|
|



|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, 2003
|-------------------------------------------



|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, 2003 was:
|-------------------------------------------------------------------------------------------------------



|            | 
|----------- | 
|844,078,519 | 
|731,545,678 | 
|270,750,000 | 



|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                                                  | 1   
|        |                                                               |     
|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                                    | 14  
|        | The Company                                                   | 14  
|        | Regulation                                                    | 33  
|        | Bottler Agreements                                            | 36  
|        | Description of Property, Plant
      and Equipment            | 38  
|        | Significant Subsidiaries                                      | 41  
|        |                                                               |     
|Item 5. | Operating and Financial Review
      and Prospects            | 42  
|        |                                                               |     
|Item 6. | Directors, Senior Management and
      Employees              | 63  
|        | Compensation of Directors and Officers                        | 73  
|        | Stock Incentive Plan                                          | 74  
|        | Share Ownership                                               | 74  
|        | Board Practices                                               | 75  
|        | Employees                                                     | 76  
|        | Insurance Policies                                            | 76  
|        |                                                               |     
|Item 7. | Major Shareholders and Related
      Party Transactions       | 77  
|        | Major Shareholders                                            | 77  
|        | Related Party Transactions                                    | 81  
|        |                                                               |     
|Item 8. | Financial Information                                         | 83  
|        | Consolidated Statements and Other
      Financial Information | 83  
|        | Legal Proceedings                                             | 83  
|        |                                                               |     
|Item 9. | The Offer and Listing                                         | 86  
|        | Trading Markets                                               | 86  
|        | Trading on the Mexican Stock Exchange                         | 88  



| | i | 
| | - | 



---





|TABLE OF CONTENTS (Contd.)
|---------------------------



|Item 10.     | Additional Information                                           | 89 
|------------ | ---------------------------------------------------------------- | ---
|             | Bylaws                                                           | 89 
|             | Material Agreements                                              | 96 
|             | Exchange Controls                                                | 97 
|             | Taxation                                                         | 98 
|             | Documents on Display                                             | 102
|             |                                                                  |    
|Item 11.     | Quantitative and Qualitative Disclosures
      about Market Risk | 103
|             | Interest Rate Risk                                               | 103
|             | Foreign Currency Exchange Rate
      Risk                        | 104
|             | Equity Risk                                                      | 106
|             | Commodity Price Risk                                             | 106
|             |                                                                  |    
|Items 12-14. | Not Applicable                                                   | 108
|             |                                                                  |    
|Item 15.     | Controls and Procedures                                          | 108
|             |                                                                  |    
|Item 16A.    | Audit Committee Financial Expert                                 | 108
|             |                                                                  |    
|Item 16B.    | Code of Ethics                                                   | 108
|             |                                                                  |    
|Item 16C.    | Principal Accountant Fees and Services                           | 108
|             |                                                                  |    
|Item 16D.    | Not Applicable                                                   | 110
|             |                                                                  |    
|Item 16E.    | Not Applicable                                                   | 110
|             |                                                                  |    
|Item 17.     | Not Applicable                                                   | 111
|             |                                                                  |    
|Item 18.     | Financial Statements                                             | 111
|             |                                                                  |    
|Item 19.     | Exhibits                                                         | 111



| | ii | 
| | -- | 



---





|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 its subsidiaries on a consolidated basis.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|References herein
to U.S. dollars, U.S.$, dollars or $ are
to the lawful currency of the United States of America.  References herein to Mexican
pesos or Ps. are to the lawful currency of Mexico.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Soft drink as
used in this annual report refers generally to  non-alcoholic beverages, including those
carbonated or containing natural or  artificial flavors and sweeteners.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Currency Translations and Estimates
|-----------------------------------



|This annual report
contains translations of certain Mexican 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  Mexican 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 Mexican pesos at
an exchange  rate of Ps.11.235 to U.S.$1.00, the exchange rate quoted by dealers to us
for  the settlement of obligations in foreign currencies on December 31, 2003. On
December 31, 2003 and on March 15, 2004, the noon buying rates for Mexican pesos  as
published by the Federal Reserve Bank of New York were Ps.11.242 to U.S.$1.00  and
Ps.10.975 to U.S.$1.00, respectively. See Item 3. Key InformationExchange  Rate
Information for information regarding exchange rates since January 1,  1999.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



|Sources
|-------



|Certain information contained
      in this annual report has been computed based upon statistics prepared by
      the Instituto Nacional de Estadística, Geografía e Informática
      of Mexico (the National Institute of Statistics, Geography and Information),
      the Federal Reserve Bank of New York, Banco de México (the Bank
      of Mexico), the Comisión Nacional Bancaria y de Valores of Mexico
      (the National Banking and Securities Commission) or the CNBV, local entities
      in each country 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 these words
reflects our views about future events and financial  performance. Actual results could
differ materially from those projected in  these 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
economic or political  conditions in Latin America, particularly in Mexico, or changes in
our  regulatory environment. 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.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Presentation of Panamco
|-----------------------



|We acquired
Corporación Interamericana de Bebidas, S.A. de C.V.,  formerly known as Panamerican
Beverages, Inc., and which we refer to as Panamco,  on May 6, 2003. Unless otherwise
indicated, our consolidated financial  statements include Panamco only from May 2003. As
a result, our consolidated  financial statements for the
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 1 | 
| | - | 



---





|year ended and as of December  31, 2003 are not
comparable to prior periods. These financial statements will also not  be  comparable to
subsequent periods, as Panamco is only included in our  consolidated  financial
statements for eight months of 2003. Through our  acquisition of Panamco, we  acquired
additional territories in Mexico, which are  reported as part of our Mexico  segment, as
well as territories in Central  America, Colombia, Venezuela and Brazil, each  of which
is reported as a separate  segment. We did not acquire any additional  territories in
Argentina, the segment  information for which is fully comparable to prior  periods.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 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, 2003
and 2002 and the related consolidated  statements of income, changes in stockholders equity
and changes in financial  position for the years ended December 31, 2003, 2002 and 2001.
Our consolidated  financial statements are prepared in accordance with Mexican GAAP.
Mexican GAAP  differs in certain significant respects from U.S. GAAP. Notes 25 and 26 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, stockholders 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 Mexican pesos as of December 31, 2003.
| | - |  | ----------------------------------------------------------------------------------------



|The effects of inflation accounting under
Mexican GAAP have not been reversed in  the reconciliation to U.S. GAAP of net income and
stockholders equity. See Note  25 to our consolidated financial statements.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Our non-Mexican
subsidiaries maintain their accounting records in the  currency and in accordance with
accounting principles generally accepted in the  country where they are located. For
presentation in our consolidated financial  statements, we adjust these accounting
records into Mexican GAAP, apply the  inflation factors of the local country to restate
to the purchasing power of the  local currency at the end of the most recent period for
which financial results  are being reported, and translate the resulting amounts into
Mexican pesos using  the exchange rate at the end of the most recent period.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Under Mexican
GAAP, Panamco is included in our consolidated financial  statements from May 2003 and is
not included for periods prior to such date. As  a result, our consolidated financial
statements for the year ended and as of  December 31, 2003 are not comparable to prior
periods.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 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.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|                              | Year Ended December31,                                                                                      
|----------------------------- | ------------------------------------------------------------------------------------------------------------
|                              | 2003(1)(2)                                                                                                  
|                              | (millions of U.S. dollars or constant Mexican
      pesos
      at December 31, 2003, except per share data)
|Income Statement Data:        |                                                                                                             
|Mexican GAAP                  |                                                                                                             
|Net sales                     | $ 3,158.6                                                                                                   
|Total revenues                | 3,180.2                                                                                                     
|Cost of sales                 | 1,600.4                                                                                                     
|Gross profit                  | 1,579.8                                                                                                     
|Operating expenses            | 982.5                                                                                                       
|Goodwill amortization         | -                                                                                                           
|Income from operations        | 597.3                                                                                                       
|Net income                    | 207.6                                                                                                       
|Majority net income           | 205.8                                                                                                       
|Majority income per share(3)  | 0.12                                                                                                        
|                              |                                                                                                             
|U.S. GAAP                     |                                                                                                             
|Net sales                     | $ 3,158.6                                                                                                   
|Total revenues                | 3,180.2                                                                                                     
|Income from operations (4)    | 562.8                                                                                                       
|Net income                    | 204.6                                                                                                       
|Net income per share (3)      | 0.12                                                                                                        
|                              |                                                                                                             
|Balance Sheet Data:           |                                                                                                             
|Mexican GAAP                  |                                                                                                             
|Total assets                  | $ 5,466.8                                                                                                   
|Long-term debt                | 2,315.2                                                                                                     
|Capital stock                 | 236.4                                                                                                       
|Majority stockholders equity | 2,016.3                                                                                                     
|Total stockholders equity    | 2,030.8                                                                                                     
|                              |                                                                                                             
|U.S. GAAP                     |                                                                                                             
|Total assets                  | $ 5,473.6                                                                                                   
|Long-term debt                | 2,315.2                                                                                                     
|Capital stock                 | 236.4                                                                                                       
|Total stockholders equity    | 1,962.5                                                                                                     
|                              |                                                                                                             
|                              |                                                                                                             
|Other Data:                   |                                                                                                             
|Mexican GAAP                  |                                                                                                             
|Depreciation(5)               | $     
      86.1                                                                                           
|Capital expenditures          | 170.0                                                                                                       
|                              |                                                                                                             
|                              |                                                                                                             
|U.S. GAAP                     |                                                                                                             
|Depreciation(5)               | $     
      85.9                                                                                           
|Capital expenditures          | 170.0                                                                                                       
|                              |                                                                                                             

|
|

|(1) |  | Includes
the new territories acquired in the Panamco acquisition from May  2003.
|--- |  | --------------------------------------------------------------------------------

|(2) |  | Translation
to U.S. dollar amounts at an exchange rate of Ps.11.235 to  U.S.$1.00 solely for the
convenience of the reader.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------

|(3) |  | For
the years ended  December 31, 1999 through December 31, 2002, computed on the basis of
1,425  million shares outstanding. For  the year ended December 31, 2003, computed on the
basis of 1,704.3 million  shares outstanding, the weighted average shares outstanding
during 2003  after giving effect to the capital increase in May 2003 in connection with
the Panamco acquisition.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) |  | We
include employee profit sharing as part of income from operations for purposes of U.S.
GAAP.
|--- |  | -----------------------------------------------------------------------------------------------



| | 5 | 
| | - | 



---





|(5) |  | Excludes
breakage of bottles and cases (Ps.273.6 million in 2003) and  amortization of other
assets, and pension and seniority premiums (Ps.755.1  million in 2003). See the
consolidated statements of changes in financial  position included in our consolidated
financial statements.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



|The following
table sets forth the nominal amount in Mexican pesos of  dividends declared and paid per
share each year and the U.S. dollar amounts on a  per share basis actually paid to
holders of American Depositary Shares, which we  refer to as ADSs, on each of the
respective payment dates.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Date Dividend Paid | Fiscal Year with 
      Respect to which 
      Dividend was Declared | Mexican pesos 
      per Share 
      (nominal) | U.S. 
      dollars
      per Share
|------------------ | --------------------------------------------------------------------- | ----------------------------------------------- | -----------------------------------
|June 28, 2000      | 1999                                                                  |                                                 |                                    
|March 28, 2001     | 2000                                                                  |                                                 |                                    
|May 9, 2002        | 2001                                                                  |                                                 |                                    
|March 14, 2003     | 2002                                                                  | (1)                                             |                                    
|March 9, 2004(2)   | 2003                                                                  | (3)                                             |                                    

|
|

|(1) |  | Dividends
were not declared for fiscal year 2002.
|--- |  | -------------------------------------------------

|(2) |  | Date
of  dividend declaration.
|--- |  | ------------------------------

|(3) |  | Because
dividends for 2003 have not been paid at the time of this annual report, the U.S. dollar
per share amount has not  been determined.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------



|The  declaration,
amount and payment of dividends are subject to  approval by holders of our  Series A
shares and our Series D shares voting as a  single class, 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.  Holders of Series L shares, including in the form of ADSs,
are not entitled to  vote on the declaration and payment of dividends. We have
historically paid  dividends although we decided not to pay a dividend for the year 2002.
Accordingly, our historical dividend payments are not necessarily indicative of  future
dividends.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



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



|     | Exchange Rate
|---- | -------------
|     | High         
|1999 | 10.60        
|2000 | 10.09        
|2001 | 9.97         
|2002 | 10.43        
|2003 | 11.41        
|     |              

|
|

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



| | 6 | 
| | - | 



---





|          | Exchange Rate
|--------- | -------------
|          | High         
|2003:     |              
|September | 11.04        
|October   | 11.32        
|November  | 11.40        
|December  | 11.41        
|          |              
|2004:     |              
|January   | 11.10        
|February  | 11.25        
|March(1)  | 11.05        

|
|

|(1) |  | From
the period beginning March 1 until March 15, 2004.
|--- |  | -------------------------------------------------------



|Mexico has a free
foreign exchange market and, since December 1994, the  Mexican government has not
intervened to maintain the value of the Mexican peso  against the U.S. dollar. The
Mexican 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 Mexican peso remained relatively stable from
1999 until the fall  of 2001. In late 2001 and early 2002, the Mexican peso appreciated
considerably  against the U.S. dollar and, more strongly, against other foreign
currencies.  From the second quarter of 2002 and until the end of 2003, the Mexican peso
depreciated in value. In 2004 to date, the Mexican peso has appreciated in value  and
returned to its 2003 levels. We can make no assurance that the Mexican  government will
maintain its current policies with regard to the Mexican peso or  that the Mexican peso
will not further depreciate significantly in the future.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|We pay all cash
dividends in Mexican pesos. As a result, exchange rate  fluctuations will affect the U.S.
dollar amounts received by holders of our  ADSs, which represent ten 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 Mexican peso and the U.S.
dollar have affected  the U.S. dollar equivalent of the Mexican 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 on our relationship
with The Coca-Cola Company.
|--------------------------------------------------------------------



|Approximately 93.2% of our
      sales volumes in 2003 were derived from sales of Coca-Cola trademark
      beverages. We produce, market and distribute Coca-Cola trademark
      beverages through standard bottler agreements that cover all of our present
      territories. Through its rights under the bottler agreements and as a large
      shareholder, 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. See The Coca-Cola Company
      and FEMSA have substantial influence on the conduct of our business.
      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. The Coca-Cola Company also
      makes significant contributions to our marketing budget although they are
      not required to contribute a particular amount. In addition, we are prohibited
      from bottling any soft drink product or distributing other beverages 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. We may not transfer control of the
      bottler rights of any of our territories without the consent of The Coca-Cola
      Company.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|We depend on The Coca-Cola
      Company to renew our bottler agreements. Our bottler agreements for Mexico
      expire in 2005 and 2013, renewable in each case for ten-year terms. Our
      bottler agreements for Colombia, Brazil and Argentina expire in 2004, renewable
      in each case for five-year terms (except for Argentina, which is renewable
      for ten year terms). Our remaining territories are governed by bottler agreements
      that expire after 2005 that have similar renewal periods. There can be no
      assurances that The Coca-Cola Company will decide to renew any of these
      agreements. In addition, these agreements generally may be terminated in
      the event that we fail to comply with their terms. Non-renewal or termination
      would prevent us from selling Coca-Cola trademark beverages in the
      affected territory and would have an adverse effect on our business, financial
      condition, prospects and results of operations.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



|The Coca-Cola
Company and Fomento Económico Mexicano, S.A. de  C.V., a Mexican holding company
with interests in the beverages sector and other  related businesses that we refer to as
FEMSA, have significant influence on the  conduct of our business and together possess
the ability to control our company.  The Coca-Cola Company indirectly owns 39.6% of our
outstanding capital stock,  representing 46.4% of our capital stock with full voting
rights. 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 our capital stock  with full voting
rights. 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. The  interests of The Coca-Cola Company and FEMSA may be different from
the interests  of our remaining shareholders, and they may cause us to take actions that
are  not in the interest of our remaining shareholders.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|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
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 8 | 
| | - | 



---





|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. We are a party to a number of bottler agreements  with The
Coca-Cola Company and have also entered into a credit agreement with  The Coca-Cola
Company pursuant to which we may borrow up to U.S.$250 million for  working capital and
other general corporate purposes. See Item 7. Major  Shareholders and Related Party
TransactionsRelated Party Transactions and  Item 4. Information on the
CompanyBottler Agreements. Transactions with  affiliates may create the potential
for conflicts of interest, which could  result in terms less favorable to us than could
be obtained from an unaffiliated  third party.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|We have recently increased our leverage as
a  result of the Panamco acquisition.
|--------------------------------------------------------------------------------



|In connection with
the acquisition of Panamco, we incurred  approximately Ps.26,352 million of debt
(including existing debt of Panamco).  Our total indebtedness as of December 31, 2003 was
Ps.29,004 million. Our debt  level is now significantly higher than it has been
historically. 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 pursuing  acquisitions and other opportunities that may present themselves to us or
from  obtaining additional financing or completing refinancings on terms favorable to  us.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|We may not achieve expected operating
efficiencies in the newly acquired territories.
|-------------------------------------------------------------------------------------



|Through the
acquisition of Panamco, we acquired new territories in  Mexico as well as in the
following countries in which we have not historically  conducted operations: Guatemala,
Nicaragua, Costa Rica, Panama, Colombia,  Venezuela and Brazil. Since the acquisition, we
have undertaken a plan in the  newly acquired territories to integrate our operations, to
improve the  utilization of assets across our territories and to implement the commercial
strategies that we have historically applied in our territories in Mexico and  Argentina.
Conditions in these new territories are different from the conditions  under which we
have historically operated with less favorable consumption  patterns than those
experienced in Mexico and different and more challenging  political and economic
climates. In addition, distribution and marketing  practices in our new territories
differ from our historical practices. Several  of these territories have a lower level of
pre-sale as a percentage of total  distribution than we are accustomed to having, and the
product and presentation  mix varies from territory to territory with customer
preferences. There can be  no assurance that our initiatives will reduce operating costs
or maintain or  improve sales in the near term or at all, which may adversely affect our
sales  growth and operating margins.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Competition could affect our business.
|--------------------------------------



|The beverage
industry throughout Latin America is highly competitive.  We face competition from other
bottlers of soft drinks such as PepsiCo, Inc.,  which we refer to as PepsiCo, and from
producers of low cost beverages or B brands. We also compete against
beverages other than soft drinks such as water,  fruit juice and sport drinks. Although
competitive conditions are different in  each of our territories, we compete principally
in terms of price, packaging,  consumer sale promotions, customer service and non-price
retail incentives.  There can be no assurances that we will be able to avoid lower
pricing as a  result of competitive pressure. Lower pricing, changes made in response to
competition and changes in consumer preferences may have an adverse effect on  our
results of operations.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Our principal competitor in
      Mexico is The Pepsi Bottling Group, which we refer to as PBG. PBG is the
      largest Pepsi bottler worldwide and competes with Coca-Cola trademark
      beverages. We have also experienced stronger competition in Mexico from
      lower priced soft drinks in multi-serving presentations. In Argentina and
      Brazil, we compete against Companhia de Bebidas das Americas, commonly referred
      to as AmBev, the largest brewer in Latin America, which sells Pepsi products,
      in addition to a portfolio that includes local brands with flavors such
      as guaraná. In each of our territories we compete against bottlers
      of Pepsi with various other bottlers and distributors of nationally and
      regionally advertised soft drinks as well as complementary beverages such
      as water, juice and sports drinks. In certain territories, we also compete
      against soft drink flavors that have a strong local presence.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 9 | 
| | - | 



---





|A water shortage or a failure to maintain
existing concessions could 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. 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 the vast majority
of the water used in our  soft drink production in Mexico pursuant to these concessions,
which the Mexican  government granted based on studies of the existing and projected
groundwater  supply. Our existing water concessions in Mexico may be terminated by
governmental authorities under certain circumstances and their renewal depends  on
receiving necessary authorizations from municipal water authorities. See  Item 4.
Information on the CompanyRegulationWater Supply Law. In our other
territories, our existing water supply may not be sufficient to meet our future
production needs and the available water supply may be adversely affected by  shortage or
changes in governmental regulations.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|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 or prove sufficient to
meet our water supply  needs.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



|Our most
significant raw materials are concentrate, which we acquire  from companies designated by
The Coca-Cola Company, sweeteners and packaging  materials. Prices for concentrate are
determined by The Coca-Cola Company  pursuant to our bottler agreements as a percentage
of the weighted average  retail price, net of applicable taxes. The prices for our
remaining raw  materials are driven by market prices and local availability as well as
the  imposition of import duties and import restrictions and fluctuations in exchange
rates. We are also required to use only suppliers approved by The Coca-Cola  Company,
which may limit the number of suppliers available to us. Our sales  prices are
denominated in the local currency in which we operate, while the  prices of certain
materials used in the bottling of our products, mainly  aluminum cans and plastic
bottles, are paid in or determined with reference to  the U.S. dollar 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.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|After concentrate,
packaging and sweeteners constitute the largest  portion of our raw material costs. Sugar
prices in all of the countries in which  we operate other than Brazil are subject to
local regulations and other barriers  to market entry that cause us to pay in excess of
international market prices  for sugar. In Mexico, sugar prices increased approximately
8% in 2003, and our  ability to substitute other sweeteners has been limited by the
imposition of a  20% excise tax on carbonated soft drinks produced with non-sugar
sweeteners. In  Venezuela, there was a shortage of sugar during the second half of 2003
due to  the inability of the main sugar importers to access foreign currencies as a
result of the exchange controls implemented at the beginning of 2003.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|We cannot assure
you that our raw material prices will not increase in  the future. Increases in the
prices of raw materials will increase our cost of  sales and adversely affect our results
of operations.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Taxes on soft drinks could 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. Mexico recently implemented a  20% excise tax on carbonated soft drinks
produced with non-sugar sweetener.  Certain countries in Central America, Argentina and
Brazil have also imposed  taxes on our products. See Item 4. Information on the
CompanyRegulationTaxation of Soft Drinks. 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.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Regulatory developments may have an effect
on our business.
|-----------------------------------------------------------



|We are subject to
regulation in each of the territories in which we  operate. The principal areas in which
we are subject to regulation are  environment, labor, taxes and antitrust. The adoption
of new laws or regulations  in the
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 10 | 
| | -- | 



---





|countries in which we operate may increase our
operating costs or impose  restrictions on our operations. In particular, environmental
standards became  more stringent recently in several of the countries in which we
operate, and we  are in the process of complying with these new standards.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Voluntary price
restraints or statutory price controls have been  imposed historically in several of the
countries in which we operate. The  imposition of these restrictions may have an adverse
effect on our results of  operations and financial position. 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.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Risks Related to the Series L Shares and the
ADSs
|-------------------------------------------------



|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,
including 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 notice of shareholders meetings from The Bank  of
New York, the depositary for our ADSs, with sufficient time to enable holders  to return
voting instructions to the depositary in a timely manner.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|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 ADS  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.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|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 their equity  interests.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Our Series L
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,  which we refer to as the SEC, with respect to that future issuance of shares
or  (ii) the offering qualifies for an exemption from the registration requirements  of
the U.S. Securities Act of 1933. In addition, under current Mexican law,  sales by the
ADS 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
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 these 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 these
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.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Risks Related to Mexico and the 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
segment. In the past, Mexico has experienced both  prolonged periods of weak economic
conditions and dramatic deteriorations in  economic conditions that have had a negative
impact on our company. There can be  no assurances that such conditions will not return
or that such conditions will  not have a material adverse effect on our financial
condition and results of  operations.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Our business may
be significantly affected by the general condition of  the Mexican economy, the rate of
inflation and interest rates. Decreases in the  growth rate of the Mexican economy,
periods of negative growth, and increases in  inflation or interest rates may result in
lower demand for soft drink beverages,  lower real pricing or a 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 reduce costs and expenses, and our profit margins may
suffer as a  result. In addition, an increase in interest rates in Mexico would increase
the  cost to us of variable rate, Mexican peso-denominated funding and have an  adverse
effect on our financial position and results of operations.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



|A depreciation of
the Mexican peso relative to the U.S. dollar would  increase the cost to us of a portion
of our raw materials, the price of which is  paid in or determined with reference to U.S.
dollars and debt obligations  denominated in U.S. dollars and thereby may negatively
affect our net results. A  severe devaluation or depreciation of the Mexican peso may
also result in  disruption of the international foreign exchange markets and may limit
our  ability to transfer or to convert Mexican pesos into U.S. dollars and other
currencies for the purpose of making timely payments of interest and principal  on our
U.S. dollar indebtedness or obligations in other currencies. 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 Mexican pesos into U.S.
dollars or to transfer other currencies out of  Mexico, the Mexican government could
institute restrictive exchange rate  policies in the future. To the extent that there are
currency fluctuations, they  are likely to have an effect on our financial condition,
results of operations  and cash flows in future periods.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Political events in Mexico could affect
our  operations.
|--------------------------------------------------------



|Mexican political events may
      also significantly affect our operations. In the Mexican national elections
      held on July 2, 2000, Vicente Fox of the Partido Acción Nacional
      (the National Action Party) or PAN, won the
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 12 | 
| | -- | 



---





|presidency. Although his victory ended more than 70 years
      of presidential rule by the Partido Revolucionario Institucional
      (the Institutional Revolutionary Party) or PRI, neither the PRI nor the
      PAN succeeded in securing a majority in the Mexican congress. In elections
      in 2003, the PAN lost additional seats in the Mexican congress and state
      governships. The resulting legislative gridlock has impeded the progress
      of reforms in Mexico, which may adversely affect economic conditions in
      Mexico or our results of operations. During 2004, there will be elections
      for governors in ten of 32 states and for local congresses in 14 states.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Developments in other Latin American
countries in which we operate may affect our business.
|-------------------------------------------------------------------------------------------



|In addition to
Mexico, we conduct operations in Guatemala, Nicaragua,  Costa Rica, Panama, Colombia,
Venezuela, Brazil and Argentina. These countries  expose us to different or greater
country risk than Mexico. For many of these  countries, operating results in recent years
have been adversely affected by  deteriorating macroeconomic and political conditions. In
Venezuela and  Argentina, significant economic and political instability, including a
contracting economy, a drastic currency devaluation, high unemployment, the  introduction
of exchange controls and social unrest have resulted in higher  production costs and
declining net sales. In Colombia, we have experienced  limited disruptions in production
and distribution as a result of political  instability.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|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 or
interest rates or by political  developments or changes in law. Devaluation of the local
currency against the  U.S. dollar may increase the operating costs in that country, and a
depreciation  against the Mexican peso may negatively affect the results of that country
as  reported in our Mexican GAAP financial statements. 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. As a result
of these potential risks, we may experience lower  demand, lower real pricing or
increases in costs, which may negatively impact  our results of operations.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 13 | 
| | -- | 



---





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



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



|Overview
|--------



|We are the largestCoca-Cola
      bottler in Latin America, with our territories representing approximately
      40% of Coca-Cola sales volumes in Latin America, and the second largest
      bottler of Coca-Cola trademark beverages in the world, calculated
      in each case by sales volume in unit cases sold in our territories in 2003.
      We operate in the following territories:
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | Mexico
 a substantial portion of central Mexico (including Mexico City) and  southeast Mexico
(including the Gulf region).
| | - |  | ---------------------------------------------------------------------------------------------------------------------------

| |  |  | Central America  Guatemala City and surrounding
      areas, Nicaragua (nationwide), Costa Rica (nationwide) and Panama (nationwide).
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------

| |  |  | Colombia  most of the country.
| | - |  | -------------------------------

| |  |  | Venezuela  nationwide.
| | - |  | -----------------------

| |  |  | Brazil  the area of greater Sã Paulo,
      Campinas, Santos, the state of Mato Grosso do Sul and part of the state
      of Goias.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------

| |  |  | Argentina federal capital of Buenos Aires
      and surrounding areas.
| | - |  | -----------------------------------------------------------------------



|Our Company was established
      on October 30, 1991 as a sociedad anónima de capital variable
      (a variable capital stock corporation), organized under the laws of Mexico
      and has a duration of 99 years. 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 www.cocacola-femsa.com.mx.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|The following is
an overview of  our operations by segment in 2003:
|-------------------------------------------------------------------



|Operations by SegmentOverview
|------------------------------

|Year Ended December 31,
2003(1),(2)
|-----------------------------------



|                       | Mexico   | Central America | Colombia | Venezuela | Brazil  | Argentina
|---------------------- | -------- | --------------- | -------- | --------- | ------- | ---------
|                       | Pesos    |                 | %        |           | Pesos   |          
|Total Revenues         | 23,935.2 |                 | 66.7%    |           | 2,186.5 |          
|Income from Operations | 5,633.6  |                 | 84.0%    |           | 218.4   |          
|                       |          |                 |          |           |         |          

|
|

|(1) |  | The
sums of the financial data for each of our segments and percentages  with respect thereto
differ from our consolidated financial information  due to intercompany transactions,
which are eliminated in consolidation,  and certain non-operating assets and activities
of Coca-Cola FEMSA,  including corporate services.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) |  | Expressed
in millions of Mexican pesos.
|--- |  | ---------------------------------------



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



|In 1979, a
subsidiary of FEMSA acquired certain soft drink bottler  subsidiaries that are now a part
of our company. At that time, the acquired  subsidiaries had 13 Mexican distribution
centers operating 701 distribution  routes, and the production capacity of the acquired
subsidiaries was 83 million  physical cases. In 1991, FEMSA
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 14 | 
| | -- | 



---





|transferred its ownership in  the subsidiaries
to  FEMSA Refrescos, S.A. de C.V., the corporate predecessor of our  company.
|----------------------------------------------------------------------------------------------------------------------------



|FEMSA is a
beverage company with significant interests in Mexico and  other Latin American
countries. It owns 45.7% of the stock in Coca-Cola FEMSA,  70% of FEMSA Cerveza, S.A. de
C.V., a significant player in the Mexican beer  market as well as a major exporter in key
international markets including the  United States, 100% of FEMSA Comercio, S.A. de C.V.,
a convenience store chain  in Mexico and 100% of FEMSA Empaques, S.A. de C.V., which we
refer to as FEMSA  Empaques, a producer and distributor of beverage-related packaging
materials. In  2003, we represented 47%, 55% and 50%, of FEMSAs total revenues,
income  from operations and net income, respectively.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Consistent with
our goals of maximizing long-term profitability and  growth and enhancing our competitive
position, in June 1993, a subsidiary of The  Coca-Cola Company subscribed for 30% of our
capital stock in the form of Series  D Shares for U.S.$195 million. In September 1993,
FEMSA sold Series L Shares  that represented 19% of our capital stock to the public, and
we listed these  shares on the Mexican Stock Exchange and in the form of ADSs on the New
York  Stock Exchange. After giving effect to these transactions, FEMSA retained a 51%
indirect interest in our company.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|In a series of
transactions between 1994 and 1997, we acquired the  territory for the federal capital of
Buenos Aires by purchasing 100% of  Coca-Cola FEMSA de Buenos Aires, S.A. de C.V. from a
subsidiary of The Coca-Cola  Company. We expanded our Argentine operations in February
1996 by acquiring the  former San Isidro Refrescos S.A. territories, which we refer to as
SIRSA,  including certain properties of Refrescos del Norte S.A. Through these
transactions, we expanded our Argentine operations to include the contiguous San  Isidro
and Pilar areas.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



|In May 2003, we expanded our
      operations throughout Latin America by acquiring 100% of Panamco, then the
      largest soft drink bottler in Latin America in terms of sales volumes in
      2002. Through our acquisition of Panamco, we began producing and distributing
      Coca-Cola trademark beverages in additional territories in the central
      and the gulf regions of Mexico and in Central America (Guatemala, Nicaragua,
      Costa Rica and Panama), Colombia, Venezuela and Brazil, along with bottled
      water, beer and other beverages in some of these territories. The total
      cost of the transaction was approximately Ps.38,603 million, excluding transaction
      expenses, and we financed the acquisition as follows: Ps.17,267 million
      of new debt (including approximately Ps.5,245 million used to refinance
      existing Panamco indebtedness); a Ps.2,779 million capital investment from
      FEMSA; the issuance of our Series D Shares to subsidiaries of The Coca-Cola
      Company in exchange for a capital contribution of Ps.7,041 million in the
      form of equity interests in Panamco; Ps.2,820 million in cash; and Ps.9,085
      million of assumed net debt.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|After the Panamco
acquisition, FEMSA indirectly owns 45.7% of our  capital stock, representing 53.6% of our
capital stock with full voting rights,  and The Coca-Cola Company indirectly owns 39.6%
of our capital stock,  representing 46.4% of our capital stock with full voting rights.
The remaining  14.7% of our capital stock trades on the Mexican Stock Exchange and in the
form  of ADSs on the New York Stock Exchange.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



|We are the largest bottler
      of Coca-Cola trademark beverages in Latin America in terms of sales
      volumes in 2003, with operations in Mexico, Guatemala, Nicaragua, Costa
      Rica, Panama, Colombia, Venezuela, Brazil and Argentina. While our corporate
      headquarters are in Mexico City, we have established divisional headquarters
      in the following three regions:
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



| | 15 | 
| | -- | 



---





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

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



|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 our revenues by
implementing well planned product,  package and pricing strategies through channel
distribution and by implementing  best practices in order to improve operational
efficiencies throughout our  company. To achieve these goals we continue our efforts in:
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | working
with The Coca-Cola Company to continue exploring new lines  of beverages that extend
existing brands and allow us to  participate in new beverage segments;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | implementing
packaging strategies designed to increase consumer  demand for our products and to build
a strong returnable base in  our new territories;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | replicating
our successful best practices throughout the whole value chain  within the newly acquired
territories;
| | - |  | ------------------------------------------------------------------------------------------------------------------

| |  |  | rationalizing
and adapting our organizational and asset structure in order to be in a better position
to respond to a  changing competitive environment;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | strengthening
our selling capabilities in order to get closer to our clients, helping them satisfy the
beverage needs of  consumers;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------

| |  |  | integrating
our operations through advanced information technology systems;
| | - |  | ---------------------------------------------------------------------------

| |  |  | evaluating
our bottled water strategy, in conjunction with The Coca-Cola Company, to maximize its
profitability across our  market territories; and
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | committing
to building a best-in-class collaborative team, from top to bottom.
| | - |  | ------------------------------------------------------------------------------



|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 new presentations. See The CompanyProduct and Packaging Mix. 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. In
2003, as part of the integration process from  the acquisition of Panamco, we closed
several under-utilized manufacturing  centers and shifted distribution activities to
other existing facilities. See  Description of Property, Plant and Equipment. In
each of our facilities, we  seek to increase productivity through infrastructure and
process reengineering  for improved asset utilization. Our capital expenditure program
includes  investments in production and distribution facilities, bottles, cases, coolers
and information systems. We believe that this program will allow us to maintain  our
capacity and flexibility to innovate and to respond to consumer demand for  non-alcoholic
beverages.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|We continue with
the integration process in our new Mexican  territories, realizing synergies in
back-office operations, manufacturing and  procurement and have implemented closure and
integration of facilities and
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 16 | 
| | -- | 



---





|headcount reductions. We closed Panamcos Miami and
      Mexico City offices, consolidating our headquarter operations into our original
      office in Mexico City. In our other new territories we have replicated some
      of our traditional management practices and systems, and we have introduced
      several packing presentations across our new territories, strengthening
      Coca-Cola brands and offering new options to the consumers. We have
      implemented new pricing architecture strategies, differentiating returnable
      presentations from non-returnables in order to achieve an adequate combination
      of price and convenience.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|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. To build upon these skills, we
also offer management  training programs designed to enhance our executives abilities
and  cross-fertilization programs, whereby a growing team of multinational executives
exchange experiences, know how and talent among our new and existing  territories.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



|The following map
shows the locations of our territories, giving in  each case the population to which we
offer products, the number of retailers of  our carbonated soft drinks and the per capita
consumption of our soft drink  products:
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





| | 17 | 
| | -- | 



---





|Per capita
consumption data for a territory is determined by dividing  sales volumes within the
territory (in bottles, jugs, 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 of our products consumed  annually per capita. In evaluating the
development of local volume sales in our  territories, we and The Coca-Cola Company
measure, among other factors, the per  capita consumption of our carbonated beverages.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 18 | 
| | -- | 



---





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



|We produce, market and distribute
      the following Coca-Cola trademark beverages, proprietary brands and
      brands licensed from third parties, as of March 15, 2004:
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Colas: | Mexico                | Central
      America | Colombia | Venezuela | Brazil | Argentina
|------ | --------------------- | --------------------- | -------- | --------- | ------ | ---------
|       | Coca-Cola             | X                     | X        | X         | X      | X        
|       | Coca-Cola light       | X                     | X        | X         | X      | X        
|       | Coca-Cola light lemon |                       |          |           |        | X        
|       | Coca-Cola vanilla     | X                     |          | X         | X      |          



|Flavored Soft Drinks: | Mexico                     | Central
      America | Colombia | Venezuela | Brazil | Argentina
|--------------------- | -------------------------- | --------------------- | -------- | --------- | ------ | ---------
|                      | Beat                       | X                     |          |           |        |          
|                      | Canada Dry ginger ale      |                       | X        |           |        |          
|                      | Chinotto                   |                       |          |           | X      |          
|                      | Chinotto light             |                       |          |           | X      |          
|                      | Crush                      |                       |          |           |        |          
|                      | Delaware Punch             | X                     |          |           |        |          
|                      | Fanta                      | X                     | X        | X         |        | X        
|                      | Fanta light                |                       |          |           |        | X        
|                      | Fanta multi-flavors        | X                     | X        |           |        | X        
|                      | Fresca                     | X                     | X        |           |        |          
|                      | Fresca pink grapefruit     | X                     |          |           |        |          
|                      | Frescolita                 |                       |          |           | X      |          
|                      | Grapette                   |                       |          |           | X      |          
|                      | Hit                        |                       |          |           | X      |          
|                      | Kist(1)                    |                       | X        |           |        |          
|                      | Kola Román(2)              |                       |          | X         |        |          
|                      | Kuat                       |                       |          |           |        | X        
|                      | Kuat laranja               |                       |          |           |        | X        
|                      | Kuat light                 |                       |          |           |        | X        
|                      | Lift                       | X                     | X        | X         |        |          
|                      | Lift green apple           | X                     | X        |           |        |          
|                      | Mundet multi-flavors(3)    | X                     |          |           |        |          
|                      | Premio(1)                  |                       |          | X         |        |          
|                      | Prisco(3)                  | X                     |          |           |        |          
|                      | Quatro                     | X                     |          | X         | X      |          
|                      | Schweppes                  |                       |          |           |        | X        
|                      | Senzao                     | X                     |          |           |        |          
|                      | Sidral Mundet(3)           | X                     |          |           |        |          
|                      | Sidral Mundet light(3)     | X                     |          |           |        |          
|                      | Simba                      |                       |          |           |        | X        
|                      | Sintonia                   |                       |          |           |        | X        
|                      | Sprite                     | X                     | X        | X         |        | X        
|                      | Sprite light / Sprite Cero | X                     |          |           |        | X        
|                      | Taí                        |                       |          |           |        | X        



| | 19 | 
| | -- | 



---





| | Water:            | Mexico | Central
      America | Colombia | Venezuela | Brazil | Argentina
| | ----------------- | ------ | --------------------- | -------- | --------- | ------ | ---------
| | Alpina(1)         |        | X                     |          |           |        |          
| | Ciel              | X      |                       |          |           |        |          
| | Ciel Mineralizada | X      |                       |          |           |        |          
| | Club K(1)         |        |                       | X        |           |        |          
| | Crystal(1)        |        |                       |          |           | X      |          
| | Dasani            |        | X                     |          |           |        |          
| | Kin               |        |                       |          |           |        | X        
| | Manantial(1)      |        |                       | X        |           |        |          
| | Nevada            |        |                       |          | X         |        |          
| | Pure Mountain(1)  |        | X                     |          |           |        |          
| | Santa Clara(1)    |        |                       | X        |           |        |          
| | Shangri-la(1)     |        | X                     |          |           |        |          
| | Soda Clausen(1)   |        |                       | X        |           |        |          
| | Soda Kin          |        |                       |          |           |        | X        



|Other Categories:(4) | Mexico            | Central
      America | Colombia | Venezuela | Brazil | Argentina
|-------------------- | ----------------- | --------------------- | -------- | --------- | ------ | ---------
|                     | Black Fire        |                       |          |           |        |          
|                     | Burn              |                       |          |           |        | X        
|                     | Flash Power       |                       |          |           |        | X        
|                     | Fruitopia         |                       | X        |           |        |          
|                     | Hi-C              |                       | X        |           |        |          
|                     | Juizz(1)          |                       | X        |           |        |          
|                     | Kapo              |                       | X        |           |        |          
|                     | Keloco(1)         | X                     |          |           |        |          
|                     | Kin light         | X                     |          |           |        |          
|                     | Malta Regional(2) |                       |          |           | X      |          
|                     | Mickey Aventuras  | X                     |          |           |        |          
|                     | Nativa            |                       |          |           |        |          
|                     | Nestea(2)         | X                     | X        |           | X      | X        
|                     | Polar             |                       | X        |           |        |          
|                     | Powerade          | X                     | X        | X         | X      |          
|                     | Schweppes         |                       | X        |           | X      |          
|                     | Shangri-la(1)     |                       | X        |           |        |          
|                     | Sunfil            |                       | X        |           | X      |          
|                     | Super 12(1)       |                       | X        |           |        |          
|                     | Super Malta(2)    |                       | X        |           |        |          
|                     |                   |                       |          |           |        |          

|
|

|(1) |  | Proprietary
brand.
|--- |  | ------------------

|(2) |  | Brand
licensed from third parties other than The Coca-Cola Company.
|--- |  | -------------------------------------------------------------------

|(3) |  | Brand
licensed from FEMSA.
|--- |  | --------------------------

|(4) |  | Includes
juices, sport drinks,  dairy, malt, powder, iced tea and mixers.
|--- |  | -------------------------------------------------------------------------



|Sales Overview
|--------------



|We measure sales volume in
      terms of unit cases. 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. The
      following table illustrates our historical sales volumes for each of our
      territories. The sales volume include the newly acquired Panamco territories
      only from May 2003.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 20 | 
| | -- | 



