December 2001, the Argentine government
adopted a series of economic  measures, the most important of which consisted of
restrictions on cash  withdrawals and foreign exchange transactions. On January 6, 2002,
the Argentine  government published the Economic Emergency Law that will be in effect
through  December 10, 2003. This law grants powers to the government to establish the
system that will determine the exchange rate of the Argentine peso with respect  to
foreign currencies and to establish foreign exchange regulations.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Due to the instability of the Argentine economy
and the devaluation of the  Argentine peso, the Company has recognized a loss in the
value of its investment  in Coca-Cola FEMSA de Buenos Aires, S.A. (Coca-Cola FEMSA
de Buenos Aires). As  of December 31, 2002, this situation continues, and the
losses accumulated in  stockholders equity generated by the Argentine peso
devaluation amount to Ps.  1,538,745.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Additionally, as a result of the continuing
difficult economic situation in  Argentina, the uncertainty with respect to the period of
recovery and the  instability of the exchange rate, on July 1, 2002 the Company
determined the  value of Coca-Cola FEMSA de Buenos Aires based on price market value
multiples  of comparable businesses resulting in the recognition of an impairment of
goodwill generated by the acquisition in the amount of Ps. 401,823, which was  recognized
in other expenses in the results of the year.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|As a result, the net investment in Coca-Cola
FEMSA de Buenos Aires is no longer  considered to be an economic hedge of the liabilities
denominated in US dollars  incurred to acquire Coca-Cola FEMSA de Buenos Aires.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Note 4.  Significant Accounting Policies
|----------------------------------------



|The Companys accounting policies are in
accordance with Mexican GAAP, which  require that the Companys management make
certain estimates and use certain  assumptions to determine the valuation of various
items included in the  consolidated financial statements.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|The Companys management believes that the
estimates and assumptions used were  appropriate as of the date of these consolidated
financial statements.
|------------------------------------------------------------------------------------------------------------------------------------------------------



| | F-8 | 
| | --- | 



---





|The significant accounting policies are as
follows:
|---------------------------------------------------



|a) | Recognition of the Effects of Inflation:
|-- | ----------------------------------------

| | The recognition of the effects of inflation in
      the financial information consists of:
| | -------------------------------------------------------------------------------------------

| |  |  | Restating nonmonetary assets such as inventories
      and fixed assets, including related costs and expenses when such assets
      are consumed or depreciated.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | Restating capital stock, additional paid-in capital
      and retained earnings by the amount necessary to maintain the purchasing
      power equivalent in Mexican pesos on the dates such capital was contributed
      or income was generated through the use of factors derived from the National
      Consumer Price Index (NCPI).
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | Including in stockholders equity the cumulative
      effect of holding nonmonetary assets, which is the net difference between
      changes in the replacement cost of nonmonetary assets and adjustments based
      upon NCPI factors.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | The Company
restates its consolidated financial statements in terms of the  purchasing power of the
Mexican peso as of the dated of the most recent  balance sheet presented by using NCPI
factors for Mexican subsidiaries,  and by using for foreign subsidiaries the inflation
rate plus the latest  year-end exchange rate of the country in which the foreign
subsidiary is  located.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | The Company
restates its income statement using NCPI factors determined  from the month in which the
transaction occurred to the most recent  balance sheet date.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------



| | Financial
information for the Mexican subsidiaries for prior years was  restated using NCPI
factors. Financial information for foreign  subsidiaries and affiliated companies
included in the consolidated  financial statements was restated using the inflation rate
of the country  in which the foreign subsidiary or affiliated company is located and then
translated at the year-end exchange rate of the Mexican peso (see Note 3).
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | Accordingly,
the amounts presented are comparable with each other and with  the preceding years since
all are expressed in the purchasing power of the  respective currencies as of the end of
the latest year presented.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|b) | Cash and Cash Equivalents:
|-- | --------------------------

| | Cash consists
of non-interest bearing bank deposits. Cash equivalents  consist principally of
short-term bank deposits and fixed-rate investments  with banks and brokerage houses
valued at quoted market prices.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|c) | Inventories and Cost of Sales:
|-- | ------------------------------

| | The value of
inventories is adjusted to replacement cost, without  exceeding market value. Cost of
sales is determined based on replacement  cost at the time of sale. Advances to suppliers
to purchase raw materials  and spare parts are included in the inventory account and are
restated by  applying NCPI inflation factors, considering their average age.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|d) | Prepaid Expenses:
|-- | -----------------

| | These
represent payments for services that will be received over the next  12 months. Prepaid
expenses are recorded at historical cost and are  recognized in the income statement in
the month in which the services or  benefits are received. Prepaid expenses are
principally represented by  advertising, leasing and promotional expenses.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | Advertising
costs consist of television and radio advertising airtime paid  in advance, which are
generally amortized over a 12-month period based on  the transmission of the television
and radio spots. The related production  costs are recognized in the results of
operations the first time the  advertising takes place.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | Promotional
costs are expensed as incurred, except for those promotional  costs related to the
launching of new products or presentations. Those  costs are recorded as prepaid expenses
and amortized over the year, during  which they are estimated to increase sales of the
related products or  presentations to normal operating levels, which is generally one
year (see  Note 7).
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | F-9 | 
| | --- | 



---





|e) | Property, Plant and Equipment:
|-- | ------------------------------

| | Are initially
recorded at their acquisition and/or construction cost.  Property, plant and equipment of
domestic origin, except bottles and cases  (see Note 4 g), are restated by applying NCPI
inflation factors. Imported  equipment is restated by applying the inflation rate of the
country of  origin, and then translated at the year-end exchange rate.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | Depreciation
of property, plant and equipment is computed using the  straight-line method based on the
value of the assets reduced by their  residual values. Depreciation rates are determined
by the Company together  with independent appraisers, considering the estimated remaining
useful  lives of the assets.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | The annual
average depreciation rates of property, plant and equipment are  as follows:
| | ---------------------------------------------------------------------------------------

| |                           |     
| | ------------------------- | ----
| |                           | %   
| |                           |     
| | Building and construction | 2.2 
| | Machinery and equipment   | 5.1 
| | Distribution equipment    | 7.1 
| | Other equipment           | 12.4
| |                           |     



| | The main types
of machinery and equipment include: bottling production  lines, conveyors, packaging
equipment, laboratory equipment, as well as  storage and container equipment.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|g) | Bottles and Cases:
|-- | ------------------

| | Bottles and
cases are recorded at acquisition cost and restated to their  replacement cost. The
Company classifies bottles and cases as property,  plant and equipment.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | Depreciation
is computed only for tax purposes using the straight-line  method at a rate of 10% per
year. For financial reporting purposes,  breakage is recorded as an expense as it is
incurred. The Company  estimates that breakage expense is similar to the depreciation
calculated  based on an estimated average useful life of approximately four years for
returnable glass bottles, four years for returnable cases and one year for  returnable
plastic bottles. For the years ended December 31, 2002, 2001  and 2000, breakage expense
amounted to Ps. 192,074, Ps. 198,837 and Ps.  279,059, respectively. Bottles and cases in
circulation, which have been  placed in the hands of customers, are presented net of
deposits received  from customers, and the difference between the cost of these assets
and  the deposits received is amortized according to their useful lives.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|h) | Investments in Shares:
|-- | ----------------------

| | The
investments in shares of affiliated companies are initially recorded  at their
acquisition cost and subsequently valued using the equity method.  Investments in
affiliated companies in which the Company does not have  significant influence are
recorded at cost and restated based upon NCPI  factors.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|i) | Deferred Charges:
|-- | -----------------

| | Represent
payments whose benefits will be received in future year. These  consist principally of:
| | -------------------------------------------------------------------------------------------------

| |  |  | Investment in refrigerators, which are placed in
      the market to showcase and promote the Companys products. These are
      amortized over their estimated useful life of three years. The amortization
      for the years ended December 31, 2002, 2001 and 2000 recognized in selling
      expenses amounted to Ps. 160,746, Ps. 109,673 and Ps. 126,490, respectively.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | Agreements with customers for the right to sell
      and promote the Companys products during certain periods of time,
      which are being considered as monetary assets and amortized in accordance
      with the timing of the receipt by the Company of such benefits, the average
      term of which is of five years. The amortization for the years ended December
      31, 2002, 2001 and 2000 recognized in selling expenses amounted to Ps. 20,135,
      Ps. 25,083 and Ps. 26,224, respectively.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | Leasehold improvements, which are restated by applying
      NCPI factors, considering their average age, are amortized using the straight-line
      method over the term in which the benefits are expected to be received.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|j) | Goodwill:
|-- | ---------

| | Represents the
difference between the price paid and the book value of the  shares and / or assets
acquired, which is substantially equal to the fair  value of such assets. Goodwill is
amortized over a period of no more than  20 years.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | F-10 | 
| | ---- | 



