As Filed with the Securities and Exchange Commission on June 29, 2004
================================================================================

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

                            ------------------------

                                    FORM 20-F

                            ------------------------

                                  ANNUAL REPORT
                       PURSUANT TO SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934
                   For the fiscal year ended December 31, 2003

                        Commission File Number: 333-7480

                        INDUSTRIAS BACHOCO, S.A. DE C.V.
             (Exact name of Registrant as specified in its charter)

                               Bachoco Industries
                 (Translation of Registrant's name into English)

                            The United Mexican States
                 (Jurisdiction of incorporation or organization)

                           Avenida Tecnologico No. 401
                          Ciudad Industrial C.P. 38010
                           Celaya, Guanajuato, Mexico
                    (Address of principal executive offices)

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

                                                Name of each exchange
            Title of each class                  on which registered
    -----------------------------------     -------------------------------
        American Depositary Shares,             New York Stock Exchange
       each representing six Units,
    each Unit consisting of one Series
      B Share and one Series L Share.

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.

Indicate the number of outstanding shares of each of the issuer's classes of
capital or common stock as of the close of the period covered by the annual
report:

                   Series B Capital Stock    450,000,000 Shares
                   Series L Capital Stock    150,000,000 Shares

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.

                                 Yes [X] No [_]

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

                             Item 17 [_] Item 18 [X]

--------------------------------------------------------------------------------

<PAGE>

                                TABLE OF CONTENTS

                                                                            Page
                                                                            ----
PART I

  ITEM 1.    IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS.............1
  ITEM 2.    OFFER STATISTICS AND EXPECTED TIMETABLE...........................1
  ITEM 3.    KEY INFORMATION...................................................1
  ITEM 4.    INFORMATION ON THE COMPANY.......................................11
  ITEM 5.    OPERATING AND FINANCIAL REVIEW AND PROSPECTS.....................28
  ITEM 6.    DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES.......................40
  ITEM 7.    MAJOR STOCKHOLDERS AND RELATED PARTY TRANSACTIONS................51
  ITEM 8.    FINANCIAL INFORMATION............................................53
  ITEM 9.    THE OFFER AND LISTING............................................54
  ITEM 10.   ADDITIONAL INFORMATION...........................................57
  ITEM 11.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
               RISK...........................................................72
  ITEM 12.   DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES...........74

PART II

  ITEM 13.   DEFAULT, DIVIDEND, ARREARAGES AND DELINQUENCIES..................74
  ITEM 14.   MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS
               AND USE OF PROCEEDS............................................74
  ITEM 15.   CONTROLS AND PROCEDURES..........................................74
  ITEM 16.   [RESERVED].......................................................74
  ITEM 16A.  AUDIT COMMITTEE FINANCIAL EXPERT.................................74
  ITEM 16B.  CODE OF ETHICS...................................................74
  ITEM 16C.  PRINCIPAL ACCOUNTANT FEES AND SERVICES...........................75
  ITEM 16D.  EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES.......75
  ITEM 16E.  PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED
               PURCHASERS.....................................................75

PART III

  ITEM 17.   FINANCIAL STATEMENTS.............................................75
  ITEM 18.   FINANCIAL STATEMENTS.............................................75
  ITEM 19.   EXHIBITS.........................................................76
  INDEX OF EXHIBITS...........................................................78

                                       i

<PAGE>

      Industrias Bachoco, S.A. de C.V. is a holding company with no operations
other than holding the stock of its subsidiaries. Its principal operating
subsidiary is Bachoco, S.A. de C.V. ("BSACV"), which owns the principal
operating assets of Industrias Bachoco, S.A. de C.V. and accounted for 94.6% of
consolidated total assets on December 31, 2003. References herein to "Bachoco,"
"we," "us," "our" or the "Company" are, unless the context requires otherwise,
to Industrias Bachoco, S.A. de C.V. and its consolidated subsidiaries as a
whole.

      We are incorporated under the laws of the United Mexican States
("Mexico"), and all of our operations are in Mexico. Our principal executive
offices are located at Avenida Tecnologico No. 401, Ciudad Industrial C.P.
38010, Celaya, Guanajuato, Mexico, and our telephone number is (011) (52) (461)
618-3500.

                           Presentation of Information

      We publish our financial statements in Mexican pesos and present our
financial statements in accordance with generally accepted accounting principles
in Mexico ("Mexican GAAP"). Mexican GAAP requires restatement of all financial
statements to constant pesos as of the date of the most recent balance sheet
presented. Except as otherwise indicated, all data in both the financial
statements included below in Item 18 (which together with the attached notes
constitute the "consolidated financial statements") and the selected financial
information included throughout this Form 20-F (this "Annual Report") have been
restated in constant pesos as of December 31, 2003.