---





|                | Sales Volumes
      Year Ended December 31
|--------------- | ------------------------------------------
|                | 2001                                      
|                | (millions of unit cases)                  
|                |                                           
|Mexico          | 850.1                                     
|Central America | 72.9                                      
|Colombia        | 114.1                                     
|Venezuela       | 110.1                                     
|Brazil          | 176.6                                     
|Argentina       | 126.6                                     
|                |                                           
|Combined Volume | 1,450.5                                   



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



|Our single most important brand
      is Coca-Cola, which accounted for 60.2% of the total consolidated
      sales volume in 2003. Fanta, Sprite, Lift and Fresca, our
      next largest brands in consecutive order, accounted for 5.1%, 3.1%, 2.4%
      and 2.1%, respectively, of sales volumes in 2003. We produce, market and
      distribute Coca-Cola trademark beverages in each of our territories
      in containers authorized by The Coca-Cola Company, which consist of a variety
      of returnable and non-returnable presentations in the form of glass bottles,
      cans and plastic bottles made of polyethylene terephtalate, which we refer
      to as PET. Presentation sizes for our Coca-Cola trademark beverages
      range from a 6.5-ounce personal size to a 20-liter multi-serving size. We
      consider multi-serving size presentations as equal to or larger than 1.0
      liter. In general, personal sizes have a higher price per unit case as compared
      to multi-serving sizes. We offer both returnable and non-returnable presentations,
      which allow us to offer different combinations of convenience and price
      to implement revenue management strategies and to target specific distribution
      channels and population segments in our territories. In addition, we sell
      some Coca-Cola trademark beverage syrups in containers designed for
      soda fountain use, which we refer to as fountain. We also sell bottled water
      products in jug presentations, which is a presentation larger than 17 liters,
      that have a much lower price per unit than our other beverage products.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|In addition to Coca-Cola
      trademark beverages, we produce, market and distribute certain other proprietary
      brands and beverages licensed from third parties other than The Coca-Cola
      Company in a variety of presentations.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|The
characteristics of our territories are very diverse. Central Mexico  is densely populated
and has a large number of competing soft drink brands and  higher per capita income as
compared to the rest of our territories. Brazil and  Argentina are densely populated but
have lower per capita consumption of soft  drink products as compared to Mexico. Portions
of Central America and Colombia  are large and mountainous areas with lower population
density, lower per capita  income and lower per capita consumption of soft drink
products. In Venezuela,  per capita income and consumption have been affected due to the
economic and  political unrest in recent years. In recent years, per capita income has
been  negatively affected by macroeconomic conditions in most of the countries where  we
operate.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|The following discussion analyzes
      our product and packaging mix by segment. The volume data presented is for
      the years 2002 and 2003 and includes the newly acquired territories for
      all of 2002 and the first four months of 2003 prior to the acquisition of
      Panamco. As discussed above, we did not acquire these territories until
      May 6, 2003. Nonetheless, we believe that presenting the prior periods in
      this section provides a more complete illustration of the characteristics
      of our territories than would be possible based solely on information from
      the last eight months of 2003. We have not included information for periods
      prior to 2002. We have presented above under Sales Overview
      our actual sales volumes by territory for the three years ended December
      31, 2001, 2002 and 2003, which include the newly acquired territories solely
      for eight months of 2003.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Mexico. Our
      product portfolio consists of Coca-Cola trademark beverages, and
      since 2001 has included the third party Mundet trademark beverages.
      In 2003, we expanded our core brand portfolio line launching the flavored
      soft drinks Fresca pink grapefruit and Lift green apple. We
      also introduced Coca-Cola vanilla in our
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 21 | 
| | -- | 



---





|Mexican territories, strengthening  the cola
category. Soft drink per capita consumption in Mexico during 2003 was 483  eight-ounce
servings.
|---------------------------------------------------------------------------------------------------------------------------------------------



|The following
table highlights historical sales volume and mix in  Mexico for our products:
|-------------------------------------------------------------------------------------------



|                                 | Year Ended December 31, 
|-------------------------------- | ------------------------
|                                 | 2003                    
|Product Sales Volumes            | (millions of unit cases)
|Coca-Cola Trademark Beverages    | 985.4                   
|Other Beverages                  | 16.2                    
|                                 |                         
|Total                            | 1,001.6                 
|                                 |                         
|% Growth                         | 2.2                     
|                                 |                         
|Unit Case Volume Mix by Category | (in percentages)        
|Colas                            | 59.8                    
|Flavored Soft Drinks             | 18.7                    
|                                 |                         
|Total Carbonated Soft Drinks     | 78.5                    
|Water(1)                         | 20.9                    
|Other Categories                 | 0.6                     
|                                 |                         
|Total                            | 100.0                   
|                                 |                         
|                                 |                         
|Product Mix by Presentation      | (in percentages)        
|Returnable                       | 27.9                    
|Non-returnable                   | 54.9                    
|Fountain                         | 1.3                     
|Jug                              | 15.9                    
|                                 |                         
|Total                            | 100.0                   
|                                 |                         

|
|

|(1) |  | Includes
jug volumes.
|--- |  | ---------------------



|Our most popular
soft drink presentations were the 2.5-liter and  2.0-liter returnable plastic bottles,
the 0.6-liter non-returnable plastic  bottle, and the 2.5-liter and the 2.0-liter
non-returnable plastic bottle, which  combined accounted for more than 60% of our total
soft drink sales volume in  2003 in Mexico. Since 1995, we have introduced a number of
new presentations in  Mexico. These include 2.5-liter 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. In  2003, we
launched new 2.5-liter returnable and non-returnable presentations.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Multi-serving
presentations are an important component of our product  mix. In 2003, multi-serving
presentations represented 67% of our total soft  drink sales volumes in Mexico, as
compared to 64% in 2002. We expect that demand  for multi-serving presentations will
continue increasing. We believe that the  popularity of multi-serving presentations is
primarily attributable to the lower  price per ounce of product in larger presentations.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|In the past, the packaging
      trend in the soft drink industry in Mexico had moved toward non-returnable
      presentations. However, due to the entrance of low price brands in multi-serving
      size presentations, we have refocused our packaging mix strategy to reinforce
      our sales of multi-serving size returnable packages, and as a result non-returnable
      presentations remained almost flat in 2003 as compared to 2002. Returnable
      plastic and glass presentations offer consumers a more affordable, although
      less convenient, product, and we believe returnable packages present an
      opportunity for us to attract new customers and maintain customer loyalty,
      because they make Coca-Cola trademark beverages more attractive to
      price-sensitive consumers. The price of a 2.5-liter returnable package is
      approximately 30% less than the same size non-returnable package. These
      returnable products are mainly sold to small store retailers, representing
      the largest distribution channel in the Mexican market, that benefit from
      returnable bottles lower price per ounce of product, allowing them
      to compete with larger supermarkets. 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.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 22 | 
| | -- | 



---





|Total sales volumes reached
      1,001.6 million unit cases in 2003, increasing 2.2% compared to 2002, including
      a 2.9% carbonated soft drink volume growth during the same period. The volume
      growth was mainly driven by (i) the solid performance of our new flavored
      brands including Fresca pink grapefruitand Lift green apple,
      accounting for approximately 70% of the incremental volumes during the year,
      (ii) the incremental sales volumes reached by Ciel still water in
      a 5.0-liter presentation and, (iii) volume growth from Coca-Cola
      brand beverages. This volume growth was partially offset by a decline in
      our jug water volume, mainly in the 19.0-liter water jug presentation, the
      result of our new revenue management initiatives intended to improve the
      profitability of our bottled water business in our new territories, and
      to a lesser extent to the increased size of multi-serving presentations.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|In 2003, product and packaging
      innovation helped us weather a relatively weak economic environment and
      increased competition from low price soft drink brands in multi-serving
      size presentations, which have increased their presence and product alternatives
      in certain areas of our Mexican territories. With the introduction of our
      new multi-serving size 2.5-liter returnable and non-returnable presentations,
      for the Coca-Cola brand and selected flavors, we reduced the price
      gap per ounce versus low price brands during 2003, enhancing the value proposition
      for our customers.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Central America.
      Our product sales in Central America consist predominantly of Coca-Cola
      trademark beverages. During 2003 we launched the Dasani water brand
      in one of our Central American territories. Soft drink per capita consumption
      in Central America during 2003 was 131 eight-ounce servings.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|The following
table highlights historical sales volume mix and total  sales volumes in Central America:
|-------------------------------------------------------------------------------------------------------



|                                 | Year Ended December 31, 
|-------------------------------- | ------------------------
|                                 | 2003                    
|Product Sales Volumes            | (millions of unit cases)
|Coca-Cola Trademark Beverages    | 99.6                    
|Other Beverages                  | 7.7                     
|                                 |                         
|Total                            | 107.3                   
|                                 |                         
|% Growth                         | 7.2                     
|                                 |                         
|Unit Case Volume Mix by Category | (in percentages)        
|Colas                            | 69.4                    
|Flavored Soft Drinks             | 24.7                    
|                                 |                         
|Total Carbonated Soft Drinks     | 94.1                    
|Water                            | 4.2                     
|Other Categories                 | 1.7                     
|                                 |                         
|Total                            | 100.0                   
|                                 |                         
|                                 |                         
|Product Mix by Presentation      | (in percentages)        
|Returnable                       | 51.8                    
|Non-returnable                   | 42.9                    
|Fountain                         | 5.3                     
|Jug                              |                        
|                                 |                         
|Total                            | 100.0                   
|                                 |                         



|In Central America, we sell
      the majority of our sales volumes through small retailers. In 2003, multi-serving
      presentations represented 47.5% of our total soft drink sales volumes in
      Central America. We also launched a 2.0-liter returnable presentation in
      Central America for the Coca-Cola brand and selected flavor brands
      in 2003 to take advantage of the trend to larger presentations.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Total sales
volumes reached 107.3 million unit cases in 2003,  increasing 7.2% compared to 2002,
including 8.1% growth in carbonated soft drink  sales volumes during the same period. The
sales volume growth was mainly driven  by (i) the solid performance of the cola category,
increasing almost 7% during  the year, and representing 66%
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 23 | 
| | -- | 



---





|of the incremental sales  volumes, especially in
our territories in Guatemala and Nicaragua, and (ii) the  incremental sales  volume
reached by the carbonated soft drink flavor segment, which  represented  the majority of
the balance.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Colombia. Our
      product portfolio in Colombia consists of Coca-Cola trademark beverages,
      certain products sold under proprietary trademarks, as well as sales of
      the Kola Román brand, which we license from a third party. Soft
      drink per capita consumption in Colombia during 2003 was 80 eight-ounce
      servings.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|The following
table highlights historical sales volume mix and total  sales volumes in Colombia:
|------------------------------------------------------------------------------------------------



|                                 | Year Ended December 31, 
|-------------------------------- | ------------------------
|                                 | 2003                    
|Product Sales Volumes            | (millions of unit cases)
|Coca-Cola Trademark Beverages    | 133.5                   
|Other Beverages                  | 38.3                    
|                                 |                         
|Total                            | 171.8                   
|                                 |                         
|% Growth                         | (7.1                    
|                                 |                         
|Unit Case Volume Mix by Category | (in percentages)        
|Colas                            | 62.4                    
|Flavored Soft Drinks             | 22.3                    
|                                 |                         
|Total Carbonated Soft Drinks     | 84.7                    
|Water(1)                         | 15.1                    
|Other Categories                 | 0.2                     
|                                 |                         
|Total                            | 100.0                   
|                                 |                         
|                                 |                         
|Product Mix by Presentation      | (in percentages)        
|Returnable                       | 53.4                    
|Non-returnable                   | 36.8                    
|Fountain                         | 3.0                     
|Jug                              | 6.8                     
|                                 |                         
|Total                            | 100.0                   
|                                 |                         

|
|

|(1) |  | Includes
jug volumes.
|--- |  | ---------------------



|The Colombian
market is characterized by lower per capita consumption  and relatively lower levels of
non-returnable presentations. In 2003,  multi-serving presentations represented 45.7% of
our total soft drink sales  volumes in Colombia. We are continuing to evaluate the right
product, package  and pricing architecture for our portfolio of brands in Colombia.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Total sales
volumes amounted to 171.8 million unit cases in 2003,  decreasing 7.1% compared to 2002,
including a 4.4% carbonated soft drink volume  decline during the same period. The volume
decline was mainly driven by a  reduction in the production of water sold in less
profitable packages, which  accounted for almost 50% of the volume decline during the
year. Carbonated soft  drinks accounted for the balance.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Venezuela. Our
      product portfolio in Venezuela consists predominantly of Coca-Cola
      trademark beverages. Soft drink per capita consumption in Venezuela during
      2003 was 123 eight-ounce servings.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 24 | 
| | -- | 



---





|The following
table highlights historical sales volume mix and total  sales volumes in Venezuela:
|-------------------------------------------------------------------------------------------------



|                                 | Year Ended December 31, 
|-------------------------------- | ------------------------
|                                 | 2003                    
|Product Sales Volumes            | (millions of unit cases)
|Coca-Cola Trademark Beverages    | 148.6                   
|Other Beverages                  | 3.0                     
|                                 |                         
|Total                            | 151.6                   
|                                 |                         
|% Growth                         | (6.9                    
|                                 |                         
|Unit Case Volume Mix by Category | (in percentages)        
|Colas                            | 57.0                    
|Flavored Soft Drinks             | 29.2                    
|                                 |                         
|Total Carbonated Soft Drinks     | 86.2                    
|Water(1)                         | 8.2                     
|Other Categories                 | 5.6                     
|                                 |                         
|Total                            | 100.0                   
|                                 |                         
|                                 |                         
|Product Mix by Presentation      | (in percentages)        
|Returnable                       | 36.4                    
|Non-returnable                   | 57.6                    
|Fountain                         | 2.7                     
|Jug                              | 3.3                     
|                                 |                         
|Total                            | 100.0                   
|                                 |                         

|
|

|(1) |  | Includes
jug volumes.
|--- |  | ---------------------



|During January of
2003, political unrest in Venezuela due to a national  strike made it practically
impossible for Panamco to run this operation on a  regular basis. Supply shortages during
the first quarter and a severe economic  recession significantly affected volume
performance during 2003. We  re-introduced the one-liter returnable glass presentation
for the Coca-Cola  brand in 2003, which we believe had a positive impact on sales volumes
in 2003.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Total sales
volumes decreased in 2003 to 151.6 million unit cases,  including a decrease of 2.3% in
carbonated soft drink volumes. Carbonated soft  drink flavors accounted for almost 60% of
the sales volume decline during the  year, and still bottled water accounted for the
majority of the balance, driven  by a change of consumption habits due to the countrys
economic recession.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Brazil. Our product
      portfolio in Brazil consists mainly of Coca-Cola trademark beverages.
      Pursuant to an agreement with Cervejarias Kaiser, we distribute the Kaiser
      brands of beer, which represented 18.2% of our sales volumes in Brazil in
      2003. During 2003, we expanded our product lines, introducing Coca-Cola
      light lemon, Kuat laranja and Sintonia. Soft drink per
      capita consumption in Brazil during 2003 was 189 eight-ounce servings.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 25 | 
| | -- | 



---





|The following
table highlights historical sales volume mix and total  sales volumes in Brazil:
|----------------------------------------------------------------------------------------------



|                                 | Year Ended December 31, 
|-------------------------------- | ------------------------
|                                 | 2003                    
|Product Sales Volumes            | (millions of unit cases)
|Coca-Cola Trademark Beverages    | 206.1                   
|Other Beverages                  | 59.0                    
|                                 |                         
|Total                            | 265.1                   
|                                 |                         
|% Growth                         | (17.8                   
|                                 |                         
|Unit Case Volume Mix by Category | (in percentages)        
|Colas                            | 53.4                    
|Flavored Soft Drinks             | 23.7                    
|                                 |                         
|Total Carbonated Soft Drinks     | 77.1                    
|Water                            | 4.1                     
|Other Categories(1)              | 18.8                    
|                                 |                         
|Total                            | 100.0                   
|                                 |                         
|                                 |                         
|Product Mix by Presentation      | (in percentages)        
|Returnable                       | 11.1                    
|Non-returnable                   | 85.1                    
|Fountain                         | 3.8                     
|Jug                              |                        
|                                 |                         
|Total                            | 100.0                   
|                                 |                         

|
|

|(1) |  | Includes
beer.
|--- |  | --------------



|During 2003, we
initiated a packaging differentiation strategy intended  to diversify our operation from
2.0-liter PET non-returnable packages and cans,  which together accounted for almost 80%
of sales volumes in 2002 and the  beginning of 2003. We launched more than six different
packaging presentations  during 2003, including a new 12-ounce non-returnable glass
bottle and a new  200-milliliter returnable glass bottle in order to offer convenience
and  affordability for the on-premise segment. By selling more profitable stock  keeping
units or SKUs, we intend to strengthen our packaging and brand  portfolio, and enhance
our pricing architecture in order to increase the  profitability of the segment.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Total sales volumes amounted
      to 265.1 million unit cases in 2003, decreasing 17.8% compared to 2002 volumes,
      including a 14.7% decline in non-profitable carbonated beverage sales volumes
      during the same period. The majority of the volume decline during 2003 came
      from 2.0-liter non-returnable presentations, especially for low margin products
      like Simba and Taí, as we tried to reach a better price
      value combination by shifting to more profitable presentations. Carbonated
      soft drinks accounted for 60% of the volume decline during 2003, beer represented
      30% and bottled water represented the balance.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Argentina. Our
      product portfolio in Argentina consists exclusively of Coca-Cola
      trademark beverages. Soft drink per capita consumption in Argentina during
      2003 was 276 eight-ounce servings.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 26 | 
| | -- | 



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|The following
table highlights historical sales volume mix and total  sales volumes in Argentina:
|-------------------------------------------------------------------------------------------------



|                                 | Year Ended December 31, 
|-------------------------------- | ------------------------
|                                 | 2003                    
|Product Sales Volumes            | (millions of unit cases)
|Coca-Cola Trademark Beverages    | 126.6                   
|Other Beverages                  |                        
|                                 |                         
|Total                            | 126.6                   
|                                 |                         
|% Growth                         | 9.5                     
|                                 |                         
|Unit Case Volume Mix by Category | (in percentages)        
|Colas                            | 71.4                    
|Flavored Soft Drinks             | 27.4                    
|                                 |                         
|Total Carbonated Soft Drinks     | 98.8                    
|Water                            | 0.9                     
|Other Categories                 | 0.3                     
|                                 |                         
|Total                            | 100.0                   
|                                 |                         
|                                 |                         
|Product Mix by Presentation      | (in percentages)        
|Returnable                       | 24.5                    
|Non-returnable                   | 71.8                    
|Fountain                         | 3.7                     
|Jug                              |                        
|                                 |                         
|Total                            | 100.0                   
|                                 |                         



|In 2002, in order to minimize
      the impact of the deteriorated economic situation in Argentina, as well
      as increase the affordability of our products, we launched new returnable
      presentations such as a 1.25-liter returnable glass presentation and a 2.0-liter
      returnable PET presentation, which combined with existing presentations
      accounted for 25% of our sales volumes in 2003. During 2003 we also experienced
      an increase in our premium brands fostered by the launch of Fanta light
      and the slow recovery of the Argentine economy.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Total sales volumes amounted
      to 126.6 million unit cases in 2003, increasing 9.5% compared to 2002. The
      sales volume increase was mainly driven by our returnable packaging strategy
      and the economic recovery from the devaluation of the Argentine peso in
      2002. We also experienced a product shift from our less profitable value
      protection brands, Taí and Crush, toward our core and
      premium brands, the Coca-Cola brand and Fanta, which increased
      15.1% and 40.6%, respectively. For the first time, in 2003 we sold more
      sales volumes from premium brands than from value protection brands, fostered
      by a 10.9% volume increase of the Coca-Cola light brand and the successful
      introduction of Fanta light during the year. Premium brands represented
      12.2% of total sales volumes during 2003.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



|Sales of our
products are seasonal, as our sales levels generally  increase during the summer months
of each country and during the Christmas  holiday season. In Mexico, Central America,
Colombia and Venezuela we typically  achieve our highest sales during the summer months
of April through September as  well as during the Christmas holidays in December. In
Argentina and Brazil, our  highest sales levels occur during the summer months of October
through March and  the Christmas holidays in December.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



|Our company, in conjunction
      with The Coca-Cola Company, has developed a sophisticated marketing strategy
      to promote the sale and consumption of our products. 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. Through the use
      of advanced information technology, we have collected customer and consumer
      information that allow 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. We are in the process of
      rolling out our information technology system in our new territories in
      order to standardize the systems in these territories with our original
      territories.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 27 | 
| | -- | 



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Retailer
    Incentive Programs.Incentive programs include providing retailers
    with commercial refrigerators for the display and cooling of soft drink products
    and for point-of-sale display materials.  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.We advertise in all major communications media.  We focus our advertising
    efforts 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 more dynamic and specialized marketing
    of our products, our strategy is to segment our market and develop targeted
    efforts for each segment or distribution channel.  Our principal channels
    are small retailers, on-premise consumption such as restaurants and bars,
    supermarkets and third party distributors.  Presence in these channels 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.  In response to this analysis, we tailor
    our product, price, packaging and distribution strategies to meet the particular
    needs of 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 in hand-held computers to support the gathering
    of product, consumer and delivery information required to implement our channel
    marketing strategies effectively, for most of our sales routes in Mexico and
    Argentina, and will continue investing to increase pre-sale coverage in certain
    of our new territories.

Cooperative
    Marketing Budget.Our consolidated total marketing expenditure made
    in 2003 was Ps.1,498.4 million.  In 2003 and 2002, The Coca-Cola Company contributed
    48% and 41%, respectively, of our marketing expenditures budget.  See Bottler
    Agreements.

Product Distribution

The
    following table provides an overview of our product distribution centers and
    the retailers to which we sell our products:

Product Distribution Summary
    As of December 31, 2003

|                       | Mexico  | Central America | Colombia | Venezuela | Brazil  | Argentina
|---------------------- | ------- | --------------- | -------- | --------- | ------- | ---------
|Distribution Centers   | 113     | 43              | 42       | 38        | 10      | 4        
|Number of Retailers(1) | 547,185 | 139,289         | 442,210  | 234,740   | 120,008 | 75,735   

|
|

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| | -- | 



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We use
  two main sales methods depending on market and geographic conditions: the traditional
  or conventional truck route system, in which the person in charge of the delivery
  makes immediate sales from inventory available on the truck, and the pre-sale
  system. 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 have previously ordered, 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. In certain areas
  we also make sales through third party wholesalers of our products. The vast
  majority of our sales are on a cash basis.

We believe that service visits
    to retailers and frequency of deliveries are essential elements in an effective
    selling distribution system for soft drink products.  Accordingly, we have
    continued to expand our pre-sale system throughout our operations, except
    in areas where we believe consumption patterns do not warrant pre-sale.  We
    are in the process of replicating our business model in our new territories.

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 generally
    retain third parties to transport our finished products from the bottler plants
    to the distribution centers.

Mexico.  We contract
    with a subsidiary of FEMSA for the transportation of finished products to
    our distribution centers from our Mexican production facilities.  See Item
    7.  Major Shareholders and Related Party TransactionsRelated Party Transactions.
    From the distribution centers, we then distribute our finished products to
    retailers through our own fleet of trucks.In 2003, we implemented
    these practices in the newly acquired Mexican territories.

In Mexico, we sell a majority
    of our beverages at small retail stores to customers who take the beverages
    home or elsewhere for consumption.  We also sell products through the on-premise
    segment, supermarkets and others.  On premise 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.

Central America.In
    Central America, we distribute our finished products to retailers through
    a combination of our own fleet of trucks and third party distributors.In Central America, excluding Guatemala, we sold more than 50% of sales
    volumes through the pre-sale system in 2003.  In Guatemala, we sold only around
    10% of sales volumes through pre-sale in 2003, but we currently plan to increase
    pre-sale coverage in the future.  In our Central American operations, just
    as in most of our territories, an important part of our sales volumes are
    through small retailers, and we have low supermarket penetration in this region,
    representing less than 8% of sales volumes in 2003.

Colombia.Approximately
    half of sales volumes in Colombia are sold through pre-sale and half through
    the traditional system in 2003.  We distribute our finished products to retailers
    through a combination of our own fleet of trucks and third party distributors.
    Since May 2003, we consolidated five distribution centers out of 47 in our
    Colombian operations, with the objective of increasing productivity levels
    and asset utilization.

Venezuela.In
    Venezuela close to 70% of our sales volumes in 2003 were through the pre-sale
    system.  We distribute our finished products to retailers through a combination
    of our own fleet of trucks and third party distributors.  During 2003 we consolidated
    the operations of two of the 40 distribution facilities.  Our Venezuelan operations
    distribute a significant part of sales volumes through small retailers and
    supermarkets, which represent approximately 13% of our sales volumes in 2003.

Brazil.In Brazil,
    almost 100% of our direct sales volumes are through the pre-sale system, although
    the delivery of our finished products to customers is by a third party.  At
    the end of 2003, we operated ten distribution facilities in our Brazilian
    territories. In contrast with the rest of our territories, which have low
    supermarket penetration,



| | 29 | 
| | -- | 



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in Brazil we sold more than 25% of our sales volume through
    supermarkets in 2003.  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
    16% of our products in 2003.

Argentina. At
    December 31, 2003, we operated four distribution centers in Argentina.  We
    distribute our finished products to retailers through a combination of our
    own fleet of trucks and third party distributors.Independent wholesalers
    distributed approximately 5.7% of our products in 2003.

In Argentina, in 2003 we sold
    the majority of our products in the take-home segment, which consists of sales
    to consumers who take the beverages home or elsewhere for consumption.  In
    2003, the percentage of sales volumes through supermarkets decreased to 17.9%
    from 23.4% in 2002.

Competition

Although we believe that our
    products enjoy wider recognition and greater consumer loyalty than those of
    our principal competitors, the soft drink segments in the territories in which
    we operate are highly competitive.  Our principal competitors are local bottlers
    of Pepsi and other bottlers and distributors of national and regional soft
    drink brands.  We face increased competition in many of our territories from
    producers of low price beverages, commonly referred to as B brands.  A number
    of our competitors in Central America and Brazil also offer both soft drinks
    and beer, which may enable them to achieve distribution efficiencies.

During 2003, we faced new competitive
    pressures that are different than those we have historically faced as we began
    operations in Central America, Colombia, Venezuela and Brazil. In addition,
    distribution and marketing practices in some of these territories differ from
    our historical practices.

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 compete by seeking to offer an attractive price / value
    proposition to the different segments in our markets and by building on our
    brand equity.  We believe that the introduction of new products and new presentations
    has been a significant competitive technique that allows us to increase demand
    for our products, provide different options to consumers and increase new
    consumption opportunities.  See Sales Overview.

Mexico.Our principal
    competitors in Mexico are bottlers of Pepsi products, whose territories overlap
    but are not co-extensive with our own.  These competitors include Pepsi Gemex
    in central Mexico, a subsidiary of PBG, the largest bottler of Pepsi globally,
    and several other Pepsi bottlers in central and southeast Mexico.  In addition,
    we compete with Cadbury Schweppes and with other national and regional brands
    in our Mexican segment.  We also face an increase in competition from low
    price producers offering multi-serving size presentations in the soft drink
    industry.

Central America.
    In the countries that comprise our Central America segment, our main competitors
    are Pepsi bottlers. In Guatemala and Nicaragua we compete against The Central
    American Bottler Corporation, in Costa Rica our principal competitor is Embotelladora
    Centroamericana, S.A. and in Panama our main competitor is Refrescos Nacionales,
    S.A.

Colombia.  Our
    principal competitor is Postobón S.A., which we refer to as Postobón, a well-established
    local bottler that sells flavored soft drinks, some of which have a wide consumption
    preference, such as cream soda, the second most popular category in the Colombian
    soft drink industry in terms of sales volumes, and Pepsi products. Postobón
    is a vertically integrated producer, the owners of which hold other significant
    commercial interests in Colombia.

Venezuela.  In
    Venezuela, our main competitor is Pepsi-Cola Venezuela, C.A., a joint venture
    formed between PepsiCo and Empresas Polar, S.A., the leading beer distributor
    in the country. We also compete with the producers of Kola Real in
    part of the country.

Brazil.In Brazil,
    we compete against AmBev, a Brazilian company with a portfolio of brands that
    includes Pepsi, local brands with flavors such as guaraná and proprietary
    beers.  We also compete against B brands or

| | 30 | 
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Tubainas, which are small, local producers of low cost flavored
    soft drinks in multi-serving presentations that represent an important portion
    of the soft drink market.

Argentina.  In
    Argentina, our main competitor is BAESA, a Pepsi bottler, which is owned by
    Argentinas principal brewery, Quilmes Industrial S.A., and indirectly controlled
    by AmBev.  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.

Raw Materials

Pursuant to the bottler agreements
    with The Coca-Cola Company, we are required to purchase concentrate, including
    aspartame, an artificial sweetener used in diet sodas, 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 net of applicable taxes.
    Although The Coca-Cola Company has the right to unilaterally set the price
    of concentrates, in practice this percentage is set pursuant to periodic negotiations
    with The Coca-Cola Company.  In connection with the Panamco acquisition, The
    Coca-Cola Company agreed that concentrate prices would not be raised through
    May 2004.  See Item 7. Major Shareholders and Related Party TransactionsMajor
    ShareholdersThe Coca-Cola Memorandum.  In most cases, concentrate is 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.  Our 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 suppliers approved by The Coca-Cola Company, which
    includes manufacturing subsidiaries of FEMSA Empaques.  Prices for packaging
    materials historically are determined with reference to the U.S. dollar, although
    the local currency equivalent in a particular country is subject to price
    volatility in accordance with changes in exchange rates.  Under our agreements
    with The Coca-Cola Company, we may use raw or refined sugar or HFCS as sweeteners
    in our products, although we currently use sugar in all of our operations
    except for Argentina.  Sugar prices in all of the countries in which we operate,
    other than Brazil, are subject to local regulations and other barriers to
    market entry that cause us to pay in excess of international market prices
    for sugar.  We have experienced sugar price volatility in these territories
    as a result of changes in local conditions and regulations.

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

Mexico.We
    purchase some glass bottles, closures, plastic cases, commercial refrigerators,
    cans and certain lubricants and detergents for bottling lines from subsidiaries
    of FEMSA Empaques.  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 some 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., which we refer to 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 33.68% 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.  Our supply agreements
    provide for market based pricing.

Sweeteners are combined with
    water to produce basic syrup, which is added to the concentrate as the sweetener
    for the soft drink.  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 bottler subsidiary for the sale of sugar at a price that
    is determined monthly based on the

| | 31 | 
| | -- | 



---



cost of sugar to PROMESA. We also purchase sugar from Beta
    San Miguel, another sugar-cane producer in which we hold a 2.54% equity interest.

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., which we refer to as Nafin, a Mexican government-owned
    development bank, pursuant to which Nafin acts as trustee.  In addition, 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 bottler 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 non-sugar
    sweetener, including HFCS.  The effect of these excise taxes is to limit our
    ability to substitute other sweeteners for sugar.

Imported sugar is also presently
    subject to import duties, the amount of which is set by the Mexican government.
    As a result, sugar prices in Mexico are in excess of international market
    prices for sugar and increased by approximately 8% in 2003.

Central America.The
    majority of our raw materials such as glass and plastic bottles and cans are
    purchased from several local suppliers.  Sugar is available from one supplier
    in each country.  Local sugar prices are significantly higher than international
    market prices, and our ability to import sugar or HFCS is limited.

Colombia.We
    use sugar as a sweetener in our products, which we buy from several domestic
    sources. We purchase pre-formed ingots from a local supplier and Tapón Corona,
    in which we have a 40% equity interest.  We purchase all our glass bottles
    and cans from suppliers, in which our competitor Postobón owns a 40% equity
    interest.  Other suppliers exist for glass bottles, however, cans are available
    only from this one source.

Venezuela.  We
    use sugar as a sweetener in our products, of which we purchase the majority
    from the local market and the rest we import mainly from Colombia.  In the
    second half of 2003, there was a shortage of sugar due to the inability of
    the main sugar importers to access foreign currencies as a result of the exchange
    controls implemented at the beginning of 2003.  We only buy glass bottles
    from one supplier, Productos de Vidrio, S.A., a local supplier, but there
    are other alternative suppliers authorized by The Coca-Cola Company.  We have
    several supplier options for plastic non-returnable bottles but we acquire
    most of our requirements from ALPLA de Venezuela, S.A.  One exclusive supplier
    handles all our can requirements.

Brazil.  Sugar
    is widely available in Brazil at internal market prices which are generally
    lower than international prices.  We purchase glass bottles, PET bottles and
    cans from several domestic and international suppliers.

Argentina.In Argentina, we use HFCS from several different local suppliers as sweetener
    in our products instead of sugar.  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., which we refer to 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 customers in Buenos Aires from Complejo Industrial CAN
    S.A., which we refer to as CICAN, in which Coca-Cola FEMSA de Buenos Aires
    has a 48.1% equity interest.

| | 32 | 
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REGULATION

Price Controls.At
    present, there are no price controls on our products in any of our segments.
    In Mexico, prior to 1992, prices of carbonated soft drinks were regulated
    by the Mexican government.  From 1992 to 1995, the industry was subject to
    voluntary price restraints.  In response to the devaluation of the Mexican
    peso relative to the U.S. dollar in 1994 and 1995, however, 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.(the National
    Association of Bottlers) to engage in voluntary consultations with the Mexican
    government with respect to price increases for returnable presentations.
    These voluntary consultations were terminated in 1996.  In the last ten years,
    the governments in Colombia, Brazil, and Venezuela have also imposed formal
    price controls on soft drinks. The imposition of price controls in the future
    may limit our ability to set prices and adversely affect our results of operations.

Taxation of Soft Drinks.All the countries in which we operate impose a value-added tax on the
    sale of soft drinks, with a rate of 15% in Mexico, 12% in Guatemala, 15% in
    Nicaragua, 13% in Costa Rica, 5% in Panama, 16% in Colombia, 16% in Venezuela,
    18% in Brazil (only in the territories where we operate) and 21% in Argentina.
    In addition, several of the countries in which we operate impose the following
    excise or other taxes:

| |  |  | Mexico
imposes a 20% excise tax on soft drinks produced with HFCS in January 2002  that was
suspended in September 2002.  In January 2003, the Mexican government  implemented a 20%
excise tax on carbonated soft drinks produced with non-sugar  sweeteners.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | Guatemala
imposes an excise tax of 0.18 cents  in local currency (Ps.0.25 as of December 31, 2003)
per liter of soft drink.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------

| |  |  | Nicaragua imposes a 9% consumption tax.                                                                                                                                                                                       
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  |  | Costa Rica imposes a specific tax on non-alcoholic
      bottled beverages based on the combination of packaging and flavor, a 5%
      excise tax on local brands, a 10% tax on foreign brands and a 14% tax on
      mixers.

| |  |  | Panama
imposes a 5% tax based on the cost of  goods produced.
| | - |  | -------------------------------------------------------------

| |  |  | Brazil
imposes an excise tax of 9% and a consumption  tax of 6.9% in the territories where we
operate.
| | - |  | ------------------------------------------------------------------------------------------------------

| |  |  | Argentina
imposes an excise tax on colas and  on flavored soft drinks containing less than 5% lemon
juice or less than 10%  fruit juice of 8.7%, and an excise tax on flavored soft drinks
with 10% or  more fruit juice and on mineral water of 4.2%.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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 Water Law of 1992),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 Water
    Law of 1992, 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 the right to transfer the unused volume 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.

| | 33 | 
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---



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
    or that we will be able to maintain our current concessions.

We do not currently require
    a permit to obtain water in our other territories.  In Nicaragua, Costa Rica
    and some plants in Colombia, we own private water wells.  In Argentina, we
    obtain water from Aguas Argentinas, a privately-owned concessionaire of the
    Argentine government.  In the remainder of our territories, we obtain water
    from governmental agencies or municipalities.  In the past five years we have
    not had a water shortage in any of our territories, although we can give no
    assurances that water will be available in sufficient quantities to meet our
    future production needs or that additional regulations relating to water use
    will not be adopted in the future.

Environmental Matters.In all of the countries where we operate, our businesses are subject to
    federal and state laws and regulations relating to the protection of the environment.
    In Mexico, the principal legislation is the Ley General de Equilibrio Ecológico
    y Protección al Ambiente (the FederalGeneral Law for Ecological
    Equilibrium and Environmental Protection) or the Mexican Environmental Law
    and the Ley General para la Prevención y Gestión Integral de los Residuos
    (the General Law for the Prevention and Integral Management of Waste) which
    are 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 Mexican Environmental Law, rules have
    been 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),
    also enforced by SEMARNAP.  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 bottler plants located in Mexico City, 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, Plant and EquipmentProduction Facilities.

Our Central American operations
    are subject to several federal and state laws and regulations relating to
    the protection of the environment, which have been enacted in the last ten
    years, as awareness has increased in this region about the protection of the
    environment and the disposal of dangerous and toxic materials.  In some countries
    in Central America, we are in the process of bringing our operations into
    compliance with new environmental laws. For example, in Nicaragua we are in
    the final phase of the construction of a water treatment plant located at
    our bottler plant in Managua.  Also, our Costa Rica operations have participated
    in a joint effort along with the local division of The Coca-Cola Company called
    Proyecto Planeta (Project Planet) for the collection and recycling
    of non-returnable plastic bottles.

Our Colombian operations are
    subject to several Colombian federal, state and municipal laws and regulations
    related to the protection of the environment and the disposal of toxic and
    dangerous materials.  These laws include the control of atmospheric emissions
    and strict limitations on the use of chlorofluorocarbons. We are also engaged
    in nationwide campaigns for the collection and recycling of glass and plastic
    bottles.