---





| | Goodwill is
recorded in the functional currency of the  subsidiary in which the investment was made
and is restated by applying  the inflation rate of the country of origin and the year-end
exchange  rate.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|k) | Payments from The Coca-Cola Company:
|-- | ------------------------------------

| | The Coca-Cola
Company participates in the advertising and promotional  programs of the Company. The
resources received for advertising and  promotional incentives are included as a
reduction of selling expenses.  The net expenses incurred were Ps. 714,840, Ps. 692,619
and Ps. 707,252,  during the years ended December 31, 2002, 2001 and 2000, respectively.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | In addition,
The Coca-Cola Company has made payments in connection with  Coca-Cola FEMSAs
refrigeration equipment investment program. These  resources are related to the increase
in volume sales of Coca-Cola  products that result from such expenditures and will be
reimbursed if the  established conditions in the contracts are not met. The refrigeration
equipment is recorded in Deferred Charges net of the participation of  The
Coca-Cola Company.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|l) | Labor Liabilities:
|-- | ------------------

| | Labor
liabilities include obligations for pension and retirement plan and  seniority premiums
based on actuarial calculations by independent  actuaries, using the projected unit
credit method. These liabilities are  considered to be nonmonetary, and are restated
using NCPI factors, with  such restatement presented in stockholders equity. The
increase in labor  liabilities of the year is charged to expense in the income statement
(see  Note 13).
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | The
unamortized prior service costs of the pension and retirement plan,  and seniority
premium are recorded as expenses in the income statement,  and are amortized over the
estimated 14-year period during which the  employees will receive the benefits of the
plan, beginning in 1996.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | The
subsidiaries of the Company (except Coca-Cola FEMSA de Buenos Aires)  have established
funds for the payment of pension benefits through  irrevocable trusts with the employees
as beneficiaries.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | Severance
indemnities are charged to expenses on the date that they are  incurred. The severance
payments resulting from the Companys reduction of  personnel, as a result of the
restructuring of certain areas, are included  in other expenses, net. During the years
ended December 31, 2002, 2001 and  2000, these amounted to Ps. 63,175, Ps. 25,992 and Ps.
32,170,  respectively.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|m) | Revenue Recognition and Operating Costs and
      Expenses:
|-- | -----------------------------------------------------------

| | Revenue is
recognized upon shipment of goods to customers or upon delivery  to the customer and the
customer has taken ownership of the goods. Net  sales reflect units delivered at selling
list prices reduced by promotion  allowances and discounts. The Companys revenue
transactions with  discounts from regular prices are very limited. Therefore, no
allowance  for sales discounts is recorded.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | Cost of sales
includes expenses related to raw materials used in the  production process, including but
not limited to the following:  concentrate, sweeteners, cans, glass and plastic
nonreturnable bottles,  crowns and plastic caps, as well as related inbound freight
costs. Cost of  sales also includes labor (wages and other benefits), depreciation of
production facilities and equipment and other costs including fuel,  electricity,
breakage of returnable bottles in the production process,  equipment maintenance,
inspection, and inter and intra- plant transfer  costs.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | Administrative
expenses include labor costs (salaries and other benefits)  for employees not directly
involved in the sale of the Companys products,  professional services fees,
depreciation of offices facilities and  amortization of capitalized software costs.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | Selling
expenses include:
| | -------------------------

| |  |  | Distribution: labor costs (salaries and other benefits),
      outbound freight costs, warehousing costs of finished products, breakage
      for returnable bottles in the distribution process, depreciation and maintenance
      of trucks and other distribution facilities and equipment. During the years
      ended December 31, 2002, 2001 and 2000, these distribution costs amounted
      to Ps. 1,990,751, Ps. 2,112,767 and Ps. 2,186,291, respectively.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | Sales: labor costs (salaries and other benefits)
      and sales commission paid to sales personnel.
| | - |  | ----------------------------------------------------------------------------------------------------

| |  |  | Marketing: labor costs (salaries and other benefits),
      promotions and advertising costs.
| | - |  | ---------------------------------------------------------------------------------------------



| | F-11 | 
| | ---- | 



---





|n) | Income Tax, Tax on Assets and Employee Profit
      Sharing:
|-- | ------------------------------------------------------------

| | The Company
determines and records its income tax (ISR), tax on assets  (IMPAC)
and employee profit sharing (PTU) in accordance with the tax  legislation and
revised Bulletin D-4, Tratamiento Contable del Impuesto  Sobre la Renta, del
Impuesto al Activo y la Participacion de los  Trabajadores en las Utilidades (Accounting
for Income Tax, Tax on Assets  and Employee Profit Sharing), which requires that deferred
tax assets and  liabilities be recorded for all temporary differences between the
accounting and tax bases of assets and liabilities.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | The balance of
deferred income tax and deferred tax on assets is  determined using the liability method,
which takes into account all  temporary differences between the accounting and tax bases
of assets and  liabilities. Deferred employee profit sharing is calculated considering
only those temporary differences that arise from the reconciliation  between the
accounting income for the year and the bases for employee  profit sharing, that are
expected to generate a benefit or liability.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | The balance of
deferred taxes is comprised of monetary and nonmonetary  items, based on the temporary
differences from which it is derived.  Deferred taxes are classified as a long-term asset
or liability,  regardless of when the temporary differences are expected to reverse.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | The deferred
tax provision for the year to be included in the results of  operations is determined by
comparing the deferred tax balance at end of  the year to the balance at the beginning of
the year, excluding from both  balances any temporary differences that are recorded
directly in  stockholders equity. The deferred taxes related to such temporary
differences are recorded in the same stockholders equity account. The  initial
effect of the application of this new bulletin as of January 1,  2000 was recorded in
retained earnings (see Note 19 d).
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | Each
subsidiary determines and records its taxes as if it had filed  separately based on the
tax incurred during the year, in accordance with  tax legislation. Therefore, the income
tax provision reflected in the  consolidated financial statements represents the sum of
the provision for  the subsidiaries and Coca-Cola FEMSA.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | FEMSA has
received authorization from the Secretaria de Hacienda y Credito  Publico (SHCP)
to prepare its income tax and tax on asset returns on a  consolidated basis, which
includes the proportional taxable income or loss  of its Mexican subsidiaries, which is
60% of the stockholders participation.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|o) | Integral Cost of Financing:
|-- | ---------------------------

| | The integral
cost of financing includes:
| | ----------------------------------------



| | Interest:
Interest income and expenses are recorded when earned or incurred,  respectively.
| | -------------------------------------------------------------------------------------------



| | Foreign
Exchange Gains and Losses:
Transactions in foreign currency are recorded in Mexican
pesos using the  exchange rate applicable on the date they occur. Assets and liabilities
in  foreign currencies are adjusted to the year-end exchange rate, recording  the
resulting foreign exchange gain or loss directly in the income  statement, except for the
foreign exchange gain or loss from financing  obtained for the acquisition of foreign
subsidiaries (see Note 3).
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | Gain (Loss) on
Monetary Position:
This is the result of the effects of inflation on monetary items. The
gain  (loss) on monetary position for Mexican subsidiaries is computed by  applying NCPI
factors to the net monetary position at the beginning of  each month, excluding the
financing contracted for the acquisition of  foreign companies (see Note 3).
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | The gain
(loss) on monetary position of foreign subsidiaries is computed  by applying the monthly
inflation rate of the country in which such  subsidiary is located to the net monetary
position at the beginning of  each month, expressed in such countrys local
currency, then translating  the monthly results into Mexican pesos using the year-end
exchange rate,  except as mentioned in Note 3.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|p) | Financial Instruments:
|-- | ----------------------

| | The Company
contracts financial instruments to manage the financial risks  associated with its
operations. If the instrument is used to manage the  risk related with the Companys
operations, the effect is recorded in cost  of sales and in operating expenses, interest
expense or in the foreign  exchange loss (gain), depending on the related contract.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | F-12 | 
| | ---- | 