      Mexican GAAP differs in certain respects from generally accepted
accounting principles in the United States ("U.S. GAAP"). For a discussion of
certain significant differences between Mexican GAAP and U.S. GAAP as they
relate to us, together with a reconciliation of operating income, net income and
total stockholders' equity to U.S. GAAP, and a condensed statement of cash flows
under U.S. GAAP, see Note 17 to the consolidated financial statements. The
effect of price-level restatement under Mexican GAAP has not been reversed in
the reconciliation to U.S. GAAP. See Note 17 to the consolidated financial
statements.

      References herein to "U.S. dollars," "U.S.$" or "$" are to the lawful
currency of the United States. References herein to "pesos" or "Ps." are to the
lawful currency of Mexico. This Annual Report contains translations of certain
peso amounts into U.S. dollars at specified rates solely for the convenience of
the reader. Unless otherwise indicated, such U.S. dollar amounts have been
translated from pesos at an exchange rate of Ps.11.242 to U.S.$1.00, the
exchange rate on December 31, 2003.

      Certain other terms are defined the first time that they are used in this
Annual Report.

      Certain figures set forth herein may not reflect the exact amount due to
rounding.

      As used herein, the term "tonnes" refers to metric tons of 1,000 kilograms
(equal to 2,204.6 pounds) and the term "billion" refers to one thousand million
(1,000,000,000). One square meter is equivalent to 10.764 square feet.

                                   Market Data

      This Annual Report contains certain statistical information regarding the
Mexican chicken, beef, egg, feed and swine markets and our market share. We have
obtained this information from a variety of sources, including the producers'
associations Union Nacional de Avicultores ("UNA"); Consejo Nacional
Agropecuario ("CNA") and Consejo Mexicano de Porcicultura ("CMP"), as well as
Banco de Mexico ("Mexican Central Bank"); Secretaria de Agricultura, Ganaderia,
Desarrollo Rural, Pesca y

                                       ii
<PAGE>

Alimentos ("Ministry of Agriculture, Livestock, Rural Development, Fishing and
Food" or "SAGARPA") and publications of the U.S. Department of Agriculture
("USDA"). The producers' associations rely principally on data provided by their
members. Information for which no source is cited was prepared by us on the
basis of our knowledge of the Mexican chicken, egg, feed and swine markets and
the wide variety of information available regarding these markets. The
methodology and terminology used by different sources are not always consistent,
and data from different sources are not readily comparable.

                           Forward-Looking Statements

      We may from time to time make written or oral forward-looking statements
in our periodic reports to the Securities and Exchange Commission on Forms 20-F
and 6-K, in our annual report to stockholders, in offering circulars and
prospectuses, in press releases and other written materials and in oral
statements made by one of our officers, directors or employees to analysts,
institutional investors, representatives of the media and others.

      Examples of such forward-looking statements include, but are not limited
to: (i) projections of revenues, income (or loss), earnings (or loss) per share,
capital expenditures, dividends, capital structure or other financial items or
ratios; (ii) statements of our plans, objectives or goals or those of our
management, including those relating to new contracts; (iii) statements about
future economic performance and (iv) statements of assumptions underlying such
statements. Words such as "believe," "anticipate," "plan," "expect," "intend,"
"target," "estimate," "project," "predict," "forecast," "guideline," "should"
and similar expressions are intended to identify forward-looking statements but
are not the exclusive means of identifying such statements.

      Forward-looking statements involve inherent risks and uncertainties, and a
number of unexpected changes could cause actual results to deviate from our
plans, objectives, expectations, estimates and intentions. We recognize that the
accuracy of our predictions and our ability to follow through on our intentions
depend on factors beyond our control. The potential risks are many and varied,
but include unexpected changes in:

      o     economic, weather and political conditions;

      o     raw material prices;

      o     competitive conditions; and

      o     demand for chicken, eggs, feed and swine.

                                      iii
<PAGE>

                                     PART I

ITEM 1.    Identity of Directors, Senior Management and Advisers

           Not Applicable.

ITEM 2.    Offer Statistics and Expected Timetable

           Not Applicable.

ITEM 3.    Key Information

Selected Financial Data

      The information set forth below is derived from Bachoco's consolidated
financial statements, which are included in Item 18. In this disclosure, we
explain the figures and year-to-year changes in our consolidated financial
statements. Where there appears an ambiguity or discrepancy in the text, you
should interpret it in light of the information contained in the consolidated
financial statements.