Our Venezuelan operations are
    subject to several Venezuelan federal, state and municipal laws and regulations
    related to the protection of the environment.  The most relevant of these
    laws are the Ley Orgánica del Ambiente (the Organic Environmental Law),
    the Ley Sobre Sustancias, Materiales y Desechos Peligrosos (the Substance,
    Material and Dangerous Waste Law), and the Ley Penal del Ambiente (the
    Criminal Environment Law).  Since the enactment of the Organic Environmental
    Law in 1995, our Venezuelan subsidiary has presented to the proper authorities
    plans to bring our

| | 34 | 
| | -- | 



---



production facilities and distribution centers into compliance
    with the law. While the laws provide certain grace periods for compliance
    with the new environmental standards, we have had to adjust some of the originally
    proposed timelines presented to the authorities, because of delays in the
    completion of some of these projects.

Our Brazilian operations are
    subject to several federal, state and municipal laws and regulations related
    to the protection of the environment.  Among the most relevant laws and regulations
    are those dealing with the emission of toxic and dangerous gases, which impose
    penalties, such as fines, facility closures or criminal charges depending
    upon the level of non-compliance. Our production plant located in Jundiaí
    has been recognized by the Brazilian authorities for its compliance with environmental
    regulations and for having standards well above those imposed by the law.
    The plant has been certified for the ISO 9000 since March 1995 and the ISO
    14001 since March 1997.

Our Argentine operations are
    subject to 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 and is in compliance with waste water discharge 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.  Currently, 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 our territories,
    and there is increased awareness of local authorities for higher environmental
    standards in the countries where we operate, changes in current regulations
    may result in an increase in costs, which may have an adverse effect on our
    future results of operations or financial condition.  Management is not aware
    of any pending regulatory changes that would require a significant amount
    of additional remedial capital expenditures.

| | 35 | 
| | -- | 



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BOTTLER AGREEMENTS

Coca-Cola Bottler Agreements

Bottler agreements are the standard
    agreements 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 under a separate bottler agreement for each of our territories.

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, 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.
    Concentrate prices are determined as a percentage of the weighted average
    wholesale price, net of applicable taxes.  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.

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 each of our territories.
    Our bottler agreements do not contain restrictions on The Coca-Cola Companys
    ability to set the price of concentrates charged to our subsidiaries 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.  However, under our bylaws and
    the shareholders agreement with a subsidiary of The Coca-Cola Company and
    a subsidiary of FEMSA, 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, appointed by The Coca-Cola Company.  This provides us with
    limited protection against The Coca-Cola Companys ability to raise concentrate
    prices to the extent that such increase is deemed detrimental to us pursuant
    to the shareholder agreement and the bylaws.  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 which case we have a 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 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 plant and equipment, staff and distribution
      facilities 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 in our
      territories;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

| | 36 | 
| | -- | 



---



| |  |  | develop, stimulate and satisfy fully the demand
      for Coca-Cola trademark beverages using all approved means, which
      includes the investment in advertising and marketing plans;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | maintain
a 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.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------

The Coca-Cola Company contributed
    approximately 48% of our advertising and marketing budget in our territories
    during 2003.  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.  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.

We have separate bottler agreements
    with The Coca-Cola Company for each of the territories in which we operate.
    Some of these bottler agreements renew automatically unless one of the parties
    gives prior notice that it does not wish to renew the agreement, while others
    require us to give notice electing to renew the agreement.The following
    table summarizes by segment the expiration dates and renewal provisions of
    our bottler agreements:

|Segment                        | Expiration Date                                                                                       | Renewal Provision                                                                                     
|------------------------------ | ----------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------
|                              
|Mexico                         | For two territories  June 2013                                                                       | Ten years, renewable automatically.                                                                   
|                               |                                                                                                      
|For two territories  May 2005 | Ten years, requires notice at least
      six but not more than twelve months before expiration date.
|                               |                                                                                                       |                                                                                                       
|Central America(1)             | Guatemala  March 2006                                                                                | Renewable as agreed between the parties.                                                              
|                               |                                                                                                       |                                                                                                       
|                               | Nicaragua  May 2006                                                                                  | Five years, requires notice at least
      six but not more than twelve months before expiration date.
|                               |                                                                                                       |                                                                                                       
|                               | Costa Rica  September 2007                                                                           | Five years, requires notice at least
      six but not more than twelve months before expiration date.
|                               |                                                                                                       |                                                                                                       
|Colombia                       | June 2004(2)                                                                                          | Five years, requires notice at least
      six but not more than twelve months before expiration date.
|                               |                                                                                                       |                                                                                                       
|Venezuela                      | For Coca-Cola trademark beverages
       August 2006                                                 | Five years, requires notice at least
      six but not more than twelve months before expiration date.
|                               |                                                                                                       |                                                                                                       
|                               | For other beverages  August
      2006                                                               | Renewable as agreed between the parties.                                                              
|                               |                                                                                                       |                                                                                                       
|Brazil                         | April 2004(2)                                                                                         | Five years, requires notice at least
      six but not more than twelve months before expiration date.
|                               |                                                                                                       |                                                                                                       
|Argentina                      | September 2004(2)                                                                                     | Ten years, renewable automatically.                                                                   

|
|

|(1) |  | We
are currently in the process of finalizing  the bottler agreement for Panama, which we
expect will be substantially similar  to our existing bottler agreements for Central
America.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) |  | A
renewal notice has been sent by us to The  Coca-Cola Company.
|--- |  | ---------------------------------------------------------------

The bottler agreements are subject
    to termination by The Coca-Cola Company in the event of default by us. The
    default provisions include limitations on the change in ownership or control
    of our company and the assignment or transfer of the bottler agreements and
    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 independently of similar rights set forth in the shareholders agreement.
    These provisions may prevent changes in our principal shareholders, including
    mergers or acquisitions involving sales or dispositions of our capital stock,
    which will involve an effective change of

| | 37 | 
| | -- | 



---



control, without the consent of The Coca-Cola Company.  See
    Item 7. Major Shareholders and Related Party TransactionsMajor Shareholders
    The Shareholders Agreement.

We have also entered into tradename
    licensing agreements with The Coca-Cola Company pursuant to which we are authorized
    to use certain trademark names of The Coca-Cola Company.  These agreements
    have an indefinite term, but are terminated if we cease to manufacture, market,
    sell and distribute Coca-Cola trademark 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.

DESCRIPTION
    OF PROPERTY, PLANT AND EQUIPMENT

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 bottler  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.
| | - |  | ---------------------------------------

See Item 5.  Operating and Financial Review and ProspectsCapital
    Expenditures.

As of December 31, 2003, we
    owned 32 bottler plants company wide.  By country, we have twelve bottler
    facilities in Mexico, four in Central America, six in Colombia, six in Venezuela,
    three in Brazil and one in Argentina.

Since the Panamco acquisition
    during 2003, we consolidated 20 of our plants into existing facilities, including
    four plants in Mexico, one in Central America, eleven in Colombia, three in
    Venezuela and one in Brazil.  At the same time, we increased our productivity
    measured in unit cases sold by our remaining plants by more than 50% company
    wide.

As of December 31, 2003 we operated
    250 distribution centers, more than 40% of which were in our Mexican territories.
    We own approximately 80% of these distribution centers and lease the remainder.
    See The CompanyProduct Distribution.  During 2003, as part of our consolidation
    process, we reduced the number of our distribution centers across our territories
    by 37.

We maintain an all risk insurance
    policy covering our properties (owned and leased), machinery and equipment
    and inventories as well as losses due to business interruptions.  The policy
    covers damages caused by natural disaster, including hurricane, hail, earthquake
    and damages caused by human acts, including explosion, fire, vandalism, riot
    and losses incurred in connection with goods in transit.  In addition, we
    maintain an all risk liability insurance policy that covers product liability.
    We purchase our insurance coverage through an insurance broker.  The policies
    are issued by Allianz and the coverage is partially reinsured in the international
    reinsurance market.

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| | -- | 



---

The table below summarizes principal
    use, installed capacity and percentage utilization of our production facilities
    by country:

Production Facility Summary
    As of December 31, 2003

Country
      Principal Use
      Installed Capacity
          
          (thousands of unit cases)
      % Utilization(1)Mexico
      Bottler Facility
      1,417,345
      59.5%Guatemala
      Bottler Facility
      30,303
      54.6%Nicaragua
      Bottler Facility
      26,807
      70.8%Costa Rica
      Bottler Facility
      37,992
      56.3%Panama
      Bottler Facility
      28,830
      36.1%Colombia
      Bottler Facility
      264,036
      37.5%Venezuela
      Bottler Facility
      268,763
      42.1%Brazil
      Bottler Facility
      378,969
      56.3%Argentina
      Bottler Facility
      206,736
      60.3%(1) Annualized Rate




| | 39 | 
| | -- | 



---



The table below summarizes plant
    location and facility area of our production facilities:

Production Facility By Location
    As of December 31, 2003

Country
      Plant
      Facility
        Area
        (thousands of sq. meters)Mexico
      San Cristobal
        de las Casas, Chiapas
      24Cedro,
        Distrito Federal
      18Cuautitlán,
        Estado de Mexico
      35Los
        Reyes la Paz, Estado de Mexico
      28Toluca,
        Estado de Mexico
      280Celaya,
        Guanajuato
      87León,
        Guanajuato
      38Morelia,
        Michoacan
      50Juchitán,
        Oaxaca
      27Ixtacomitán,
        Tabasco
      90Apizaco,
        Tlaxcala
      80Coatepec,
        Veracruz
      96Guatemala
      Guatemala
        City
      46Nicaragua
      Managua
      59Costa
        Rica
      San
        José
      52Panama
      Panama
        City
      29Colombia
      Barranquilla
      27Bogotá
        Norte
      89Bucaramanga
      27Cali
      88Manantial
      33Medellín
      44Venezuela
      Antimano
      14Barcelona
      141Calabozo
      70Maracaibo
      34Maracay
      31Valencia
      91Brazil
      Campo
        Grande
      36Jundiaí1
      91Moji
        das Cruzes
      95Argentina
      Alcorta
      73




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| | -- | 



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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,
    2003:

| | Name of Company                                                                             | Percentage Owned
| | ------------------------------------------------------------------------------------------- | ----------------
| | Propimex, S.A. de C.V.,
        a Mexican corporation                                       | 99.99%          
| | Inmuebles del Golfo, S.A.
        de C.V., a Mexican corporation                            | 99.99%          
| | Corporación Interamericana
        de Bebidas, S.A. de C.V., 
        a Mexican corporation | 99.97%          
| | Panamco México, S.A. de
        C.V., a Mexican corporation                                 | 98.14%          
| | Panamco Bajío, S.A. de C.V.,
        a Mexican corporation                                  | 93.37%          

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| | -- | 



---



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
    25 and 26 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 majority net income, majority
    stockholders equity and certain other selected financial data.

Our consolidated financial statements
    include the financial statements of Coca-Cola FEMSA and those of all companies
    in which we own directly or indirectly a majority of the outstanding voting
    capital stock and/or over which we exercise control.

Acquisition of Panamco. On May 6, 2003, we completed the acquisition of Panamco.  The acquisition
    of Panamco resulted in a substantial increase in the size and geographic scope
    of our operations.  The purchase price for 100% of the capital stock of Panamco
    was Ps.29,518 million, excluding transaction expenses.  We also assumed Ps.9,085
    million of net debt.  The acquisition was financed with an equity contribution
    from FEMSA of Ps.2,779 million, an exchange of The Coca-Cola Companys equity
    interests in Panamco valued at Ps.7,041 million for new shares of our company,
    cash on hand of Ps.2,820 million and new indebtedness of Mexican pesos and
    U.S. dollars in the amount of Ps.17,267 million.  As a result of the Panamco
    acquisition, in accordance with Mexican GAAP, we recognized as intangible
    assets with indefinite lives, the rights to produce and distribute trademark
    brands of The Coca-Cola Company.  These identified intangibles, calculated
    as the difference between the price paid and the fair value of the net assets
    acquired, were valued at Ps.33,420 million, including financial and advisory
    fees, costs associated with closing certain acquired facilities, rationalizing
    and consolidating operations, relocating the corporate and other offices and
    the integration of the operations.

Comparability of Information
    Presented; Reporting Segments. Under Mexican GAAP, Panamco is included
    in our consolidated financial statements from May 2003 and is not reflected
    for periods prior to this date.  As a result, our consolidated financial statements
    as of and for the year ended December 31, 2003 are not comparable to
    prior periods.  Financial information provided by us with respect to the newly
    acquired territories is also not comparable to Panamcos consolidated financial
    statements for prior periods as they were prepared using different policies
    and in accordance with U.S. GAAP and in U.S. dollars. These financial statements
    will also not be comparable to subsequent periods, as Panamco is only included
    in our consolidated financial statements for eight months of 2003.

For our consolidated financial
    statements for the years ended and as of December 31, 2001 and 2002,
    we reported Mexico and Argentina as separate reporting segments.  For our
    consolidated financial statements for the year ended and as of December 31,
    2003, we reported each of Mexico, Central America, Colombia, Venezuela, Brazil
    and Argentina as a separate reporting segment.  Through our acquisition of
    Panamco, we acquired additional territories in Mexico, which are reported
    as part of our Mexico segment, as well as territories in Central America,
    Colombia, Venezuela and Brazil.  We did not acquire any additional territories
    in Argentina, the segment information for which is fully comparable to prior
    periods.

| | 42 | 
| | -- | 



---



Although our consolidated financial
    information is not comparable to prior periods, we maintain sales volume data
    for our territories on a basis comparable to that maintained by Panamco for
    prior periods.  For comparison purposes, the following table presents sales
    volume by segment:

Year Ended December 31,2003
      2002(millions of
          
          unit cases)
      (percentage)
      (millions of
          
          unit cases)
      (percentage)Total Volumes:Mexico
      1,001.6
      
      54.9
      %
      980.5
      
      52.5
      %Central America
      107.3
      
      5.9
      
      100.1
      
      5.4Colombia
      171.8
      
      9.4
      
      185.0
      
      9.9Venezuela
      151.6
      
      8.3
      
      162.9
      
      8.7Brazil
      265.1
      
      14.5
      
      322.6
      
      17.3Argentina
      126.6
      
      7.0
      
      115.6
      
      6.2Total
      1,824.0
      
      100.0
      %
      1,866.7
      
      100.0
      %


The presented sales volume information is different from our
  actual sales volume. We have presented this information because these sales
  volumes are one of the metrics we use to manage our business. Sales volumes
  are discussed in greater detail by segment in Item 4. Information on the
  CompanyThe CompanySales Overview.

Effects of Changes in
    Economic Conditions. Our results of operations are affected by changes
    in economic conditions in Mexico and in the other countries in which we operate.
    For the years ended December 31, 2003, 2002 and 2001, 66.7%, 90.6% and 89.1%,
    respectively, of our net sales were attributable to Mexico.  Although after
    the Panamco acquisition, we have greater exposure to countries in which we
    have not historically conducted operations, particularly countries in Central
    America and Colombia, Venezuela and Brazil, we continue to generate a substantial
    portion of our revenues in Mexico.

Our future results may be significantly
    affected by the general economic and financial conditions in the countries
    where we operate.  Decreases in economic growth rates, periods of negative
    growth, devaluation of local currencies, increases in inflation or interest
    rates and political developments may result in lower demand for our products,
    lower real pricing or a 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 reduce costs and expenses, and our profit margins may suffer as a result
    of downturns in the economy of each country.  In addition, an increase in
    interest rates in Mexico would increase our cost of variable rate debt and
    Mexican peso-denominated funding and would have an adverse effect on our financial
    position and results of operations.  A depreciation of the U.S. dollar would
    increase our cost of raw materials with prices payable in or determined with
    reference to the U.S. dollar and of debt obligations denominated in U.S. dollars,
    and thereby may negatively impact our results of operations.

Operating Leverage.Companies
    with structural characteristics that result in margin expansion in excess
    of sales growth are referred to as having high 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 distribution centers 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.

| | 43 | 
| | -- | 



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Critical Accounting Estimates

The preparation of our consolidated
    financial statements requires that we make estimates and assumptions that
    affect (i) the reported amounts of our assets and liabilities, (ii) the
    disclosure of our contingent assets and liabilities as of the date of the
    financial statements and (iii) the reported amounts of revenues and expenses
    during the reporting period.  We base our estimates and judgments on our historical
    experience and on various other reasonable factors, which together form the
    basis for making judgments about the carrying values of our assets and liabilities.
    Our actual results may differ from these estimates under different assumptions
    or conditions.  We evaluate our estimates and judgments on an on-going basis.
    Our significant accounting policies are described in Notes 4 and 5 to our
    consolidated financial statements.  We believe our most critical accounting
    policies that imply the application of estimates and/or judgments are:

Allowance for Doubtful
    Accounts.We determine our allowance for doubtful accounts based on
    an evaluation of the aging of our receivables portfolio.  The amount of the
    allowance contemplates our historical loss rate on receivables and the economic
    environment in which we operate.  Most of our sales, however, are realized
    in cash and do not give rise to doubtful accounts.

Bottles and Cases; Allowance
    for Bottle Breakage.  We classify bottles and cases in accordance
    with industry practices as fixed assets.  Breakage is expensed as incurred,
    and returnable bottles and cases are not depreciated.  We determine depreciation
    of bottles and cases only for tax purposes.

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

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

We describe the methodology
    used to restate imported equipment in Note 5(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.

We valued at fair value all
    fixed assets acquired in the Panamco transaction, considering their operational
    condition at the acquisition date and the future cash flows they will generate
    in accordance with our managements estimated future use.

In 2003, after conducting an
    extensive analysis on the current conditions and expected useful lives of
    our refrigerator inventories in Mexico, we decided to modify the useful life
    of refrigerators in our original territories from three to five years.  We
    made this decision based on the quality of our equipment as observed on a
    regular basis in point of sales locations and the benefit of our maintenance
    policy.  As a result depreciation expense recorded in the 2003 income statement
    decreased approximately Ps.92 million.  The useful life for refrigerators
    in the new territories acquired from Panamco is five years.

Valuation of Intangible
    Assets and Goodwill.As we discuss in Note 5(i) to our consolidated
    financial statements, beginning in 2003 we applied Bulletin C-8, Activos
    Intangibles (Intangible Assets), which established that project development
    costs should be capitalized if they fulfill the criteria established for recognition
    as assets. Additionally, Bulletin C-8 requires identifying all intangible
    assets to reduce as much as possible the goodwill associated with business
    combinations. Prior to 2003, the excess of the purchase price over the fair
    value of the net assets acquired in a business combination was considered
    to be goodwill. With the adoption of Bulletin C-8, we consider such excess
    to

| | 44 | 
| | -- | 



---



relate to the rights to produce and distribute Coca-Cola
    trademark products. We separate intangible assets between those with a finite
    useful life and those with an indefinite useful life, in accordance with the
    period over which we expect to receive the benefits.

We valued at fair value all
    of Panamcos assets and liabilities as of the date of the acquisition and,
    as required by Bulletin C-8, we conducted an analysis of the excess purchase
    price over the fair value of the net assets. The analysis resulted in the
    recognition of an intangible asset with indefinite life in the amount of Ps.33,420
    for the right to produce and distribute Coca-Colatrademark products,
    which will be subject to annual impairment tests, under U.S. GAAP and Mexican
    GAAP.  The fair value of the assets and liabilities was determined based on
    the following:

| |  |  | the
fair value of the assets acquired (determined  as the value of the fixed assets, the
glass returnable bottles and the refrigerators  considering (i) their remaining useful
lives, (ii) their general  operational condition at the acquisition date, (iii) certain
operational  and strategic decisions implemented when we assumed control of the
operations  and (iv) compliance with our accounting policies and estimates);
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | labor
and other liabilities (severance of personnel  and other obligations generated by Panamcos
operations before we assumed  control); and
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | cancellation
of goodwill (the goodwill previously  recorded by Panamco was cancelled).
| | - |  | --------------------------------------------------------------------------------------

For Mexican GAAP purposes, goodwill
    is the difference between the price paid and the fair value of the shares
    and/or net assets acquired that was not assigned directly to an intangible
    asset.  Goodwill and assigned intangible assets are 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. Goodwill is amortized over a period of not more than 20 years.

Under U.S. GAAP, SFAS No. 142,
    Goodwill and Other Intangible Assets, effective in 2002, goodwill is no
    longer subject to amortization, but instead is subject to an initial impairment
    review and subsequent impairment test.  This test is performed annually unless
    an event occurs or circumstances change by which it becomes more likely than
    not that a reporting unit will reduce its fair value below its carrying amount,
    in which case an interim impairment test is performed. Our impairment review
    indicates that no impairment charge is required as of the beginning of 2004.

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

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.
    Due to 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 performed a valuation of its investment
    in Coca-Cola FEMSA de Buenos Aires, based on market price value multiples
    of comparable businesses. The valuation resulted in the recognition of an
    impairment of Ps.457 million, which was recorded in our 2002 results.  Given
    the present economic situation in Argentina, we believe that the current net
    asset value of our foreign subsidiary is fairly valued, and although we can
    give you no assurances, we do not expect to recognize additional impairments
    in the future in Argentina.

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. We can give no assurance that
    our expectations will not change as a result of new information or developments.
    Changes in economic or political conditions in all the countries in which
    we operate or in the industries in which we participate, however, may cause
    us to change our current assessment.

Labor Liabilities.
    Our labor liabilities are comprised of pension plan and seniority premiums.
    The determination of our obligations and expenses for pension and other post-retirement
    benefits depends on our selection of

| | 45 | 
| | -- | 



---



certain assumptions used by actuaries in calculating such
    amounts.  We evaluate our assumptions at least annually.  Those assumptions
    are described in Note 15 to our consolidated financial statements and
    include, the discount rate, expected long-term rate of return on plan assets,
    rates of increase in compensation costs and certain employee-related factors,
    such as turnover, retirement age and mortality.  The assumptions include the
    economic risk involved in the countries in which our business operates.

In accordance with Mexican GAAP,
    actual results that differ from our assumptions are accumulated and amortized
    over future periods and, therefore, generally affect our recognized expenses
    and recorded obligations in such future periods.  While we believe that our
    assumptions are appropriate, significant differences in our actual experience
    or significant changes in our assumptions may materially affect our pension
    and other post-retirement obligations and our future expense.

The following table is a summary
    of the three key assumptions to be used in determining 2004 annual pension
    expense for Mexico, along with the impact on pension expense of a 1% change
    in each assumed rate:

|Assumption              | 2004 rate
      (in real terms) | Impact of 1%
      change
      (millions)(1), (2)
|----------------------- | ------------------------------- | --------------------------------------------------
|                       
|Mexican Subsidiaries:   |                                 |                                                   
|Discount rate           | 6.0%                            |                                                   
|Salary growth rate.     | 1.5%                            |                                                   
|Long-term asset return. | 5.5%                            |                                                   
|                        |                                 |                                                   
|Foreign Subsidiaries:   |                                 |                                                   
|Discount rate           | 4.5%                            |                                                   
|Salary growth rate.     | 1.5%                            |                                                   
|Long-term asset return. | 4.5%                            |                                                   

|
|

|(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) |  | +
indicates an increase  of 1%; - indicates a decrease of 1%.
|--- |  | -----------------------------------------------------------------

New Accounting Pronouncements

Mexican GAAP

Bulletin C-15,Deterioro en
  el Valor de los Activos de Larga Duración y su Disposición(Impairment
  of the Value of Long-Lived Assets and their Disposal):In March 2003,
  the Instituto Mexicano de Contadores Públicos(the Mexican Institute
  of Certified Public Accountants), which we refer to as the IMCP, issued
  Bulletin C-15, the application of which is mandatory for financial statements
  for periods beginning on or after January 1, 2004, although early application
  is encouraged. Bulletin C-15 establishes, among others, new principles for the
  calculation and recognition of impairment losses for long-lived assets and their
  reversal. The calculation of such loss requires the determination of the recoverable
  value, which is now defined as the greater of the net selling price of a cash-generating
  unit and its value in use, which is the present value of discounted future net
  cash flows. The accounting principles issued prior to this new bulletin used
  future net cash flows, without requiring the discounting of such cash flows.
  We do not anticipate that this new standard will have a significant impact on
  our financial position or results of operations.

Bulletin C-12,Instrumentos
  Financieros con Características de Pasivo, de Capital o de Ambos (Financial
  Instruments with Characteristics of Debt, Equity or Both): In April
  2003, the IMCP issued Bulletin C-12, the application of which is mandatory for
  financial statements for periods beginning on or after January 1, 2004, although
  early

| | 46 | 
| | -- | 



---



application is encouraged. Bulletin C-12 establishes the more
  significant differences between debt and equity, as the basis for the development
  of the criteria necessary to appropriately identify, classify and record, upon
  initial recognition, the debt and equity components of compound financial instruments.
  This new pronouncement is similar to SFAS No. 150, Accounting for Certain
  Financial Instruments with Characteristics of both Liabilities and Equity,
  of U.S. GAAP. We do not anticipate that this new standard will have a significant
  impact on our financial position or results of operations.

U.S. GAAP

SFAS No 149, Amendments of
    Statement 133 on Derivative Instruments and Hedging Activities (which we
    refer to as 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 agreements and
    for hedging activities under SFAS No. 133.  The changes in this statement
    improve financial reporting by requiring that agreements with comparable characteristics
    be accounted for similarly. The new standard will be effective for agreements
    entered into or modified after September 30, 2003, except as stated below
    and for hedging relationships designated after September 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 September 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 results of operations.

FASB Interpretation No. 46,
    Consolidation of Variable Interest Entities (which we refer to as FIN 46):
    In January 2003, the FASB issued FIN 46. FIN 46 clarified the application
    of Accounting Research Bulletin No. 51, Consolidated Financial Statements,
    to certain entities in which equity investors do not have the characteristics
    of a controlling financial interest or do not have sufficient equity at risk
    for the entity to finance its activities without additional subordinated financial
    support from other parties.  FIN 46 was effective immediately for all variable
    interests held in a variable interest entity created after January 31, 2003.
    For a variable interest held in a variable interest entity created before
    February 1, 2003 we would be required to apply the provisions of FIN 46 as
    of December 31, 2004.  We do not currently have any variable interests in
    a variable interest entity.

| | 47 | 
| | -- | 



---

Results of Operations

The following table sets forth
    our consolidated income statement for the years ended December 31, 2003, 2002
    and 2001:

|                                                                                                                                             | Year Ended December 31,                                                              
|-------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------
|                                                                                                                                             |                                                                                      
|                                                                                                                                             | 2003(1)(2)                                                                           
|                                                                                                                                             |                                                                                      
|                                                                                                                                             | (millions of
      U.S. dollars or constant Mexican pesos
      at December 31, 2003)
|Revenues:                                                                                                                                    |                                                                                      
|Net sales                                                                                                                                    | $                                                                                    
|Other operating
      revenues                                                                                                               |                                                                                      
|                                                                                                                                             |                                                                                      
|Total revenues                                                                                                                               |                                                                                      
|Cost of sales                                                                                                                                |                                                                                      
|                                                                                                                                             |                                                                                      
|Gross profit                                                                                                                                 |                                                                                      
|Operating expenses:                                                                                                                          |                                                                                      
|Administrative                                                                                                                               |                                                                                      
|Selling                                                                                                                                      |                                                                                      
|                                                                                                                                             |                                                                                      
|                                                                                                                                             |                                                                                      
|Goodwill amortization                                                                                                                        |                                                                                      
|                                                                                                                                             |                                                                                      
|Income from operations                                                                                                                       |                                                                                      
|Integral result of financing:                                                                                                                |                                                                                      
|Interest expense                                                                                                                             |                                                                                      
|Interest income                                                                                                                              |                                                                                      
|Foreign exchange gain (loss), net                                                                                                            |                                                                                      
|Gain (loss) from monetary position                                                                                                           |                                                                                      
|                                                                                                                                             |                                                                                      
|Total integral
      result of financing                                                                                                     |                                                                                      
|Other expenses, net                                                                                                                          |                                                                                      
|                                                                                                                                             |                                                                                      
|Income for the year before income taxes,
      
             employee profit sharing and change
      
             in accounting principles |                                                                                      
|Income taxes and employee profit sharing                                                                                                     |                                                                                      
|                                                                                                                                             |                                                                                      
|Income for the year before change in
      
             accounting principles                                                               |                                                                                      
|Change in accounting principles                                                                                                              |                                                                                      
|                                                                                                                                             |                                                                                      
|Net income for the year                                                                                                                      | $                                                                                    
|                                                                                                                                             |                                                                                      
|Minority net income                                                                                                                          |                                                                                      
|Majority net income                                                                                                                          | $                                                                                    
|                                                                                                                                             |                                                                                      

|
|

|(1) |  | Includes
the new territories  acquired in the Panamco acquisition from May 2003.
|--- |  | --------------------------------------------------------------------------------

|(2) |  | Translation
to U.S.  dollar amounts at an exchange rate of Ps.11.235 to U.S.$1.00 solely for the
convenience of the reader.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------

| | 48 | 
| | -- | 



---



Results of Operations by Segment

The following table sets forth
    certain financial information for each of our segments for the years ended
    December 31, 2003, 2002 and 2001.  For the years ended December 31, 2002 and
    2001, we reported our results of operations in two segments, Mexico and Argentina.
    See Note 24 to our consolidated financial statements for additional information
    by segment.

|                         | Year Ended December 31,          
|------------------------ | ---------------------------------
|                         |                                  
|                         | 2003                             
|                         |                                  
|                         | (millions
      of Mexican Pesos)
|Net Sales                |                                  
|Mexico                   | Ps.                              
|Central
      America(1) |                                  
|Colombia                 |                                  
|Venezuela                |                                  
|Brazil                   |                                  
|Argentina                |                                  
|Total Revenues           |                                  
|Mexico                   | Ps.                              
|Central
      America(1) |                                  
|Colombia                 |                                  
|Venezuela                |                                  
|Brazil                   |                                  
|Argentina                |                                  
|Gross Profit             |                                  
|Mexico                   | Ps.                              
|Central
      America(1) |                                  
|Colombia                 |                                  
|Venezuela                |                                  
|Brazil                   |                                  
|Argentina                |                                  
|Income from Operations   |                                  
|Mexico                   | Ps.                              
|Central
      America(1) |                                  
|Colombia                 |                                  
|Venezuela                |                                  
|Brazil                   |                                  
|Argentina                |                                  

|
|

|(1) |  | Includes
Guatemala, Nicaragua, Costa Rica and Panama.
|--- |  | -----------------------------------------------------

Results of Operations for the Year Ended December 31, 2003
    Compared to the Year Ended December 31, 2002.

Consolidated Results of Operations

Net Sales.  Consolidated
    net sales grew by 91.6% to Ps.35,486.8 in 2003, from Ps.18,518.6 in 2002,
    as a result of the inclusion of sales from the newly acquired territories
    for eight months of 2003 as well as increases in sales in our previously existing
    territories in Mexico and Argentina.  Consolidated sales volumes increased
    to 1,450.5 million unit cases for 2003.  Consolidated average unit price per
    case decreased by 18.1% from Ps.29.86 in 2002 to Ps.24.46 in 2003 due to the
    inclusion of the newly acquired territories, which had higher sales volumes
    of less profitable products.

| | 49 | 
| | -- | 



---



Other Operating Revenues. Other
    operating revenues increased by 62.9% to Ps.242.6 million in 2003, from Ps.148.9
    million in 2002.  Other operating revenues mainly consist of sales to other
    bottlers pursuant to tolling arrangements in Argentina, revenues from sales
    of recyclable scrap to bottle suppliers and sales of point of sales materials
    for the fountain business.

Cost of Sales. Cost
    of sales increased to Ps.17,980.3 million in 2003, from Ps.8,680.8 million
    in 2002, as a result of the inclusion of the newly acquired territories for
    eight months of 2003.  As a percentage of total sales, cost of sales increased
    3.8%, reflecting the higher costs of sales in the newly acquired territories
    mainly due to the different product mix and higher manufacturing costs.  We
    were also affected by the impact of the devaluation of the U.S. dollar against
    the Mexican peso as applied to our raw materials with prices that are paid
    in or determined with reference to the U.S. dollar.

The components of cost of sales
    include raw materials (principally soft drink concentrate, packaging materials,
    sweeteners and water), depreciation expenses attributable to our production
    facilities, wages and other employment expenses associated with the labor
    force employed at our production facilities and certain overhead expenses.
    Concentrate prices are determined as a percentage of the retail price of our
    products net of applicable taxes.  See Item 4.  Information on the CompanyThe
    CompanyRaw Materials.

Operating Expenses.
    Consolidated operating expenses were Ps.11,038.7 million in 2003, as a result
    of the inclusion of the newly acquired territories for eight months of 2003.
    As a percentage of total sales, operating expenses increased 2.4%, due to
    the standardization of marketing practices in the newly acquired territories
    and the fact that distribution costs in our new territories are higher than
    in our original territories.

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 2003 and 2002, our
    distribution costs amounted to Ps.2,803.6 million and Ps.2,099.0 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, which may include all expenses related to their distribution
    network in cost of sales when computing gross profit (or an equivalent measure).

Goodwill Amortization.
    We did not recognize goodwill amortization in 2003.  In May of 2003 we considered
    the excess of the purchase price over the fair value of the net assets acquired
    in the Panamco acquisition, related to the rights to produce and distribute
    Coca-Colatrademark products, as intangible assets with an indefinite
    useful life. These intangible assets with indefinite lives are not amortized,
    but are periodically subject to an impairment test.

Income from Operations.
    Consolidated income from operations after amortization of goodwill grew to
    Ps.6,710.4 million in 2003, from Ps.4,626.8 million in 2002.  Income from
    operations as a percentage of total revenues decreased 6% in 2003, from 24.8%
    to 18.8%, mainly as a result of the inclusion of our new territories, which
    had lower operating margins.

Integral Result of Financing.
    The term integral result of financing refers to the combined financial effects
    of net interest expense or interest income, net foreign exchange 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 liabilities denominated in currencies other than local currencies.
    A foreign exchange loss arises if a liability is denominated in a foreign
    currency that appreciates relative to the local currency 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 local currency 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 local inflation on monetary assets and liabilities.

In 2003, we reported a loss
    of Ps.2,481.5 million from integral result of financing, as compared to a
    gain of Ps.560.3 million in 2002.  This loss principally reflects our new
    financial position after the Panamco acquisition, and the combined effect
    of:

| | 50 | 
| | -- | 



---



| |  |  | accrued
interest expenses related to existing  debt and the acquisition financing incurred  in
connection with the Panamco  transaction, which more than offset the interest income
generated by our reduced  cash balances;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | a
foreign exchange loss generated mainly by the  devaluation of the Mexican peso against
the U.S. dollar, as applied to our  U.S. dollar-denominated debt; and
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | a
consolidated monetary gain, as a result of  inflation adjustments applied to the
consolidated net monetary liability position.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------

Other Expenses.Other
    expenses decreased from Ps.614.2 in 2002 to Ps.238.6 in 2003 mainly as a result
    of the impairment recorded in 2002 related to the Argentine operations.

Income Taxes and Employee
    Profit Sharing.  Income taxes and employee profit sharing decreased
    from Ps.1,912.1 million in 2002 to Ps.1,658.2 million in 2003.  The companys
    consolidated effective income tax and employee profit sharing rate remained
    41.6% in 2003, reflecting the Mexican effective tax rate of 44.0% that is
    applied to Mexican income before taxes, which comprised the majority of our
    taxable income during 2003.

Net Income. Consolidated
    net income decreased by 12.4% in 2003 to Ps.2,332.1 from Ps.2,660.8. Net income
    per share was Ps.1.36 (U.S.$1.21 per ADS) in 2003 computed on the basis of
    1,704.3 million compounded average shares outstanding during 2003.

Consolidated Results of Operations by Geographic Segment

Mexico

Net Sales.Net
    sales in Mexico increased to Ps.23,683.2 million in 2003, from Ps.16,774.9
    million in 2002, principally as a result of the inclusion of the newly acquired
    territories for eight months of 2003. Sales volumes in Mexico grew to 850.1
    million unit cases during 2003 from 504.7 million unit cases in 2002.Although most of this growth in sales volumes is a result of the inclusion
    of the newly acquired territories, volume growth was also driven by:

| |  |  | solid
performance of our new flavored brands including Fanta multi-flavors, Fresca pink
grapefruit and Lift green apple;
| | - |  | ------------------------------------------------------------------------------------------------------------------------

| |  |  | incremental
sales volumes achieved by Ciel still water in a 5.0-liter presentation, particularly in
central Mexico; and
| | - |  | -----------------------------------------------------------------------------------------------------------------------

| |  |  | volume
growth from the Coca-Cola brand.
| | - |  | ---------------------------------------

The effect of these volume increases
    on our net sales was mitigated by a lower average real price per unit case
    in Mexico, which decreased to Ps.27.86 in 2003, mainly due to the incorporation
    of jug water volumes with a much lower cost per unit from the newly acquired
    territories and to a lesser extent by the increased size of multi-serving
    presentations.

Income from Operations.Gross profit totaled Ps.12,844.5 million, reaching a 53.7% margin as a
    percentage of total revenues in 2003. Higher raw materials prices, the effect
    of the devaluation of the Mexican peso versus the U.S. dollar on our raw materials
    with prices payable in or determined with reference to the U.S. dollar, a
    softer economy and a lower disposable income, amplified by a migration to
    multi-serving presentations from individual size presentations resulted in
    declining margins in 2003.  During 2003, we eliminated Panamcos former headquarters
    in Mexico City and Miami, closed four plants out of 16, consolidated 29 distribution
    centers out of 142, introduced more than 73,000 new coolers into the market
    and reconfigured pre-sale and distribution networks by reducing third party
    selling and distribution.  Operating income totaled Ps.5,633.6 million in
    2003, reaching a 23.5% margin as a percentage of total revenues.

| | 51 | 
| | -- | 



---



Central America

Net Sales.  Net
    sales in Central America were Ps.2,182.6 million for 2003.  During this period,
    our average real price per unit case was Ps.29.93.Sales volumes in
    Central America in 2003 were driven by:

| |  |  | solid
performance of the cola category, especially  in our territories in Guatemala and
Nicaragua; and
| | - |  | ------------------------------------------------------------------------------------------------------

| |  |  | incremental
sales volume in the carbonated soft  drinks flavor segment.
| | - |  | -----------------------------------------------------------------------

Higher volumes from our core brands in returnable presentations
    as well as volumes sold in non-returnable PET bottles contributed to the results
    during the year.

Income from Operations.Gross profit totaled Ps.1,087.9 million in 2003, reaching a 49.8% gross
    margin as a percentage of total revenues during the same period. Procurement
    and other cost reduction initiatives offset cost increases of U.S. dollar-denominated
    packaging costs during the year.  We closed one of our two plants in Panama,
    and consolidated two distribution centers in the region.  Operating income
    totaled Ps.218.4 million, reaching an operating income margin of 9.9% as a
    percentage of total revenues.  We believe our Central American territories
    will present opportunities for us to develop a more effective returnable packaging
    base, new product alternatives and improve execution practices.  In Guatemala,
    however, we face a strong competitive environment combined with a higher than
    normal cost structure.

Colombia

Net Sales.Net sales in Colombia were Ps.2,319.1 million for 2003.  During this period,
    our average real price per unit case was Ps.20.32.  Sales volumes were weak
    during this period as a result of:

| |  |  | low
sales of carbonated soft drinks as a result  of an increasing competitive landscape of
alternative lower price or inexpensive  beverage categories such as powders, natural
juices and tap water affecting  the Colombian carbonated soft drinks industry; and
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | a
reduction in the production of water sold in  less profitable packages.
| | - |  | -------------------------------------------------------------------------

Income from Operations.Gross profit totaled Ps.1,068.1 million, reaching a 46.1% gross margin
    as a percentage of total revenues during the same period. Lower volumes, higher
    packaging costs and the impact of the devaluation of the Colombian peso versus
    the U.S. dollar, applied to U.S. dollar denominated expenses resulted in declining
    margins.  During 2003, we implemented a strong asset consolidation program
    intended to increase the efficiency of our manufacturing network. We converted
    11 manufacturing plants out of 17 into distribution facilities from May 2003
    to February 2004 and also consolidated five distribution centers as part of
    our strategy to face a tough competitive environment.  Operating income was
    Ps.261.1 million, reaching an 11.3% margin as a percentage of total revenues
    during 2003.