---





| | Prior to 2001,
the Company recorded in the result of the year the effect  of financial instruments at
their maturity date except for foreign  exchange options, for which the premium paid was
amortized throughout the  life of the contract.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | Beginning in
January 2001, Bulletin C-2, Instrumentos Financieros (Financial Instruments),
went into effect, which requires an enterprise to  record all financial instruments in
the balance sheet as assets or  liabilities. The bulletin requires that financial
instruments entered into  for hedging purposes be valued using the same valuation
criteria applied  to the hedged asset or liability.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | Additionally,
financial instruments entered into for purposes other than  hedging the operations of the
Company should be valued at fair market  value. The difference between the financial
instruments initial value and  fair market value should be recorded in the income
statement at the end of  the year. The initial effect of this bulletin is included in net
income of  2001, net of taxes, as a change in accounting principle, which amount to  Ps.
28,972.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|q) | Cumulative Result of Holding Nonmonetary Assets:
|-- | ------------------------------------------------

| | This
represents the sum of the differences between book values and  restatement values, as
determined by applying NCPI factors to nonmonetary  assets such as inventories and fixed
assets, and their effect on the  income statement when the assets are consumed or
depreciated.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|r) | Comprehensive Income:
|-- | ---------------------

| | Comprehensive
income is comprised of the net income and other  comprehensive income items such as the
translation adjustment and the  result of holding nonmonetary assets and is presented in
the consolidated  statement of changes in stockholders equity.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|s) | Valuation of Goodwill and Long-Lived Assets:
|-- | --------------------------------------------

| | The Company
reviews the carrying value of its goodwill and long-lived  assets for impairment whenever
events or changes in circumstances indicate  that the carrying amount of an asset may not
be recoverable. In order to  determine whether an impairment exists, management compares
estimated  future cash flows to be generated by those assets with their carrying  value.
If such assets are considered to be impaired, the impairment charge  to be recognized in
net income is measured by the amount by which the  carrying amount exceeds their fair
value.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Note 5.  Other Accounts Receivable.
|-----------------------------------

|
|
|
|
|
|
|
|
|
|
|
|
|
|
|



|The changes in the allowance for doubtful
accounts are as follows:
|------------------------------------------------------------------

|
|
|
|
|
|
|
|
|
|
|



| | F-13 | 
| | ---- | 



---





|Note 6.  Inventories.
|---------------------

|
|
|
|
|
|
|
|
|
|
|
|
|



|Note 7.  Prepaid Expenses.
|--------------------------

|
|
|
|
|
|
|
|
|
|



| | The
advertising and promotional expenses recorded in the income statement  for the years
ended December 31, 2002, 2001 and 2000 are as follows:
| | -----------------------------------------------------------------------------------------------------------------------------------------------

|
|
|
|
|
|
|
|



|Note 8.  Investments in Shares.
|-------------------------------

|
|
|
|
|
|
|
|
|
|
|
|



|Note 9.  Property, Plant and Equipment.
|---------------------------------------

|
|
|
|
|
|
|
|
|
|
|
|
|



|The Company has identified fixed assets consisting mainly
      of land, buildings and equipment for disposal, in accordance with an approved
      program for the disposal of certain investments, which at December 31, 2001
      amounted to Ps. 25,225 (nominal value). Such assets are not in use and have
      been valued at their estimated realizable value, according to independent
      appraisals. Those fixed assets recorded at their estimated realizable value
      are considered monetary assets on which a loss on monetary position is computed
      and recorded in the results of operations.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | F-14 | 
| | ---- | 



---







|Note 10.  Deferred Charges.
|---------------------------

|                                    
|------------------------------------
|                                    
|                                    
|Refrigeration
      equipment       
|Leasehold improvements              
|Intangible labor asset (see Note 13)
|Bonus program (see Note 14)         
|Yankee bond                         
|Agreements with customers           
|Pallets                             
|Deferred acquisition costs          
|Other                               
|                                    
|                                    
|                                    



|Note 11.  Balances and Transactions with
Related Parties and Associated Companies.
|----------------------------------------------------------------------------------



|The consolidated balance sheet and income
statement include the following  balances and transactions with related parties and
affiliated companies:
|---------------------------------------------------------------------------------------------------------------------------------------------------



|a) FEMSA and Subsidiaries:
|--------------------------

|                                                   
|---------------------------------------------------
|Balance
      Sheet                                
|                                                   
|                                                   
|Assets
      (accounts receivable)                 
|Liabilities
      (suppliers and other liabilities)
|                                                   
|                                                   
|                                                   
|Income Statement                                   
|                                                   
|Sales
      and other revenues                     
|Purchases of inventories                           
|Operating expenses                                 
|                                                   



|b)  The Coca-Cola Company:
|--------------------------

|                                             
|---------------------------------------------
|Balance
      Sheet                          
|                                             
|Assets (accounts receivable)                 
|Liabilities (suppliers and other liabilities)
|                                             
|                                             
|                                             
|Income Statement                             
|                                             
|Purchases
      of concentrate               
|Interest expense                             
|                                             
|                                             



|c) Other associated companies:
|------------------------------



|For the years ended December 31, 2002, 2001 and
2000, the Companys  subsidiaries received services from other companies in which
stockholders of  the Company have and equity interest.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                        
|----------------------------------------
|Interest:                               
|                                        
|Expense                                 
|Income                                  
|                                        
|                                        
|                                        
|Purchases
      of canned products from:
|                                        
|IEQSA                                   
|CICAN                                   
|                                        



| | F-15 | 
| | ---- | 



---





|Note 12.  Balances and Transactions in
Foreign Currency.
|--------------------------------------------------------



|Assets, liabilities and transactions denominated
in a foreign currency other  than the functional currency of the reporting unit,
translated into U.S.  dollars, are as follows:
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                  
|------------------
|                  
|                  
|Balances:         
|                  
|December 31, 2002:
|                  
|                  
|December 31, 2001:
|                  
|                  

|(1) Mexican pesos per U.S. dollar.
|----------------------------------

|
|

|Income
      Statement                  | Thousands
      of U.S. Dollars
|--------------------------------------- | -------------------------------
|                                        | 2002                           
|                                       
|Interest
      income                   | $                              
|Interest
      expenses and commissions |                                
|                                       
|                                        | $                              
|                                       



|As of January 21, 2003, the issue date of these
consolidated financial  statements, the exchange rate was 10.696 Mexican pesos per one
U.S. dollar, and  the foreign currency position was similar to that at December 31, 2002.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Note 13.  Labor Liabilities.
|----------------------------



|The actuarial calculations for the Mexican
subsidiaries pension and retirement  plan and seniority premiums and the cost for
the year were determined using the  following long-term assumptions:
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                            
|----------------------------
|                            
|                            
|Annual discount
        rate
|Salary increase             
|Return on assets            
|                            



|In June 2001 the Company decreased the projected
service obligation derived from  a change in the actuarial calculations motivated by a
confirmation received from  the Mexican Social Security Institute (IMSS)
regarding the interpretation of  Article 28 of the Social Security Law in effect in July
1997, in which the IMSS  increased the pensions to those insured for disability, old age,
and discharge  due to aging.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|The balances of the liabilities and the trust
assets, as well as the expenses  for the year are as follows:
|-----------------------------------------------------------------------------------------------------------

|                                                                                           
|-------------------------------------------------------------------------------------------
|Pension and retirement
      plans:                                                        
|                                                                                           
|Vested
      benefit obligation                                                            
|Non-vested
      benefit obligation                                                        
|                                                                                           
|Accumulated
      benefit obligation                                                       
|Excess
      of projected benefit obligation over accumulated benefit 
          obligation
|                                                                                           
|Projected
      benefit obligation                                                         
|Plan
      assets at fair value                                                            
|                                                                                           
|Unfunded
      projected benefit obligation                                                
|Unrecognized
      net transition obligation services                                      
|Unrecognized
      actuarial net gain                                                      
|                                                                                           
|Total                                                                                      
|                                                                                           