      In preparing the consolidated financial statements, we followed Mexican
GAAP, which differs in certain respects from U.S. GAAP. Note 17 to the
consolidated financial statements provides a description of the main differences
between Mexican GAAP and U.S. GAAP as they relate to us; a reconciliation to
U.S. GAAP of total stockholders' equity, net income and operating income, and a
condensed statement of cash flows under U.S. GAAP as of December 31, 2002 and
2003 and for the years ended December 31, 2001, 2002 and 2003. Our financial
statements were prepared pursuant to Bulletin B-10, as amended, and Bulletin
B-12, issued by the Mexican Institute of Public Accountants, which became
effective on January 1, 1990.

      Bulletin B-10 is designed to account for the effects of inflation on
financial disclosures by requiring us:

      o     to restate non-monetary assets at current replacement cost or by
            using the Mexican National Consumer Price Index ("NCPI");

      o     to restate non-monetary liabilities using the NCPI;

      o     to restate the components of stockholders' equity using the NCPI;
            and

      o     to record gains or losses in purchasing power that result from the
            monetary liabilities or assets that we hold.

Bulletin B-10 also requires restatement of all financial statements in constant
pesos as of the date of the most recent balance sheet presented. Except as
otherwise indicated, we have restated all financial information taken from the
financial statements or derived from them, as explained below, in constant pesos
as of December 31, 2003. Bulletin B-12 requires that the statement of changes in
financial position reconcile the discrepancies between the restated historical
balance sheet and the current balance sheet. The effects of price-level
restatement under Mexican GAAP have not been reversed in the reconciliation to
U.S. GAAP. See Note 17 to the consolidated financial statements.

      Through December 31, 1996, non-monetary assets were valued according to
their current replacement cost based on independent appraisals. Effective
January 1, 1997, the Fifth Amendment to

<PAGE>

Bulletin B-10 modified the method for the restatement of non-monetary assets to
account for the effects of inflation. Under the Fifth Amendment, we restate (a)
inventory and cost of sales by using replacement cost and (b) property, plant
and equipment by applying factors derived from the NCPI.

                                       2
<PAGE>

<TABLE>
<CAPTION>
                                                                  As of and for the year ended December 31,
                                         ------------------------------------------------------------------------------------------
                                            1999            2000            2001            2002            2003           2003(2)
                                         ----------      ----------      ----------      ----------      ----------      ----------
Income Statement Data                               (millions of constant pesos as of December 31, 2003)(1)              (millions
                                                                                                                          of U.S.
                                                                                                                         dollars)(1)
<S>                                   <C>             <C>             <C>             <C>             <C>            <C>
Mexican GAAP:
Net revenues ........................ Ps.   7,054.5   Ps.  10,542.8   Ps.  10,607.9   Ps.  10,769.7   Ps.  10,751.2  U.S.$    956.3
   Cost of sales ....................       5,239.3         7,531.6         7,764.8         7,989.0         8,746.0           778.0
                                         ----------      ----------      ----------      ----------      ----------      ----------
   Gross profit .....................       1,815.1         3,011.2         2,843.1         2,780.7         2,005.2           178.4
   Operating income .................         934.5         1,719.8         1,418.8         1,291.4           432.1            38.4
   Comprehensive financing income ...         134.4           155.6           121.4            14.9           125.1            11.1

   Net income .......................       1,017.3         1,405.0         1,187.8         1,539.4           539.5            48.0
   Net income per Unit(3) ...........           3.41            4.7             3.98            5.16            1.79            0.16

   Net income per ADS(4) ............          20.5            28.3            23.9            31.0            10.7             0.96
   Dividends per Unit(5) ............           0.78            0.63            1.19            0.97            1.02            0.09
   Weighted average Units
     outstanding (thousands) ........     298,078         296,124         297,454         297,898         299,369         299,369
U.S. GAAP:
Net revenues ........................ Ps.   7,054.5   Ps.  10,542.8   Ps.  10,607.9   Ps.  10,769.7   Ps.  10,772.7   U.S.$   958.2
   Cost of sales ....................       5,239.3         7,531.6         7,764.8         7,989.0         8,746.0           778.1
                                         ----------      ----------      ----------      ----------      ----------      ----------
   Gross profit .....................       1,815.1         3,011.2         2,843.1         2,780.7         2,026.7           180.3

   Operating income .................         934.5         1,720.6         1,417.0         1,305.1           467.0            41.5
   Comprehensive financing income ...         134.4           123.2            95.2            11.3           116.4            10.3