Venezuela

Net Sales.  Net
    sales in Venezuela were Ps.2,542.2 million for 2003.  During this period,
    our average real price per unit case was Ps.23.08.  Sales volumes in Venezuela
    were adversely affected by:

| |  |  | political
unrest, stock shortages and a severe  economic recession; and
| | - |  | -----------------------------------------------------------------------

| |  |  | a
change of consumption habits due to the countrys  economic recession.
| | - |  | ------------------------------------------------------------------------

We were able to mitigate some of this decline by implementing
    an asset rationalization strategy intended to increase the efficiency of our
    manufacturing network during the year.  Sales volumes improved slightly at
    the end of 2003 as a result of our packaging and revenue management strategies.
    Volume growth from theCoca-Cola brand increased and partially offset
    the volume decline of carbonated soft drink flavors during the year.

| | 52 | 
| | -- | 



---



Income from Operations.Gross profit totaled Ps.1,105.9 million in 2003, reaching a 43.4% gross
    margin as a percentage of total revenues during the same period. Political
    unrest, combined with a devaluation of the bolivar against the U.S. dollar
    applied to our raw materials that are payable or are determined with reference
    to the U.S. dollar, and a severe decline in the economic activity in the country,
    resulted in a contraction of more than 10% of the countrys gross domestic
    product, which was only partially offset by price increases during the year.
    We consolidated our production facilities from nine to six and closed two
    distribution facilities in 2003.  Operating income was Ps.231.5 million, reaching
    an operating income margin of 9.1% during 2003.

Brazil

Net Sales.Net sales in Brazil were Ps.2,785.8 million in 2003.  During this period,
    our average real price per unit case was Ps.15.77.  In 2003, we undertook
    an initiative to use in-house pre-sale and to rely less on third party wholesalers
    in order to have more control over the point of sale and to permit us to implement
    packaging management strategies.  We launched more than ten different SKUs
    to target different consumption occasions, including Coca-Cola com Limãoand Kuat laranja(guaraná flavor with orange). Traditionally in
    Brazil, most of our consumption came from only two packaging alternatives,
    cans and 2.0-liter bottles.  We are now focusing on a broader array of presentations
    to spur consumer demand. For example, our new 12-ounce non-returnable glass
    bottle and our new 200-milliliter returnable glass bottle offer a combination
    of convenience and affordability for on-premise consumption of Coca-Cola.Our new 2.25-liter and 3.0-liter non-returnable PET presentations for
    carbonated soft drink flavors and theCoca-Cola brand, respectively,
    provide packaging alternatives and permit selling strategies between the supermarket
    and small retailers opening a road to implement our segmentation and revenue
    management initiatives.

Income from Operations.Gross profit totaled Ps.1,011.0 million in 2003, reaching a 36.1% margin
    as a percentage of total revenues. The implementation of new commercialization
    and point of sale development strategies improved our packaging and product
    mix during the year.  We consolidated one plant out of four during 2003. Operating
    income was Ps.149.8 million, reaching an operating income margin of 5.4% during
    2003.

Argentina

Net Sales.Net sales in Argentina increased by 13.2% in 2003 to Ps.1,973.9 million
    from Ps.1,743.8 million in 2002. During 2003, our average real price per unit
    case increased by 3.4% in 2003 to Ps.15.59 from Ps.15.08, as a result of price
    increases implemented during the year and a change of mix toward our core
    brands in returnable presentations and our premium brands, which have the
    highest average prices per unit.

Sales volumes in Argentina increased
    9.5% to 126.6 million unit cases in 2003, from 115.6 million unit cases in
    2002.  We believe the principal volume drivers in Argentina in 2003 were our
    returnable packaging strategy and the economic recovery from the devaluation
    of the Argentine peso in 2002.   We also experienced a product shift from
    our less profitable value protection brands, Taíand Crush,
    toward our core brands, Coca-Cola and Fanta, which increased
    15.1% and 40.6% in terms of sales volumes, respectively, and for the first
    time, more sales from premium brands than from value protection brands, fostered
    by a 10.9% volume increase of theCoca-Cola light brand and the successful
    introduction of Fanta light during the year.

Income from Operations.Gross profit totaled Ps.767.6 million during 2003, reaching a gross margin
    of 37%, an improvement of 2.6% as compared to 2002. This improvement was mainly
    driven by (i) higher sales volume, (ii) higher average prices per unit
    case, and (iii) an appreciation of the Argentine peso versus the U.S. dollar
    applied to U.S. dollar-denominated raw materials and expenses.  In Argentina,
    operating expenses as a percentage of total revenues decreased 4.4% from 31%
    in 2002 to 26.6% in 2003, mainly as a result of the appreciation of the Argentina
    peso versus the U.S. dollar applied to expenses payable in or determined with
    reference to the U.S. dollar and strict cost control measures.  Operating
    income during 2003 in our Argentine territories reached Ps.215.6 million and
    operating margin rose from 2.9% during 2002 to 10.4% in 2003.

| | 53 | 
| | -- | 



---



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

Consolidated Results of Operations

Net Sales.  Consolidated
    net sales grew by 5% in 2002, principally reflecting growth in Mexico, which
    more than offset a decrease in net sales in Argentina.

Other Operating Revenues.
    Other operating revenues increased by 10.2% in 2002, to Ps.148.9 million.
    The increase primarily reflects revenues obtained from toll production agreements
    in Argentina with neighboring Coca-Cola bottlers, whereby we produce
    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 our 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 a percentage of the retail price of our products
    net of applicable taxes.  See Item 4.  Information on the CompanyThe CompanyRaw
    Materials.  As a percentage of total revenues, cost of sales remained unchanged
    during 2002 as compared to 2001 at 46.5%.

Operating Expenses.
    Consolidated operating expenses decreased by 0.6% in 2002 as compared to 2001
    and by 1.6% compared as a percent of total revenues (to 28.5% from 30.1%).
    The decrease, in absolute terms, resulted from a 3.7% decline in selling expenses,
    which offset an 8.6% 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.

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.2,099.0 million and Ps.2,236.4 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 that may include all expenses related to their distribution
    network in cost of sales when computing gross profit (or an equivalent measure).

Goodwill Amortization.
    Goodwill amortization for 2002 was Ps.40.7 million, compared to Ps.108.3 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.457.2 million
    of the goodwill generated by the acquisition of our territories in Argentina.
    This non-cash impairment charge was recorded under other expense, net, in
    our consolidated income statement.  Under Mexican GAAP, the remaining value
    of goodwill will continue to be amortized in the income statement.

Income from Operations.  Consolidated income from operations after amortization of goodwill grew
    by 14.1% to Ps.4,626.8 million in 2002.  Operating income as a percentage
    of total revenues increased by 2% in 2002, from 24.8% to 22.8%.  This increase
    primarily reflects a decrease in operating expenses, a 2.9% increase in the
    average price per unit case, a slight reduction in cost of sales per unit
    case and lower goodwill amortization expenses because of a non-cash impairment
    charge to goodwill relating to our operations in Argentina in July 2002.

Integral Result of Financing.
    The term integral result of financing refers to the combined financial effects
    of net interest expense or interest income, net foreign exchange 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 liabilities denominated in currencies other than local currency.
    A foreign exchange loss arises if a liability is denominated in a foreign
    currency that appreciates relative to the local currency 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 local currency 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.560.3 million from integral result of financing, as compared to a loss
    of Ps.129.6 million in 2001.  This improvement principally reflects:

| | 54 | 
| | -- | 



---



| |  |  | a
net foreign exchange gain of Ps.250.0 million  in 2002, as compared to a loss of Ps.10.3
million in 2001.  In 2002, both  the Mexican peso and the Argentine peso depreciated in
value against the U.S.  dollar, which produced a net foreign exchange gain as our U.S.
dollar-denominated  cash positions in Mexico and Argentina exceeded our U.S.
dollar-denominated  liabilities.  In 2001, the Mexican peso appreciated in value against
the U.S.  dollar.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | a
gain on monetary position of Ps.394.8 million  in 2002, as compared to a loss on monetary
position of Ps.84.2 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.28.7 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 exchange losses or gains on the U.S. dollar liabilities incurred in
    connection with the acquisition of our Argentine territories, only with respect
    to the un-hedged portion of such liabilities.  According to Mexican GAAP,
    the investment in our Argentine territories was designated as a hedge to the
    indebtedness incurred. As of June 30, 2002, the dollar-denominated outstanding
    liabilities relating to the acquisition of our Argentine territories amounted
    to U.S.$300 million and the net investment in our Argentine territories 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 our Argentine territories
    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.44.1 million in 2001 to Ps.614.2
    million in 2002, mainly as a result of the Ps.457.2 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 Taxes and Employee
    Profit Sharing.  Income taxes and employee profit sharing increased
    from Ps.1,526.7 million in 2001 to Ps.1,912.1 million in 2002.  The companys
    consolidated effective income tax and employee profit sharing rate increased
    from 39.3% 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 14.4% to Ps.2,660.8 in 2002, resulting in earnings
    per share of Ps.1.87 (U.S.$ 0.17 per ADS).

Consolidated Results Operations by Geographic Segment

Mexico

Net Sales.Net sales grew by 6.7% in Mexico.  During 2002, our average real price
    per unit case increased by 1.1%, mainly due to price increases implemented
    in central Mexico during February 2002.  Sales volumes in Mexico 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 Mexico:

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

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

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

| | 55 | 
| | -- | 



---



The following chart sets forth
    sales volumes and average unit price per case for 2002, as well as percent
    growth over 2001 in Mexico:

|                 | Excluding Kin
      light(1) |          | Including Kin
      light (1)
|---------------- | ---------------------------- | -------- | -----------------------------
|                 | Total                        | % Growth |                              
|                 |                             
|Sales volumes(2) | 498.4                        |          | 4.3                          
|Avg. unit price  | Ps. 33.66                    |          | 2.3                          

|
|

|(1) |  | We
distributed our Kin  light powdered beverage brand on a complimentary basis 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 Mexico 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.
| | - |  | ------------------------------------------------

Income from Operations.Gross profit totaled Ps.9,359.2 million, reaching a gross margin of 55.6%
    in 2002 compared to a margin of 54.7% in 2001 due to a greater absorption
    of fixed costs driven by sales volume growth.  Operating expenses decreased
    slightly as a percentage of total revenues by 120 basis points to 28.2%.
    This reflects primarily a decrease of 1.3 percentage points in selling expenses
    as a percentage of total revenues.  Administrative expenses remained unchanged
    as a percentage of total revenues.  Income from operations during 2002 reached
    Ps.4,597.4 million with an operating margin of 27.3%, an increase of 25.2%
    from 2001.

Argentina

Net Sales.Net sales in Argentina decreased by 9.1% in 2002, despite an 11% decline
    in sales volume.  In Argentina, our average real price per unit case increased
    by 2.1% 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 volumes 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% 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.

Income from Operations.Gross profit totaled Ps.627.6 million, reaching a gross margin of 34.4%
    in 2002 compared to a margin of 44.2% in 2001. Cost of sales as a
    percentage of total revenues during 2002 increased 9.8 percentage points to
    65.6%.  These results are due to 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.  Selling expenses decreased by 25.9%, a
    reduction of 5.8 percentage 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 17.2% as a
    result of higher depreciation resulting mostly from the

| | 56 | 
| | -- | 



---



restatement to year-end values of the leases of our computer
    equipment recorded in foreign currencies, following the significant devaluation
    of the Argentine peso.   Income from operations during 2002 reached Ps.29.4
    million with an operating margin of 1.6%, a decline of 2.2 percentage points
    as compared to 2001, as a result of an 11% decline in sales volume combined
    with higher administrative expenses.

Liquidity and Capital Resources

Liquidity.  The
    principal source of our liquidity is cash generated from operations.  A significant
    majority of our sales are on a cash basis with the remainder on a short-term
    credit basis.  We have traditionally been able to rely on cash generated from
    operations to fund our working capital requirements and our capital expenditures.
    Our working capital benefits from the fact that we make our sales on a cash
    basis, while we generally pay our suppliers on credit.  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.

As a result of the Panamco acquisition,
    our total indebtedness was Ps.29,004 million as of December 31, 2003, as compared
    to Ps.3,306 million as of December 31, 2002.  Cash and cash equivalents were
    Ps.2,783 million as of December 31, 2003, as compared to Ps.6,429 million
    as of December 31, 2002. Approximately U.S.$43 million of cash is subject
    to restrictions as a result of certain collateral arrangements we have entered
    into on behalf of our subsidiaries with respect to existing indebtedness.

As part of our financing policy,
    we expect to continue to finance our liquidity needs from cash from operations.
    Nonetheless in the future we may be required to finance our working capital
    and capital expenditure needs with short-term or other borrowings.  As a result
    of regulations in certain countries in which we operate, it may not be beneficial
    or, as in the case of exchange controls in Venezuela, practicable for us to
    remit cash generated in local operations to fund cash requirements in other
    countries.  In the event that cash from operations in these countries is not
    sufficient to fund future working capital requirements and capital expenditureswe may decide, or be required, to fund cash requirements in these countries
    through local borrowings rather than remitting funds from another country.
    As of December 31, 2003, we had U.S. dollar-denominated, uncommitted approved
    lines of credit totaling approximately Ps.2,944 million, of which Ps.2,039
    million was available as of such date.  In December 2003, we finalized a loan
    agreement with The Coca-Cola Company that permits us to borrow, upon the satisfaction
    of certain conditions, U.S.$250 million prior to December 20, 2006 for funding
    working capital needs and for other general corporate purposes at any time
    when such funding is not otherwise available under our existing lines of credit.

We continuously evaluate opportunities
    to pursue acquisitions or engage in joint venture or other transactions.We would expect to finance any significant future transactions with a
    combination of cash from operations, long-term indebtedness and capital stock
    of our company.

| | 57 | 
| | -- | 



---

Sources and Uses of Cash.
  The following table summarizes the sources and uses of cash for the three years
  ended December 31, 2003:

|                                                                         | Principal Sources and Uses
      of Cash
      Year ended December 31,
|------------------------------------------------------------------------ | ----------------------------------------------------------------------
|                                                                         | (millions of constant Mexican pesos at December 31, 2003)             
|                                                                         | 2003                                                                  
|Net resources generated by operations                                    | $     223.9                                                           
|Net resources used in investing activities(1)(2)                         | (2,809.0                                                              
|Net resources obtained from (used in) financing
           activities(2) | 2,260.5                                                               
|Dividends declared and paid.                                             |                                                                      

|
|

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

|(2) |  | The
increase in 2003 reflects the acquisition of Panamco  and the corresponding financing.
|--- |  | ------------------------------------------------------------------------------------------



Contractual Obligations

The table below
  sets forth our contractual obligations as of December 31, 2003:

|                            | As of December 31, 2003
      (amounts in millions of Mexican pesos)
|--------------------------- | --------------------------------------------------------------------
|Contractual Obligations     | Maturity less
      than 1 year                                     
|Long-Term Debt Obligations  | 1,238.2                                                             
|Capital Lease Obligations   | 7.6                                                                 
|Operating Lease Obligations | 173.3                                                               
|                            |                                                                     
|Total                       | 1,419.1                                                             



Debt Structure

On December 31,
  2003, we had cash and cash equivalents of Ps.2,783.2 million (U.S.$247.7 million),
  total short term debt of Ps.2,963 million (U.S.$263.7 million) and long term
  debt of Ps.26,041.3 million (U.S.$2,317.8 million). The following chart sets
  forth the current debt breakdown of the company and its subsidiaries by currency
  and interest rate type as of December 31, 2003:

|Currency        | % Total Debt | % Interest
      Rate Floating | Average Rate(1)
|--------------- | ------------ | ------------------------------ | ---------------
|U.S. dollars    | 42           | %                              | 5              
|Mexican Pesos   | 56           | %                              | 56             
|Colombian Pesos | 2            | %                              | 100            

|
|

|(1) |  | Annualized
average interest rate per currency as of  December 31, 2003.
|--- |  | -----------------------------------------------------------------------

Summary of Significant Debt Instruments

The following is
  a brief summary of our significant long-term indebtedness with restrictive covenants
  outstanding as of December 31, 2003:



| | 58 | 
| | -- | 



---



9.40% Senior
  Unsecured Notes Due 2004. On August 26, 1994, we entered into a note purchase
  agreement pursuant to which we issued 9.40% Senior Unsecured Notes due 2004
  in the amount of U.S.$100 million. The note purchase agreement imposes certain
  conditions on a consolidation or merger by us and restrictions on liens, sale
  and leaseback transactions, assets sales and subsidiary indebtedness. We are
  also required to maintain a ratio of consolidated net borrowings to consolidated
  net worth and a minimum level of net worth. In addition, upon a change of control,
  which is defined as the failure of The Coca-Cola Company to hold at least 25%
  of our capital stock with voting rights, we are required to make an offer to
  prepay the notes at their face value.

8.95% Notes Due
  2006. On October 28, 1996, we entered into an indenture pursuant to which
  we issued 8.95% Notes due 2006 in the amount of U.S.$200 million. The indenture
  imposes certain conditions upon a consolidation or merger by us and restricts
  the incurrence of liens and sale and leaseback transactions. In addition, upon
  a change of control, which is defined as the failure of The Coca-Cola Company
  to hold at least 25% of our capital stock with voting rights, we are required
  to make an offer to repurchase the notes at their face value.

7.25% Notes Due
  2009. On July 11, 1997, our subsidiary Panamco issued 7.25% Senior Notes
  Due 2009, of which U.S.$290 million remain outstanding as of December 31, 2003.
  We guaranteed these notes on October 15, 2003. The indenture imposes
  certain conditions upon a consolidation or merger by us or Panamco and restricts
  the incurrence of liens and sale and leaseback transactions by Panamco.

Term Loans.
  On April 23, 2003, we entered into a Term Loan Agreement pursuant to which we
  borrowed:

| |  |  | Ps.2,741.3
million with a five-year maturity that  amortizes in semi-annual installments beginning
in 30 months from the borrowing  date;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------

| |  |  | U.S.$298.5
with a three-year maturity; and
| | - |  | ------------------------------------------

| |  |  | U.S.$208.5
million with a five-year maturity.
| | - |  | ---------------------------------------------

The Term Loan Agreement contains restrictions on liens,
  fundamental changes such as mergers and certain asset sales and our ability
  to incur restrictions on the ability of our subsidiaries to pay dividends and
  subsidiary indebtedness. In addition, we are required to maintain a minimum
  interest expense coverage ratio and comply with a maximum leverage ratio. Finally,
  there is an event of default upon a change of control, which is defined as the
  failure of The Coca-Cola Company to hold at least 25% of our capital stock with
  voting rights.

Certificados
  Bursátiles. During 2003, we established a program for and issued the
  following certificados bursátiles in the Mexican capital markets:

|Issue Date | Maturity | Amount             |  | Rate                  
|---------- | -------- | ------------------ |  | ----------------------
|           |          |                    |  |                       
|2003       | 2005     | Ps. 2,750 million  |  | 28 day TIIE + 55 bps  
|2003       | 2007     | Ps. 2,000 million  |  | 28 day TIIE + 55 bps  
|2003       | 2008     | Ps. 1,250 million  |  | 182 day CETE + 120 bps
|2003       | 2008     | Ps. 2,500 million  |  | 91 day CETE + 115 bps 
|2003       | 2009     | Ps.    500 million |  | 9.90% Fixed           
|2003       | 2010     | Ps. 1,000 million  |  | 10.4% Fixed           

|
|

|(1) |  | TIIE
      means the Tasa de Interés Interbancaria de Equilibrio (the Equilibrium
      Interbank Interest Rate).
|--- |  | -----------------------------------------------------------------------------------------------------------------

|(2) |  | CETE
      means the Certificados de Tesorería del Gobierno Federal (the
      Federal Government Treasury Certificates).
|--- |  | -------------------------------------------------------------------------------------------------------------------------

The certificados bursátiles contain restrictions
  on the incurrence of liens and accelerate upon the occurrence of an event of
  default, including a change of control, which is defined as the failure of The
  Coca-Cola Company to hold at least 25% of our capital stock with voting rights.



| | 59 | 
| | -- | 



---



We believe we are currently in
  compliance with all of our restrictive covenants, although a significant and
  prolonged deterioration in our consolidated results of operations could cause
  us to cease to be in compliance under certain indebtedness. We can provide no
  assurances that we will be able to incur indebtedness in the future or to refinance
  existing indebtedness on similar terms.

Off-balance SheetArrangements

We do not have any off-balance
  sheet arrangements.

Contingencies

We have various loss contingencies,
  for which reserves have been recorded in those cases where we believe the results
  of an unfavorable resolution is probable. See Item 8Financial InformationConsolidated
  Statements and Other Financial InformationLegal Proceedings. Most
  of these loss contingencies have been recorded as reserves against intangibles.
  Any amounts required to be paid in connection with these loss contingencies
  would be required to be paid from available cash.

Capital Expenditures

The following table sets forth
  our capital expenditures (before sales of property, plant and equipment) for
  the periods indicated on a consolidated and by segment basis:

|Consolidated
      Capital Expenditures
|---------------------------------------
|                                       
|                                       
|                                       
|Total                                  
|Plants and distribution                
|Bottles                                
|Deferred charges and other investments 
|                                       
|Total                                  



|Capital Expenditures by Segment
|-------------------------------
|                               
|                               
|                               
|                               
|Mexico                         
|Central America                
|Colombia                       
|Venezuela                      
|Brazil                         
|Argentina                      
|                               
|Total                          

Our capital expenditures in 2003
  focused on integration of our new territories, placing refrigeration equipment
  with retailers and investments in returnable bottles and cases, increasing plant
  operating efficiencies, improving the efficiency of our distribution infrastructure
  and advancing information technology. Through these measures, we strive to improve
  our profit margins and overall profitability.



| | 60 | 
| | -- | 



---



In connection with the continued
  integration of our new territories, we estimated that our capital expenditures
  in 2004 would be approximately of Ps.3,300 million. Our capital expenditures
  in 2004 are primarily intended for:

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

| |  |  | market
investments (primarily for the placement  of refrigeration equipment); and
| | - |  | ---------------------------------------------------------------------------------

| |  |  | 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,  and improve our manufacturing facilities.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

We estimate that a majority of
  our projected capital expenditures for 2004 will be spent in our Mexican territories.
  We believe that internally generated funds will be sufficient to meet our budgeted
  capital expenditure for 2004. Our capital expenditure plan for 2004 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 Capital Resources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.

We continuously evaluate opportunities
  to pursue acquisitions or engage in joint ventures or other transactions. The
  consummation of any of these opportunities may require us to make significant
  investments or capital expenditures.

Hedging Activities

Our business activities require
  the holding or issuing of derivative instruments to hedge our exposure to market
  risks related to changes in interest rates, foreign currency exchange rates,
  equity risk and commodity price risk. See Item 11. Quantitative and
  Qualitative Disclosures about Market Risk.

The following table provides a
  summary of the fair value of derivative instruments as of December 31, 2003.
  The fair market value is obtained mainly from external sources, which are our
  counterparties to the contracts.

|                                  | Fair Value
      
      At December 31, 2003
      (millions of constant Mexican pesos)
|--------------------------------- | ---------------------------------------------------------------------------------------
|                                  | Maturity
      less than
      1 year                                                  
|Prices quoted by external sources | (71.0)                                                                                 

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
income taxes and deferred employee profit  sharing;
| | - |  | ------------------------------------------------------------

| |  |  | deferred
promotional expenses;
| | - |  | ------------------------------



| | 61 | 
| | -- | 



---





| |  |  | restatement
of imported machinery and equipment;
| | - |  | ------------------------------------------------

| |  |  | goodwill
amortization;
| | - |  | ----------------------

| |  |  | financial
instruments; and
| | - |  | --------------------------

| |  |  | capitalization
of interest expense.
| | - |  | -----------------------------------

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
  is contained in Notes 25 and 26 to our consolidated financial statements.

Pursuant to Mexican GAAP, our
  consolidated financial statements recognize certain effects of inflation in
  accordance with Bulletins 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.2,298.4 million in 2003, Ps.2,624.4 million in 2002 and Ps.2,392.1 million
  in 2001. Net income as reconciled to U.S. GAAP was lower than net income as
  reported under Mexican GAAP by Ps.13.4 million in 2003, lower by Ps.36.4 million
  in 2002 and higher by Ps.66.2 million in 2001.

Shareholders equity under
  U.S. GAAP was Ps.22,048.9 million in 2003, Ps.9,294.4 million in 2002 and Ps.8,208.5
  million in 2001. Compared to Mexican GAAP, shareholders equity under U.S.
  GAAP was Ps.604.2 million lower in 2003, Ps.373.7 million lower in 2002 and
  Ps.45.3 million higher in 2001.



| | 62 | 
| | -- | 



---





Item 6. Directors, Senior Management and Employees

Directors

Management of our business is
  vested in our board of directors. Our bylaws provide that our 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; four directors and their respective
  alternate directors are elected by holders of the Series D Shares voting as
  a class; and three directors and their respective alternate 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.

In addition, holders of any series
  of our shares that do not vote in favor of the directors elected, either individually
  or acting together with other dissenting shareholders of any series, are entitled
  to elect one additional director and the corresponding alternate director for
  each 10% of our outstanding capital stock held by such individual or group.
  Any directors and alternate directors elected by dissenting shareholders will
  be in addition to those elected by the majority of the 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.

See Item 7. Major Shareholders
  and Related Party TransactionsRelated Party Transactions for information
  on relationships with certain directors and senior management.

As of March 15, 2004, our board
  of directors had the following members (including alternate directors):

|Series A Directors                      
|----------------------------------------
|José Antonio Fernández
      Carbajal(1)
|Director                                
|                                        
|                                        
|                                        



| | 63 | 
| | -- | 



---





|Series A Directors    
|----------------------
|                      
|                      
|                      
|                      
|Alfonso Garza Garza(2)
|Director              
|                      
|                      
|                      
|                      
|                      
|                      
|                      
|José Luis Cutrale     
|Director              
|                      
|                      
|                      



| | 64 | 
| | -- | 



---





|Series A Directors     
|-----------------------
|                       
|                       
|                       
|Carlos Salazar Lomelín 
|Director               
|                       
|                       
|                       
|                       
|                       
|                       
|                       
|Ricardo Guajardo Touché
|Director               
|                       
|                       
|                       



| | 65 | 
| | -- | 



---





|Series A Directors    
|----------------------
|                      
|                      
|                      
|                      
|Alfredo Martínez Urdal
|Director              
|                      
|                      
|                      
|                      
|                      
|                      
|                      
|Federico Reyes Garcia 
|Director              
|                      
|                      
|                      
|                      
|                      
|                      
|                      
|Eduardo Padilla Silva 



| | 66 | 
| | -- | 



---





|Series A Directors    
|----------------------
|Director              
|                      
|                      
|                      
|                      
|                      
|                      
|                      
|Armando Garza Sada(2) 
|Director              
|                      
|                      
|                      
|                      
|                      
|                      
|                      
|Daniel Servitje Montul
|Director              
|                      
|                      



| | 67 | 
| | -- | 



---





|Series A Directors
|------------------
|                  
|                  
|                  
|                  
|                  
|Enrique Senior    
|Director          
|                  
|                  
|                  
|                  
|                  
|                  

|Series D Directors
|------------------
|                  
|Gary Fayard       
|Director          
|                  
|                  
|                  
|                  
|                  
|                  
|                  
|Steven J. Heyer   
|Director          
|                  
|                  
|                  



| | 68 | 
| | -- | 



---





|Series D Directors                            
|----------------------------------------------
|                                              
|                                              
|                                              
|                                              
|Charles H. McTier                             
|Director                                      
|                                              
|                                              
|                                              
|                                              
|                                              
|                                              
|                                              
|Eva Garza Gonda de Fernández(3)
      Director
|First elected:                                
|Term expires:                                 
|Principal occupation:                         
|Other directorships:                          
|Business experience:                          
|Education:                                    
|Alternate director:                           
|                                              

|Series L Directors          
|----------------------------
|                            
|Alexis E. Rovzar de la Torre
|Director                    
|                            
|                            
|                            



| | 69 | 
| | -- | 



---





|Series L Directors          
|----------------------------
|                            
|                            
|                            
|                            
|                            
|José Manual Canal Hernando  
|Director                    
|                            
|                            
|                            
|                            
|                            
|                            
|Francisco Zambrano Rodríguez
|Director                    
|                            
|                            
|                            
|                            
|                            

|
|

|(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 of directors is Carlos Eduardo Aldrete Ancira and the Alternate
  Secretary of the board is David A. González Vessi.

Statutory Examiners

Under Mexican law, a statutory
  examiner must be elected by the shareholders at the annual ordinary shareholders
  meeting for a term of one year. We currently have two statutory examiners, one
  elected by the holders of Series A Shares and one by the holders of Series D
  Shares, and two alternate statutory examiners, one elected by the holders of
  Series A Shares and one by the holders of Series D Shares. Mexican law also
  requires that the statutory examiners receive periodic reports from our board
  of directors regarding material aspects of our affairs, including our financial
  condition. The primary role of the statutory examiners is to report to our shareholders
  at the annual ordinary shareholders meeting on the accuracy of the financial
  information presented to such statutory examiners by the board of directors.
  Our Series A statutory examiner is Ernesto González Dávila and our
  Series D statutory examiner is Fausto



| | 70 | 
| | -- | 



---





Sandoval Amaya. Our alternate Series A statutory examiner is
  Ernesto Cruz Velázquez de León and our alternate Series D statutory
  examiner is Humberto Ortíz Gutiérrez.

Executive Officers

As of March 15, 2004, the following
  are the principal executive officers of our company:

|Carlos Salazar Lomelín        | Born:                          | April 1951                                                                                                                                                                                                                                                                                                                                                                                       
|----------------------------- | ------------------------------ | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Chief Executive
      Officer | Joined:                        | 2000                                                                                                                                                                                                                                                                                                                                                                                             
|                              | Appointed to current position: | 2000                                                                                                                                                                                                                                                                                                                                                                                             
|                              |                                |                                                                                                                                                                                                                                                                                                                                                                                                  
|Ernesto Torres Arriaga        | Born:                          | July 1936                                                                                                                                                                                                                                                                                                                                                                                        
|Vice President                | Joined:                        | 1979                                                                                                                                                                                                                                                                                                                                                                                             
|                              | Appointed to current position: | 1995                                                                                                                                                                                                                                                                                                                                                                                             
|                              | Business experience with us:   | Production Manager of IEMSA.                                                                                                                                                                                                                                                                                                                                                                     
|                              | Other business experience:     | Director of Production for the State
      of Mexico. Extensive experience at various bottler plants in Mexico, where
      he held several positions in the production, technical and logistics areas,
      eventually becoming General Manager of Sales, Production and Administration.                                                                                                       
|                              | Education:                     | Holds a degree in Food Engineering
      from Kansas State University.                                                                                                                                                                                                                                                                                                                           
|                              |                                |                                                                                                                                                                                                                                                                                                                                                                                                  
|Héctor Treviño Gutiérrez      | Born:                          | August 1956                                                                                                                                                                                                                                                                                                                                                                                      
|Chief Financial
      and     | Joined:                        | 1993                                                                                                                                                                                                                                                                                                                                                                                             
|Administrative
      Officer  | Appointed to current position: | 1993                                                                                                                                                                                                                                                                                                                                                                                             
|                              | Business experience with us:   | Headed Corporate Development department.                                                                                                                                                                                                                                                                                                                                                         
|                              | Other business experience:     | At FEMSA, was in charge of International
      Financing, served as General Manager of Financial Planning and General Manager
      of Strategic Planning.                                                                                                                                                                                                                                       
|                              | Education:                     | Holds a degree in Chemical and Administrative
      Engineering from ITESM and an MBA from the Wharton School of Business.                                                                                                                                                                                                                                                                       
|                              |                                |                                                                                                                                                                                                                                                                                                                                                                                                  
|Rafael Suárez Olaguibel       | Born:                          | April 1960                                                                                                                                                                                                                                                                                                                                                                                       
|Commerical
      Planning     | Joined:                        | 1986                                                                                                                                                                                                                                                                                                                                                                                             
|and Strategic                 | Appointed to current position: | 2003                                                                                                                                                                                                                                                                                                                                                                                             
|Development
      Officer     | Business experience with us:   | Has held several director positions
      at KOF, including Chief Operating Officer in Mexico, Planning and Projects
      Director and Corporate Marketing Manager for the Valley of Mexico and Director
      of Marketing. He also served as Distribution and Marketing Director of FEMSAs
      soft drink division and as Chief Operating Officer of Coca-Cola FEMSA de
      Buenos Aires.



| | 71 | 
| | -- | 



---





|                                | Other business experience:     | Has worked in the Administrative,
      Distribution and Marketing departments of The Cola-Cola Export Company.                                                                                                                                           
|------------------------------- | ------------------------------ | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                | Education:                     | Holds a degree in Economics from
      ITESM.                                                                                                                                                                                                             
|                                |                                |                                                                                                                                                                                                                                                           
|Alejandro Duncan                | Born:                          | May 1957                                                                                                                                                                                                                                                  
|Technical Officer               | Joined:                        | 1995                                                                                                                                                                                                                                                      
|                                | Appointed to current position: | 2002                                                                                                                                                                                                                                                      
|                                | Business experience with us:   | Infrastructure Planning Director
      of Mexico.                                                                                                                                                                                                         
|                                | Other business experience:     | Has undertaken responsibilities in
      different production, logistics, engineering, project planning and manufacturing
      departments of FEMSA and was a Plant Manager in central Mexico, Manufacturing
      Director in Buenos Aires.             
|                                | Education:                     | Holds a degree in Mechanical Engineering
      from ITESM andan MBA from the Universidad de Monterrey.                                                                                                                                                    
|                                |                                |                                                                                                                                                                                                                                                           
|Eulalio Cerda Delgadillo        | Born:                          | July 1958                                                                                                                                                                                                                                                 
|Human Resources
      Officer   | Joined:                        | 1996                                                                                                                                                                                                                                                      
|                                | Appointed to current position: | 2001                                                                                                                                                                                                                                                      
|                                | Business experience with us:   | Manager, positions in several departments,
      including maintenance, projects, packaging and human resources.                                                                                                                                          
|                                | Other business experience:     | At Cervecería Cuauhtémoc,
      served as New Projects Executive and worked in several departments including
      Marketing, Maintenance, Packaging, Bottler, Human Resources, Technical Development
      and Projects.                                 
|                                | Education:                     | Holds a degree in Mechanical Engineering
      from ITESM.                                                                                                                                                                                                
|                                |                                |                                                                                                                                                                                                                                                           
|John Anthony Santa María Otazúa | Born:                          | August 1957                                                                                                                                                                                                                                               
|Chief Operating
      Officer - | Joined:                        | 1995                                                                                                                                                                                                                                                      
|Mexico                          | Appointed to current position: | 2003                                                                                                                                                                                                                                                      
|                                | Business experience with us:   | Has served as Strategic Planning
      and Business Development Officer and Chief Operating Officer of Mexican
      operations. He has experience in several areas of the company, namely development
      of new products and mergers and acquisitions.
|                                | Other business experience:     | Has experience with different bottler
      companies in Mexico in areas such as Strategic Planning and General Management.                                                                                                                               



| | 72 | 
| | -- | 



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|                                | Education:                     | Holds a degree in Business Administration
      and an MBA with a major in Finance from Southern Methodist University.                                                                                                                             
|------------------------------- | ------------------------------ | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                |                                |                                                                                                                                                                                                                                                    
|Ernesto Silva Almaguer          | Born:                          | March 1953                                                                                                                                                                                                                                         
|Chief Operating
      Officer - | Joined:                        | 1996                                                                                                                                                                                                                                               
|Mercosur                        | Appointed to current position: | 2003                                                                                                                                                                                                                                               
|                                | Business experience with us:   | Chief Operating Officer in Buenos
      Aires and New Business Development and Information Technology Director.                                                                                                                                    
|                                | Other business experience:     | Has worked as General Director of
      Famosa and Quimiproductos, served as Vice President of International Sales
      at FEMSA Empaques and Manager of FEMSAs Corporate Planning and held
      several positions at the Grupo Industrial ALFA.
|                                | Education:                     | Holds a degree in Mechanical and
      Administrative Engineering from Universidad Autónoma de Nuevo León
      and an MBA from the University of Texas at Austin.                                                                                 
|                                |                                |                                                                                                                                                                                                                                                    
|Hermilo Zuart Ruíz              | Born:                          | March 1949                                                                                                                                                                                                                                         
|Chief Operating
      Officer  | Joined:                        | 1992                                                                                                                                                                                                                                               
|Latin Centro                    | Appointed to current position: | 2003                                                                                                                                                                                                                                               
|                                | Business experience with us:   | Chief Operating Officer in the Valley
      of Mexico, Chief Operating Officer in the southeast of Mexico.                                                                                                                                         
|                                | Other business experience:     | Has undertaken several responsibilities
      in manufacturing, commercialization, planning and administrative areas of
      FEMSA: Franquicias Officer, mainly in charge of Mundet products.                                                     
|                                | Education:                     | Hold 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,
  2003, the aggregate compensation of all of our executive officers paid or accrued
  in that year for services in all capacities was approximately Ps.124.3 million,
  of which approximately Ps.54.8 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. See Stock
  Incentive Plan.

For each meeting attended, we
  paid Ps.30,000 to each director during 2002 and the first quarter of 2003, and
  Ps.35,000 beginning in the second quarter of 2003. Beginning in 2003 we paid
  the Audit Committee members Ps.120,000 per year, and each of the Finance and
  the Compensation Committees members Ps.14,000 per year. The aggregate compensation
  for directors during 2003 was Ps.3.2 million.

Our senior management and executive
  officers participate in our benefit plan on the same basis as our other employees.
  Members of our board of directors do not participate in our benefit plan. As
  of December 31, 2003, amounts



| | 73 | 
| | -- | 



---





set aside or accrued for all employees under these retirement
  plans were Ps.786.5 million, of which Ps.206.4 million is already funded.

Stock Incentive Plan

The bonus program for executive
  officers is based upon the accomplishment of certain critical factors, established
  annually by management. The bonus is paid in cash the following year based on
  the accomplishment of these goals.

From 1999 to 2003, we instituted
  a compensation plan for certain key executives, that consisted of granting them
  an annual bonus in FEMSA and Coca-Cola FEMSA stock or options, based on each
  executives responsibilities within the organization and his or her performance.
  Executives receiving bonuses had access to the assigned stocks or options in
  20% increments in each of the five years following the granting of the bonus,
  beginning one year after they were granted. The five-year program ended in 2003,
  the last year shares were assigned. We are in the process of designing a new
  plan that will be effective in 2004 and that we expect will have the same general
  terms as the prior plan.

EVA-Based Stock Incentive Plan

Beginning in 2004 we plan to commence
  a new three-year stock incentive plan for the benefit of our executive officers,
  which we refer to as the EVA Stock Incentive Plan. This new plan replaces the
  Stock Incentive Plan described above and is being developed using as the main
  metric for evaluation the Economic Value Added (or EVA) framework developed
  by Stern Stewart & Co., a compensation consulting firm. Under the proposed
  terms of the EVA Stock Incentive Plan, eligible executive officers will be entitled
  to receive a special cash bonus, which will be used to purchase a stock grant
  on the Mexican stock exchange.

Based on the current proposed
  structure for the plan, each year our Chief Executive Officer, in conjunction
  with our Evaluation and Compensation Committee, will determine the amount of
  the special cash bonus used to purchase the stock grant. This amount will be
  determined based on each executive officers level of responsibility and
  based on the EVA generated by us.

We intend for the stock grants
  to be administrated by certain trusts for the benefit of the selected executive
  officers in the same manner as in the previous Stock Incentive Plan. Under the
  proposed terms of the EVA Stock Incentive Plan, each time a special bonus is
  assigned to an executive officer, the executive officer will contribute the
  special bonus received to the administrative trust in exchange for a stock grant.
  Pursuant to the proposed plan, the administrative trust will acquire a specified
  proportion of BD Units of FEMSA and Series L Shares of Coca-Cola FEMSA in the
  open market using the special bonus contributed by each executive officer. The
  ownership of the BD Units of FEMSA and the Series L Shares of Coca-Cola FEMSA
  will vest upon the executive officer holding a stock grant each year over the
  next five years following the date of receipt of the stock grant, at a rate
  per year equivalent to 20% of the number of BD Units of FEMSA and Coca-Cola
  FEMSA Series L Shares, as applicable.