| | F-16 | 
| | ---- | 



---



|                                                                                           
|-------------------------------------------------------------------------------------------
|Seniority premiums:                                                                        
|                                                                                           
|Vested
      benefit obligation                                                            
|Non-vested
      benefit obligation                                                        
|                                                                                           
|Accumulated
      benefit obligation                                                       
|Excess
      of projected benefit obligation over accumulated benefit 
          obligation
|                                                                                           
|Projected
      benefit obligation                                                         
|Unrecognized
      net transition obligation services                                      
|Unrecognized
      net loss                                                                
|                                                                                           
|                                                                                           
|Additional
      labor liability                                                           
|                                                                                           
|Total                                                                                      
|                                                                                           
|Total
      Labor Liabilities                                                              
|                                                                                           

|                            |    
|--------------------------- | ---
|Expense for the Year:       |    
|                           
|Pension and retirement plan | Ps.
|Seniority premiums          |    
|                           
|                            | Ps.
|                           

|The accumulated actuarial gains and losses were
generated by the differences in  the assumptions used for the actuarial calculations at
the beginning of the year  versus the real behavior of those variables at the end of the
year.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|At December 31, 2002 and 2001, the projected
benefit obligation in some  subsidiaries was less than the accumulated benefit obligation
reduced by the  amount of the plan assets at fair value, resulting in an additional
liability,  which is recorded as an intangible asset included in Deferred charges,
net (see Note 10).
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|The trust assets consist of fixed income and
variable funds, valued at market.  The contribution to the pension plan trust by certain
subsidiaries amounted to  Ps. 100 (nominal value) at December 31, 2001.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|The integral cost of financing includes the
interest cost related to labor  liabilities, net of the return on plan assets. This
amounted to Ps. 5,286, Ps.  5,285 and Ps. 9,667 for the years ended December 31, 2002,
2001 and 2000,  respectively.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Note 14.  Bonus Program.
|------------------------



|Certain subsidiaries of the Company have
implemented a bonus program for the  benefit of certain executive officers of such
subsidiaries. Under the terms of  this program approved in April 1997, the executive
officers were to be entitled  on the fifth anniversary of the program to a cash payment
of a special bonus  based on the officers salary and the amount of the increase in
real terms in  the market value of FEMSA and Coca-Cola FEMSA shares, during the preceding
five  years, provided that no payments would be made unless the market value of FEMSA
and Coca-Cola FEMSA shares (equal parts) have at least doubled in real terms by  such
fifth anniversary. In March 2002, the Company amended certain terms of the  program and
extended the program by one year. As a result, the program will not  expire until March
2003.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|The Company hedged its potential obligation
under the bonus program by investing  in cash-settled options related to FEMSA shares,
and such purchased options were  deposited in a trust. The cost of the purchased options
has been recorded in  other assets, net and was amortized over the original five-year
term of the  options. As of December 31, 2002, the amount has been completely amortized,
and  as of December 31, 2001 the unamortized cost amounted to Ps. 2,902 (see Note  10).
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | F-17 | 
| | ---- | 



---





|The purchased options are marked to market,
and any income derived therefore  is recorded only to the extent that such income exceeds
the potential  compensation as a function of the special bonuses that would be due based
on the  stock price at the end of each reporting year. As of the date of these financial
statements, no income has been recorded.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Additionally, in 1999 the Company instituted a
new compensation plan for certain  key executives, which consists of granting them an
annual bonus based on each  executives responsibilities within the organization and
the executives performance during the previous year, which is accrued over a period
of five  years beginning in 1999. The annual bonus is recorded in the results of
operations of the year.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|For each key executive, on an annual basis, the
net after-tax amount will be  irrevocably transferred in kind to a trust, which through
the instructions of a  technical committee can:
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | Acquire stock of FEMSA or any of its subsidiaries
      that are listed on the Mexican stock exchange or certificates of deposit
      that represent shares listed in the NYSE, and/or
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | Acquire
purchase options of the stock mentioned above.
| | - |  | ------------------------------------------------------



|The executives will have access to the assigned
stock or options in 20%  increments in each of the five years following the granting of
the bonus.
|--------------------------------------------------------------------------------------------------------------------------------------------------



|Note 15.  Bank Loans.
|---------------------



|Long-term bank loans and notes payable of the
Company are as follows (denominated in U.S. dollars, unless otherwise indicated):
|-------------------------------------------------------------------------------------------------------------------------------

|                                           
|-------------------------------------------
|Bank                                       
|                                           
|Fixed interest rate:                       
|Yankee Bond                                
|Private placement with Citibank,
      N.A.
|GE Capital Leasing                         
|                                           
|                                           
|                                           
|Various                                    
|                                           
|Current maturities of long-term
      debt 
|                                           
|                                           
|                                           

|As of December 31, 2002 and 2001 the Libor rate
was 1.38% and 1.88%,  respectively.
|-----------------------------------------------------------------------------------



|Maturities of long-term bank loans as of
December 31, 2002 are as follows:
|--------------------------------------------------------------------------

| |     
| | ----
| | 2004
| | 2005
| | 2006
| | 2007
| | 2008
| |     
| |     
| |     

|As of December 31, 2002, the Company was in
compliance with all restrictions and  covenants established in its loan agreements.
|-------------------------------------------------------------------------------------------------------------------------------



|Note 16.  Fair Value of Financial Instruments.
|----------------------------------------------



|a) | Long-term Debt:
|-- | ---------------

| | The fair value of long-term bank loans and syndicated
      loans is based on the discounted value of contractual cash flows. The discount
      rate is estimated using rates currently offered for debt with similar remaining
      maturities. The fair value of long-term notes payable is based on quoted
      market prices.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





| | F-18 | 
| | ---- | 



---



|              
|--------------
|              
|              
|Carrying value
|Fair value    
|              

|b) | Cash-Settled Options:
|-- | ---------------------

| | The terms of
accounting for the cash-settled options are described in Note  14. The fair value was
estimated based on quoted market prices to  terminate the contracts at the reporting date.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|c) | Forward Agreements to Purchase-Sell U.S. Dollars:
|-- | -------------------------------------------------

| | At December
31, 2002 and December 31, 2001, the Company does not have any  forward agreements to
hedge its operations denominated in U.S. dollars.
| | --------------------------------------------------------------------------------------------------------------------------------------------------



| | As of December
31, 2000, the Company had 35 contracts to buy and sell U.S.  dollars for a total amount
of $131,400 maturing during 2001. The  agreements for the sale of U.S. dollars were for
the same amount and  mature on the same date as the agreements to purchase U.S. dollars.
The  goal was to manage the Companys foreign exchange risk. The Company had 10
forward agreements to purchase Argentine pesos for a total amount of  $100,000, which
expired during November and December 2001.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|d) | Call Options:
|-- | -------------

| | At December
31, 2000, the Company had contracts to purchase and sell U.S.  dollars for a total amount
of $87,600 during 2001.
| | -----------------------------------------------------------------------------------------------------------------------------



|e) | Commodity Price Contracts:
|-- | --------------------------

| | On December
31, 2002 the Company signed various derivative contracts with  different financial
institutions to hedge the cost of aluminum for 2003  and 2004. These contracts vary in
nature to diversify the instruments,  thereby minimizing the risk for the Company.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |                    
| | -------------------
| | Maturity
      Date
| |                    
| | 2003               
| |                    
| |                    
| | 2004               
| |                    
| |                    

|The fair value is estimated based on quoted
market prices to terminate the  contracts at the reporting date. The Company does not
anticipate canceling these  agreements and expects them to expire as original contracted.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Note 17.  Stockholders Equity.
|-------------------------------



|As of December 31, 2002, the capital stock of
the Company is comprised of 1,425  million common shares without par value and with
foreign ownership restrictions.  Fixed capital amounts to Ps. 633,250 (nominal value) and
variable capital may  not exceed 10 times the minimum fixed capital stock.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|The characteristics of the common shares are as
follows:
|--------------------------------------------------------

| |  |  | Series
A and series D are ordinary, have unlimited voting rights,  are
subject to transfer restrictions, and at all times must represent a  minimum of 75% of
subscribed capital stock.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | Series
A shares may only be acquired by Mexican  individuals  and may not  represent
less than 51% of the total  subscribed  capital stock.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | Series
D shares have open subscription and cannot exceed 49% of the ordinary  shares.
| | - |  | ---------------------------------------------------------------------------------------