Share Ownership

As of March 15, 2004, several
  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 69.7% of the voting
  stock of FEMSA, which in turn owns 45.7% of our outstanding capital stock. As
  a result of the Technical Committees internal procedures, the Technical
  Committee procedures, the Technical Committee as a whole is deemed to have 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.
  These directors and alternate directors are 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.



| | 74 | 
| | -- | 



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Board Practices

Our bylaws state that the board
  of directors will meet at least four times a year, 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 agreements
  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. The Finance and Planning
      Committee works with the management to set annual and long-term strategic
      and financial plans of the company and monitors adherence to these plans.
      It is responsible for setting our optimal capital structure of the company
      and recommends the appropriate level of borrowing as well as the issuance
      of securities. Financial risk management is another responsibility of the
      Finance and Planning Committee. The members are Armando Garza Sada, Steven
      J. Heyer, Federico Reyes García, Ricardo Guajardo and Alfredo Martínez
      Urdal. The Secretary of the Finance and Planning Committee is Hector Treviño,
      our Chief Financial Officer.
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 2. | Audit Committee.The Audit Committee
      is responsible for reviewing the accuracy and integrity of the quarterly
      and annual financial statements as well as performance of the external and
      internal auditors. It works to develop the internal and external audit plan
      and reviews the auditors recommendations on internal controls. In
      addition, this Committee is responsible for the review of all significant
      unusual transactions, as well as transactions with related parties. Alexis
      Rovzar is the President of the Audit Committee. The additional members include:
      Charles H. McTier, José Manuel Canal and Francisco Zambrano, all of
      them independent directors (as defined under the Mexican Securities Market
      Law). The Secretary of the Audit Committee is José González, head
      of FEMSA ́s internal auditing area.
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 3. | Evaluation and Compensation Committee.
      The Evaluation and Compensation Committee, or Human Resources Committee,
      reviews and recommends the management compensation programs to ensure that
      they are aligned with shareholders interests and corporate performance.
      The Committee is also responsible for identifying suitable director and
      senior management candidates and setting their compensation levels. It also
      develops evaluation objectives for the Chief Executive Officer and assesses
      his performance and remuneration in relation to these objectives. The members
      of the Evaluation and Compensation Committee are Daniel Servitje, Gary Fayard
      and Ricardo González Sada. The Secretary of the Evaluation and Compensation
      Committee is Eulalio Cerda, head of Coca-Cola FEMSAs human resources
      department.
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 75 | 
| | -- | 



---



Employees

As of December 31, 2003, our headcount,
  including employees of third party distributors that work for us, was as follows:
  25,683 in Mexico, 5,402 in Central America, 8,466 in Colombia, 8,159 in Venezuela,
  6,217 in Brazil and 2,914 in Argentina. The table below sets forth headcount
  (excluding third parties) by category for the periods indicated:

|           | For the Year Ended
      December 31,
|---------- | -------------------------------------
|           | 2003(1)                              
|Executives | 337                                  
|Non-Union  | 15,032                               
|Union      | 24,342                               
|           |                                      
|Total      | 39,711                               
|           |                                      

|
|

|(1) |  | As
of December 31, 2003, we also employed 17,130 additional  workers on a temporary basis.
|--- |  | ------------------------------------------------------------------------------------------

As of December 31, 2003, we almost
  tripled the number of employees as compared to 2002, due to the acquisition
  of Panamco. Approximately 61% of our personnel, most of whom were employed in
  Mexico, were members of labor unions. We had 57 separate collective bargaining
  agreements with four labor unions represented at our Mexican operations and
  several agreements with different labor unions in the rest of the countries
  where we operate. In general, we have a good relationship with the labor unions
  throughout our operations, except for in Colombia and Venezuela, which are the
  subjects of significant labor-related litigation. See Item 8. Financial
  InformationConsolidated Statements and Other Financial InformationLegal
  Proceedings. We believe we have appropriate reserves for these litigations
  and do not currently expect them to have a material adverse effect.

Insurance Policies

We maintain insurance policies
  for all of our non-union 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.



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Item 7. Major Shareholders and Related Party Transactions

MAJOR SHAREHOLDERS

Our capital stock consists of three classes of securities: Series
  A Shares held by FEMSA, Series D Shares held by The Coca-Cola Company and Series
  L Shares, held by the public. The following table sets forth our major shareholders
  as of March 15, 2004:

|Owner                                            | Outstanding
      Capital Stock | % Ownership
      of
      Outstanding
      Capital Stock | % of
      Voting Rights
|------------------------------------------------ | ------------------------------- | ---------------------------------------------------------- | ------------------------
|FEMSA (Series A Shares)(1)                       | 844,078,519                     |                                                            | 45.7                    
|The Coca-Cola Company (Series
      D Shares)(2) | 731,545,678                     |                                                            | 39.6                    
|Public (Series L Shares)(3)                      | 270,750,000                     |                                                            | 14.7                    
|                                                 |                                 |                                                            |                         
|Total                                            | 1,846,374,197                   |                                                            | 100.0                   
|                                                 |                                 |                                                            |                         

|
|

|(1) |  | FEMSA
owns these shares through its wholly-owned subsidiary  Compañía Internacional
de Bebidas, S.A. de C.V., which we refer to in this annual  report as CIBSA, 69.7% of the
voting stock of FEMSA is owned by the Technical  Committee and Trust Participants under
Irrevocable Trust No. F/29487-6 established  at BBVA Bancomer Servicios, S.A., as
Trustee. 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. As of March 15,
2004, the  Trust Participants are: BBVA Bancomer Servicios, S.A., as Trustee under Trust
No. F/25078-7, Eugenio Garza Lagüera, Paulina Garza Gonda de  Marroquín, Bárbara
Garza Gonda, 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, Maria 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.,
BBVA Bancomer Servicios , 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, Franca Servicios,  S.A. de C.V. and BBVA Bancomer Servicios, S.A.,
as Trustee under Trust No. F/29490-0  (together all of them, the Trust Participants).
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) |  | The
Coca-Cola Company indirectly owns these shares through  its wholly-owned subsidiaries,
The Inmex Corporation, Dulux CBAI 2003 B.V. and  Dulux CBEXINMX 2003 B.V.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) |  | Holders
of Series L Shares are only entitled to vote  in limited circumstances. See Item
10. Additional InformationBylaws. Holders  of ADSs are entitled, subject to
certain exceptions, to instruct The Bank of  New York, a depositary, as to the exercise
of the limited voting rights pertaining  to the Series L Shares underlying by their ADSs.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

In addition, as of March 15, 2004,
  98,840,861 authorized but unissued Series L Shares are held in treasury.

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

Our Series
  A Shares, owned by FEMSA, are held in Mexico and our Series D Shares, owned
  by The Coca-Cola Company, are held outside of Mexico.

As of December
  31, 2003, there were 24,920,542 of our ADSs outstanding, each ADS representing
  ten Series L Shares. Approximately 92% of our outstanding Series L Shares were
  represented by ADSs. As of March 15, 2004, approximately 91% of our outstanding
  Series L Shares were represented by ADSs, held by approximately 260 holders
  (including The Depositary Trust Company) with registered addresses outside of
  Mexico.

The Shareholders Agreement

In connection
  with the initial subscription by a subsidiary of The Coca-Cola Company of our
  capital stock, FEMSA and The Coca-Cola Company agreed that we would be managed
  as a joint venture. Accordingly, in June of 1993, a subsidiary of FEMSA and
  a subsidiary of The Coca-Cola Company entered into a shareholders agreement,
  which, together with our bylaws, sets forth the basic rules under which we operate.
  This agreement has been



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subsequently amended to reflect changes in the subsidiaries
  through which FEMSA and The Coca-Cola Company hold their shares of our company.

The shareholders agreement contemplates
  that we will 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.

Under our bylaws, our Series A
  Shares and Series D Shares are the only shares with full voting rights and,
  therefore, control actions by our shareholders and board of directors. The holders
  of Series A Shares and Series D Shares 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. For
  actions by the board of directors, a supermajority including the directors appointed
  by the holders of Series D Shares is required for all actions. For shareholder
  actions, a majority of the shares represented at the shareholder meeting must
  vote in favor, whereas to amend the voting or quorum rights set out in the bylaws,
  a supermajority of at least 95% of those voting and not abstaining, must vote
  in favor.

The shareholders agreement sets
  forth the principal shareholders understanding as to the effect of adverse
  actions of The Coca-Cola Company under the bottler agreements. Our bylaws provide
  that a majority of the directors appointed by the holders of Series A Shares,
  upon making a reasonable, good faith determination that any action of The Coca-Cola
  Company under any bottler 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 of material changes in our business plans, the introduction of a new,
  or termination of an existing, line of business, and related party transactions
  outside the ordinary course of business, which would ordinarily require the
  presence and approval of at least 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 for one year after the 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 in the following paragraph.

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 the circumstances described above or (ii) the ownership of our
  shares of capital stock other than the Series L Shares of the subsidiaries of
  The Coca-Cola Company or FEMSA is reduced below 20% and upon the request of
  the 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 ownership of our shares of
  capital stock other than the Series L Shares of the subsidiaries of The Coca-Cola
  Company or FEMSA is reduced below 25% (but not below 20%) and upon the request
  of the 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.

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 expires upon either the elimination of



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the super-majority voting requirements described above or The
  Coca-Cola Companys election to terminate the agreement as a result of
  a default.

The Coca-Cola Memorandum

In connection with the acquisition
  of Panamco, we established certain understandings primarily relating to operational
  and business issues with both The Coca-Cola Company and FEMSA that were memorialized
  in writing prior to 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 up to May 2004. After
      such time, The Coca-Cola Company has 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 American territorial configuration for the Coca-Cola
      bottler 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.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | 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 a subsidiary
      of FEMSA, sufficient shares to permit FEMSA to beneficially own 51% of our
      outstanding capital stock (assuming that this subsidiary of FEMSA 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, FEMSA 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 (U.S.$22.16 per
      ADS) 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.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| |  |  | We entered into a stand-by credit facility, on
      December 19, 2003, with The Coca-Cola Export Corporation. Under this facility,
      we may borrow, subject to certain conditions, up to U.S.$250 million for
      working capital and other general corporate purposes at any time when such
      funding is not otherwise available until December 2006.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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RELATED PARTY TRANSACTIONS

FEMSA

We regularly engage in transactions
  with FEMSA and its subsidiaries. In 2003, 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, a wholly-owned subsidiary of FEMSA, under several
  supply agreements. A subsidiary of FEMSA Empaques also sells refrigerators to
  our non-Mexican operations. The aggregate amount of these purchases was Ps.1,513.0
  million in 2003. We believe that our purchasing practices with FEMSA Empaques
  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 under the name OXXO. 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., a wholly owned subsidiary
  of FEMSA which we refer to as FEMSA Servicios, 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. This agreement was made on terms that
  we believe to be commercially reasonable.

In November 2000, we entered into
  a service agreement with a subsidiary of FEMSA for the transportation of finished
  products from our production facilities to our distribution centers within Mexico.
  In 2003, we paid approximately Ps.410.3 millionpursuant to this agreement.
  See Item 4. Information on the CompanyThe CompanyProduct
  Distribution. This agreement was made on terms that we believe to be commercially
  reasonable.

In
  November 2001, we entered into two franchise bottler 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 in most of our operations in the southeast
  of Mexico. 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. The total payments
  made to Promotora de Marcas Nacionales were Ps.61.8 million.

FEMSA is also a party to the understandings
  we have with The Coca-Cola Company relating to specified operational and business
  issues that may affect us following completion of the Panamco acquisition. A
  summary of these understandings is set forth under Major ShareholdersThe
  Coca-Cola Memorandum.

The Coca-Cola Company

We regularly engage in transactions
  with The Coca-Cola Company and their affiliates. Our company and The Coca-Cola
  Company pay and reimburse each other for marketing expenditures under a cooperative
  marketing arrangement. In each of 2003 and 2002, The Coca-Cola Company contributed
  approximately 48% and 41%, respectively of our marketing budget, totaling approximately
  Ps.1,371.8 million and Ps.521.6 million, respectively. In addition, The Coca-Cola
  Company has made payments to us in connection with cold-drink equipment investment
  and other volume driving investment programs. In each of 2002 and 2001, The
  Coca-Cola Company also contributed to our refrigerator equipment investment
  program. 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.5,613.6 million and
  Ps.2,725.2 million in 2003 and 2002, respectively.

Coca-Cola FEMSA de Buenos Aires
  also purchases 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.



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In connection with the acquisition
  of Panamco, subsidiaries of The Coca-Cola Company 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, 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 Major
  ShareholdersThe Coca-Cola Memorandum.

Associated Companies

We regularly engage in transactions
  with companies in which we own an equity interest. In Mexico, we purchase cans
  from IEQSA, in which we hold an approximate 33.68% interest, which in turn purchases
  cans from FEMSA Empaques. During 2003, we paid Ps.253.3 million to IEQSA. We
  also purchase sugar from Beta San Miguel, a sugar-cane producer in which we
  hold a 2.54% equity interest to which we paid Ps.221.2 million in 2003. In 2003,
  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 which Coca-Cola FEMSA de Buenos
  Aires owns a 48.1% interest. During 2003, we paid Ps.28.2 million to CICAN.
  In Colombia, we purchase some pre-formed ingots from Tapón Corona, in which
  we have a 40% equity interest and to which we paid Ps.43.8 million in 2003.
  In Brazil, we distribute beers manufactured by Cervejarias Kaiser, a subsidiary
  of Molson, in which we own a 0.74% equity interest and to which we paid Ps.24.2
  million during 2003. We also buy a small quantity of raw materials from Distribuidora
  Plástica, S.A., Metalforma, S.A. and Vidrios Panameños, S.A. of which
  we own a 19.0%, 17.5% and 2.2% equity interest, respectively.

Other Related Party Transactions

José Antonio Fernández,
  Eva Garza de Fernández and Ricardo Guajardo Touché, who are directors
  of Coca-Cola FEMSA, are also members of the board of directors of ITESM, a 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, Enrique Senior, is a Managing Director of Allen & Company
  LLC and one of our alternate directors, Herbert Allen III, is the President
  of Allen & Company LLC. Allen & Company LLC provides investment banking
  services to us and our affiliates in the ordinary course of its business.

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, of which one of our
  directors, Ricardo Guajardo Touché is the chairman of the board of directors.
  Affiliates of Grupo Financiero BBVA Bancomer, purchased participations in the
  loans and certificados bursátiles incurred to finance the Panamco
  acquisition and acted as agent for the placement of the certificados bursátiles
  and periodically provide us with financing or financial advisory services in
  the ordinary course of their business. In each case, we believe the transactions
  were conducted on an arms length basis.



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Item 8. Financial Information

CONSOLIDATED STATEMENTS AND OTHER FINANCIAL
  INFORMATION


Consolidated Financial Statements

See Item 18. Financial Statements
  and pages F-1 through F-41.

Dividend Policy

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

Significant Changes

No significant changes have occurred
  since the date of the annual financial statements included in this annual report.

Legal Proceedings

We are party to various legal
  proceedings in the ordinary course of business. Other than as disclosed in this
  annual report, we are not currently involved in any litigation or arbitration
  proceeding, including any proceeding that is pending or threatened of which
  we are aware, which we believe will have, or has had, a material adverse effect
  on our company. Other legal proceedings that are pending against or involve
  us and our subsidiaries are incidental to the conduct of our and their business.
  We believe that the ultimate disposition of such other proceedings individually
  or on an aggregate basis will not have a material adverse effect on our consolidated
  financial condition or results of operations.

Mexico

Tax Matters. During 2002,
  we initiated an appeal related to the Impuesto Especial Sobre Productos y
  Servicios(Special Tax on Products and Services) or IEPS applicable to inventories
  produced with HFCS. Additionally, during 2003, we included in the appeal the
  IEPS applicable to carbonated soft drinks produced with non-sugar sweeteners.
  See Item 4. Information on the CompanyThe CompanyRegulationTaxation
  of Soft Drinks. On November 21, 2003, we obtained a favorable resolution
  for our 2002 claim and during 2004 expect to receive from the authorities the
  IEPS paid during 2002, including accrued interest. An appeal related to the
  IEPS paid in 2003 has also been initiated, and management and legal counsel
  believe that it is highly probable that it will obtain another favorable resolution.

Antitrust Matters. During
  May 2000, the Comisión Federal de Competencia in Mexico (the Mexican
  Antitrust Commission), pursuant to a complaint filed by PepsiCo and certain
  of its bottlers in Mexico, initiated an investigation of the sales practices
  of The Coca-Cola Company and its bottlers. In November 2000, in a preliminary
  decision and in February 2002, through a final resolution, the Mexican Antitrust
  Commission determined that The Coca-Cola Company and its bottlers engaged in
  monopolistic practices with respect to exclusivity arrangements with certain
  retailers. The Mexican Antitrust Commission did not impose any fines, but ordered
  The Coca-Cola Company and its bottlers, including certain Mexican subsidiaries
  of the company, to abstain from entering into any exclusivity arrangement with
  retailers. We, along with other Coca-Cola bottlers, appealed the resolution
  rendered in February 2002 by a Recurso de Revisión (Review Recourse),
  which was presented before the Mexican Antitrust Commission. The Mexican Antitrust
  Commission confirmed its original resolution and issued a confirmatory resolution
  in July 2002. We and our Mexican operating subsidiaries appealed this resolution
  before the competent courts by initiating several juicios de amparo (appeals
  based on the violation of constitutional rights) and obtained favorable decisions.
  Under these decisions, the resolution was declared null and void and the Mexican
  Antitrust Commission was ordered to issue a new resolution amending its determination
  that The Coca-Cola Company and its bottlers had engaged in monopolistic transactions.

In a different proceeding in 2003,
  we, The Coca-Cola Company and certain other Coca-Cola bottlers were requested
  by the Mexican Antitrust Commission to deliver certain proprietary information
  pursuant to a new



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investigation initiated by the Mexican Antitrust Commission.
  We obtained injunctions against the orders from the Mexican Antitrust Commission
  to deliver the requested information.

Central America

Antitrust Matters in Costa
  Rica and Panama. During August 2001, the Comisión para Promover
  la Competenciain Costa Rica (Costa Rican Antitrust Commission) pursuant
  to a complaint filed by PepsiCo and its bottler in Costa Rica initiated an investigation
  of the sales practices of The Coca-Cola Company and our Costa Rica subsidiary
  for alleged monopolistic practices in the retail distribution channel, including
  sales gained through exclusivity arrangements. Although no assurances can be
  given, we do not believe that the outcome of this matter, even if determined
  against the company, will have a material adverse effect on our financial condition
  or results of operations. Our Costa Rica subsidiary has vigorously defended
  itself throughout the process and is anticipating a decision from the Costa
  Rican Antitrust Commission at any time.

During 2002, Refrescos
  Nacionales, S.A., the Pepsi bottler in Panama, initiated a lawsuit against our
  Panamanian operating subsidiary, based on alleged monopolistic practices in
  the retail distribution channel through the implementation of exclusivity agreements,
  which allegedly have caused significant financial and sales losses to the plaintiff.
  We believe this lawsuit is without merit and intend to vigorously defend ourselves
  in this matter.

Colombia

Labor Matters. During July
  2001, a labor union and several individuals from the Republic of Colombia filed
  a lawsuit in the U.S. District Court for the Southern District of Florida against
  certain of our subsidiaries. In the complaint, the plaintiffs alleged that the
  subsidiaries of the company acquired in the Panamco acquisition engaged in wrongful
  acts against the labor union and its members in Colombia, including kidnapping,
  torture, death threats and intimidation. The complaint alleges claims under
  the U.S. Alien Tort Claims Act, Torture Victim Protection Act, Racketeer Influenced
  and Corrupt Organizations Act and state tort law and seeks injunctive and declaratory
  relief and damages of more than U.S.$500 million, including treble and punitive
  damages and the cost of the suit, including attorney fees. We filed a motion
  to dismiss the complaint for lack of subject matter and personal jurisdiction.
  We expect a ruling on the motion to dismiss at any time. We believe this lawsuit
  is without merit and intend to vigorously defend ourselves in this matter.

Venezuela

Tax Matters. In 1999, our
  Venezuelan subsidiary received notice of certain tax claims asserted by the
  Venezuelan taxing authorities. Our subsidiary has taken the appropriate recourses
  against these claims at the administrative level as well as at the court level.
  These claims currently total approximately U.S.$23 million. The company has
  certain rights to indemnification from Venbottling Holding, Inc., a former shareholder
  of Panamco and The Coca-Cola Company for a substantial portion of such claims.
  Based on the analysis that we have completed in relation to these claims, as
  well as the defense strategy that we have developed, we do not believe that
  the ultimate disposition of these cases will have a material adverse effect
  on our financial condition or results of operations.

Labor and Distribution Matters.
  Since 1999, a group of independent distributors of our Venezuela subsidiary
  commenced a proceeding to incorporate a union of distributors. As a result,
  these distributors may, among other things, individually demand certain labor
  and severance rights against our subsidiary. Since the incorporation process
  began, we have vigorously opposed its formation through all available legal
  channels. In February 2000, our subsidiary presented a nullity recourse against
  the union incorporation solicitation, as well as an injunction request before
  the Venezuelan Supreme Court. On September 20, 2001, the Venezuelan Supreme
  Court rendered its opinion confirming the incorporation of the union, but withheld
  granting any specific labor rights to the members of the union other than the
  right to be unionized. In order to obtain specific labor rights, the union,
  or its members, will have to request and obtain from a court of law a determination
  that the members of such union are considered workers pursuant to Venezuelan
  labor laws, and thereafter claim against our Venezuela subsidiary the payment
  of such benefits and rights including retroactive payments. To our knowledge,
  neither the union nor any of its individual members have initiated any process
  with the objective of obtaining such a court decision, although certain members
  of the union have threatened such action.



| | 84 | 
| | -- | 



---





Since 2001, (after two
  decisions rendered during 2000 and 2001 by the Venezuelan Supreme Court against
  affiliates of Empresas Polar, S. A., whereby the Supreme Court found in those
  individual cases that the relationship between the affiliates of Empresas Polar,
  S. A. and those specific distributors was a relationship of labor nature and
  not of commercial nature) our subsidiary has been the subject of numerous claims
  by former distributors (including former members of the distributors union)
  claiming alleged labor and severance rights owed to them at the time of the
  termination of their relationship with us. As of December 31, 2003, our subsidiary
  was the subject of several lawsuits filed by former distributors for a total
  amount of approximately U.S.$31 million. Notwithstanding the number of claims
  and the amounts involved most of these claims have been filed by former distributors
  that either have entered into release agreements with our subsidiary at the
  time of their termination, and therefore we believe have no rights for additional
  claims, or are claims that have been filed after the expiration of the statute
  of limitations. There are also lawsuits presented by people that have never
  had a distributor or employee relationship with us, which the company believes
  have no merit. Since the decisions rendered by the Supreme Court during 2000
  and 2001 against the affiliates of Empresas Polar, S. A., the Supreme Court
  has, during 2002 and 2003, revised its criteria for determining a labor relationship
  vis-à-vis a commercial relationship. The company believes based on the
  new decisions rendered by the Supreme Court, as well as based on the individual
  analysis of each individual claim, that these claims are without merit and intends
  to vigorously defend itself against them.



| | 85 | 
| | -- | 



---





Item 9. The Offer and Listing

TRADING MARKETS

Since 1993, our Series L Shares
  have traded on the Mexican Stock Exchange and in the form of ADSs on the New
  York Stock Exchange. The ADSs were issued pursuant to a deposit agreement with
  the Bank of New York as depositary, and each ADS represents ten Series L Shares.
  On December 31, 2003, approximately 92% 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
      Mexican pesos per L Share | New York Stock Exchange
      U.S. dollars per ADS
|-------------- | ------------------------------------------------------ | --------------------------------------------------
|1999:          | High                                                   | Low                                               
|Full year      | Ps. 20.30                                              |                                                   
|2000:          |                                                        |                                                   
|Full year      | Ps. 21.15                                              |                                                   
|2001:          |                                                        |                                                   
|Full year      | Ps. 23.15                                              |                                                   
|2002:          |                                                        |                                                   
|First quarter  | Ps. 25.06                                              |                                                   
|Second quarter | 27.60                                                  |                                                   
|Third quarter  | 23.80                                                  |                                                   
|Fourth quarter | 23.60                                                  |                                                   
|2003:          |                                                        |                                                   
|First quarter  | Ps. 20.90                                              |                                                   
|Second quarter | 24.25                                                  |                                                   
|Third quarter  | 24.50                                                  |                                                   
|Fourth quarter | 24.60                                                  |                                                   
|September      | 24.50                                                  |                                                   
|October        | 24.60                                                  |                                                   
|November       | 23.78                                                  |                                                   
|December       | 24.05                                                  |                                                   
|2004:          |                                                        |                                                   
|January        | Ps. 27.39                                              |                                                   
|February       | 27.49                                                  |                                                   
|March(1)       | 27.17                                                  |                                                   
|               |                                                        |                                                   

|
|

|(1) |  | From the period beginning March 1 until March
      15, 2004.
|--- |  | -------------------------------------------------------------



| | 86 | 
| | -- | 



---





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
      in U.S. Dollars
|-------------- | ----------------------------------------------------------------------------------
|               | High                                                                              
|1999:          |                                                                                   
|Full year      | $ 102.81                                                                          
|               |                                                                                   
|2000:          |                                                                                   
|Full year      | $ 106.33                                                                          
|               |                                                                                   
|2001:          |                                                                                   
|Full year      | $ 112.25                                                                          
|               |                                                                                   
|2002:          |                                                                                   
|First quarter  | $ 111.91                                                                          
|Second quarter | 111.73                                                                            
|Third quarter  | 112.13                                                                            
|Fourth quarter | 115.51                                                                            
|               |                                                                                   
|2003:          |                                                                                   
|First quarter  | $ 116.70                                                                          
|Second quarter | 113.07                                                                            
|Third quarter  | 114.71                                                                            
|Fourth quarter | 122.23                                                                            
|September      | 113.92                                                                            
|October        | 116.88                                                                            
|November       | 122.17                                                                            
|December       | 122.23                                                                            
|2004:          |                                                                                   
|January        | $ 121.08                                                                          
|February       | 121.78                                                                            
|March(1)       | 116.28                                                                            

|
|

|(1) |  | From the period beginning March 1 until March
      15, 2004.
|--- |  | -------------------------------------------------------------

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



| | 87 | 
| | -- | 



---





TRADING ON THE MEXICAN STOCK EXCHANGE

The Mexican Stock Exchange or
  the 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 that are exclusively
  authorized to trade on the Exchange. Trading on the Mexican Stock Exchange takes
  place principally through automated systems that 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 the Institución para el Depósito de Valores,
  S.A. de C.V., which we refer to as Indeval, a privately owned securities
  depositary that acts as a clearinghouse for Mexican Stock Exchange transactions.



| | 88 | 
| | -- | 



---





Item 10. Additional Information

BYLAWS

Set forth below is a brief summary
    of certain significant provisions of our bylaws 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 statutory examiners, see
    Item 6. Directors, Senior Management and Employees.

Organization and Register

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

Purposes

The purposes of our company include the following:

| |  |  | to
establish, promote and organize commercial  or civil companies of any type, as well as to
acquire and possess shares or  participations in them;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | to
carry out all types of active and passive  transactions involving bonds, shares,
participations and securities of any  type;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------

| |  |  | to
provide or receive advisory, consulting or  other types of services in business matters;
| | - |  | -------------------------------------------------------------------------------------------

| |  |  | 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;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | to
acquire and dispose of trademarks, commercial  names, copyrights, patents, inventions,
franchises, distributions, concessions  and processes;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | to
possess and operate real and personal property  necessary for our purposes;
| | - |  | ------------------------------------------------------------------------------

| |  |  | to
subscribe, buy and sell stocks, bonds and  securities among other things; and
| | - |  | --------------------------------------------------------------------------------

| |  |  | 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 the acts,  enter into the agreements and carry out other transactions as may
be necessary  or conducive to our business purpose.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Voting Rights; Transfer Restrictions

Series A Shares and Series D
    Shares have full voting rights but are subject to transfer restrictions. Although
    no Series B Shares have been issued, our bylaws provide for the issuance of
    Series B Shares with full voting rights that are freely transferable. Series
    L Shares are freely transferable but have limited voting rights. None of our
    shares are exchangeable for shares of a different series. The
    rights of all series of our capital stock are substantially identical except
    for:

| |  |  | restrictions
on transfer of the Series A and  Series D Shares;
| | - |  | --------------------------------------------------------------

| |  |  | limitations
on the voting rights of Series L  Shares;
| | - |  | -----------------------------------------------------



| | 89 | 
| | -- | 



---





| |  |  | the
respective rights of the Series A, Series  D, and Series L Shares, voting as separate
classes in a special meeting, to  elect specified numbers of our directors and alternate
directors (and the  inability of the Series B Shares to vote for directors); and
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | prohibitions
on non-Mexican ownership of Series  A Shares. 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 these series
    of shares, they may be entitled to elect one or more additional directors.
    See Item 6. Directors, Senior Management and Employees. In addition,
    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)
    is required for:

| |  |  | the
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);
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | 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
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | cancellation of the registration of our shares
        with the Registro Nacional de Valores (the National Registry of
        Securities or RNV) by the CNBV or with other foreign stock exchanges on
        which our shares may be listed.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The affirmative vote of 95% of our capital stock (including
    the Series L Shares) and the approval of the CNBV is required to amend the
    provisions of our bylaws that require our controlling shareholders, in the
    event of cancellation of the registration of any of our shares in the RNV,
    to make a public offer to acquire these shares. Holders of Series L Shares
    are not entitled to attend or to address meetings of shareholders at which
    they are not entitled to vote.

Under Mexican law, holders of shares of any series are also
    entitled to vote as a class on any action that would prejudice the rights
    of holders of shares of these 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 statutory 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.

In order to change any voting or quorum rights set out in
    the bylaws, the following is necessary: (i) a minimum quorum of holders of
    95% of all the issued, subscribed and paid shares of Capital Stock, the vote
    of holders of at least 95% of all the issued, subscribed and paid shares of
    Capital Stock voting (and not abstaining) in connection therewith, and (ii)
    the previous approval of the CNBV.

Shareholders Meetings

Shareholders meetings
    may be ordinary meetings or extraordinary meetings. Extraordinary meetings
    are those called to consider certain matters specified in Article 182 of the
    Mexican 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 preferred stock and debentures, and increases and reductions of
    the fixed portion of the capital. In addition, our bylaws require an extraordinary
    meeting to consider the cancellation of the registration of our shares with
    the RNVor with other foreign stock exchanges on which its shares may
    be listed. All other matters are considered at an ordinary meeting.



| | 90 | 
| | -- | 



---



Mexican law also provides for a special meeting of shareholders
    to allow holders of shares of a series to vote as a class on any action that
    would prejudice exclusively the rights of holders of such series.

An ordinary meeting of the holders of Series A and Series
    D 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 and to determine the allocation of the profits of the preceding
    year. Holders of the Series A, Series D and Series L Shares at their respective
    special meetings must appoint, remove or ratify directors and statutory examiners,
    as well as determine their compensation.

Resolutions adopted at a extraordinary or ordinary shareholders
    meeting, are valid when adopted by holders of at least a majority of the issued,
    subscribed capital stock voting (and not abstaining) at the meeting, while
    resolutions adopted at a special shareholders meetings will be valid when
    adopted by the holders of at least a majority of the issued, subscribed and
    paid shares of the series of shares entitled to attend the special meeting.

The quorum for special meetings of any series of shares is
    a majority of the holders of the issued, subscribed, capital stock of such
    shares, and action may be taken by holders of a majority of such shares. The
    quorum for ordinary and extraordinary meetings at which holders of Series
    L Shares are not entitled to vote is 76% of the holders of our Series A and
    Series D Shares, and the quorum for an extraordinary meeting at which holders
    of Series L Shares are entitled to vote is 82% of the issued, subscribed and
    paid capital stock.

The board of directors, our Mexican statutory 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 statutory 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 and Series D Shares may require the board of
    directors or the statutory 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 the meeting at least 48 hours in advance of the
    time set thereof or, in the case of Series L Shares held in book-entry form
    through Indeval, submit certificates evidencing a deposit of the shares with
    Indeval. If so entitled to attend the meeting, a shareholder may be represented
    by proxy. Our directors and statutory 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 mayjudicially
    oppose resolutions adopted at a shareholders meeting if the following
    conditions are met:

| |  |  | the
holders file a complaint with a Mexican court  within 15 days after the adjournment of
the meeting at which this action was  taken;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------

| |  |  | the
holders complaint details the provisions  of the Mexican law or our bylaws that are
violated and the reason for their  claim; and
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------

| |  |  | the
holders were represented at the meeting when  the action was taken or, if represented,
voted against it.
| | - |  | ------------------------------------------------------------------------------------------------------------

Transfer Restrictions

Our bylaws provide that no holder
    of Series A or Series D Shares may sell its shares unless it has disclosed
    the terms of the proposed sale and the name of the proposed buyer and has
    previously offered to sell the shares to the holders of the other 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 the shares
    within 90 days of the offer, the selling shareholder is free to sell the shares
    to the third party at the price and under the specified terms. In addition,
    our bylaws impose certain procedures in connection with the pledge of any
    Series A or Series D Shares to any financial institution that are designed,
    among other things, to ensure that the pledged shares will be offered to the
    holders of the other Series at market value prior to any foreclosure. Finally,
    a proposed transfer of Series A or Series D Shares other than a proposed sale
    or 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



| | 91 | 
| | -- | 



---



rights of first refusal to purchase the shares at market value.
    See Item 7. Major Shareholders and Related Party TransactionsMajor
    ShareholdersThe Shareholders Agreement.

Dividend Rights

At the annual ordinary meeting
    of holders of Series A and Series D 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 and Series D 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 the 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).
    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 are 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 the dividend or other distribution. No series of shares is entitled to
    a preferred dividend. Shares that are only partially paid participate in a
    dividend or other distributions in the same proportion that the shares have
    been paid at the time of the dividend or other distributions. Treasury shares
    are not entitled to dividends or other distributions. After ten years, dividend
    entitlement lapses in favor of the company.

Liquidation

Upon our liquidation, a liquidator may be appointed to wind
    up our 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 that are only partially paid participate in any 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
    of the series to be issued 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 Federaciónand 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 the preemptive rights. See Risk FactorsRisks
    Related to the Series L Shares and the ADSsfor a description
    of the circumstances under which holders of ADSs may not be entitled to exercise
    preemptive rights.

Foreign Investment Legislation; Related Bylaw Provisions

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



| | 92 | 
| | -- | 



---



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.

Under our bylaws, in the event Series A Shares are subscribed
    or acquired by any other shareholders holding shares of any other series,
    and the shareholder has a nationality other than Mexican, these Series A Shares
    are automatically converted into shares of the same series of stock that this
    shareholder owns, and this conversion will be considered perfected at the
    same time as the subscription or acquisition,provided however that
    Series A Shares may never represent less than 51% of the outstanding capital
    stock.

Other Provisions

Redemption. Our fully paid shares are subject
    to redemption in connection with either (i) a reduction of capital stock
    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. According to our bylaws,
    any change in our authorized capital stock requires a resolution of an extraordinary
    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. The fixed portion of
    our capital stock may only be increased or decreased by amendment of our bylaws
    upon resolution of an extraordinary meeting of the shareholders. The variable
    portion of our capital stock may be increased or decreased by resolution of
    an ordinary meeting of the shareholders without amending the bylaws. 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:

| |  |  | 95%
of the average market value of the 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
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | the
book value of the shares at the end of the  fiscal year in which the exercise of the
option is effective.
| | - |  | -------------------------------------------------------------------------------------------------------------

If this 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 ordinary meeting at which the relevant annual financial statements are
    approved.

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:

| |  |  | 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
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | 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 the 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 its 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



| | 93 | 
| | -- | 



---



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 governmental protection in violation
    of this agreement, its shares could be forfeited to the Mexican government.
    Mexican law requires that this provision be included in the bylaws of all
    Mexican corporations unless the bylaws prohibit ownership of shares by non-Mexican
    persons.

Duration. Our existence under the bylaws continues
    until 2090 unless extended through a resolution of an extraordinary shareholders
    meeting.

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 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 that shareholder; we must
    sell any shares so acquired within three months, otherwise our capital stock
    will be reduced and the 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 that 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 or director
    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 the shareholders or directors vote.

Actions Against Directors. Action for civil
    liabilities against directors may be initiated by resolution passed at an
    ordinary shareholders meeting. In the event the shareholders decide
    to bring the action, the directors against whom the action is 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 an action against directors, provided that (i) the
    shareholders did not concur in the decision at the 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 the shareholders. Any recovery of damages with respect to the action will
    be for our benefit and not for the shareholders bringing action.

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. In this case, the shareholder
    would be entitled to the reimbursement of its shares, in proportion to the
    companys assets in accordance with the last approved balance sheet.
    Because holders of Series L Shares are not entitled to vote on certain types
    of these changes, these 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 United States company.



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In addition, under the United States federal securities laws,
    as a foreign private issuer, we are exempt from certain rules that apply to
    domestic United States. issuers with equity securities registered under the
    United States. 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 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 United States courts,
    or to enforce in United States courts judgments obtained against them in courts
    in jurisdictions outside the United States, in any action based on civil liabilities
    under the United States federal securities laws. There is doubt as to the
    enforceability against these persons in Mexico, whether in original actions
    or in actions to enforce judgments of United States courts, of liabilities
    based solely on the United States federal securities laws.



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MATERIAL AGREEMENTS

We manufacture, package, distribute and sell soft drink beverages
    and bottled water under bottler agreements with The Coca-Cola Company. 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.
    For a discussion of the terms of these agreements, see Item 4. Information
    on the CompanyBottler Agreements.

We are managed as a joint venture between 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.

We purchase the 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 for our original
    operations in Mexico. Under this agreement, we rent plant space to ALPLA,
    where it produces PET bottles and ingots to certain specifications and quantities
    for our use.

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

See Item 7. Major Shareholders
    and Related Party TransactionsRelated Party Transactions for a
    discussion of other transactions and agreements with our affiliates and associated
    companies.



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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 Mexican 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.



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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 our 8.95% Notes due November 1, 2006, which we refer to
    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, which we refer to 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, which we refer
    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 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, or if he or she has another home outside
    Mexico but his or her center of vital interest (as defined in
    the Mexican Tax Code) is located in Mexico. It is considered that the center
    of vital interests of an individual is situated in Mexico, among other
    cases, when more than 50% of that persons total income during a calendar
    year originates from within Mexico. 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 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 of our voting stock or corporations
    more than twenty percent of the stock of which is owned, directly or indirectly,
    individually or collectively, by related persons of our company), directly
    or indirectly, is the effective beneficiary of five percent or more of the
    aggregate amount of each such interest payment.



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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, which we refer to 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 situated in countries that have a tax treaty with
    Mexico 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 calculated
    pursuant to the Mexican Income Tax Law provisions. In both cases, the financial
    institutions involved in the transfers must withhold the tax.



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Other Mexican Taxes

There are no Mexican inheritance, gift, succession or value
    added taxes applicable to the ownership, transfer, exchange or disposition
    of 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 advisers 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,
    which we refer to as a Non-U.S. holder, generally will not be subject to U.S.
    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.

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 Mexican pesos, will be includible in the income of a U.S. holder
    in a U.S. dollar amount calculated, in general, by



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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 Mexican 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 advisers regarding the availability of the reduced dividends
    tax rate in light of their own particular circumstances. U.S. holders should
    consult their tax advisers regarding the treatment of the foreign currency
    gain or loss, if any, on any Mexican 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 advisers
    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.

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.



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DOCUMENTS ON DISPLAY

We file reports, including annual
    reports on Form 20-F, and other information with the SEC 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. 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.



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Item 11. Quantitative and Qualitative Disclosures about
    Market Risk

Our business activities require the holding or issuing of
    financial instruments that expose us to market risks related to changes in
    interest rates, foreign currency exchange rates, equity risk and commodity
    price risk.