| |  |  | Series
L shares have limited voting and other corporate rights.
| | - |  | -----------------------------------------------------------------



| | F-19 | 
| | ---- | 



---





|In addition, 270,750 thousand series B shares
and 204,000 thousand series L shares have been authorized and issued but not
subscribed.
|------------------------------------------------------------------------------------------------------------------------------------------



|As of December 31, 2002, Coca-Cola FEMSAs
capital stock is comprised as  follows:
|----------------------------------------------------------------------------------

|      
|------
|Series
|      
|A     
|D     
|L     
|      
|Total 
|      



|The restatement of stockholders equity at
December 31, 2002 for inflation is  allocated to each of the various stockholders equity
accounts as follows:
|---------------------------------------------------------------------------------------------------------------------------------------------------------

|                                        
|----------------------------------------
|                                        
|                                        
|Capital stock                           
|Additional paid-in
      capital        
|Retained earnings
      from prior years
|Net income for the
      year           
|                                        

|At an ordinary stockholders meeting held
on March 11, 2002, dividends in the  amount of 0.3937 Mexican pesos per share (nominal
value) were declared and  subsequently paid in May 2002.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|At an ordinary stockholder meeting held on March
11, 2002, the stockholders  approved a maximum of Ps. 400,000 for a stock repurchase
program.
|----------------------------------------------------------------------------------------------------------------------------------------------



|The net income of each Mexican subsidiary is
subject to a legal requirement that  5% thereof be transferred to a legal reserve until
such reserve equals 20% of  capital stock. This reserve may not be distributed to
stockholders during the  existence of the subsidiary, except as stock dividends. As of
December 31, 2002,  the legal reserve for Coca-Cola FEMSA amounts to Ps. 126,650 (nominal
value).
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|From 1999 until 2002, the income tax rate was
35%, allowing the Company to defer  payment of 3% in 1999 and 5% in 2000 and 2001, until
the date on which the  earnings were distributed as dividends on consolidated taxable
income. Beginning  in 1999, a previously taxable net income reinvested (Cuenta de
Utilidad Fiscal  Neta Reinvertida, CUFINRE) was created. As of December 31,
2002, this item  amounts to Ps. 4,847,626.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Beginning in 2002, based on the latest tax
reform, the right to defer taxes is  no longer available, and CUFINRE has to be applied
before CUFIN.
|------------------------------------------------------------------------------------------------------------------------------------------------



|Note 18.  Net Income per Share.
|-------------------------------



|This represents the net income corresponding to
each share of the Companys  capital stock, computed on the basis of the weighted
average number of shares  outstanding during the year. Additionally, the net income
distribution according  to the dividend rights of each share series is presented.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Note 19.  Tax System.
|---------------------



|a) | Income Taxes:
|-- | -------------

| | Mexican income
tax is computed on taxable  income, which differs from  accounting income principally due
to the differences between  purchases  and cost of sales, the treatment of the integral
cost of financing, the  relative cost of labor liabilities and depreciation. Taxable
income is  increased or  reduced by the effects of inflation on certain monetary  assets
and liabilities through  the tax inflationary component, which is  similar in concept to
the gain on monetary  position.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | The statutory
income tax rate from 2000 through 2002 is 35%. Beginning  in 2003, the rate will be
reduced one percentage point per year through  2005, when the rate will be 32%.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | F-20 | 
| | ---- | 



---





| | The taxable
income of Coca-Cola FEMSA Buenos Aires differs from  accounting income mainly due to the
differences in depreciation and  labor liability provisions. The Argentine income tax
rate is 35%.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|b) | Tax on Assets:
|-- | --------------

| | The Mexican
tax on assets is computed at an annual rate of 1.8% based on  the average of certain
assets at a tax-restated value less certain  liabilities. The tax on assets is paid only
to the extent that it  exceeds the income tax for the year. If in the year there is a tax
on  assets payment, this amount may be credited against any excess of income  taxes over
the tax on assets of the preceding three years. Additionally,  this payment may be
restated and credited against the excess of income  taxes over asset taxes for the
following 10 years.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | The tax laws
in Argentina established a Tax on Minimum Presumptive  Income (TMPI), which, similar to
the Mexican tax on assets, is paid only  to the extent that it exceeds the income taxes
for the year. Any  required payment of TMPI is recoverable to the extent that the income
taxes exceed the TMPI of the following four years.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|c) | Employee Profit Sharing:
|-- | ------------------------

| | Employee
profit sharing is computed at the rate of 10% of the individual  taxable income of each
of the Mexican subsidiaries, except that  depreciation of historical, rather than
restated values is used, foreign  exchange gains and losses are not included until the
asset or liability  is due, and the other effects of inflation are also excluded.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | The present
tax law in Argentina does not consider any employee profit  sharing.
| | --------------------------------------------------------------------------------



|d) | Deferred Income Taxes:
|-- | ----------------------

| | Beginning in
2000 revised Bulletin D-4 requires that deferred tax assets  and liabilities be recorded
for all temporary differences between the  accounting and tax bases of assets and
liabilities.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | The temporary
differences that generated deferred income tax liabilities  (assets) are as follows:
| | --------------------------------------------------------------------------------------------------

|                                         
|-----------------------------------------
|Deferred Income Taxes                    
|                                         
|Current:                                 
|Inventories                              
|Other
      reserves                     
|Noncurrent:                              
|Property,
      plant and equipment (1)  
|Investments
      in shares              
|Deferred
      charges                   
|Pension
      plan and seniority premiums
|                                         
|                                         
|                                         

| | (1) Including
bottles and cases.
| | --------------------------------



| | As mentioned
in clause a) above, in accordance with the tax reform the  statutory rate will be reduced
from 35% to 32%, resulting in a reduction  of the balance of deferred taxes as of
December 31, 2002 and 2001, based  on the expected dates of reversal of the temporary
differences.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | The changes in
the balance of the deferred income taxes for the year are  as follows:
| | -------------------------------------------------------------------------------------

|                                          
|------------------------------------------
|                                          
|                                          
|Balance at the beginning of the
      year
|Provision for the
      year              
|Change on the statutory
      rate        
|Result of holding nonmonetary
      assets
|                                          
|Balance at the end
      of the year      
|                                          



| | F-21 | 
| | ---- | 



---



|e) | Income Taxes, Tax on Assets and Employee Profit
      Sharing Provisions:
|-- | -------------------------------------------------------------------------

|                  
|------------------
|                  
|                  
|Current income tax

|Deferred income tax             |     | 84,520    |     | 25,072    |     | 57,056   
|------------------------------- | --- | --------- | --- | --------- | --- | ---------
|Current employee profit sharing |     | 131,307   |     | 129,867   |     | 124,837  
|                               
|                                | Ps. | 1,842,863 | Ps. | 1,461,062 | Ps. | 1,025,555
|                               

| | As of December
31, 2002 the Company does not have unamortized tax loss  carryforwards or refundable tax
on assets.
| | ------------------------------------------------------------------------------------------------------------------

|                  
|------------------
|                  
|                  
|Statutory tax rate
|                  
|                  
|                  
|                  
|                  
|Effective tax rate
|                  

|Note 20.  Contingencies and Commitments.
|----------------------------------------



|a) | Contingencies:
|-- | --------------

| | During 2002,
the Company initiated an appeal related to the Special Tax  on Products and Services
(IEPS) applicable to inventories produced with  high fructose content at the end of 2001
and early in 2002. The Company  expects a favorable decision based on a legal opinion of
the Companys  tax attorneys.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|b) | Commitments:
|-- | ------------

| | As of December
31, 2002 the Company leases certain machinery and  distribution equipment. The minimum
lease commitments under the lease  agreements are as follows:
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------

|    
|----
|    
|    
|2003
|2004
|2005
|2006
|2007
|2008
|    
|    
|    



|Note 21.  Information by Segment.
|---------------------------------



|Relevant information concerning the subsidiaries
of Coca-Cola FEMSA, divided by  geographic areas, is presented as follows:
|---------------------------------------------------------------------------------------------------------------------------