Interest Rate Risk

Interest rate risk exists principally with respect to our
    indebtedness that bears interest at floating rates. At December 31, 2003,
    we had outstanding indebtedness of Ps.27,256.8 million, of which 35.7% bore
    interest at fixed interest rates and 64.3% bore interest at variable interest
    rates. Swap contracts held by us effectively switch a portion of our variable-rate
    indebtedness into fixed-rate indebtedness. After giving effect to these contracts,
    as of December 31, 2003 69.8% of our debt was fixed-rate and 30.2% of our
    debt was variable-rate. 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, the CETE, U.S. treasury bonds and TIIE. If these
    reference rates increase, our interest payments would consequently increase.

The table below provides information about our financial instruments
    that are sensitive to changes in interest rates, including the effect of our
    interest rate swaps on our debt obligations. The table presents notional amounts
    and weighted average interest rates by expected contractual maturity dates.
    Notional amounts are used to calculate the contractual payments to be exchanged
    under the contract. Weighted average variable rates are based on the reference
    rates on December 31, 2003, plus spreads, contracted by us. The instruments
    actual payments are denominated in U.S. dollars, Mexican pesos and Colombian
    pesos. All of the payments in the table are presented in Mexican pesos, our
    reporting currency, utilizing the December 31, 2003 exchange rate of Ps.11.235
    Mexican pesos per U.S. dollar.

The table below also includes
    the fair value of long-term debt based on the discounted value of contractual
    cash flows. The discount rate is estimated using rates currently offered for
    debt with similar terms and remaining maturities. Furthermore, the fair value
    of long-term notes payable is based on quoted market prices, and the fair
    value of the interest rate swaps is estimated based on quoted market prices
    to terminate the contracts on December 31, 2003. As of December 31, 2003,
    the fair value represents a loss amount of Ps.712 million.



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Principal by Year of Maturity
    At December 31, 2003
    (millions of constant Mexican pesos)

|                                     | At December 31, 2003 |     | At December 31, 2002
|------------------------------------ | -------------------- | --- | --------------------
|                                     | 2004                 |     | 2005                
|Fixed Rate Debt                      |                      |     |                     
|U.S.
        dollars                 | 1,124                |     |                     
|Interest
        rate(1)             | 9                    | .4% |                     
|Pesos                                |                     |     |                     
|Interest
        rate(1)             |                     |     |                     
|                                     |                      |     |                     
|Variable Rate Debt                   |                      |     |                     
|U.S.
        dollars                 | 122                  |     |                     
|Interest rate(1)                     | 2                    | .7% |                     
|Pesos                                | 905                  |     |                     
|Interest
        rate(1)             | 6.3                  | %   |                     
|Colombian
        
            pesos |                     |     |                     
|Interest
        rate(1)             |                     |     |                     

|
|

|(1) |  | Calculated by a weighted average rate.
|--- |  | --------------------------------------

In the
    table above we are including the effects of all of our interest swaps agreements,
    each of which is a contract that swaps a variable interest rate for a fixed
    interest rate. As of December 31, 2003, we have the following outstanding
    agreements:



|Maturity
          Date | Notional
          Amount(1) | Pay
          Rate | Fair
        Value(1)
|----------------------- | ---------------------------- | ------------------ | ---------------------
|                       
|2006                    |                              | Ps.                | 3,219                
|2008                    |                              |                    | 6,092                
|                        |                              |                    |                      

|
|

|(1) |  | In millions of Mexican pesos.
|--- |  | -----------------------------

A hypothetical, instantaneous and unfavorable change of 100
    basis points in the average interest rate applicable to floating-rate liabilities
    held at December 31, 2003 would increase our interest expense by approximately
    Ps.82 million, or 16.0% over a 12-month period of 2004, assuming no additional
    debt is incurred during such period, in each case after giving effect to all
    of our interest swap agreements.

Foreign Currency Exchange Rate Risk

Our principal exchange rate
    risk involves changes in the value of the local currencies, of each country
    in which we operate, relative to the U.S. dollar. In 2003, the percentage
    of our consolidated total revenues was denominated as follows:

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Total Revenues by Currency

At December 31, 2003

Currency
          /Country
        %Mexican peso (Mexico)
        66.6Quetzal (Guatemala)
        1.4Cordoba (Nicaragua)
        1.3Colon (Costa Rica)
        2.2U.S. dollar (Panama)
        1.3Colombian peso (Colombia)
        6.5Bolivar (Venezuela)
        7.1Real (Brazil)
        7.8Argentine peso (Argentina)
        5.8




We estimate that a majority
    of our consolidated costs and expenses are denominated in Mexican pesos for
    Mexican subsidiaries and in the aforementioned currencies for the foreign
    subsidiaries that are part of Coca-Cola FEMSA. Substantially all of our costs
    and expenses denominated in a foreign currency, other than the functional
    currency of each country in which we operate, are denominated in U.S. dollars.
    As of December 31, 2003, 45.9% of our indebtedness was denominated in U.S.
    dollars, 51.9% in Mexican pesos and the remaining 2.2% in Colombian pesos.
    Decreases in the value of the different currencies relative to the U.S. dollar
    will increase the cost 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 Mexican peso relative
    to the U.S. dollar will also result in foreign exchange losses as the Mexican
    peso value of our foreign currency denominated indebtedness is increased.

Our exposure to market risk associated with changes in foreign
    currency exchange rates relates primarily to U.S. dollar-denominated debt
    obligations as shown in the interest risk table above. We occasionally utilize
    currency forward contracts to hedge our exposure to the U.S. dollar relative
    to the Mexican peso and other currencies.

As of December 31, 2003 and
    2002, we did not have any forward agreements to hedge our operations denominated
    in U.S. dollars, and we did not have any call option agreements to buy U.S.
    dollars.

The fair value of the foreign
    currency forward contracts is estimated based on quoted market prices of each
    agreement at year-end assuming the same maturity dates originally contracted.
    The fair value of the call option agreements is estimated based on quoted
    market prices of the cost of such agreements, considering the same amounts,
    exchange rates and maturity dates originally contracted.

A hypothetical, instantaneous and unfavorable 10% devaluation
    in the value of the Mexican peso relative to the U.S. dollar occurring on
    December 31, 2003, would have resulted in an increase in our net consolidated
    integral result of financing expense of approximately Ps.1,239 million over
    a 12-month period of 2004, reflecting higher interest expense and foreign
    exchange gain generated by the cash balances held in U.S. dollars as of that
    date, net of the loss based on our U.S. dollar-denominated indebtedness at
    December 31, 2003. 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 Mexican peso relative
    to the U.S. dollar, which gain on monetary position would reduce the consolidated
    net integral result of financing.

As of March 15, 2004, the exchange
    rates relative to the U.S. dollar of all the countries in which we operate
    have had revaluation or devaluation movements as follows:

| | 105 | 
| | --- | 



---







Exchange
            RateMarch 15, 2004
        
        (Devaluation)
            or 
            RevaluationMexico
        
        10.95
        
        
        
        2.5%Guatemala
        
        8.10
        
        
        
        (0.9)%Nicaragua
        
        15.71
        
        
        
        (1.0)%Costa Rica
        
        422.47
        
        
        
        (0.8)%Panama
        
        1.00
        
        
        
        Colombia
        
        2,654.10
        
        
        
        4.5%Venezuela
        
        1,920.00
        
        
        
        (3.6)%Brazil
        
        2.91
        
        
        
        (0.7)%Argentina
        
        2.91
        
        
        
        0.9%




A hypothetical, instantaneous
    and unfavorable 10% devaluation in the value of the currencies, of all the
    countries in which we operate, on an individual basis, relative to the U.S.
    dollar occurring on December 31, 2003, would produce a reduction in stockholders
    equity of approximately the following amounts:

Reduction
          in Stockholders equity 
          (millions of Mexican pesos)Mexico
        Ps.
        2,115Guatemala
        
        17Nicaragua
        
        60Costa Rica
        
        188Panama
        
        85Colombia
        
        457Venezuela
        
        94Brazil
        
        223Argentina
        
        70




Equity Risk

During
    2002, one of our subsidiaries entered into an equity forward purchase contract,
    expiring in June 2004, on 92% of the Molson shares received from the sale
    of Cervejarias Kaiser, with a notional amount of approximately Ps.203.4 million.
    The fair value of the equity forward purchase contract of Ps.73.8 million
    is the loss resulting from the difference between the strike price of the
    forward contract and the market value of the shares.

Commodity Price Risk

We entered into various derivative contracts to hedge the
    cost of certain raw materials. The result of the commodity price contracts
    was a gain of Ps.3 million as of December 31, 2003, which where recorded in
    the results of operations of the year. The fair value is estimated based on
    the quoted market prices to terminate the contracts at the reporting date.
    As of December 31, 2003, we had various derivate instruments contracts with
    maturity dates in 2004 and 2005, notional amounts of Ps.59 million and the
    fair value of Ps.3 million.

| | 106 | 
| | --- | 



---







The outstanding agreements and
    their terms are as follows:

Year Ended December 31, 2003
(thousands of Mexican pesos)

|                      |  |                        |  |                         |  |                    |  |                
|--------------------- |  | ---------------------- |  | ----------------------- |  | ------------------ |  | ---------------
|Maturity
        Date |  | Agreement
        Type |  | Notional
        Amount |  | Fair
        Value |  | Tonnage        
|                      |  |                        |  |                         |  |                    |  |                
|2004                  |  | Swaptions              |  | Ps.37,120               |  | Ps.(19)            |  | Tons.     2,360
|2004                  |  | Swaps                  |  | 21,687                  |  | 2,783              |  | 1,370          
|                      |  |                        |  |                         |  |                    |  |                

The fair value is estimated based on quoted market prices
    to terminate the agreements at December 31, 2003.



| | 107 | 
| | --- | 



---



Items 12-14. Not Applicable

Item 15. Controls and Procedures

(a) As of December 31, 2003, we carried out an evaluation
    under the supervision and with the participation of our management, including
    our Chief Executive Officer and Chief Financial Officer, of the effectiveness
    of the design and operation of our disclosure controls and procedures. There
    are inherent limitations to the effectiveness of any system of disclosure
    controls and procedures, including the possibility of human error and the
    circumvention or overriding of the controls and procedures. Accordingly, even
    effective disclosure controls and procedures can only provide reasonable assurance
    of achieving their control objectives. Based upon and as of the date of our
    evaluation, our 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 we file
    and submit under the Securities Exchange Act of 1934, as amended, is recorded,
    processed, summarized and reported as and when required.

(b) There has been no change in our internal control over
    financial reporting during 2003 that has materially affected, or is reasonably
    likely to materially affect, our internal control over financial reporting.

Item 16A. Audit Committee Financial Expert

At our annual ordinary shareholders meeting in March
    2004, our shareholders elected the following four members of the Audit Committee:
    Alexis Rovzar, Charles H. McTier, José Manuel Canal and Francisco Zambrano
    and designated Mr. José Manuel Canal as an audit committee financial
    expert within the meaning of this Item 16A. Although under Mexican law
    the determination of the shareholders is binding on our company, our board
    of directors will confirm this designation at its next board meeting.

Item 16B. Code of Ethics

We have
    adopted a code of ethics, as defined in Item 16B of Form 20-F under the Securities
    Exchange Act of 1934, as amended. Our code of ethics applies to our Chief
    Executive Officer, Chief Financial Officer and persons performing similar
    functions as well as to our directors and other officers and employees. Our
    code of ethics is available on our web site at www.cocacola-femsa.com.mx/code
    of ethics. If we amend the provisions of our code of ethics that apply
    to our Chief Executive Officer, Chief Financial Officer and persons performing
    similar functions, or if we grant any waiver of such provisions, we will disclose
    such amendment or waiver on our web site at the same address

Item 16C. Principal Accountant Fees and Services

Audit and Non-Audit Fees

The following table summarizes the aggregate fees billed to
    us by Galaz, Yamazaki, Ruiz Urquiza, S.C., a member firm of Deloitte Touche
    Tohmatsu, and its affiliates including Deloitte Consulting, which we collectively
    refer to as Deloitte & Touche, during the fiscal years ended December
    31, 2002 and 2003:

|                   | Year ended December 31,    
|------------------ | ---------------------------
|                   |                            
|                   | 2003                       
|                   |                            
|                   | (millions of Mexican pesos)
|                   |                            
|Audit fees         | Ps.                        
|Audit-related fees |                            
|Tax fees           |                            
|Other fees         |                            
|                   |                            
|Total fees         | Ps.                        



| | 108 | 
| | --- | 



---



Audit
    fees.Audit fees in the above table are the
    aggregate fees billed by Deloitte & Touche in connection with the audit
    of our annual financial statements, the review of our quarterly financial
    statements, and statutory and regulatory audits. Additionally, in 2003, the
    audit fees included the opening balance sheet audit fees associated with the
    Panamco acquisition.

Audit-related
    Fees.Audit-related fees in the above table for the year ended December
    31, 2003 are the aggregate fees billed by Deloitte & Touche for financial
    accounting and reporting consultations.

Audit-related
    fees in the above table for the year ended December 31, 2002 are the aggregate
    fees billed by Deloitte & Touche for due diligence associated with acquisitions
    (predominately the Panamco acquisition), financial accounting and reporting
    consultations.

Tax
    Fees.Tax fees in the above table are fees billed by Deloitte & Touche
    for services based upon existing facts and prior transactions in order to
    document, compute, and obtain government approval for amounts included in
    tax filings such as value-added tax return assistance, transfer pricing documentation
    and requests for technical advice from taxing authorities.

Other
    Fees.Other fees in the above table are fees billed by Deloitte and Touche
    for non-audit services rendered by Deloitte Consulting. As a percentage of
    total fees billed to Coca-Cola FEMSA, other fees represent 3.3% and 5.7% for
    2003 and 2002, respectively.

Audit Committee Pre-Approval Policies and Procedures

We have adopted pre-approval policies and procedures under
    which all audit and non-audit services provided by our external auditors must
    be pre-approved by the audit committee as set forth in the audit committees
    charter. Any service proposals submitted by external auditors need to be discussed
    and approved by the audit committee during its meetings, which take place
    at least four times a year. Once the proposed service is approved, we or our
    subsidiaries formalize the engagement of services. The approval of any audit
    and non-audit services to be provided by our external auditors is specified
    in the minutes of our audit committee. In addition, the members of our board
    of directors are briefed on matters discussed by the different committees
    of our board.



| | 109 | 
| | --- | 



---



Item 16D. Not Applicable

Item 16E. Not Applicable



| | 110 | 
| | --- | 



---



Item 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                                                                                      | F-1 
|                                                                                                                                        |     
|Consolidated Balance Sheets at
          December 31, 2003 and 2002                                                                     | F-2 
|                                                                                                                                        |     
|Consolidated Income Statements
          For the Years Ended
             December 31, 2003, 2002 and 2001                              | F-4 
|                                                                                                                                        |     
|Consolidated Statements of Changes
          in Financial Position For 
             the Years Ended December 31, 2003, 2002 and 2001   | F-5 
|                                                                                                                                        |     
|Consolidated Statements of Changes
          in Stockholders Equity 
             For the Years Ended December 31, 2003, 2002 and 2001 | F-6 
|                                                                                                                                        |     
|Notes to the Consolidated Financial
          Statements*                                                                               | F-8 
|                                                                                                                                        |     

|
|

|* |  | All
supplementary schedules relating to the registrant are  omitted because they are not
required or because the required information,  where material, is contained in the
Financial Statements or Notes thereto.
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

(b)     
    List of Exhibits

|Exhibit
        No: | Description                                                                                                                                                                                                                                                                                                                                              
|------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                    |                                                                                                                                                                                                                                                                                                                                                          
|Exhibit
        1.1 | Amended
        and Restated Bylaws (Estatutos Sociales) of Coca-Cola FEMSA, dated
        May 6, 2003 (with English translation) (incorporated by reference to Exhibit
        1.3 to Coca-Cola FEMSAs Annual Report on Form 20-F on June 27, 2003
        (File No. 1-12260)).                                                                        
|                    |                                                                                                                                                                                                                                                                                                                                                          
|Exhibit
        2.1 | Deposit
        Agreement, dated as of September 1, 1993, among Coca-Cola FEMSA, the Bank
        of New York, as Depositary, and Holders and Beneficial Owners of American
        Depository Receipts (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, dated as of October 28, 1996, between Coca-Cola FEMSA and Citibank,
        N.A., as Trustee (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, dated as of August 26, 1994, between Coca-Cola FEMSA
        and the holders specified therein (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 betweenCorporación
        Interamericana de Bebidas, S.A. de C.V.and The Chase
        Manhattan Bank, as Trustee (incorporated by reference to Exhibit 4.1 of                                                                                                                                           



| | 111 | 
| | --- | 



---





|Exhibit
        No: | Description                                                                                                                                                                                                                                                                                                                                                                                                                                    
|------------------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                
|                    | Panamcos
        Registration Statement on Form F-4, (File No. 333-7918)).                                                                                                                                                                                                                                                                                                                                                                    
|                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                
|Exhibit
        2.5 | First Supplemental
        Indenture, dated October 15, 2003, betweenCorporación
        Interamericana de Bebidas, S.A. de C.V., as Issuer, Coca-Cola FEMSA, as
        Guarantor, and JPMorgan Chase Bank, as Trustee.                                                                                                                                                                                                                       
|                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                
|Exhibit
        2.6 | Second Supplemental
        Indenture, dated November 19, 2003, betweenCorporación
        Interamericana de Bebidas, S.A. de C.V., as Issuer, Coca-Cola FEMSA, as
        Guarantor, and JPMorgan Chase Bank, as Trustee.                                                                                                                                                                                                                     
|                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                
|Exhibit
        2.7 | 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. (incorporated by reference to Exhibit 2.6 to Coca-Cola
        FEMSAs Annual Report on Form 20-F filed on June 27, 2003 (File No.
        1-12260)).
|                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                
|Exhibit
        4.1 | Amended
        and Restated Shareholders Agreement dated as of July 6, 2002, by and among
        CIBSA, Emprex, The Coca-Cola Company and Inmex, (incorporated by reference
        to Exhibit 4.13 to Coca-Cola FEMSAs Annual Report on Form 20-F filed
        on June 27, 2003 (File No. 1-12260)).                                                                                                                                      
|                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                
|Exhibit
        4.2 | 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.
        (incorporated by reference to Exhibit 4.14 to Coca-Cola FEMSAs Annual
        Report on Form 20-F filed on June 27, 2003 (File No. 1-12260)).                                 
|                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                
|Exhibit
        4.3 | Amended
        and Restated Bottler Agreement, dated June 21, 2003, between Coca-Cola
        FEMSA and The Coca-Cola Company with respect to operations in the valley
        of Mexico.                                                                                                                                                                                                                                                     
|                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                
|Exhibit
        4.4 | Supplemental
        Agreement, dated June 21, 1993, between Coca-Cola FEMSA and The Coca-Cola
        Company with respect to operations in the valley of Mexico (with English
        translation) (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
        4.5 | Amended
        and Restated Bottler Agreement, dated June 21, 2003, between Coca-Cola
        FEMSA and The Coca-Cola Company with respect to operations in the southeast
        of Mexico.                                                                                                                                                                                                                                                  
|                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                
|Exhibit
        4.6 | Supplemental
        Agreement, dated June 21, 1993, between Coca-Cola FEMSA and The Coca-Cola
        Company with respect to operations in the southeast of Mexico (with English
        translation) (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
        4.7 | Bottler
        Agreement, dated July 1, 1999, between Panamco Golfo, S.A. de C.V. and
        The Coca-Cola Company with respect to operations in Golfo, Mexico (English
        translation) (incorporated by reference to Exhibit 4.32 to Coca-Cola FEMSAs
        Annual Report on Form 20-F filed on June 27, 2003 (File No. 1-12260)).                                                                                                  
|                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                
|Exhibit
        4.8 | Bottler
        Agreement, dated July 1, 1999, between Panamco Bajio, S.A. de C.V. and
        The Coca-Cola Company with respect to operations in Bajio, Mexico (English
        translation) (incorporated by                                                                                                                                                                                                                                



| | 112 | 
| | --- | 



---





|Exhibit
        No:  | Description                                                                                                                                                                                                                                                                                                                                                                                                
|-------------------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                     |                                                                                                                                                                                                                                                                                                                                                                                                            
|                     | reference
        to Exhibit 4.33 to Coca-Cola FEMSAs Annual Report on Form 20-F filed
        on June 27, 2003 (File No. 1-12260)).                                                                                                                                                                                                                                                                      
|                     |                                                                                                                                                                                                                                                                                                                                                                                                            
|Exhibit
        4.9  | Bottler Agreement and Letter Agreement,
        both dated March 18, 2000, between The Coca-Cola Company and Embotelladora
        Central, S.A with respect to operations in Guatemala (English translation).                                                                                                                                                                                             
|                     |                                                                                                                                                                                                                                                                                                                                                                                                            
|Exhibit
        4.10 | Bottler Agreement and Letter Agreement,
        both dated May 13, 2001, between The Coca-Cola Company and Panamco de
        Nicaragua, S.A. with respect to operations in Nicaragua (English translation).                                                                                                                                                                                               
|                     |                                                                                                                                                                                                                                                                                                                                                                                                            
|Exhibit
        4.11 | Bottler Agreement and Letter Agreement,
        both dated October 1, 2002, between The Coca-Cola Company and Embotelladora
        Panamco Tica, S.A. with respect to operations in Costa Rica (English translation).                                                                                                                                                                                     
|                     |                                                                                                                                                                                                                                                                                                                                                                                                            
|Exhibit
        4.12 | Bottler Agreement, dated July 1,
        1999, between The Coca-Cola Company and Panamco-Colombia, S.A., with respect
        to operations in Colombia (English translation).                                                                                                                                                                                                                             
|                     |                                                                                                                                                                                                                                                                                                                                                                                                            
|Exhibit
        4.13 | Bottler Agreement, dated August
        16, 1996 and Letter of Renewal, dated February 9, 2001, between The Coca-Cola
        Company and Embotelladora Coca-Cola y Hit de Venezuela, S.A. with respect
        to operations in Venezuela (English translation).                                                                                                                                          
|                     |                                                                                                                                                                                                                                                                                                                                                                                                            
|Exhibit
        4.14 | Bottler Agreement, dated August
        16, 1996 and Letter of Renewal, dated February 9, 2001, between Advantage
        Investments, Inc. and Embotelladora Coca-Cola y Hit de Venezuela, S.A.
        with respect to operations in Venezuela (English translation).                                                                                                                                    
|                     |                                                                                                                                                                                                                                                                                                                                                                                                            
|Exhibit
        4.15 | Manufacturing Agreement, dated
        April 16, 1999, between Coca-Cola Industrias Ltda., SPAL  Industria
        Brasileira de Bebidas, S.A. and The Coca-Cola Company with respect to
        operations in Sao Paulo, Brazil (English translation).                                                                                                                                                   
|                     |                                                                                                                                                                                                                                                                                                                                                                                                            
|Exhibit
        4.16 | Manufacturing Agreement, dated
        April 16, 1999, between Coca-Cola Industrias Ltda., SPAL  Industria
        Brasileira de Bebidas, S.A. and The Coca-Cola Company with respect to
        operations in Campinas, Brazil (English translation).                                                                                                                                                    
|                     |                                                                                                                                                                                                                                                                                                                                                                                                            
|Exhibit
        4.17 | Manufacturing Agreement, dated
        April 16, 1999, between Coca-Cola Industrias Ltda., SPAL  Industria
        Brasileira de Bebidas, S.A., and The Coca-Cola Company with respect to
        operations in Campo Grande, Brazil (English translation).                                                                                                                                               
|                     |                                                                                                                                                                                                                                                                                                                                                                                                            
|Exhibit
        4.18 | Bottler
        Agreement, dated August 22, 1994, between Coca-Cola FEMSA and The Coca-Cola
        Company with respect to operations in Argentina (with English translation)
        (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
        4.19 | Supplemental
        Agreement, dated August 22, 1994, between Coca-Cola FEMSA and The Coca-Cola
        Company with respect to operations in Argentina (with English translation)
        (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
        4.20 | Amendments,
        dated May 17 and July 20, 1995, to Bottler Agreement and Letter of Agreement,
        dated August 22, 1994, each with respect to operations in Argentina, between
        Coca-Cola FEMSA and The Coca-Cola Company (with English translation) (incorporated
        by reference to Exhibit 10.3 to Coca-Cola FEMSAs Annual Report on
        Form 20-F filed on June 28, 1996 (File



| | 113 | 
| | --- | 



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|Exhibit
        No:  | Description                                                                                                                                                                                                                                                                                                                                                                                           
|-------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                     |                                                                                                                                                                                                                                                                                                                                                                                                       
|                     | No.
        1-12260)).                                                                                                                                                                                                                                                                                                                                                                                
|                     |                                                                                                                                                                                                                                                                                                                                                                                                       
|Exhibit
        4.21 | Bottler
        Agreement, dated December 1, 1995, between Coca-Cola FEMSA and The Coca-Cola
        Company with respect to operations in SIRSA (with English translation)
        (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
        4.22 | Supplemental
        Agreement, dated December 1, 1995, between Coca-Cola FEMSA and The Coca-Cola
        Company with respect to operations in SIRSA (with English translation)
        (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
        4.23 | Amendment,
        dated February 1, 1996, to Bottler Agreement between Coca-Cola FEMSA and
        The Coca-Cola Company with respect to operations in SIRSA, dated December
        1, 1995 (with English translation) (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
        4.24 | 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 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
        4.25 | Coca-Cola
        Tradename License Agreement dated June 21, 1993, between Coca-Cola FEMSA
        and The Coca-Cola Company (with English translation) (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
        4.26 | 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 | Supply
        Agreement dated June 21, 1993, between Coca-Cola FEMSA and FEMSA Empaques,
        (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
        4.30 | Supply
        Agreement dated April 3, 1998, between ALPLA Fábrica de Plásticos,
        S.A. de C.V. and Industria Embotelladora de México, S.A. de C.V.
        (with 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)).*                                                  



| | 114 | 
| | --- | 



---





|Exhibit
        No:  | Description                                                                                                                                                                                                                                                                                                                                                                   
|-------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                     |                                                                                                                                                                                                                                                                                                                                                                               
|Exhibit
        4.31 | Services
        Agreement, dated November 7, 2000, between Coca-Cola FEMSA and FEMSA Logística
        (with 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
        4.32 | 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. (with English translation) (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
        4.33 | 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. (with English translation) (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
        4.34 | Memorandum
        of Understanding, dated as of March 11, 2003, by and among Panamco, as
        seller, and The Coca-Cola Company, as buyer (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
        8.1  | Significant
        Subsidiaries.                                                                                                                                                                                                                                                                                                                                             
|                     |                                                                                                                                                                                                                                                                                                                                                                               
|Exhibit
        12.1 | CEO Certifications
      pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated 
      April 5, 2004.                                                                                                                                                                                                                                                               
|                     |                                                                                                                                                                                                                                                                                                                                                                               
|Exhibit
        12.2 | CFO Certifications
      pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated 
      April 5, 2004.                                                                                                                                                                                                                                                               
|                     |                                                                                                                                                                                                                                                                                                                                                                               
|Exhibit 13.1         | Officer Certification pursuant to
      Section 906 of the Sarbanes-Oxley Act of 2002, dated 
      April 5, 2004.                                                                                                                                                                                                                                                            

|
|

|* |  | Portions
of Exhibit 4.31 have  been omitted pursuant to a request for confidential treatment. Such
omitted  portions have been filed separately with the Securities and Exchange Commission.
|- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 115 | 
| | --- | 



---



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.



| | 116 | 
| | --- | 



---



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: April 5, 2004



| | COCA-COLA FEMSA,
        S.A. de C.V.
| | -------------------------------------
| |                                      
| | By: /s/                              



| | 117 | 
| | --- | 



---







|
|









|INDEPENDENT AUDITORS REPORT
      To the Board of Directors and Stockholders of Coca-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
      (the Company) as of December 31, 2003 and 2002, and the related
      consolidated statements of income, changes in financial position and changes
      in stockholders equity for each of the three years in the period ended
      December 31, 2003, all expressed in thousands of Mexican pesos of purchasing
      power as of December 31, 2003. 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, such consolidated financial statements present
      fairly, in all material respects, the financial position of Coca-Cola FEMSA,
      S.A. de C.V. and subsidiaries as of December 31, 2003 and 2002, and the
      results of their operations, changes in their financial position and changes
      in their stockholders equity for each of the three years in the period
      ended December 31, 2003, in conformity with accounting principles generally
      accepted in Mexico.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|As mentioned in Note 2, the Company acquired Panamerican
      Beverages, Inc. on May 6, 2003, incorporating its results of operations
      since the date of acquisition, as a result of which the 2003 consolidated
      results of operations and consolidated financial position are not comparable
      with those of the prior years.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|As mentioned in Note 5, effective January 1, 2003, the Company
      adopted new bulletins C-8 Intangible Assets and C-9 Liabilities,
      Provisions, Contingent Assets and Liabilities and Commitments. Additionally,
      effective January 1, 2001, the Company adopted Bulletin C-2 Financial
      Instruments.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Accounting principles generally accepted in Mexico vary in
      certain significant respects from accounting principles generally accepted
      in the United States of America. The application of the latter would have
      affected the determination of income for each of the three years in the
      period ended December 31, 2003, and the determination of stockholders
      equity at December 31, 2003 and 2002, to the extent summarized in Note 26.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|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 3. 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.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Galaz, Yamazaki, Ruiz Urquiza, S. C.
|------------------------------------



|A member firm of Deloitte Touche Tohmatsu
|-----------------------------------------



|C. P. C. Jorge Alamillo Sotomayor
|---------------------------------



|Mexico City, Mexico
      February 9, 2004
|------------------------------------------



| | F-1 | 
| | --- | 



---

Translation of financial statements originally issued
        in SpanishCoca-Cola FEMSA, S.A. de C.V. and SubsidiariesConsolidated
        Balance SheetsAt December
        31, 2003 and 2002
        Amounts expressed in thousands of US Dollars ($) and in thousands of constant
        Mexican Pesos (Ps.) as of December 31, 2003  ASSETS
      2003
      
      2002Current Assets:Cash and cash equivalents
      $
      247,729
      
      Ps.
      2,783,233
      
      Ps.
      6,429,449Accounts receivableTrade
      
      119,084
      
      
      1,337,910
      
      
      581,014Notes
      
      7,566
      
      
      85,002
      
      
      12,770Other
      
      34,766
      
      
      390,607
      
      
      214,452161,416
      
      
      1,813,519
      
      
      808,236Recoverable taxes
      
      96,864
      
      
      1,088,272
      
      
      251,546Inventories
      
      194,631
      
      
      2,186,675
      
      
      798,635Prepaid expenses
      
      17,982
      
      
      202,015
      
      
      76,519Total Current Assets
      
      718,622
      
      
      8,073,714
      
      
      8,364,385Property, Plant and Equipment:Land
      
      221,120
      
      
      2,484,283
      
      
      819,901Buildings, machinery and equipment
      
      2,141,467
      
      
      24,059,383
      
      
      9,373,780Accumulated depreciation
      
      (924,395
      )
      
      (10,385,578
      )
      
      (3,441,413
      )Construction in progress
      
      59,757
      
      
      671,374
      
      
      381,477Bottles and cases
      
      84,318
      
      
      947,315
      
      
      302,793Total Property, Plant and Equipment, Net
      
      1,582,267
      
      
      17,776,777
      
      
      7,436,538Investments in Shares
      
      41,865
      
      
      470,355
      
      
      131,861Other assets, Net
      
      122,637
      
      
      1,377,828
      
      
      885,139Intangible assets, Net
      
      3,001,431
      
      
      33,721,079
      
      
      268,746TOTAL ASSETS
      $
      5,466,822
      
      Ps.
      61,419,753
      
      Ps.
      17,086,669   F-2     LIABILITIES AND STOCKHOLDERS
        EQUITY
      2003
      
      2002Current Liabilities:
      
      
      
      .Bank loans and interest
      $
      180,905
      
      Ps
      2,032,471
      
      Ps.
      74,762Current maturities of long-term debt
      
      110,889
      
      
      1,245,834
      
      
      9,664Notes payable
      
      5,242
      
      
      58,889
      
      
      -Suppliers
      
      300,526
      
      
      3,376,409
      
      
      1,681,078Accounts payable
      
      121,174
      
      
      1,361,408
      
      
      433,243Accrued taxes
      
      91,206
      
      
      1,024,704
      
      
      236,289Other liabilities
      
      27,082
      
      
      304,241
      
      
      255,864Total Current Liabilities
      
      837,024
      
      
      9,403,956
      
      
      2,690,900Long-term Liabilities:Long-term debt
      
      2,315,176
      
      
      26,011,000
      
      
      3,295,968Notes payable
      
      2,703
      
      
      30,375
      
      
      -Pension plan
      
      46,931
      
      
      527,266
      
      
      171,283Seniority premiums
      
      4,705
      
      
      52,861
      
      
      22,034Deferred taxes
      
      33,507
      
      
      376,450
      
      
      847,974Other liabilities
      
      195,928
      
      
      2,201,268
      
      
      390,369Total Long-term Liabilities
      
      2,598,950
      
      
      29,199,220
      
      
      4,727,628Total Liabilities
      
      3,435,974
      
      
      38,603,176
      
      
      7,418,528Stockholders
        Equity:Minority interest in consolidated subsidiaries
      
      14,549
      
      
      163,459
      
      
      -Majority interest:Capital stock
      
      236,355
      
      
      2,655,453
      
      
      2,463,868Additional paid-in
        capital
      
      1,011,254
      
      
      11,361,439
      
      
      1,733,482Retained earnings
        from prior years
      
      841,177
      
      
      9,450,618
      
      
      6,789,817Net income for the
        year
      
      205,771
      
      
      2,311,842
      
      
      2,660,801Cumulative translation
        adjustment
      
      (127,118
      )
      
      (1,428,171
      )
      
      (1,039,670
      )Cumulative result
        of holding nonmonetary assets
      
      (151,140
      )
      
      (1,698,063
      )
      
      (2,940,157
      )Total majority interest
      
      2,016,299
      
      
      22,653,118
      
      
      9,668,141Total Stockholders Equity
      
      2,030,848
      
      
      22,816,577
      
      
      9,668,141TOTAL LIABILITIES AND
        STOCKHOLDERS EQUITY
      $
      5,466,822
      
      Ps.
      61,419,753
      
      Ps.
      17,086,669The accompanying
        notes are an integral part of these consolidated balance sheets.Mexico City, February 9, 2004  Carlos Salazar Lomelín
        Chief Executive Officer
      Héctor Treviño Gutiérrez
        Chief Financial and Administrative Officer   F-3     Translation of financial statements originally issued
        in SpanishCoca-Cola FEMSA, S.A. de C.V. and SubsidiariesConsolidated
        Income StatementsFor the
        years ended December 31, 2003, 2002 and 2001
        Amounts expressed in thousands of US Dollars ($) and in thousands of constant
        Mexican Pesos (Ps.) as of December 31, 2003  2003
      
      2002
      
      
      2001Net sales
      $
      3,158,596
      
      Ps.
      35,486,829
      
      Ps.
      18,518,634
      
      Ps.
      17,636,475Other operating revenues
      
      21,592
      
      
      242,588
      
      
      148,879
      
      
      135,089Total revenues
      
      3,180,188
      
      
      35,729,417
      
      
      18,667,513
      
      
      17,771,564Cost of sales
      
      1,600,387
      
      
      17,980,349
      
      
      8,680,755
      
      
      8,255,731Gross profit
      
      1,579,801
      
      
      17,749,068
      
      
      9,986,758
      
      
      9,515,833Operating expenses:Administrative
      
      207,735
      
      
      2,333,900
      
      
      1,474,810
      
      
      1,357,739Selling
      
      774,793
      
      
      8,704,808
      
      
      3,844,503
      
      
      3,993,292982,528
      
      
      11,038,708
      
      
      5,319,313
      
      
      5,351,031Amortization of goodwill
      
      -
      
      
      -
      
      
      40,635
      
      
      108,253Income from operations
      
      597,273
      
      
      6,710,360
      
      
      4,626,810
      
      
      4,056,549Integral result of financing:Interest expense
      
      138,091
      
      
      1,551,452
      
      
      348,379
      
      
      343,435Interest income
      
      (20,208
      )
      
      (227,039
      )
      
      (263,986
      )
      
      (287,692
      )Foreign exchange (gain) loss,
          net
      
      180,500
      
      
      2,027,922
      
      
      (249,961
      )
      
      (10,330
      )(Gain) loss on monetary position
      
      (77,512
      )
      
      (870,843
      )
      
      (394,776
      )
      
      84,183220,871
      
      
      2,481,492
      
      
      (560,344
      )
      
      129,596Other expense, net
      
      21,238
      
      
      238,586
      
      
      614,240
      
      
      44,147Income for the year before income taxes, employee profit
              sharing and change in accounting principles
      
      355,164
      
      
      3,990,282
      
      
      4,572,914
      
      
      3,882,806Income taxes and employee profit sharing
      
      147,594
      
      
      1,658,229
      
      
      1,912,113
      
      
      1,526,743Income for the year before change in accounting principles
      
      207,570
      
      
      2,332,053
      
      
      2,660,801
      
      
      2,356,063Change in accounting principles
      
      -
      
      
      -
      
      
      -
      
      
      30,124Net income for the year
      $
      207,570
      
      Ps.
      2,332,053
      
      Ps.
      2,660,801
      
      Ps.
      2,325,939Minority net income
      
      1,799
      
      
      20,211
      
      
      -
      
      
      -Majority net income
      $
      205,771
      
      Ps.
      2,311,842
      
      Ps.
      2,660,801
      
      Ps.
      2,325,939Weighted average shares outstanding (in thousands)
      
      1,704,250
      
      
      1,704,250
      
      
      1,425,000
      
      
      1,425,000Income per share before change in accounting principles
      $
      0.12
      
      Ps.
      1.36
      
      Ps.
      1.87
      
      Ps.
      1.65Majority net income per share
      $
      0.12
      
      Ps.
      1.36
      
      Ps.
      1.87
      
      Ps.
      1.63The accompanying notes are an integral part
        of these consolidated statements.  F-4     Translation of financial statements originally issued
        in SpanishCoca-Cola FEMSA, S.A. de C.V. and SubsidiariesConsolidated
        Statements of Changes in Financial PositionFor the
        years ended December 31, 2003, 2002 and 2001
        Amounts expressed in thousands of US Dollars ($) and in thousands of constant
        Mexican Pesos (Ps.) as of December 31, 2003  2003
      
      
      
      
      
      2002
      
      
      2001RESOURCES GENERATED BY (USED IN):Operating Activities:Net income for the year
      $
      207,570
      
      Ps.
      2,332,053
      
      Ps.
      2,660,801
      
      Ps.
      2,325,939Depreciation
      
      86,115
      
      
      967,490
      
      
      572,211
      
      
      638,261Breakage of bottles and cases
      
      24,359
      
      
      273,670
      
      
      200,801
      
      
      208,212Goodwill amortization and impairment
      
      -
      
      
      -
      
      
      497,829
      
      
      108,253Amortization and other
      
      67,214
      
      
      755,154
      
      
      310,352
      
      
      152,818385,258
      
      
      4,328,367
      
      
      4,241,994
      
      
      3,433,483Working capital:Accounts receivable
      
      18,497
      
      
      207,809
      
      
      197,145
      
      
      (188,522
      )Inventories
      
      (33,164
      )
      
      (372,600
      )
      
      (226,701
      )
      
      (152,897
      )Prepaid expenses and recoverable
          taxes
      
      (52,460
      )
      
      (589,387
      )
      
      (590,382
      )
      
      16,353Suppliers
      
      (11,710
      )
      
      (131,562
      )
      
      59,449
      
      
      279,758Accounts payable and other
      
      (84,825
      )
      
      (953,004
      )
      
      214,441
      
      
      (39,490
      )Accrued taxes
      
      (9,591
      )
      
      (107,754
      )
      