| | F-22 | 
| | ---- | 



---



|                                                           
|-----------------------------------------------------------
|2002                                                       
|                                                           
|Total revenues                                             
|Income from operations (1)                                 
|Interest expenses                                          
|Interest income                                            
|Income tax                                                 
|Employee profit sharing                                    
|Depreciation and goodwill amortization                     
|Goodwill impairment                                        
|Breakage of bottles and cases, amortization
      and other
|Goodwill (2)                                               
|Total long-term assets                                     
|Total assets (3)                                           
|Recoverable taxes                                          
|Total liabilities (3)                                      
|Tax liability (4)                                          
|Capital expenditures (5)                                   
|                                                           

|                                                           
|-----------------------------------------------------------
|2001                                                       
|                                                           
|Total revenues                                             
|Income from operations (1)                                 
|Interest expenses                                          
|Interest income                                            
|Income tax                                                 
|Employee profit sharing                                    
|Depreciation and goodwill amortization                     
|Breakage of bottles and cases,
      amortization and other
|Goodwill (2)                                               
|Total long-term assets                                     
|Total assets (3)                                           
|Total liabilities (3)                                      
|Tax liability (4)                                          
|Capital expenditures (5)                                   
|                                                           

|2000                                                        |     |            |     |           |     |           
|----------------------------------------------------------- | --- | ---------- | --- | --------- | --- | ----------
|                                                           
|Total revenues                                              | Ps. | 14,477,916 | Ps. | 1,557,473 | Ps. | 16,035,389
|Income from operations (1)                                  |     | 3,052,986  |     | 27,211    |     | 3,080,197 
|Interest expenses                                           |     | 363,747    |     | 2,769     |     | 366,516   
|Interest income                                             |     | 131,838    |     | 5,765     |     | 137,603   
|Income tax                                                  |     | 869,745    |     | 30,973    |     | 900,718   
|Employee profit sharing                                     |     | 124,837    |     | -         |     | 124,837   
|Depreciation and goodwill amortization                      |     | 570,979    |     | 188,034   |     | 759,013   
|Breakage of bottles and cases,
      amortization and other |     | 473,237    |     | 34,571    |     | 507,808   
|Capital expenditures (5)                                    |     | 874,489    |     | 46,097    |     | 920,586   
|                                                           

|(1) |  | Includes
effect of goodwill amortization.
|--- |  | -----------------------------------------

|(2) |  | As
of December 31, 2002 and 2001, the Company does not have any identifiable intangible
assets other than goodwill as all previously acquired intangible assets were classified
as goodwill.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) |  | Recoverable
taxes and tax liability are not included in total assets and total liabilities.
|--- |  | -------------------------------------------------------------------------------------------

|(4) |  | Includes
deferred long-term income tax for 3% (see Note 19)
|--- |  | -----------------------------------------------------------

|(5) |  | Includes
investments and divestiture in property, plant and equipment as well as deferred charges.
|--- |  | --------------------------------------------------------------------------------------------------



|Note 22. Differences Between Mexican GAAP and
US GAAP.
|------------------------------------------------------



| | F-23 | 
| | ---- | 



---





|The  consolidated financial statements of the
Company are prepared in accordance  with Mexican  GAAP, which differs in certain
significant respects from US GAAP. A  reconciliation of  the reported net stockholders
equity and comprehensive income  to US GAAP is  presented in Note 23. It should be noted
that this reconciliation  to US GAAP does not  include the reversal of the restatement of
the financial  statements for inflation  effects as required by Bulletin B-10, Reconocimiento
de los Efectos de Inflacion  en la Informacion Financiera (Recognition of the
Effects of Inflation in the  Financial Information), of Mexican GAAP. The  application of
this bulletin represents a  comprehensive measure of the effects  of price-level changes
in the Mexican economy and,  as such, is considered a more  meaningful presentation than
historical cost-based  financial reporting in  Mexican pesos for both Mexican and US
accounting purposes.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|The principal differences between Mexican GAAP
and US GAAP included in the  reconciliation that affect the consolidated financial
statements of the Company  are described as follow:
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|a) | Restatement of Prior Year Financial Statements:
|-- | -----------------------------------------------

| | As explained
in Note 4 a), in accordance with Mexican GAAP, the financial  statements for Mexican
subsidiaries for prior years were restated using  NCPI factors, and for foreign
subsidiaries for prior years was restated  using the inflation rate of the country in
which the foreign subsidiary is  located, then translated to Mexican pesos at the
year-end exchange rate  (see Note 3).
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | Under US GAAP
the restatement of prior year financial statements is not  required. The Company follows
the regulations of the Securities and  Exchange Commission of the United States of
America (SEC), which requires  that the prior financial statements must be
restated in constant units of  the reporting currency, in this case, the Mexican peso,
which requires the  restatement of such prior-year amounts using NCPI factors.
Additionally,  all other US GAAP adjustments for prior years have been restated based
upon  SEC methodology.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|b) | Classification Differences:
|-- | ---------------------------

| | Certain items
require a different classification in the balance sheet or  income statement under US
GAAP. These include:
| | ------------------------------------------------------------------------------------------------------------------------

| |  |  | As explained in Note 4 c), under Mexican GAAP advances
      to suppliers are recorded as inventories. Under US GAAP advances to suppliers
      are classified as prepaid expenses.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | The
impairment of goodwill and other long-lived assets, the gain or  loss on the disposition
of fixed assets, all severance indemnities,  and employee profit sharing must be included
in operating expenses  under US GAAP.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|c) | Promotional Expenses:
|-- | ---------------------

| | As explained
in Note 4 d), for Mexican GAAP purposes the promotional costs  related to the launching
of new products or presentations are recorded as  prepaid expenses. For US GAAP purposes,
all promotional costs are expensed  as incurred.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|d) | Goodwill:
|-- | ---------

| | As mentioned
in Note 4 i), under Mexican GAAP, goodwill must be amortized  over a period of no more
than 20 years. Under US GAAP, in accordance with  Statement of Financial Accounting
Standards (SFAS) No. 142, effective  January 1, 2002 goodwill is no longer
subject to amortization, but rather  it is subject to periodic assessment for impairment
by applying a  fair-value-based test.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | In accordance
with SFAS No. 142, the Company discontinued the amortization  of goodwill effective
January 1, 2002. The financial statement impact was  to reduce amortization expense and
increase net income under US GAAP by  $37,335 (Ps. 0.03 per share) for the year ended
December 31, 2002. A  reconciliation of previously reported net income and income per
share  under US GAAP to the amounts adjusted to exclude goodwill amortization is  as
follows:
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                             
|-----------------------------
|                             
|                             
|Reported net income          
|Add: Goodwill amortization   
|                             
|Adjusted net income          
|                             
|                             
|Reported net income per share
|Add: Goodwill amortization   

|                             
|-----------------------------
|Adjusted net income per share
|                             

| | F-24 | 
| | ---- | 



---



| | In connection
with the transition provisions for adopting this standard,  the Company performed a
transitional impairment test as of January 1, 2002  and found no impairment. The Company
will perform subsequent impairment  tests annually, unless an event occurs or
circumstances change that would  more likely than not reduce the fair value of a
reporting unit below its  carrying amount, in which case an impairment test would be
performed  between annual tests.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|e) | Restatement of Imported Machinery and Equipment:
|-- | ------------------------------------------------

| | As explained
in Note 4 e), in accordance with Mexican GAAP, imported  machinery and equipment have
been restated by applying the inflation rate  of the country of origin, then translated
at the year-end exchange rate of  the Mexican peso. Under US GAAP the restatement of
machinery and equipment  is not required. The Company follows the SEC regulations, which
require  all machinery and equipment, both domestic and imported, has been restated
using NCPI factors.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|f) | Capitalization of the Integral Result of Financing:
|-- | ---------------------------------------------------

| | Under Mexican
GAAP, the capitalization of the integral cost of financing  (interest, foreign exchange
and monetary position) generated by loan  agreements obtained to finance investment
projects is optional. The  Company does not capitalize the integral cost of financing.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | In accordance
with US GAAP, if interest is incurred during the  construction of qualifying assets,
capitalization is required as part of  the cost of such assets.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | Accordingly, a
reconciling item for the capitalization of a portion of the  integral result of financing
is included in the US GAAP reconciliation of  the net income and stockholders equity.
If the borrowings are denominated  in US dollars, the weighted-average interest rate on
all such outstanding  debt is applied to the balance of construction-in-progress to
determine  the amount to be capitalized, not to exceed interest expense. If the
borrowings are denominated in Mexican pesos, the amount of capitalizable  interest
determined as noted above is reduced by the gain on monetary  position associated with
the debt.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|g) | Financial Instruments:
|-- | ----------------------

| | In accordance
with Mexican GAAP, as mentioned in Note 4 o), beginning in  January 2001 Bulletin C-2
became effective.
| | ---------------------------------------------------------------------------------------------------------------------



| | Under US GAAP,
SFAS No. 133, Accounting for Derivative Instruments and  Hedging Activities,
also became effective in 2001. SFAS No. 133, as  amended, establishes accounting and
reporting standards requiring that  every derivative instrument (including certain
derivative instruments  embedded in other contracts) be recorded in the balance sheet as
either an  asset or liability measured at its fair value. SFAS No. 133 requires that
changes in the fair value of the derivative instruments fair value be  recognized
in:
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | The net income of the year; or
| | - |  | ------------------------------

| |  |  | Other comprehensive income, if the instruments
      represent cash flow hedges that qualify for hedge accounting.
| | - |  | ------------------------------------------------------------------------------------------------------------------



| | For purposes
of SFAS No. 133, the Company has elected not to designate its  financial instruments as
hedges for the derivative instruments, and  accordingly the entire effect of the
valuation of those instruments was  recognized in the income statement as a change in
accounting principles  under US GAAP at January 1, 2001.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | Prior to 2001,
in accordance with Mexican GAAP the income statement effect  of forward contracts was
recorded at the maturity of each contract. In  accordance with US GAAP the income
statement effect was determined by the  difference between the exchange rate at the date
the contract was signed  and the forward exchange rate, amortizing such difference on a
straight-line basis over the term of the contract.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|h) | Deferred Income Taxes and Employee Profit Sharing:
|-- | --------------------------------------------------

| | The Company
follows SFAS No. 109, Accounting for Income Taxes, for US  GAAP purposes,
which differs from Mexican GAAP as follows:
| | -----------------------------------------------------------------------------------------------------------------------------------



| | F-25 | 
| | ---- | 



---



| |  |  | Under
Mexican GAAP, deferred taxes are classified as non-current,  while under US GAAP the
classification is based on the classification  of the related asset or liability.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | Under
Mexican GAAP the effects of inflation on the deferred tax  balance generated by monetary
items are recognized in the result on  monetary position. Under US GAAP the deferred tax
balance is  classified as a nonmonetary item. As a result, the consolidated income
statement differs with respect to the presentation of the gain (loss)  on monetary
position and deferred income tax provision.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | Under
Mexican GAAP, the change in statutory income tax rate approved  early in 2002 was
considered in the calculation of deferred taxes at  December 31, 2001. Under US GAAP, a
change in statutory tax rate may  not be considered until the enactment date, which was
January 1, 2002  for the changes mentioned in Note 19 a).
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | Under
Mexican GAAP deferred employee profit sharing is calculated  considering only those
temporary differences that arise during the  year and which are expected to turn around
within a defined period,  while under US GAAP the same liability method as used for
deferred  income taxes is applied. Also, for US GAAP purposes, employee profit  sharing
must be classified as an operating expense.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|The differences in the restatement of imported
machinery and equipment and  the capitalization of financing costs, the pension plan and
financial  instruments under Mexican GAAP have a different treatment than under US  GAAP
(see Note 22 e, f, g and i). As a consequence, the related deferred  income tax presented
under Mexican GAAP is different from the effect  calculated under US GAAP (see Note 19 d).
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                              
|----------------------------------------------
|Reconciliation of Deferred Income
      Taxes 
|                                              
|Deferred income taxes under Mexican
      GAAP
|                                              
|Inflationary adjustment Mexico                
|                                              
|US GAAP adjustments:                          
|Property, plant
      and equipment, net      
|Pension and retirement
      plans            
|                                              
|Total adjustments                             
|                                              
|Deferred income taxes under US
      GAAP     
|                                              

|The changes in the balance of the deferred income taxes for
      the year are as follows:
|------------------------------------------------------------------------------------------

|                                          
|------------------------------------------
|                                          
|                                          
|Balance at the beginning of the
      year
|Provision for
      the year              
|Change on the
      statutory rate        
|Cumulative translation
      adjustment   
|                                          
|Balance at the end of the year            
|                                          

|                                                         
|---------------------------------------------------------
|Reconciliation
      of Deferred Employee Profit Sharing 
|                                                         
|Deferred employee
      profit sharing under Mexican GAAP
|                                                         
|US GAAP adjustments:                                     
|Inventories                                              
|Property,
      plant and equipment, net                 
|Deferred
      charges                                   
|Pension
      and retirement plans                       
|Other
      reserves                                     
|                                                         
|Total adjustments                                        
|                                                         
|Deferred employee
      profit sharing under US GAAP     
|                                                         



| | F-26 | 
| | ---- | 



---



|The changes in the balance of the deferred employee profit
      sharing for the year are as follows:
|-----------------------------------------------------------------------------------------------------

|
|
|
|

|Balance at the beginning
      of the year | Ps. | 309,717 | Ps. | 225,090
|------------------------------------------ | --- | ------- | --- | -------
|Provision for the
      year               |     | 96,810  |     | 86,336 
|Inflation effect                           |     | (2,517) |     | (1,709)
|                                          
|Balance at the end
      of the year       | Ps. | 404,010 | Ps. | 309,717
|                                          

|i) | Pension Plans:
|-- | --------------

| | Under Mexican
GAAP, the liabilities for employee benefits are determined  using actuarial computations
in accordance with Bulletin D-3, Labor  Obligations, which is substantially
the same as US GAAP SFAS No. 87,  Employers Accounting for Pensions.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | The effect of
the initial application of both bulletins generates a  difference in the unamortized
prior service costs and in the amortization  expense. Under Mexican GAAP and US GAAP,
there is no difference in the  liabilities for seniority premiums.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | The Company
prepared a study of pension costs under US GAAP based on  actuarial calculations, using
the same assumptions used under Mexican GAAP  (see Note 13).
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------



| | The required
disclosures under SFAS No. 87 are as follows:
| | ----------------------------------------------------------

|                                                                      
|----------------------------------------------------------------------
|Net pension cost:                                                     
|                                                                      
|Service cost                                                          
|Interest cost                                                         
|Actual return
      on plan assets                                    
|Net amortization
      and deferral                                   
|                                                                      
|Net pension cost
      (US GAAP)                                      
|Net pension cost
      recorded (Mexican GAAP)                        
|                                                                      
|Additional (income)
      expense that must berecognized under US GAAP
|                                                                      

|                                                                 
|-----------------------------------------------------------------
|Pension liability                                                
|                                                                 
|Projected benefit
      obligation                               
|Plan assets at
      fair value                                  
|                                                                 
|Unfunded projected
      benefit obligation                      
|Unrecognized
      net transition obligation                     
|Unrecognized
      net gain                                      
|                                                                 
|Total unfunded
      accrued pension liability under US GAAP     
|Total unfunded
      accrued pension liability under Mexican GAAP
|                                                                 
|Liability that
      must be canceled under US GAAP              
|                                                                 

|The changes during the year in the projected
benefit obligation of the  pension plan, as well as the changes in the plan assets at
market value,  are as follows:
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------



| | F-27 | 
| | ---- | 



---



|                                             
|---------------------------------------------
|Change in Projected Benefit
      Obligation 
|                                             
|Obligation at the beginning of
      the year
|Service cost                                 
|Interest cost                                
|Actuarial loss                               
|Benefits paid                                
|                                             
|Obligation at the end of the year            
|                                             

|                                                
|------------------------------------------------
|Change in Plan Assets at Fair
      Value       
|                                                
|Balance at the beginning of the
      year      
|Actual return
      on plan assets in real terms
|Actuarial gain                                  
|Benefits paid                                   
|                                                
|Balance at the end of the year                  
|                                                

|j) | Comprehensive Income:
|-- | ---------------------

| | In Note 23 c),
a reconciliation of comprehensive income under Mexican GAAP  to US GAAP is presented. The
reconciling items include adjustments to net  income and other comprehensive income.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|k) | Statement of Cash Flows:
|-- | ------------------------