      113,481
      
      
      162,945Interest payable
      
      14,654
      
      
      164,643
      
      
      5,106
      
      
      (6,640
      )Pension plan and seniority premiums
      
      (2,716
      )
      
      (30,513
      )
      
      (9,552
      )
      
      15,081NET RESOURCES GENERATED BY OPERATING ACTIVITIES
      
      223,943
      
      
      2,515,999
      
      
      4,004,981
      
      
      3,520,071Investing Activities:Panamerican Beverages, Inc. acquisition
      
      (2,638,932
      )
      
      (29,648,404
      )
      
      -
      
      
      -Property, plant and equipment
      
      (138,403
      )
      
      (1,554,957
      )
      
      (919,585
      )
      
      (770,242
      )Retirements of property, plant and
          equipment
      
      -
      
      
      -
      
      
      -
      
      
      134,591Investments in shares and other assets
      
      (31,637
      )
      
      (355,448
      )
      
      (490,121
      )
      
      (229,650
      )NET RESOURCES USED IN INVESTING ACTIVITIES
      
      (2,808,972
      )
      
      (31,558,809
      )
      
      (1,409,706
      )
      
      (865,301
      )Financing Activities:Amortization in real terms of financing
      
      80,693
      
      
      906,587
      
      
      245,402
      
      
      (281,186
      )Translation adjustment in foreign subsidiaries
      
      (34,580
      )
      
      (388,501
      )
      
      (515,251
      )
      
      641,181Proceeds from issuance of long-term debt
      
      1,388,417
      
      
      15,598,869
      
      
      (21,638
      )
      
      (19,329
      )Dividends paid
      
      -
      
      
      -
      
      
      (608,260
      )
      
      (331,447
      )Other liabilities
      
      (48,057
      )
      
      (539,903
      )
      
      19,194
      
      
      133,888Increase in capital stock
      
      874,014
      
      
      9,819,542
      
      
      -
      
      
      -NET RESOURCES OBTAINED FROM (USED IN) FINANCING ACTIVITIES
      
      2,260,487
      
      
      25,396,594
      
      
      (880,553
      )
      
      143,107Decrease in cash and cash equivalents
      
      (324,542
      )
      
      (3,646,216
      )
      
      1,714,722
      
      
      2,797,877Cash and cash equivalents at beginning of the year
      
      572,271
      
      
      6,429,449
      
      
      4,714,727
      
      
      1,916,850CASH AND CASH EQUIVALENTS AT END OF THE YEAR
      $
      247,729
      
      Ps.
      2,783,233
      
      Ps.
      6,429,449
      
      Ps.
      4,714,727The accompanying notes are an integral part of these
          consolidated statements of changes in financial position.  F-5     Translation of financial statements originally issued in Spanish
  Coca-Cola FEMSA, S.A. de C.V. and SubsidiariesConsolidated Statements of Changes in Stockholders Equity  For the years ended December 31, 2003, 2002 and 2001
  Amounts expressed in thousands of constant Mexican Pesos (Ps.) as of December
  31, 2003 Description
      
      Capital 
        Stock
      
      Additional
        Paid-in
        Capital
      
      Retained
        Earnings
        from Prior 
        YearsConsolidated Balances at December
        31, 2000
      Ps.
      2,463,868
      Ps.
      1,733,482
      Ps.
      4,002,649Transfer of income of prior year
      
      -
      
      -
      
      1,400,936Dividends declared and paid
      
      -
      
      -
      
      (331,447
      )Comprehensive income
      
      -
      
      -
      
      -Consolidated Balances at December
        31, 2001
      Ps.
      2,463,868
      Ps.
      1,733,482
      Ps.
      5,072,138Transfer of income of prior year
      
      -
      
      -
      
      2,325,939Dividends declared and paid
      
      -
      
      -
      
      (608,260
      )Comprehensive income
      
      -
      
      -
      
      -Consolidated Balances at December
        31, 2002
      Ps.
      2,463,868
      Ps.
      1,733,482
      Ps.
      6,789,817Minority interest at Panamerican
        Beverages, Inc. acquisition
      
      -
      
      -
      
      -Increase in capital stock
      
      191,585
      
      9,627,957
      
      -Transfer of income of prior year
      
      -
      
      -
      
      2,660,801Comprehensive income
      
      -
      
      -
      
      -Consolidated Balances at December
        31, 2003
      Ps.
      2,655,453
      Ps.
      11,361,439
      Ps.
      9,450,618The accompanying notes
        are an integral part of these consolidated statements of changes in stockholders
        equity. Transfer of additional paid in capital to capital stock F-6    Net
        Income for
        the Year
      
      
      Cumulative
        Translation
        Adjustment
      
      
      Cumulative
        Result of Holding
        Nonmonetary
        Assets
      
      
      Total
        Majority
        Interest
      
      
      Minority
        Interest in
        Consolidated
        Subsidiaries
      
      
      Total
        Stockholders
        EquityPs.
      1,400,936
      
      Ps.
      (1,165,600
      )
      Ps.
      (2,224,946
      )
      Ps.
      6,210,389
      
      Ps.
      -
      
      Ps.
      6,210,389(1,400,936
      )
      
      -
      
      
      -
      
      
      -
      
      
      -
      
      
      --
      
      
      -
      
      
      -
      
      
      (331,447
      )
      
      -
      
      
      (331,447
      )2,325,939
      
      
      641,181
      
      
      (682,866
      )
      
      2,284,254
      
      
      -
      
      
      2,284,254Ps.
      2,325,939
      
      Ps.
      (524,419
      )
      Ps.
      (2,907,812
      )
      Ps.
      8,163,196
      
      Ps.
      -
      
      Ps.
      8,163,196(2,325,939
      )
      
      -
      
      
      -
      
      
      -
      
      
      --
      
      
      -
      
      
      -
      
      
      (608,260
      )
      
      -
      
      
      (608,260
      )2,660,801
      
      
      (515,251
      )
      
      (32,345
      )
      
      2,113,205
      
      
      -
      
      
      2,113,205Ps.
      2,660,801
      
      Ps.
      (1,039,670
      )
      Ps.
      (2,940,157
      )
      Ps.
      9,668,141
      
      Ps.
      -
      
      Ps.
      9,668,141-
      
      
      -
      
      
      -
      
      
      -
      
      
      143,248
      
      
      143,248-
      
      
      -
      
      
      -
      
      
      9,819,542
      
      
      -
      
      
      9,819,542(2,660,801
      )
      
      -
      
      
      -
      
      
      -
      
      
      -
      
      
      -2,311,842
      
      
      (388,501
      )
      
      1,242,094
      
      
      3,165,435
      
      
      20,211
      
      
      3,185,646Ps.
      2,311,842
      
      Ps.
      (1,428,171
      )
      Ps.
      (1,698,063
      )
      Ps.
      22,653,118
      
      Ps.
      163,459
      
      Ps.
      22,816,577   F-7


|Coca-Cola FEMSA, S.A. de C.V.
      and SubsidiariesNotes to the Consolidated Financial
      StatementsAt December 31, 2003, 2002 and 2001Amounts expressed in thousands of US Dollars
      ($) and in thousands of constant Mexican Pesos (Ps.) as of December 31,
      2003
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------









|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
45.7% of the  capital  stock  (53.6% of the voting  shares),  and The  Coca-Cola
Company,  which  indirectly  owns 39.6% of the capital  stock.  The  remaining  14.7% 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 Mexico, Central America
(Guatemala, Nicaragua, Costa Rica  and Panama), Colombia, Venezuela, Brazil and Argentina.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|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.  Acquisition of  Panamerican
Beverages, Inc.
|----------------------------------------------------



|On May 6, 2003,  Coca-Cola FEMSA acquired 100%
of the outstanding stock of Panamerican  Beverages,  Inc. (Panamco) for Ps.
29,518,105  excluding  transaction  expenses.  As part of the acquisition,  the Company
assumed Ps. 9,084,963 of net debt and incurred  transaction  costs of Ps.  388,436,
which  consisted of financial,  advisory and legal fees that were  capitalized  as
adjustments to the purchase  price.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|The results of Panamcos operations have been
included in the consolidated  financial statements since the date of acquisition, as a
result of which the  2003 results of operations and balance sheet are not comparable with
those of  the prior year. The 2003 statement of changes in financial position has been
reclassified to present the effects of the acquisition and incorporation of  Panamco as a
single line item.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|At the acquisition date, Panamco produced and
distributed Coca-Cola trademark  beverages in its bottling territories in Mexico,
Guatemala, Nicaragua, Costa  Rica, Panama, Colombia, Venezuela and Brazil, along with
bottled water and other  beverages in some of these territories and beer in Brazil. The
results of  Panamcos operations have been included in the consolidated financial
statements  since the date of acquisition.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|The transaction was financed with an equity
contribution from FEMSA of Ps.  2,778,674, an exchange of The Coca-Cola Companys equity
interests in Panamco  valued at Ps. 7,040,868, for new shares of Coca-Cola FEMSA, cash on
hand of Ps.  2,820,351, and new indebtedness in Mexican pesos and US dollars in the
amount of  Ps. 17,266,648.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|The exchange of equity interests of The
Coca-Cola Company as well as the capital  increase from FEMSA generated additional
paid-in capital in majority  stockholders equity, since the shares were subscribed at a
value greater than  the book value of the shares at the subscription date.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|The acquisition of Panamcos operations has
great strategic importance for  Coca-Cola FEMSA, because it positions the Company as:
|---------------------------------------------------------------------------------------------------------------------------------



|a) A strong multinational  bottler, assuring its
growth in a consolidating environment.
|---------------------------------------------------------------------------------------



|b) The largest  Coca-Cola bottler in Mexico and
Latin America, with great potential for creating  synergies.
|------------------------------------------------------------------------------------------------------------



|The fair values of the assets acquired and
liabilities assumed are as follows:
|------------------------------------------------------------------------------



| | F-8 | 
| | --- | 



---



|                                                             
|-------------------------------------------------------------
|                                                             
|Cash and cash equivalents                                    
|Other current assets                                         
|Property, plant and equipment                                
|Other assets                                                 
|Rights to produce and distribute Coca-Cola trademark products
|                                                             
|Total assets acquired                                        
|Short-term debt                                              
|Current liabilities                                          
|Long-term debt                                               
|Other long-term liabilities                                  
|                                                             
|Total liabilities assumed                                    
|                                                             
|Net assets acquired                                          
|                                                             

|Note 3.  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 25. A reconciliation from Mexican GAAP to US
GAAP is included in Note 26.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|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, 2003 of 11.235 Mexican
      pesos to one US dollar.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|The consolidated financial statements include
the financial statements of  Coca-Cola FEMSA and those of all companies in which it owns
directly or  indirectly a majority of the outstanding voting capital stock and/or
exercises  control. All intercompany balances and transactions have been eliminated in
such  consolidation.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Note 4.  Foreign Subsidiary Incorporation
|-----------------------------------------



|The accounting records of the foreign
subsidiaries are maintained in the  currency of the country where they are located and in
accordance with accounting  principles generally accepted in each country. For
incorporation into the  Companys consolidated financial statements, they are adjusted to
Mexican GAAP  and are restated to the purchasing power of the local currency at the end
of the  year by applying the inflation factors of the country of origin and are
subsequently translated into Mexican pesos using the year-end exchange rate.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|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.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|When the Company designates foreign subsidiary
net investment as an economic  hedge of its own financing acquisition, the accounting
treatment for the  integral result of financing is as follows:
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | The
foreign exchange gain or loss is recorded as part of the cumulative  translation
adjustment, to the extent the net investment in the foreign  subsidiary covers the debt,
net of taxes. The foreign exchange gain or loss  associated with any unhedged portion of
such debt is recorded in the  integral result of financing.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | The
monetary position result is computed using the inflation factors of the  country in which
the acquired subsidiary is located to the extent the net  investment in the foreign
subsidiary covers the debt. The unhedged portion  of such debt is calculated using
inflation factors of the country of the  company that contracts the financing. The total
effect is recorded in the  integral result of financing.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|When the Company has not designated an economic
hedge, the foreign exchange gain  or loss and gain or loss on monetary position are
recorded in the integral  result of financing.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | F-9 | 
| | --- | 



---





|The monetary position result and exchange gain
or loss on intercompany foreign  currency denominated balances that are considered to be
of a  long-term-investment nature (that is, settlement is not planned or anticipated  in
the foreseeable future), are reflected in cumulative translation adjustment  in the
stockholders equity.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|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. Due to 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  performed a valuation of its investment in Coca-Cola FEMSA de Buenos Aires, S.A.
(Coca-Cola FEMSA de Buenos Aires) based on market price value multiples of
comparable businesses. The valuation resulted in the recognition of an  impairment of
goodwill of Ps. 457,194, which was recorded in results of 2002. 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.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|In January 2003, the Venezuelan government
suspended the exchange of bolivars  for US dollars, and in February 2003, implemented an
exchange control regime,  under which it created a foreign exchange control agency
(CADIVI) that approves  all foreign currency transactions and instructs the Central Bank
of Venezuela  (BCV) to release foreign currency to approved companies. Under the exchange
control regime, approved US dollars are released by the BCV at the official  exchange
rate of 1,600 bolivars per US dollar. For most of 2003, releases had  been minimal in
relation to amounts requested. In view of the uncertainties  regarding the availability
of US dollars at the official rate, the Company has  used the last available
market-closing rate of 1,853 to translate the financial  statements of its Venezuelan
subsidiary into Mexican pesos. In February 6, 2004,  a devaluation of the bolivar to
1,920 bolivars per U.S. dollar was announced in  the Gaceta Oficial. (Official Gazzette)
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|The Company has not designated any investment in
foreign subsidiary as an  economic hedge of the liabilities incurred to acquire Panamcos
territories.
|-------------------------------------------------------------------------------------------------------------------------------------------------------



|Note 5.  Significant Accounting Policies
|----------------------------------------



|The Companys accounting policies are in
accordance with Mexican GAAP, which  require that the Companys management make certain
estimates and use certain  assumptions to determine the valuation of various items
included in the  consolidated financial statements. The Companys management believes
that the  estimates and assumptions used were appropriate as of the date of these
consolidated financial statements.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|The significant accounting policies are as
follows:
|---------------------------------------------------



|a)    Recognition of the Effects of Inflation:
|----------------------------------------------



|The recognition of
the effects of inflation in the financial  information consists of:
|--------------------------------------------------------------------------------------

| |  |  | Restating
non-monetary assets such as inventories and fixed assets,  including related costs and
expenses when such assets are consumed or  depreciated.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | Restating
capital stock, additional paid-in capital and retained  earnings by the amount necessary
to maintain the purchasing power  equivalent in Mexican pesos on the dates such capital
was contributed  or income generated through the use of inflation factors.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | Including
in stockholders equity the cumulative effect of holding  non-monetary assets, which is
the net difference between changes in  the replacement cost of non-monetary assets and
adjustments based upon  inflation factors.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | Including
in the cost of financing the purchasing power gain or loss from  holding monetary items.
| | - |  | --------------------------------------------------------------------------------------------------



|The Company restates its consolidated financial
statements in terms of the  purchasing power of the Mexican peso as of the most recent
balance sheet  date by using inflation 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.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | F-10 | 
| | ---- | 



---





|Financial information for the Mexican
subsidiaries for prior years was  restated using Mexican inflation 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 current year-end exchange rate of the Mexican peso.  Accordingly, the amounts are
comparable with each other and with the  preceding years since all are expressed in the
purchasing power of the  same currency 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 brokerage houses valued at the quoted market prices (See
      note 17).
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|c) | Inventories
and Cost of Sales:
|-- | ------------------------------



| | The value
of inventories is adjusted to replacement cost, without  exceeding market value. Advances
to suppliers to purchase raw materials  and spare parts are included in the inventory
account and are restated by  applying inflation factors, considering their average age.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | Cost of
sales is determined based on replacement cost at the time of sale.  Cost of sales
includes expenses related to raw materials used in  production process, labor (wages and
other benefits), depreciation of  production facilities and equipment and other costs
including fuel,  electricity, breakage of returnable bottles in the production process,
equipment maintenance, inspection, and inter and intra-plant transfer  costs.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|d) | Prepaid
Expenses:
|-- | -----------------



| | These represent
payments for services that will be received over the next  12 months. Prepaid expenses
are recorded at historical cost and recognized  in the income statement in the month in
which the services or benefits are  received. Prepaid expenses are principally
represented by advertising,  promotional and leasing 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 at the
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 period,  during which they are estimated to increase sales of the
related products  or presentations to normal operating levels, which is generally one
year.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|e) | Property,
Plant and Equipment:
|-- | ------------------------------



| | These assets
are initially recorded at their cost of acquisition and/or  construction cost. Property,
plant and equipment of domestic origin,  except bottles and cases (see Note 5 f), are
restated by applying  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 is
computed using the straight-line method, based on the  value of the restated assets
reduced by their residual values. The Company  together with independent appraisers
determines depreciation rates,  considering the estimated remaining useful lives of the
assets.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | The estimated
useful lives of the main assets are as follows:
| | -------------------------------------------------------------

|                          
|--------------------------
|                          
|Buildings and construction
|Machinery and equipment   
|Distribution equipment    
|Other equipment           
|                          

|f) | 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.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | F-11 | 
| | ---- | 



---





| | For financial
reporting purposes, breakage is recorded as an expense as it  is incurred.  Depreciation
is computed only for tax purposes using the  straight-line method at a rate  of 10% per
year. The Company estimates that  breakage expense is similar to the  depreciation
calculated based on an  estimated average useful life of approximately five  years for
returnable  glass bottles, five years for returnable cases and one year for  returnable
plastic bottles. For the years ended December 31, 2003, 2002 and 2001,  breakage expense
amounted to Ps. 273,670, Ps. 200,801 and Ps. 208,212,  respectively.  Bottles and cases
that have been placed in the hands of  customers and for which a  deposit from customers
has been received are  presented net of such deposits, and the  difference between the
cost of  these assets and the deposits received is amortized  according to their  useful
lives. The bottles and cases for which no deposit has been  received  are expensed when
placed in the hands of customers.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|g) | Investments
in Shares:
|-- | ----------------------



| | Investments in
shares of associated 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 and which do not have an
observable market value are  recorded at acquisition cost and restated based upon
inflation factors of  the country of origin. Investments in affiliated companies in which
the  Company does not have significant influence and which do have an  observable market
value are adjusted to market value, with such  adjustments reflected in earnings.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|h) | Other
Assets:
|-- | -------------



| | This assets
represent payments whose benefits will be received in future  years, and consist of:
| | ------------------------------------------------------------------------------------------------

| |  |  | Refrigeration equipment, which is initially recorded
      at the cost of acquisition. Equipment of domestic origin is restated by
      applying domestic inflation factors. Imported equipment is restated by applying
      the inflation rate of the county of origin and then translated at the year-end
      exchange rate. Refrigeration equipment is amortized based on an estimated
      average useful life of approximately five years in 2003 and three years
      in 2002 and 2001. The effect of the change in useful life amounted to Ps.
      92,000 of additional income in 2003.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | 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 terms of such agreement, based on the volume sold by the customers.
      The term of these agreements is between three and four years.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | Prior to 2002, the amortization was included in
      operating expenses. Beginning in 2002, the Company adopted as a suppletory
      standard the provisions of Emerging Issues Task Force (EITF)
      No. 01-09, Accounting for Consideration Given by a Vendor to a Customer
      (Including a Reseller of the Vendors Products) of the Financial Accounting
      Standards Board (FASB), which requires presenting the amortization
      of these capitalized amounts as a reduction of net sales.
| |  |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | Enterprise resource planning (ERP) system implementation
      costs incurred during the development stage, which are capitalized in accordance
      with Bulletin C-8, Activos Intangibles (Intangible Assets) (C-8)
      and are amortized using the straight-line method over four years. Expenses
      that do not fulfill the requirements for capitalization, such as research
      expenses, are expensed as incurred.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | Leasehold improvements, which are restated by applying
      inflation factors and amortized using the straight-line method, over the
      terms of lease contracts.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------



|i) | Intangible
Assets and Goodwill:
|-- | -------------------------------



| | These assets
represent payments whose benefits will be received in future  years. Beginning in 2003
the Company applies C-8, which establishes that  project development costs should be
capitalized if they fulfill the  criteria established for recognition as assets.
Additionally, C-8 requires  identifying all intangible assets to reduce as much as
possible the  goodwill associated with business combinations. Prior to 2003, the excess
of the purchase price over the fair value of the net assets acquired in a  business
combination was considered to be goodwill. With the adoption of  C-8, the Company
considers such excess to relate to the right to produce  and distribute Coca-Cola
trademark products. The Company separates  intangible assets between those with a finite
useful life and those with  an indefinite useful life, in accordance with the period over
which the  Company expects to receive the benefits.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | F-12 | 
| | ---- | 



---





| | Intangible assets
with indefinite lives are not amortized, but are  periodically subject to an impairment
test. These represent the right to  manufacture, package, distribute, and sell Coca-Cola
trademark beverages  in the territories acquired. Those 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. The most
significant bottler agreements have terms of 10 years.  The bottler agreements are
automatically renewable for 10-year terms,  subject to non-renewal by either party. The
agreements are recorded in the  functional currency of the subsidiary in which the
investment was made and  are restated by applying the inflation rate of the country of
origin and  the year-end exchange rate.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | Goodwill is
the difference between the price paid and the fair value of  the shares and/or net assets
acquired that was not assigned directly to an  intangible asset. 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. Goodwill is amortized over a period of not more than 20 years.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|j) | Impairment
of Goodwill and Long-Lived Assets:
|-- | ---------------------------------------------



| | The Company
reviews the carrying value of its goodwill and other 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 impairment exists,
management compares estimated future  discounted 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.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|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. 1,498,436, Ps. 755,039
and Ps. 747,540  during the years ended December 31, 2003, 2002 and 2001, 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 investment is recorded in Other assets, 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 non-monetary and are restated using long-term
assumptions. The increase in labor liabilities of the year is charged to  expense in the
income statement.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | Unamortized prior
service costs are recorded as expenses in the income  statement over the period during
which the employees will receive the  benefits of the plan, which in the case of pension
and retirement plans  and seniority premiums is 14 years since 1996.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | Certain subsidiaries
of the Company 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. During the years ended December 31, 2003,
2002 and  2001, these payments amounted to Ps. 30,636, Ps. 76,577 and Ps. 27,026,
respectively.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|m) | Contingencies
and Commitments:
|-- | ------------------------------



| | Beginning January 1, 2003, the Company adopted
      the provisions of new Bulletin C-9, Liabilities, Provisions, Contingent
      Assets and Liabilities and Commitments (C-9), which establishes
      additional guidelines clarifying the accounting for provisions, accruals
      and contingent liabilities, and establishes new standards for the use of
      present
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | F-13 | 
| | ---- | 



---





| | value techniques
to measure liabilities and accounting for the early settlement  or substitution of
obligations. The adoption of C-9 did not have a  material impact on the Companys
financial position and results of  operations.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|n) | Revenue
Recognition:
|-- | --------------------



| | Revenue is
recognized upon shipment of goods to customers or upon delivery  to the customer and the
customer has taken ownership of the goods. Net  sales reflect units delivered at selling
list prices reduced by promotion  allowances and discounts.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|o) | Operating
Expenses:
|-- | -------------------



| | Administrative expenses
include labor costs (salaries and other benefits)  for employees not directly involved in
the sale of the Companys products,  professional services fees, depreciation of offices
facilities and  amortization of capitalized software costs.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | Selling expenses
include:
| | -------------------------



| | a) | Distribution:
labor costs (salaries and other benefits), outbound  freight costs, warehousing costs of
finished products, breakage for  returnable bottles in the distribution process,
depreciation and  maintenance of trucks and other distribution facilities and equipment.
During the years ended December 31, 2003, 2002 and 2001, these  distribution costs
amounted to Ps. 2,803,654, Ps. 2,099,028 and Ps.  2,236,401, respectively.
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | b) | Sales:
labor costs (salaries and other benefits) and sales commission  paid to sales personnel.
| | -- | -----------------------------------------------------------------------------------------------



| | c) | Marketing:
labor costs (salaries and other  benefits), promotions and advertising costs.
| | -- | ----------------------------------------------------------------------------------------



|p) | Income
Tax, Tax on Assets and Employee Profit Sharing:
|-- | ------------------------------------------------------



| | Income taxes
and employee profit sharing are charged to results of the year  in which they are
incurred, including the deferred income tax that arises  from the temporary differences
between the accounting and tax bases of  assets and liabilities, including the tax loss
carryforward benefit.  Deferred employee profit sharing is calculated considering only
those  temporary differences that arise from the reconciliation between the  accounting
income for the year and the basis for employee profit sharing  that are expected to
generate a benefit or liability within a defined  period.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | The tax
on assets paid that is expected to be recovered is recorded as a  reduction of the
deferred tax liability.
| | ------------------------------------------------------------------------------------------------------------------



| | The balance
of deferred taxes is  comprised of monetary and non-monetary items, based on the
temporary  differences from which it is derived. Deferred taxes are classified as a
long-term asset or liability, regardless of when the temporary differences  are expected
to reverse.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | The deferred
tax provision for the year to be included in the results of  operations is determined by
comparing the deferred tax balance at the 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.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | FEMSA has
received authorization from the Secretaria de Hacienda y Credito  Publico
(SHCP) to prepare its income tax and tax on asset returns on a  consolidated
basis, which includes the proportional taxable income or loss  of its Mexican
subsidiaries, which is limited to 60% of the stockholders  participation. The provisions
for income taxes of the foreign countries have  been determined on the basis of the
taxable income of each individual  company and not on a consolidated basis.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|q) | Integral Result of Financing: The integral result of financing includes:
|-- | ------------------------------------------------------------------------



| | Interest:
| | ---------



| | Interest income
and expenses are recorded when earned or incurred,  respectively.
| | ---------------------------------------------------------------------------------



| | Foreign Exchange
Gains and Losses:
| | ----------------------------------



| | Transactions in
foreign currency are recorded in local currency 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 any foreign exchange gain or loss from financing
obtained for the  acquisition of foreign subsidiaries that is considered to be an
economic  hedge (see Note 4).
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | F-14 | 
| | ---- | 



---





| | Gain (Loss)
on Monetary Position:
| | ---------------------------------



| | This is
the result of the effects of inflation on monetary items. The gain  (loss) on monetary
position is computed by applying inflation factors of the  country of origin to the net
monetary position at the beginning of each  month, excluding the financing contracted for
the acquisition of any foreign  subsidiaries that is considered to be an economic hedge
(see Note 4).
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | The gain
(loss) on monetary position of foreign subsidiaries is translated  into Mexican pesos
using the year-end exchange rate.
| | --------------------------------------------------------------------------------------------------------------------------------



|r) | Financial
Instruments:
|-- | ----------------------



| | The Company
frequently contracts financial instruments to manage the  financial risks associated with
its operations. If the instrument is used to  manage the risk related with the Companys
operations, the effect is  recorded in cost of sales and in operating expenses. If the
instrument is  used to manage the risks related with the financing operations, the effect
is recorded in interest expense or in the foreign exchange loss (gain),  depending on the
related contract.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 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. 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. 30,124.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|s) | Cumulative
Result of Holding Non-monetary Assets:
|-- | -------------------------------------------------



| | This represents
the sum of the differences between book values and  restatement values, as determined by
applying inflation factors to  non-monetary assets such as inventories and fixed assets,
and their effect  on the income statement when the assets are consumed or depreciated.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|t) | Comprehensive
Income:
|-- | ---------------------



| | Comprehensive income
is comprised of the net income and other  comprehensive income items such as the
translation adjustment and the  result of holding non-monetary assets and is presented in
the consolidated  statement of changes in stockholders equity.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Note 6. Accounts Receivable
|---------------------------

|                                      
|--------------------------------------
|                                      
|                                      
|Trade                                 
|Allowance for doubtful accounts       
|Notes                                 
|The Coca-Cola Company                 
|Alpla, S.A. de C.V.                   
|Arteva, S.A. de C.V.                  
|Travel advances to employees          
|Insurance claims                      
|Government bonds                      
|Receivables from sales of fixed assets
|Loans to employees                    
|Guarantee deposits                    
|Other                                 
|                                      
|                                      
|                                      



| | F-15 | 
| | ---- | 



---





| | The changes in the allowance for doubtful accounts
      are as follows:
| | ------------------------------------------------------------------------

|                                                       
|-------------------------------------------------------
|                                                       
|                                                       
|Balance at the beginning of the year                   
|Provision for the year                                 
|Write-offs                                             
|Panamco allowance at date of acquisition               
|Restatement of the balance at the beginning of the year
|                                                       
|Balance at the end of the year                         
|                                                       

|Note 7.  Inventories
|--------------------

|                                     
|-------------------------------------
|                                     
|                                     
|Finished products                    
|Raw materials                        
|Spare parts                          
|Advances to suppliers                
|Work in process                      
|Advertising and promotional materials
|Allowance for obsolescence           
|                                     
|                                     
|                                     

|Note 8.  Prepaid Expenses
|-------------------------

|                                    
|------------------------------------
|                                    
|                                    
|Advertising and promotional expenses
|Bonus                               
|Insurance                           
|Other                               
|                                    
|                                    
|                                    

|The advertising and promotional expenses
recorded in the income statement  for the year ended December 31, 2003, 2002 and 2001 are
as follows:
|----------------------------------------------------------------------------------------------------------------------------------------------

|                    
|--------------------
|                    
|                    
|Advertising         
|Promotional expenses
|                    

|Note 9.  Investments in Shares
|------------------------------

|                                                                         
|-------------------------------------------------------------------------
|Company                                                                  
|                                                                         
|Industria Envasadora de Querétaro, S.A.
      de
          C.V. (IEQSA)
|Complejo Industrial Can, S.A. (CICAN)                                  
|Beta San Miguel, S.A. de C.V.                                            
|Tapon Corona de Colombia, S.A.                                           
|Molson, Inc.                                                             
|Other investments                                                        
|                                                                         
|                                                                         
|                                                                         

|The investment in Molson, Inc.
(Molson) shares resulted from the Brazilian  subsidiarys sale of its
investment interest of 12.1% in Cervejarias Kaiser,  S.A. (Kaiser), a
Brazilian brewery, to Molson in 2002.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|The Molson stock is subject to a two-year
contractual restriction on sale that  expires on March 19, 2004, pursuant to the
agreement with Molson entered into at  the time of the acquisition of Kaiser by Molson.
The two-year restriction can  only
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | F-16 | 
| | ---- | 



---





|be shortened in the case of a change in control
of Molson, transfer of  substantially all of the assets of Molson, or any material
inaccuracy in  Molsons representations and warranties contained in the Kaiser purchase
agreement. As of December 31, 2003, no events have occurred which have decreased  the
original restriction period.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|The investment in Molson shares is recorded at
its market value of Ps. 309,786  and is presented net of the fair value of the related
equity forward contract of  Ps. 73,799.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Note 10.  Property, Plant and Equipment
|---------------------------------------

|                                  
|----------------------------------
|                                  
|                                  
|Land                              
|Buildings, machinery and equipment
|Accumulated depreciation          
|Construction in progress          
|Bottles and cases                 
|                                  
|                                  
|                                  

|Note 11.  Other Assets
|----------------------

|                                        
|----------------------------------------
|                                        
|                                        
|Refrigeration equipment                 
|Long-term notes                         
|Leasehold improvements                  
|Additional labor liability (see Note 15)
|Yankee bond                             
|Advertising                             
|Commissions                             
|Other                                   
|                                        
|                                        
|                                        

|Note 12.  Intangible Assets
|---------------------------

|                                                              
|--------------------------------------------------------------
|                                                              
|                                                              
|Unamortized Intangible Assets                                 
|Rights to produce and distribute Coca-Cola trademark products:
|Panamco territories (see Note 2)                              
|Coca-Cola FEMSA de
        Buenos Aires                       
|Tapachula,  Chiapas territory                                 
|                                                              
|                                                              
|                                                              

|Note 13.  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)
|                                             



| | F-17 | 
| | ---- | 



---





|                        
|------------------------
|Transactions            
|                        
|Income:                 
|Sales and other revenues
|Expenses:               
|Purchases of inventories
|Operating expenses      
|                        
|                        

|b)  The Coca-Cola Company:
|--------------------------

|                                             
|---------------------------------------------
|Balance Sheet                                
|                                             
|Assets (accounts receivable)                 
|Liabilities (suppliers and other liabilities)
|                                             

|                        
|------------------------
|Transactions            
|                        
|Expenses:               
|Purchases of concentrate
|Interest expense        
|                        

|c) Other associated and affiliated companies:
|---------------------------------------------



|For the years ended December 31, 2003, 2002 and
2001, the Companys  subsidiaries received services from other companies in which
stockholders  of the Company have and equity interest.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                            
|----------------------------
|Balance Sheet               
|                            
|Assets (accounts receivable)
|Liabilities (suppliers)     
|                            

|               
|---------------
|Transactions:  
|               
|Interest income
|               

|                                      
|--------------------------------------
|Purchases of Products from:           
|                                      
|IEQSA                                 
|CICAN                                 
|Tapon Corona
        de Colombia, S.A.
|Distribuidora Plastica, S.A.          
|Metalforma, S.A.                      
|Vidrios Panameños, S.A.               
|Beta San Miguel,
        S.A. de C.V. 
|                                      

|Note 14.  Balances and Transactions in
Foreign Currency
|-------------------------------------------------------



|Assets, liabilities and transactions denominated
in a foreign currency, other  than the functional currency of the reporting unit,
translated into US dollars,  are as follows:
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                  
|------------------
|Balances          
|                  
|December 31, 2003:
|                  
|                  
|December 31, 2002:
|                  
|                  

|(1) |  | Mexican
pesos per one US dollar.
|--- |  | --------------------------------



| | F-18 | 
| | ---- | 



---





|                                 
|---------------------------------
|Transactions                     
|                                 
|Interest income                  
|Interest expenses and commissions
|                                 
|                                 
|                                 

|As of February 9, 2004 the issue date of these
consolidated financial  statements, the exchange rate was 11.120 Mexican pesos per one US
dollar, and  the foreign currency position was similar to that as of December 31, 2003.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Note 15.  Labor Liabilities
|---------------------------



|The actuarial calculations for the pension and
retirement plan and seniority  premiums and the cost for the year 2003 were determined
using the following  long-term assumptions:
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                
|----------------
|                
|                
|Mexico          
|Brazil          
|Colombia        
|Costa Rica      
|Nicaragua       
|Guatemala       
|                
|Measurement date
|                

|(1) |  | Not
applicable, as the benefits are not funded
|--- |  | ----------------------------------------------



|The bases for the determination of the long-term
asset return rate is supported  by a historical analysis of average returns in real terms
of the last 30 years  of the Certificados de Tesoreria del Gobierno Federal
(CETES) (Federal  Government Treasury Certificates) and the expectations of
long-term returns of  the actual investments of the Company.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Panama, Venezuela and Argentina operations do
not have any pension and  retirement plans.
|-----------------------------------------------------------------------------------------



|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 benefitObligation
|                                                                                 
|Projected benefit
        obligation                                             
|Pension plan
        funds at fair value                                         
|                                                                                 
|Unfunded projected
        benefit obligation                                    
|Unrecognized
        net transition obligation services                          
|Unrecognized
        actuarial net gain                                          
|                                                                                 
|                                                                                 
|Additional
        labor liability                                               
|                                                                                 
|Total                                                                            
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|                                                                                 
|Seniority Premiums:                                                              
|Vested benefit obligation                                                        
|Non-vested benefit obligation                                                    
|                                                                                 



| | F-19 | 
| | ---- | 



---





|Accumulated benefit obligation                                                              |     | 40,366  |  |     | 21,868  
|------------------------------------------------------------------------------------------- | --- | ------- |  | --- | --------
|Excess of projected benefit obligation
      over 
          accumulated benefit obligation |     | 5,524   |  |     | 2,013   
|                                                                                           
|Projected benefit obligation                                                                |     | 45,890  |  |     | 23,881  
|Unrecognized net transition obligation
      services                                       |     | (2,145) |  |     | (2,291) 
|Unrecognized net loss                                                                       |     | (6,679) |  |     | (12,679)
|                                                                                           
|                                                                                            |     | 37,066  |  |     | 8,911   
|Additional labor liability                                                                  |     | 15,795  |  |     | 13,123  
|                                                                                           
|Total                                                                                       | Ps. | 52,861  |  | Ps. | 22,034  
|                                                                                           
|Total Labor Liabilities                                                                     | Ps. | 580,127 |  | Ps. | 193,317 
|                                                                                           



|                                 
|---------------------------------
|Expense for
      the Year:      
|                                 
|Pension and retirement
      plan
|Seniority premiums               
|                                 
|                                 
|                                 

|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 actual behavior of those variables at the end of
the year.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|At December 31, 2003 and 2002, the projected
benefit obligation in some  subsidiaries was less than the accumulated benefit obligation
reduced by the  amount of the plan assets at fair value, resulting in an additional
liability,  which is recorded as an intangible asset included in other assets (see Note
11).
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|The trust assets consist of fixed income and
variable funds, valued at market.
|------------------------------------------------------------------------------



|The pension plan trust assets are invested as of
December 31, 2003 and 2002 in  the following financial instruments:
|--------------------------------------------------------------------------------------------------------------------

|                                      
|--------------------------------------
|                                      
|                                      
|Fixed Rate:                           
|Traded securities                     
|Bank instruments                      
|Federal government
        instruments
|                                      
|Variable Rate.                        
|Publicly-traded
        shares        
|                                      
|                                      
|                                      



|The Company has a policy of maintaining at least
30% of the trust assets in  Federal Government instruments. Objective portfolio
guidelines have been  established for the remaining 70%, and investment decisions are
being made to  comply with those guidelines to the extent that market conditions and
available  funds allow. The composition of the objective portfolio is consistent with the
Mexican company share composition of the portfolios of the five best-known  international
companies that manage long-term funds.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|The contributions to the pension plan by certain
subsidiaries amounted to Ps.  100 (nominal value) at December 31, 2003. The Company
estimates that it will not  have to contribute to the pension plan during 2004.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|The integral result of financing includes the
interest cost related to labor  liabilities, net of the return on plan assets. This
amounted to Ps. 14,276, Ps.  5,496 and Ps. 5,495 for the years ended December 31, 2003,
2002 and 2001,  respectively.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Note 16.  Bonus Program
|-----------------------



|The bonus program for executive officers is
based upon the accomplishment of  certain critical factors, established annually by
management. The bonus is paid  in cash the following year, based on the accomplishment of
such goals.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



---





|In 1999 and the following five years, the
Company instituted a new compensation  plan for certain key executives, which consisted
of granting them an annual  bonus in FEMSA and Coca-Cola FEMSA stock or options, based on
each executives  responsibilities within the organization and the executives
performance. 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, beginning one
year after they are granted. The five-year program ended in 2003, the last year  shares
were assigned.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Note 17.  Bank Loans
|--------------------



|Current bank loans and notes payable outstanding
at December 31, 2003 and 2002,  principally consist of revolving loans denominated in
Mexican pesos and US  dollars. The weighted average annual interest rate in 2003 for debt
denominated  in Mexican pesos and US dollars was 6.25% and 6.24%, respectively, and in
2002  the weighted average annual rate was 8.74% for revolving loans denominated in US
dollars.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Long-term bank loans and notes payable of the
Company, as well as their maturity  dates, are as follows:
|--------------------------------------------------------------------------------------------------------

|                                           
|-------------------------------------------
|                                           
|                                           
|Fixed interest rate:                       
|                                           
|US dollars:                                
|                                           
|                                           
|                                           
|Mexican pesos:                             
|                                           
|                                           
|                                           
|Variable interest
      rate:              
|                                           
|US dollars:                                
|                                           
|                                           
|                                           
|Mexican pesos:                             
|                                           
|                                           
|                                           
|Colombian pesos:                           
|                                           
|                                           
|Long-Term Debt                             
|Current maturities of
      long- term debt
|                                           
|                                           
|                                           



| | F-21 | 
| | ---- | 



---





|                                            
|--------------------------------------------
|                                            
|                                            
|                                            
|                                            
|Fixed interest rate:                        
|                                            
|US dollars:                                 
|Yankee Bond                                 
|Private Placement                           
|                                            
|Mexican pesos:                              
|Notes                                       
|Units of Investment 
             (UDIS)    
|                                            
|                                            
|Variable interest rate:                     
|                                            
|US dollars:                                 
|Bank Loans                                  
|Leasing                                     
|                                            
|Mexican pesos:                              
|Bank Loans                                  
|Notes                                       
|                                            
|Colombian pesos:                            
|Notes                                       
|                                            
|                                            
|Long-Term Debt                              
|Current maturities of 
       long-term debt
|                                            
|                                            
|                                            

|The Company and some of its subsidiaries have
financing from different  institutions, with different restrictions and covenants, which
mainly consist of  maximum levels of leverage and capitalization, as well as minimum
consolidated  net worth and debt and interests coverage ratios. As of December 31, 2003,
the  Company was in compliance with all restrictions and covenants established in  their
financing agreements.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|The Company has restricted cash of approximately
$43,000, which has been pledged  as collateral for some of its short-term bank loans.
|--------------------------------------------------------------------------------------------------------------------------------------



|Note 18.  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 debt is based on
quoted market  prices.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|              
|--------------
|              
|              
|Carrying value
|Fair value    
|              



|b) | Equity
Forward Contract:
|-- | ------------------------



| | As mentioned
in Note 9, during 2002 a subsidiary of the Company entered  into an equity forward
purchase contract, expiring in March 2004, on 92%  of the Molson shares received from the
sale of Kaiser, with a notional  amount of
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | F-22 | 
| | ---- | 