| | Under Mexican
GAAP, the Company presents a consolidated statement of  changes in financial position in
accordance with Bulletin B-12, Estado de  Cambios en la Situacion Financiera (Statement
of Changes in Financial  Position), which identifies the generation and application of
resources by  the differences between beginning and ending financial statement balances
in constant Mexican pesos. Bulletin B-12 also requires that monetary and  foreign
exchange gains and losses be treated as cash items for the  determination of resources
generated by operations.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | In accordance
with US GAAP the Company follows SFAS No. 95, Statement of  Cash Flows,
excluding the effects of inflation (see Note 22 l).
| | -------------------------------------------------------------------------------------------------------------------------------------------

|l) | Summarized Financial Information under US GAAP:
|-- | -----------------------------------------------

|                                                
|------------------------------------------------
|Balance Sheets                                  
|                                                
|Current assets                                  
|Fixed assets                                    
|Other assets                                    
|                                                
|Total assets                                    
|                                                
|Current liabilities                             
|Long-term liabilities                           
|Other liabilities                               
|                                                
|Total liabilities                               
|Stockholders equity                            
|                                                
|Total liabilities and stockholders
      equity
|                                                

| | F-28 | 
| | ---- | 



---



|                  | 
|----------------- | 
|Income Statements | 

|                                                
|------------------------------------------------
|Total revenues                                  
|Income from operations                          
|Income before income taxes                      
|Income taxes                                    
|                                                
|Net income                                      
|Cumulative translation result                   
|Result of holding nonmonetary assets            
|                                                
|Comprehensive income                            
|                                                
|Weighted average common shares
      outstanding
|                                                
|Net comprehensive income per share              
|                                                

|                                                                       |    
|---------------------------------------------------------------------- | ---
|Cash Flows                                                             |    
|                                                                      
|Net income                                                             | Ps.
|Non-cash items                                                         |    
|Other expenses                                                         |    
|Working capital investment                                             |    
|Taxes                                                                  |    
|                                                                      
|Net cash flows from operating activities                               |    
|                                                                      
|Total fixed asset investments                                          |    
|                                                                      
|Financial expenses                                                     |    
|Bank loans                                                             |    
|Dividends paid                                                         |    
|Other financial transactions                                           |    
|                                                                      
|Net cash flows used in financing
      activities                      |    
|                                                                      
|Net increase in cash and cash equivalents                              |    
|Effect of exchange rate changes
      on cash                          |    
|Cash and cash equivalents at the
      beginning 
          of theyear |    
|                                                                      
|Cash and cash equivalents at the
      end of the year                 | Ps.
|                                                                      

|                                                
|------------------------------------------------
|Supplemental Information
      about Cash Flows:
|                                                
|                                                
|Interest paid                                   
|Income tax and tax on assets paid               
|                                                

|                                                          
|----------------------------------------------------------
|Statements of Changes
      in Stockholders Equity:      
|                                                          
|                                                          
|Stockholders equity as of
      the beginning of the year
|Dividends paid                                            
|Cumulative translation result                             
|Result of holding nonmonetary
      assets                
|Net income                                                
|                                                          
|Stockholders equity as of
      the end of the year      
|                                                          



| | F-29 | 
| | ---- | 



---



|Note 23. Reconciliation of Mexican GAAP to US GAAP.
|---------------------------------------------------

|a) | Reconciliation of Net Income for the year:
|-- | ------------------------------------------

|                                                               
|---------------------------------------------------------------
|                                                               
|                                                               
|Net income under Mexican GAAP                                  
|US GAAP adjustments:                                           
|Restatement of
      prior year financial statements(Note 22 a)
|Goodwill amortization
      (Note 22 d)                        
|Promotional expenses
      (Note 22 c)                         
|Restatement of
      machinery and equipment (Note 22 e)       
|Capitalization of interest
      expense (Note 22 f)           
|Deferred income taxes (Note
      22 h)                        
|Deferred employee profit
      sharing (Note 22 h)             
|Pension plan cost (Note 22 i)                                  
|Financial instruments
      (Note 22 g)                        
|                                                               
|Total adjustments                                              
|                                                               
|Net income under US GAAP                                       
|                                                               
|Weighted average common shares
      outstanding               
|Net income per share under US GAAP                             
|                                                               

|Under US GAAP, the monetary position effect of
the income statement  adjustments is included in each adjustment, except for the
capitalization  of the integral cost of financing and pension plan liabilities that are
nonmonetary.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|b) | Reconciliation of Stockholders Equity:
|-- | ---------------------------------------

|                                                                
|----------------------------------------------------------------
|                                                                
|                                                                
|Stockholders equity under
      Mexican GAAP                   
|US GAAP adjustments:                                            
|Restatement
      of prior year financial statements (Note 22 a)
|Goodwill
      amortization (Note 22 d)                         
|Restatement
      of machinery and equipment (Note 22 e)        
|Capitalization
      of interest expense (Note 22 f)            
|Deferred
      income taxes (Note 22 h)                         
|Deferred
      employee profit sharing (Note 22 h)              
|Promotional
      expenses (Note 22 c)                          
|Financial
      instruments (Note 22 g)                         
|Accumulated
      pension plan liability (Note 22 i)            
|                                                                
|Total adjustments                                               
|                                                                
|Stockholders equity under
      US GAAP                        
|                                                                

| | F-30 | 
| | ---- | 



---





|c) | Reconciliation of Comprehensive Income:
|-- | ---------------------------------------

|                                           |    
|------------------------------------------ | ---
|                                           |    
|                                          
|Comprehensive income under MexicanGAAP     | Ps.
|US GAAP
      adjustments:                 |    
|Net
      income (Note 23 a)               |    
|Cumulative
      translation result        |    
|Result
      of holding nonmonetary assets |    
|                                          
|Comprehensive income under US GAAP         | Ps.
|                                          

|Note 24.  Future Impact of Recently Issued
Accounting Standards Not Yet in Effect.
|----------------------------------------------------------------------------------



|a) | In Mexican GAAP:
|-- | ----------------



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



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



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



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



| | F-31 | 
| | ---- | 



---





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



|b) | In US GAAP:
|-- | -----------

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



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



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



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



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



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



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



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



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

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

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

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



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



|Note 25. Subsequent Event
|-------------------------



|On May 6, 2003, Coca-Cola FEMSA acquired 100% of the outstanding
      stock of Panamerican Beverages, Inc. (Panamco) for US$3,709 million, excluding
      transaction expenses. As part of the acquisition, the Company assumed US$885
      million of debt, of which US$373 million was repaid in connection with the
      acquisition.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | F-33 | 
| | ---- | 



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| | The transaction was financed with new indebtedness
      in Mexican pesos of Ps. 7,998 million and US$1,234 million, an equity contribution
      from FEMSA of US $260 million, an exchange of The Coca-Cola Companys equity
      interests in Panamco valued at US$674 million for new shares of Coca-Cola
      FEMSA, the assumption of indebtedness of US $512 million and cash on hand
      of US $285 million.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | Transaction costs and expenses, including financial
      and advisory fees, and costs associated with exiting activities of the former
      Panamco business include: (i) closing certain acquired facilities; (ii)
      rationalizing and consolidating operations, (iii) relocating the corporate
      and other offices, and (iv) other costs associated with the integration
      of the operations are expected to be material. These costs will be recorded
      on the Companys Consolidated Balance Sheet as adjustments to the purchase
      price or on the Company's Consolidated Statements of Income as expenses,
      as appropriate.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | Assets acquired and liabilities assumed as part
      of this acquisition will be recorded on the Companys consolidated balance
      sheet as of the acquisition date based upon their estimated fair values
      at such date. The excess of the purchase price over the estimated fair values
      of the underlying assets acquired and liabilities assumed will be allocated
      as identifiable intangible assets, principally bottling agreement rights,
      which the company has determined have an indefinite life. Appraisals and
      valuations of the acquired tangible and intangible assets in each of the
      eight countries in which Panamco operated are currently in process. The
      Company is unable to provide a preliminary estimate of the fair value of
      the assets acquired and liabilities assumed due to the incomplete nature
      of the valuations and pending the finalization of the integration plans.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | After the transaction, FEMSA indirectly owns
      45.7% of the economic value of Coca-Cola FEMSA and 53.6% of the voting shares.
      The Coca-Cola Company indirectly owns 39.6% of the economic value and 46.4%
      of the voting shares. The public owns the remaining economic value.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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