---





| | approximately Ps.
203,350. The fair value of the equity forward  purchase contract of Ps. 73,799 is the
loss resulting from the difference  between the strike price of the forward contract and
the market value of  the shares.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|c) | Interest
Rate Swaps:
|-- | --------------------



| | The Company
uses interest rate swaps to manage the interest rate risk  associated with its
borrowings, pursuant to which it pays amounts based on  a fixed rate and receives amounts
based on a floating rate. Additionally,  the Company sold some put options as a
complement to the swap agreements,  for which a premium was received. The net effect for
the year ended  December 31, 2003 is recorded in the financing expenses and amounted to
Ps.  31,480.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | The fair
value is estimated based on quoted market prices to terminate the  contracts at the
reporting date.
| | ------------------------------------------------------------------------------------------------------------



| | At December
31, 2003, the Company has the following outstanding agreements:
| | ---------------------------------------------------------------------------

|            
|------------
|MaturityDate
|            
|May 2006    
|April 2008  
|May 2008    
|July 2008   
|            



|d) | Forward
Agreements to Purchase-Sell US Dollars:
|-- | -----------------------------------------------



| | At December
31, 2003 and 2002, the Company does not have any forward  agreements to hedge its
operations denominated in US dollars.
| | -----------------------------------------------------------------------------------------------------------------------------------



| | During 2003
various contracts to guarantee the purchase of US dollars in  connection with the
acquisition of Panamco were terminated, which resulted  in an exchange loss of
approximately Ps. 293,827.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|e) | Commodity
Price Contracts:
|-- | --------------------------



| | During 2002
and 2003 the Company entered into various derivative contracts  maturing in 2003 and 2004
to hedge the cost of aluminum. The result of the  commodity price contracts was a gain of
Ps. 3,019 as of December 31, 2003,  which is recorded in the results of operations of the
year. The fair value  is estimated based on quoted market prices to terminate the
contracts at  the reporting date.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | The outstanding
contracts and their terms are as follows:
| | ---------------------------------------------------------

| |                     
| | --------------------
| | Maturity 
      Date
| |                     
| | 2004                
| |                     

|Note 19.  Minority Interest in Consolidated
Subsidiaries
|--------------------------------------------------------

|               
|---------------
|               
|               
|Mexico         
|Colombia       
|Central America
|               
|               
|               



|Note 20.  Stockholders Equity
|------------------------------



|As of December 31, 2003, the capital stock of
the Company was comprised of  1,846,374 thousands common shares without par value and
with no foreign  ownership restrictions. Fixed capital amounts to Ps. 820,503 (nominal
value) and  variable capital may not exceed 10 times the minimum fixed capital stock.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | F-23 | 
| | ---- | 



---





|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 76% 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.
| | - |  | -----------------------------------------------------------------



|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, 2003, Coca-Cola FEMSAs
capital stock is comprised as  follows:
|----------------------------------------------------------------------------------

|      
|------
|Series
|      
|A     
|D     
|L     
|      
|Total 
|      



|The restatement of stockholders equity 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 a stockholders meeting held on December 20,
2002, the stockholders approved  that the agreements reached in such meeting be deemed
legal on the dates  required to complete the Panamco acquisition, the most significant of
which were  an increase in capital stock and additional paid-in capital of Ps. 9,819,542
to  be contributed by FEMSA and The Coca-Cola Company.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|At an ordinary stockholders meeting held on
March 11, 2002, the stockholders  approved:
|----------------------------------------------------------------------------------------

| |  |  | Dividends
in the amount of 0.3937 Mexican pesos per share (nominal value) were  declared and
subsequently paid in May 2002.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------

| |  |  | A
maximum of Ps. 400,000 for a  stock repurchase program.
| | - |  | ---------------------------------------------------------



|The net income of the Company is subject to the
legal requirement that 5%  thereof be transferred to a legal reserve until such reserve
equals 20% of  capital stock. This reserve may not be distributed to stockholders during
the  existence of the Company, except as stock dividends. As of December 31, 2003,  the
legal reserve for Coca-Cola FEMSA amounted to Ps. 126,650 (nominal value).
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Retained earnings and other reserves distributed
as dividends, as well as the  effects derived from capital reductions, are subject to
income tax at the rate  in effect, except for the restated stockholder contributions and
distributions  made from consolidated taxable income, denominated Cuenta de
Utilidad Fiscal  Neta Consolidada (CUFIN). From 1999 to 2001, the
deferral of a portion (3% in  1999 and 5% in 2000 and 2001) of the income tax was
allowed, until the  distribution of such earnings as dividends. For this purpose a
Cuenta de  Utilidad Fiscal Neta Consolidada Reinvertida (CUFINRE)
was created, which  like CUFIN represents previously taxed earnings. Beginning in 2002,
the right to  defer payment of this income tax was eliminated.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | F-24 | 
| | ---- | 



---





|Dividends paid in excess of CUFIN and CUFINRE
will be subject to income taxes at  a grossed-up rate based on the current statutory
rate. Beginning in 2003, this  tax may be credited against the income tax of the year in
which the dividends  are paid and in the following two years against the income tax and
estimated tax  payments.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|As of December 31, 2003, the balances of CUFIN
and CUFINRE amounted to Ps. 2,389,700 and Ps. 2,525,847.
|-------------------------------------------------------------------------------------------------------



|Note 21. Net Majority Income per Share
|--------------------------------------



|This represents the net majority income
corresponding to each share of the  Companys capital stock, computed on the basis of the
weighted average number of  shares outstanding during the year.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Note 22. Tax System
|-------------------



|a) | Income
Tax:
|-- | -----------



| | Income tax
is computed on taxable income, which differs from accounting  income principally due to
the treatment of the integral result of  financing, the cost of labor liabilities,
depreciation and other  accounting provisions. In the case of Mexico, it also differs
because  purchases are deductible instead of cost of sales. The tax loss of any  year may
be carried forward and could be applied against taxable income as  indicated below.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | The income
tax rates applicable in the countries where the Company  operates and the period in which
tax loss carryforwards may be applied are  as follows:
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                         
|---------------------------------------------------------
|                                                         
|                                                         
|Statutorytax rate                                        
|Tax 
            loss carryforward
            expiration
|                                                         

| | (a) | In
Brazil tax loss carryforwards do not expire and may be carried  forward indefinitely.
Utilization of tax carryforwards in any year,  however, is limited to 30% of the taxable
income generated in such  year.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (b) | Colombian
tax losses generated before December 31, 2002 may be carried  forward for a period of
five years, and tax losses generated after  January 1, 2003 may be carried forward for a
period of eight years, but  limited to 25% of the taxable income of each year.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (c) | In
Guatemala tax loss carryforwards may only be applied by companies of  recent creation
(not applicable to the Company).
| | --- | -------------------------------------------------------------------------------------------------------------------------



| | The Mexican
statutory income tax rate from 2000 through 2002 was 35%.  Beginning 2003, the rate will
be reduced one percentage point per year  through 2005, when the rate will be 32%.
Therefore the statutory tax rate  for Mexico during 2003 is 34%.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|b) | Tax
on Assets:
|-- | --------------



| | The operations
in Mexico, Guatemala, Nicaragua, Venezuela, Colombia and  Argentina are subject to a tax
on assets.
| | ------------------------------------------------------------------------------------------------------------------



| | The Mexican
tax on assets is computed at an annual rate of 1.8% based on  the average of certain
assets at tax restated value less certain  liabilities. The tax on assets is paid only to
the extent that it exceeds  the income tax of the year. If in any year a tax on assets
payment is  required, this amount can be credited against the excess of income taxes
over the tax on assets in each of the preceding three years. Additionally,  this payment
may be restated and credited against the excess of income  taxes over asset taxes for the
following ten years.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | In Guatemala
there is an alternative minimum tax (IEMA) equivalent to  the lower of 2.25%
of the prior years revenues or 3.5% of total assets as  of the beginning of the year,
which is paid only to the extent that it  exceeds the income taxes of the year. If in any
year a payment of IEMA is  required, this amount may be credited against the
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | F-25 | 
| | ---- | 



---





| | excess of
income taxes  over the IEMA of the following year. Such alternative minimum tax was
declared unconstitutional in February 2, 2004.
| | --------------------------------------------------------------------------------------------------------------------------------------------



| | In Nicaragua
the tax on assets results from applying a 1% rate to total  tax assets as of the end of
the year, and it is paid only to the extent  that it exceeds the income taxes of the
year. If in any year a tax on  assets payment is required, this tax is definitive and
amount may not be  credited against the excess of income taxes in future years.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | In Venezuela
the tax on assets results from applying a 1% rate to the net  average amount of
non-monetary assets adjusted for inflation and monetary  assets devalued for inflation.
The tax on assets is paid only to the  extent that it exceeds the income tax of the year.
If in any year a tax on  assets payment is required, this amount may be credited against
the excess  of income taxes over the tax on assets in the following three years.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | In Colombia
the tax on assets results from applying a 6% rate to net tax  assets as of the beginning
of the year to determine the basis for the  alternative minimum tax, equivalent to 38.5%
of such basis. This tax is  paid only to the extent that it exceeds the income taxes of
the year. If a  tax on assets payment was required in 2001 or 2002, the amount may be
credited against the excess of income taxes over the tax on assets in the  following
three years. If a tax on assets payment is required subsequent  to 2002, the amount may
be credited against the excess of income taxes  over the tax on assets in the following
five years.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | The tax
laws in Argentina established a Tax on Minimum Presumptive Income  (TMPI)
that results from applying a rate of 1% to certain productive  assets, and it is paid
only to the extent that it exceeds the income taxes  of the year. If in any year a
payment is required, this amount may be  credited against the excess of income taxes over
the TMPI in the following  ten years.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|c) | Employee
Profit Sharing:
|-- | ------------------------



| | Employee profit
sharing is applicable to Mexico and Venezuela. In Mexico  employee profit sharing is
computed at the rate of 10% of the individual  taxable income except that depreciation of
historical, rather than  restated values is used, foreign exchange gains and losses are
not  included until the asset is disposed of or the liability is due, and the  other
effects of inflation are also excluded in Venezuela employee profit  sharing is
equivalent to 15% of after tax earnings.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|d) | Deferred
Income Taxes and Employee Profit Sharing:
|-- | --------------------------------------------------



| | The temporary
differences that generated deferred income tax liabilities  (assets) are as follows:
| | --------------------------------------------------------------------------------------------------

|                                   
|-----------------------------------
|Deferred Income Taxes              
|                                   
|Inventories                        
|Property, plant and equipment(1)   
|Investments in shares              
|Other assets                       
|Pension plan and seniority premiums
|Tax loss carryforwards             
|Reserves                           
|                                   
|                                   
|                                   

|(1) |  | Including
bottles and cases.
|--- |  | ----------------------------



| | F-26 | 
| | ---- | 



---





| | The changes
in the balance of the deferred income taxes for the year are  as follows:
| | -------------------------------------------------------------------------------------

|                                       
|---------------------------------------
|                                       
|                                       
|Balance at beginning of the year       
|Balance acquisition of Panamco         
|Provision for the year                 
|Change in the statutory income tax rate
|Result of holding non-monetary assets  
|                                       
|Balance at end of the year             
|                                       



| | At December
31, 2003, there are no significant non-recurring temporary  differences between the
accounting income for the year and the bases for  employee profit sharing, therefore the
Company did not record a provision  for deferred Mexican employee profit sharing.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|e) | Income
Taxes, Tax on Assets and Employee Profit Sharing Provisions:
|-- | -------------------------------------------------------------------

|                       
|-----------------------
|                       
|                       
|Current income taxes   
|Deferred income taxes  
|Employee profit sharing
|                       
|                       
|                       



| | A reconciliation
of the Mexican statutory income tax rate to the  consolidated effective tax rate is as
follows:
| | ----------------------------------------------------------------------------------------------------------------

|                                                                                   
|-----------------------------------------------------------------------------------
|                                                                                   
|                                                                                   
|Mexican statutory income tax rate                                                  
|Gain from monetary
        position                                                
|Inflationary component                                                             
|Non-deductible expenses
        and other                                          
|Income taxed at other
        than Mexican
                  statutory
        rate
|Goodwill impairment                                                                
|                                                                                   
|Consolidated effective tax rate                                                    
|                                                                                   

|f) | Tax
Loss Carryforwards and Recoverable Tax on Assets:
|-- | -----------------------------------------------------



| | As of
December 31, 2003, only Mexico, Venezuela and Brazil subsidiaries have  tax loss
carryforwards and/or recoverable tax on assets.
| | --------------------------------------------------------------------------------------------------------------------------------------



| | The expiration
dates of such amounts are as follows:
| | ----------------------------------------------------

|                   
|-------------------
|Year               
|                   
|2004               
|2005               
|2006               
|2007               
|2008               
|2009               
|2010 and thereafter
|                   
|                   
|                   



| | Due to
the uncertainty of the realization of certain tax loss  carryforwards, as of December 31,
2003 a valuation allowance has been  provided of Ps. 1,275,646 of the carryforward.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | F-27 | 
| | ---- | 



---





|Note 23.  Contingencies and Commitments
|---------------------------------------



|a) | Contingencies:
|-- | --------------



| | During 2002,
Coca-Cola FEMSA initiated an appeal related to the IEPS  (Special Tax on Products
and Services) applicable to inventories produced  with high fructose content.
Additionally, during 2003, the Company included  in its appeal the IEPS applicable to
dietetic soft drinks and mineral  waters. On November 21, 2003, the Company obtained a
favorable resolution  for its 2002 claim and during 2004 is expecting to receive from the
authorities the IEPS paid during 2002, including accrued interest. An  appeal related to
the IEPS paid in 2003 has also been initiated, and  management and legal counsel believe
that it is highly probable that it  will obtain a favorable resolution. The Company has
posted a bond for 2003  Mexican tax liabilities in the amount of Ps. 84,792, for which
management  has a high expectation that payments will not have to be made.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | In 2000,
the Comision Federal de Competencia in Mexico (the Mexican  Antitrust Commission, the
Commission) initiated an investigation of the  sales practices of Coca-Cola
and its bottlers. In February 2002, through a  final resolution, the Mexican Antitrust
Commission held that Coca-Cola and  its bottlers engaged in monopolistic practices with
respect to exclusivity  arrangements with certain retailers, and ordered Coca-Cola and
its  bottlers, to abstain from entering into any exclusivity arrangement with  retailers.
The Company, along with other Coca-Cola bottlers, appealed the  resolution. In 2003, the
Company were requested by the Commission to  deliver some intellectual and proprietary
information, and the bottlers  refused to deliver the information and initiated another
appeal, with most  subsidiaries obtaining injunctions against the orders from the
Commission.  The Company and its legal counsel believe that it is probable to prevail
and obtain a permanent injunction against the Commission.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | During 2001,
the Comision para Promover la Competencia in Costa Rica (the  Costa Rican Antitrust
Commission) initiated an investigation on the sales  practices of Coca-Cola for
alleged monopolistic practices in the retail  distribution channel including the gain of
share of sales through  exclusivity arrangements. The Company does not believe that the
resolution  of this matter will have a material adverse effect on its financial
condition or results of operations.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | In 1999,
the Company received notice of certain tax claims asserted by the  Venezuelan taxing
authorities. These claims currently total approximately  $23,000. The Company has certain
rights to indemnification from the  original owner before Panamco and The Coca-Cola
Company for a substantial  portion of such claims. The Company does not believe that the
ultimate  disposition of these cases will have a material adverse effect on its
financial condition or results of operations.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | Since 2001,
the Venezuelan subsidiary was the subject of lawsuits filed by  former distributors,
claiming alleged labor and severance rights owed to  them at the time of the termination
of their relationship with the  Venezuelan subsidiary, for a total amount of
approximately $31,000. The  Company believes based on the decisions rendered by the
Supreme Court on  similar cases, as well as based on the analysis of each case, that
these  claims are without merit.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | In 2001,
a labor union and several individuals from the Republic of  Colombia filed a lawsuit in
the U.S. District Court for the Southern  District of Florida against the Company and The
Coca-Cola Company. In the  complaint, the plaintiffs alleged that the Company engaged in
wrongful acts  against the labor union and its members in Colombia for the amount of
$500,000. The Company has filed a motion to dismiss the complaint for lack  of subject
matter and personal jurisdiction and believes this lawsuit is  without merit. The Company
has received proposals to settle the claim, but  no agreements have been reached.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | There are
certain tax contingencies of the foreign subsidiaries that  required asset guarantees
while in litigation.
| | --------------------------------------------------------------------------------------------------------------------



| | The Company
also has various other loss contingencies, for which reserves  have been recorded in
those cases where the Company believes the results of  an unfavorable resolution is
probable. The details regarding these  contingencies has not been disclosed since the
Company believes that to do  so would adversely impact its legal position.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | Other legal
proceedings are pending against or involve the Company and its  subsidiaries, which are
incidental to the conduct of their businesses. The  Company believes that the ultimate
disposition of such other proceedings  will not have a material adverse effect on its
consolidated financial  condition or results of operations
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|b) | Commitments:
|-- | ------------



| | As of
December 31, 2003 the Company has operating lease commitments as  follows:
| | --------------------------------------------------------------------------------



| | F-28 | 
| | ---- | 



---





|
|
|
|
|
|
|
|
|
|
|
|

| | Rental expense
for all  operating  leases  charged  against  earnings  amounted  to  approximately  Ps.
146,976,  Ps.  35,628  and Ps. 36,155 for the years ended December 31, 2003, 2002 and
2001, respectively.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Note 24.  Information by Segment
|--------------------------------



|Relevant information concerning the subsidiaries
of Coca-Cola FEMSA, divided by  geographic areas, is as follows:
|-----------------------------------------------------------------------------------------------------------------

|
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|(1) |  | Includes
Guatemala, Costa Rica, Panama and Nicaragua
|--- |  | ----------------------------------------------------

|(2) |  | Includes
breakage  of bottles
|--- |  | -----------------------------



| | F-29 | 
| | ---- | 



---





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|(1) |  | Includes
Guatemala, Costa Rica, Panama and Nicaragua
|--- |  | ----------------------------------------------------

|(3) |  | Excludes
the non-cash charges relatives to current assets and liabilities
|--- |  | -------------------------------------------------------------------------



| | F-30 | 
| | ---- | 



---





|
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|(1) |  | Includes
Guatemala, Costa Rica, Panama and Nicaragua
|--- |  | ----------------------------------------------------

|(4) |  | Includes
investments in property, plant and equipment and other assets
|--- |  | ----------------------------------------------------------------------



| | F-31 | 
| | ---- | 



---





|Note 25.  Differences Between Mexican GAAP
and US GAAP
|------------------------------------------------------



|The consolidated financial statements of the
Company are prepared in accordance  with Mexican GAAP, which differs in certain
significant respects from US GAAP. A  reconciliation of the reported majority net income,
majority stockholders  equity and majority comprehensive income to US GAAP is presented
in Note 26. It  should be noted that this reconciliation to US GAAP does not include the
reversal of the restatement of the financial statements as required by Bulletin  B-10,
Reconocimiento de los Efectos de la Inflacion en la Informacion  Financiera
(Recognition of the Effects of Inflation in the Financial  Information), of Mexican GAAP,
since 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 below.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|a) | Restatement
of Prior Year Financial Statements:
|-- | -----------------------------------------------



| | As explained
in Note 5 a), in accordance with Mexican GAAP, the financial  statements for Mexican
subsidiaries for prior years were restated using  inflation factors, and for foreign
subsidiaries and affiliated companies  for prior years were restated using the inflation
rate of the country in  which the foreign subsidiary or affiliated company is located,
then  translated to Mexican pesos at the year-end exchange rate.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | Under US
GAAP, the Company applies the regulations of the Securities and  Exchange Commission of
the United States of America (SEC), which require  that prior year financial
statements be restated in constant units of the  reporting currency, in this case the
Mexican peso, which requires the  restatement of such prior year amounts using inflation
factors.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | Additionally, all
other US GAAP adjustments for prior years have been  restated based upon the SEC
methodology.
| | ---------------------------------------------------------------------------------------------------------------



|b) | Classification
Differences:
|-- | ---------------------------



| | Certain items
require a different classification in the balance sheet or  income statement under US
GAAP. These include:
| | ------------------------------------------------------------------------------------------------------------------------

| |  |  | As
explained in Note 5 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) | Deferred
Promotional Expenses:
|-- | ------------------------------



| | As explained
in Note 5 d), for Mexican GAAP purposes, the promotional  costs related to the launching
of new products or presentations are  recorded as prepaid expenses. For US GAAP purposes,
such promotional costs  are expensed as incurred.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|d) | Intangible
Assets:
|-- | ------------------



| | As mentioned
in Note 5 i), under Mexican GAAP until January 1, 2003 all  intangible assets were
amortized over a period of no more than 20 years.  Effective January 1, 2003 revised
Bulletin C-8, Activos Intangibles  (Intangible Assets) (C-8),
went into effect and recognizes that certain  intangible assets have indefinite lives and
should not be amortized. Under  US GAAP, in accordance with Statement of Financial
Accounting Standards  (SFAS) No. 142, Goodwill and Other Intangible
Assets, effective  January 1, 2002, goodwill and indefinite-lived intangible assets
are also  no longer subject to amortization but rather are subject to periodic
assessment for impairment. Accordingly, amortization of indefinite-lived  intangible
assets was discontinued in 2002 for US GAAP and in 2003 for  Mexican GAAP.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | F-32 | 
| | ---- | 



---





| | A reconciliation
of previously reported net income and income per share  under US GAAP to the amounts
adjusted to exclude intangible amortization  is as follows:
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                   
|-----------------------------------
|                                   
|                                   
|Reported net income:               
|Add: intangible
      amortization 
|                                   
|Adjusted net income                
|                                   
|Reported net income per share:     
|Add: intangible
      amortization 
|                                   
|Adjusted net income
      per share
|                                   

| | As a
result of the adoption of this standard, the Company performed an  impairment test as of
January 1, 2002 and found no impairment. Subsequent  impairment tests are performed
annually by the Company, unless an event  occurs or circumstances change that would more
likely than not reduce the  fair value of a reporting unit below its carrying amount, in
which case an  impairment test would be performed between annual tests. As mentioned in
Note 4, due to significant adverse changes in the Argentine economy during  2002, on July
1, 2002 the Company recognized an impairment of the  intangible generated by the
acquisition of Coca-Cola FEMSA de Buenos Aires.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|e) | Restatement
of Imported Equipment:
|-- | ----------------------------------



| | As explained
in Note 5 e), under Mexican GAAP, imported machinery and  equipment have been restated by
applying the inflation rate of the country  of origin, then translated at the year-end
exchange rate of the Mexican  peso.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | Under US
GAAP, the Company applies the SEC regulations, which require that  all machinery and
equipment, both domestic and imported, be restated using  inflation factors.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|f) | Capitalization
of the Integral Result of Financing:
|-- | ---------------------------------------------------



| | Under Mexican
GAAP, the capitalization of the integral result of financing  (interest, foreign exchange
and monetary position) generated by loan  agreements obtained to finance investment
projects is optional, and the  Company has elected not to capitalize the integral result
of financing.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | In accordance
with US GAAP, if interest is incurred during the  construction of qualifying assets,
capitalization is required as part of  the cost of such assets. Accordingly, a
reconciling item for the  capitalization of a portion of the integral result of financing
is  included in the US GAAP reconciliation of the majority net income and  majority
stockholders equity. If the borrowings are denominated in US  dollars, the
weighted-average interest rate on all such outstanding debt  is applied to the balance of
construction-in-progress to determine the  amount to be capitalized. If the borrowings
are denominated in Mexican  pesos, the amount of interest to be capitalized 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 5 r), beginning in  January 2001 Bulletin C-2,
Instrumentos Financieros (Financial  Instruments), 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 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.
| | - |  | -------------------------------------------------------------------------------------------------------------



| | F-33 | 
| | ---- | 



---





| | For purposes
of SFAS No. 133, the Company elected not to designate its  financial instruments as
hedges for the derivative instruments, and  accordingly the entire effect of the
valuation of those instruments  contracted before December 31, 2000, was recognized in
the income  statement as a change in accounting principle under US GAAP at January 1,
2001.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | Under Mexican
GAAP, the swap agreements for aluminum prices, as well as  cash-settled options
contracted by the Company (see Note 18), have been  designated as hedges and accordingly
valued using the same valuation  criteria applied to the underlying asset or liability,
which are  recognized in the income statement when the consumption or payment takes
place. However, under US GAAP, these agreements must be adjusted to their  market value,
recognizing the corresponding asset or liability. Since the  hedging relationship
required by US GAAP has not been adequately  documented, a reconciling item has been
included in the US GAAP  reconciliation to adjust earnings for this difference in
valuation method.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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

| |  |  | Under
Mexican GAAP, deferred taxes are classified as non-current, while  under US GAAP are
based on the classification of the related asset or  liability.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | Under
Mexican GAAP, the effects of inflation on the deferred tax  balance generated by monetary
items are recognized in the result on  monetary position. Under US GAAP, the deferred tax
balance is  classified as a non-monetary item. As a result, the consolidated income
statement differs with respect to the presentation of the gain (loss)  on monetary
position and deferred income tax provision.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | Under
Mexican GAAP, the change in statutory income tax rate (see Note  22 a) approved early in
2002 prior to issuance of the financial  statements was considered in the calculation of
deferred taxes at  December 31, 2001. Under US GAAP, a change in statutory tax rate may
not be considered until the enactment date, which was January 1, 2002.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | 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.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | The
differences in prepaid expenses, restatement of imported machinery  and equipment,
capitalization of financing costs, financial instruments  and pension plan mentioned in
Note 25 c) e), f), g) and i) generate a  difference calculating the deferred income tax
under US GAAP compared  to the one presented under Mexican GAAP (see Note 22 d).
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                                    
|--------------------------------------------------------------------
|Reconciliation of Deferred Income
      Taxes                       
|                                                                    
|Deferred income taxes under Mexican
      GAAP                      
|US GAAP adjustments:                                                
|Prepaid expenses                                                    
|Restatement of imported
      machinery and plant and equipment, net
|Financial instruments                                               
|Pension and retirement
      plans                                  
|                                                                    
|Total adjustments                                                   
|Restatement of prior year financial
      statements                
|                                                                    
|Deferred income taxes under US GAAP                                 
|                                                                    



| | The total
deferred income taxes under US GAAP include the  corresponding  current  portion  (asset)
liability as of December 31,  2003 and 2002 of Ps. (172,026) and Ps. 84,674, respectively.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | F-34 | 
| | ---- | 



---





| | The changes
in the balance of the deferred income taxes for the years  under US GAAP are as follows:
| | ----------------------------------------------------------------------------------------------------

|                                    
|------------------------------------
|                                    
|                                    
|Balance at the beginning of the year
|Provision for the year              
|Other comprehensive income          
|Panamco acquisition effect          
|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                 
|Other
      assets                                       
|Pension
      and retirement plans                       
|Other
      reserves                                     
|                                                         
|Total adjustments                                        
|                                                         
|Deferred employee profit
      sharing under US GAAP     
|                                                         



|The changes in the balance of the deferred
employee profit sharing for the years  under US GAAP are as follows:
|---------------------------------------------------------------------------------------------------------------

|                                          
|------------------------------------------
|                                          
|                                          
|Balance at the beginning
      of the year
|Provision for the year                    
|Panamco acquisition effect                
|Inflation adjustment                      
|                                          
|Balance at the end of the
      year      
|                                          

|i) | Pension
Plan:
|-- | -------------



| | Under Mexican
GAAP, the liabilities for employee benefits are determined  using actuarial computations
in accordance with Bulletin D-3,  Obligaciones Laborales (Labor Obligations),
which is substantially the  same as US GAAP SFAS No. 87, Employers Accounting for
Pensions, except  for the initial year of application of both bulletins, which
generates a  difference in the unamortized prior service costs and in the amortization
expense.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | Under Mexican
GAAP and US GAAP, there is no difference in the liabilities  for seniority premiums.
| | --------------------------------------------------------------------------------------------------



| | The Company
has prepared a study of pension costs under US GAAP based on  actuarial calculations
using the same assumptions applied under Mexican  GAAP (see Note 15).
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 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 expense
      (income) that must be 
          recognized under US GAAP
|                                                                                  



| | F-35 | 
| | ---- | 



---



|                                                                 
|-----------------------------------------------------------------
|Pension
      Liability                                          
|                                                                 
|Projected
      benefit obligation                               
|Pension
      plan funds 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              
|                                                                 

|                                             
|---------------------------------------------
|Change
      in Projected Benefit Obligation 
|                                             
|Obligation
      at the beginning of the year
|Panamco
      acquisition                    
|Service
      cost                           
|Interest
      cost                          
|Actuarial
      gain (loss)                  
|Benefits
      paid                          
|                                             
|Obligation
      at the end of the year      
|                                             

|                                                
|------------------------------------------------
|Change
      in Pension Plan Funds              
|                                                
|Balance
      at the beginning of the year      
|Panamco
      acquisition                       
|Actual
      return on plan assets in real terms
|Benefits
      paid                             
|                                                
|Balance
      at the end of the year            
|                                                

|j) | Minority
Interest:
|-- | ------------------



| | Under Mexican
GAAP, the minority interest in consolidated subsidiaries is  presented as a separate
component within stockholders equity in the  consolidated balance sheet.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | Under US
GAAP, this item must be excluded from consolidated stockholders  equity in the
consolidated balance sheet. Additionally, the minority  interest in the net earnings of
consolidated subsidiaries is excluded from  consolidated net income.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | The US
GAAP adjustments shown in Note 26 a) and b) are calculated on a  consolidated basis.
Therefore, the minority interest effect is presented as  a separate line item, in order
to obtain net income and stockholders  equity.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|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,
which is presented excluding the effects of inflation (see Note  25 l).
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------



| | F-36 | 
| | ---- | 



---





|l) Summarized Consolidated Financial
Information under US GAAP:
|---------------------------------------------------------------

| |                                                     
| | ----------------------------------------------------
| | Balance Sheets                                      
| |                                                     
| | Current assets                                      
| | Property, plant and
      equipment, net            
| | Other assets                                        
| |                                                     
| | Total assets                                        
| |                                                     
| | Current liabilities                                 
| | Long-term liabilities                               
| | Other liabilities                                   
| |                                                     
| | Total liabilities                                   
| | Minority interest
      in consolidated subsidiaries
| | Stockholders equity                                
| |                                                     
| | Total liabilities
      and stockholders equity    
| |                                                     

| |                                                 
| | ------------------------------------------------
| | Income Statements                               
| |                                                 
| | Total revenues                                  
| | Income from operations                          
| | Income before income tax
      and tax on assets
| | Income tax                                      
| | Net income                                      
| | Minority net income                             
| |                                                 
| | Majority net income                             
| | Cumulative translation result                   
| | Result of holding non-monetary
      assets     
| | Other comprehensive income                      
| |                                                 
| | Comprehensive income                            
| |                                                 
| | Weighted average common
      shares outstanding
| |                                                 
| | Net comprehensive income
      per share        
| |                                                 



| | F-37 | 
| | ---- | 



---





|                                                      
|------------------------------------------------------
|Cash Flows(1)                                         
|                                                      
|Net income                                            
|Non-cash items                                        
|Other expenses                                        
|Working capital investment                            
|                                                      
|Net cash flows from operating activities              
|                                                      
|Panamco acquisition                                   
|Fixed and other assets investments                    
|                                                      
|Total investing activities                            
|                                                      
|Financial expenses                                    
|Bank loans                                            
|Capital increase                                      
|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 from Panamco acquisition    
|Cash and cash equivalents at the beginning of the year
|                                                      
|Cash and cash equivalents at the end of the year      
|                                                      

|(1) |  | Expressed in historical Mexican pesos
|--- |  | -------------------------------------

|                                             
|---------------------------------------------
|Supplemental Information about Cash Flows:(1)
|                                             
|Interest paid                                
|Income tax and tax on assets paid            
|                                             

|(1) |  | Expressed in historical Mexican pesos
|--- |  | -------------------------------------

|                                                 
|-------------------------------------------------
|Statements of Changes in Stockholders Equity:   
|                                                 
|Stockholders equity at the beginning of the year
|Dividends declared and paid                      
|Cumulative translation adjustment                
|Increase in capital stock                        
|Result of holding non-monetary assets            
|Other comprehensive income                       
|Net income for the year                          
|                                                 
|Stockholders equity at the end of the year      
|                                                 



| | F-38 | 
| | ---- | 



---





|Note 26.  Reconciliation of Mexican GAAP to
US GAAP
|---------------------------------------------------



|a)      Reconciliation of Net
      Majority Income for the year:
|-----------------------------------------------------------------

|                                                                                   
|-----------------------------------------------------------------------------------
|                                                                                   
|                                                                                   
|Net majority income under Mexican GAAP                                             
|US GAAP adjustments:                                                               
|Restatement of prior year financial
        statements(Note
        25 a)          
|Deferred promotional expenses
        (Note 25 c)                                  
|Intangible assets (Note 25 d)                                                      
|Restatement of imported machinery
        and equipment
                (Note 25 e)
|Capitalization of the integral
        result of financing(Note
        25 f)      
|Financial instruments (Note 25
        g)                                          
|Deferred income taxes (Note 25
        h)                                          
|Deferred employee profit sharing
        (Note 25 h)                               
|Pension plan  (Note 25 i)                                                          
|                                                                                   
|Total adjustments                                                                  
|                                                                                   
|Net income 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 result of financing,
goodwill and pension plan liabilities  that are non-monetary.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|b) | Reconciliation
of Stockholders Equity:
|-- | ---------------------------------------

|                                                                      
|----------------------------------------------------------------------
|                                                                      
|                                                                      
|Majority stockholders equity under Mexican GAAP                      
|US GAAP adjustments:                                                  
|Restatement of prior
        year financial statements (Note 25 a)    
|Deferred promotional
        expenses (Note 25 c)                     
|Intangible assets 
        (Note 25 d)                                
|Restatement of imported
        machinery and equipment (Note 25 e)   
|Capitalization of
        the integral result of financing (Note 25 f)
|Other comprehensive
        income (Note 25 g)                        
|Deferred income taxes
        (Note 25 h)                             
|Deferred employee
        profit sharing (Note 25 h)                  
|Pension plan (Note
        25 i)                                      
|                                                                      
|Total adjustments                                                     
|                                                                      
|Stockholders equity under US GAAP                                    
|                                                                      



|c) | Reconciliation
of Comprehensive Income:
|-- | ---------------------------------------

|                                                       
|-------------------------------------------------------
|                                                       
|                                                       
|Majority comprehensive income under
        MexicanGAAP
|US GAAP adjustments:                                   
|Net income (Note 26
        a)                         
|Translation adjustment                                 
|Result of holding
        non-monetary assets          
|Other comprehensive
        income                     
|                                                       
|Comprehensive income under US GAAP                     
|                                                       



|Note 27.  Future Impact of Recently Issued
Accounting Standards Not Yet in Effect.
|----------------------------------------------------------------------------------



|a) | In
Mexican GAAP:
|-- | ----------------



| | 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)
(C-15):
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | F-39 | 
| | ---- | 



---





| | In March
2003, the Mexican Institute of Public Accountants (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. 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.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | Bulletin C-12, Instrumentos Financieros
      con Caracteristicas de Pasivo, de Capital o de Ambos (Financial
      Instruments with Characteristics of Debt, Equity or Both) (C-12):
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | In April
2003, the IMCP issued Bulletin C-12, whose application is  mandatory for financial
statements of periods beginning on or after January  1, 2004, although early application
is encouraged. C-12 establishes the  more significant differences between debt and
equity, as the basis for the  development of the criteria necessary to appropriately
identify, classify  and record, upon initial recognition, the debt and equity components,
of  compound financial instruments. This new pronouncement is similar SFAS No.  150,
Accounting for Certain Financial Instruments with Characteristic of  Both
Liabilities and Equity, of US GAAP. 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
149, Amendment of Statement 133 on Derivative Instruments and  Hedging
Activities (SFAS No. 149):
| | -------------------------------------------------------------------------------------------------------------



| | In April
2003 the FASB issued SFAS No. 149, which amends and clarifies  financial accounting and
reporting for derivative instruments, including  certain derivative instruments embedded
in other contracts and for hedging  activities under SFAS No. 133. The changes in this
statement improve  financial reporting by requiring that contracts with comparable
characteristics be accounted for similarly. The new standard will be  effective for
contracts entered into or modified after September 30, 2003,  except as stated below and
for hedging relationships designated after  September 3, 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  September 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.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | FASB Interpretation
No. 46, Consolidation of Variable Interest Entities (FIN 46):
| | -------------------------------------------------------------------------------------



| | In January 2003, the FASB issued FIN 46. FIN
      46 clarified the application of Accounting Research Bulletin No. 51, Consolidated
      Financial Statements, to certain entities in which equity investors
      do not have the characteristics of a controlling financial interest or do
      not have sufficient equity at risk for the entity to finance its activities
      without additional subordinated financial support from other parties. FIN
      46 was effective immediately for all variable interests held by the Company
      in a variable interest entity created after January 31, 2003. For a variable
      interest held by the Company in a variable interest entity created before
      February 1, 2003, the Company will be required to apply the provisions of
      FIN 46 as of December 31, 2004. The Company does not currently have any
      variable interests in a variable interest entity.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | F-40 | 
| | ---- | 



---





|Note 28. Unaudited Supplemental Pro Forma
Information
|-----------------------------------------------------



|The unaudited pro forma financial information
presents the results for the  years ended December 31, 2003 and 2002 as if the
acquisition of Panamco  had occurred at the beginning of the respective periods. Such
information  has been prepared for comparative purposes only.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|These pro forma results have been prepared on
the basis of Mexican GAAP,  and accordingly, they include restatement for the effects of
inflation as  required by Mexican GAAP. These pro forma results include certain
adjustments to conform Panamcos previous accounting policies and  estimates with those
of the Company, including such items as depreciation  rates, accounting for bottles and
cases, useful lives of refrigerators, as  well as the increased integral result of
financing on acquisition debt.  The corresponding income tax effects have also been
considered.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|The pro forma amounts do not reflect any
operating efficiencies and cost  savings that the Company believes are achievable.
|---------------------------------------------------------------------------------------------------------------------------

|                   | (Unaudited; in thousands, except per share amounts)
|------------------ | ---------------------------------------------------
|                   | Year Ended December 31,                            
|                   | 2003                                               
|                   |                                                    
|Net sales          | 43,710,952                                         
|Total revenues     | 44,006,113                                         
|Net income         | 2,766,723                                          
|Earnings per share | 1.50                                               
|                   |                                                    

|The pro forma results are not necessarily
indicative either of the results  of operations that actually would have resulted had the
acquisition been  in effect at the beginning of the respective periods or of future
results.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | F-41 | 
| | ---- | 



---