   Net income ....................... Ps.   1,059.1   Ps.   1,432.9   Ps.   1,202.5   Ps.   1,557.3   Ps.     503.1   U.S.$    44.7
   Net income per Unit(3) ...........           3.54            4.83            4.04            5.23            1.68            0.15

   Net income per ADS(4) ............          21.3            29.0            24.2            31.4            10.08            0.90
   Dividends per Unit(5) ............           0.78            0.63            1.19            0.97            1.02            0.09

Statement of Financial Position Data
Mexican GAAP:
   Cash and cash equivalents ........ Ps.   1,481.1   Ps.   1,370.8   Ps.   1,285.5   Ps.   1,763.4   Ps.   1,569.2   U.S.$   139.5
   Property, plant and equipment ....       7,232.0         7,202.1         7,470.7         7,414.5         7,804.9           694.3
   Total assets .....................      11,241.5        11,047.9        11,572.1        12,024.3        12,404.8         1,103.4
   Short-term debt(6) ...............       1,240.5           189.9           163.3           122.4            58.1             5.2
   Long-term debt ...................       1,232.7           681.9           171.1            76.2            92.9             8.3
   Stockholders' equity .............       8,100.5         8,030.5         8,680.2         9,850.8        10,059.8           894.8
U.S. GAAP:
   Cash and cash equivalents ........ Ps.   1,481.1   Ps.   1,370.8   Ps.   1,285.5   Ps.   1,763.4   Ps.   1,569.2   U.S.$   139.5
   Property, plant and equipment ....       7,205.2         7,209.0         7,503.63        7,449.3         7,847.0           698.1
   Total assets ..................... Ps.  11,215.2   Ps.  11,054.8   Ps.  11,598      Ps. 12,075.9   Ps.  12,421.3         1,104.9
   Short-term debt(5) ...............       1,240.5           189.9           163.3           122.4            58.1             5.2
   Long-term debt ...................       1,232.7           681.9           171.1            76.2            92.9             8.3
   Stockholders' equity .............       6,833           7,995.2         8,662.7         9,853.9        10,032.2           892.5

Selected Operating Data
   Sales volume (thousands of
     tonnes):
     Chicken ........................         415.7           601.1           662.2           665.4           655.4           655.4
     Eggs ...........................          67.5            70.0            85.6           131.7           132.1           132.1
     Swine ..........................           9.5             9.0             9.0             9.0             8.5             8.5
     Feed ...........................           0.0           292.4           346.0           324.7           316.2           316.2
   Gross margin(%) ..................          25.7%           28.6%           26.8%           25.8%           18.7%           18.7%
   Operating margin(%) ..............          13.2%           16.3%           13.4%           12.0%            4.0%            4.0%
   Net margin(%) ....................          14.4%           13.3%           11.2%           14.3%            5.0%            5.0%
   Total employees ..................      11,215          16,396          18,482          18,306          18,495          18,495
</TABLE>
----------
(1)   Except per Unit and per ADS amounts and operating data.
(2)   Peso amounts have been translated into U.S. dollars, solely for the
      convenience of the reader, at the rate of Ps.11.242 per U.S. dollar.
(3)   Net income per Unit has been computed based on the weighted average number
      of common shares outstanding.
(4)   Net income per ADS has been computed by multiplying net income per Unit by
      six, to reflect the ratio of six Units per ADS.
(5)   Dividends per Unit has been computed by dividing the total amount of
      dividends paid (in constant pesos as of December 31, 2003) by the weighted
      average units outstanding.
(6)   Includes notes payable to banks and current portion of long-term debt.

                                       3
<PAGE>

Exchange Rates

      Mexico has had a free market for foreign exchange since 1991. Prior to
December 21, 1994, the Mexican Central Bank intervened in the foreign exchange
market to keep the peso-U.S. dollar exchange rate within a range prescribed by
the Mexican government. In December 1994, the Mexican government suspended
intervention by the Mexican Central Bank and allowed the peso to float freely
against the U.S. dollar. The peso declined sharply in December 1994 and
continued to fall under conditions of high volatility in 1995.

      In 1996, the peso fell more slowly and was less volatile. Relative
stability characterized the foreign exchange markets during the first three
quarters of 1997. However, the fall of the Hang Seng Index of the Hong Kong
Stock Exchange on October 24, 1997 marked the beginning of a period of increased
volatility in the foreign exchange markets, with the peso falling more than 10%
in just a few days.

      In 1998, the foreign exchange markets experienced volatility as a result
of the financial crisis in Asia and Russia and financial turmoil in other
countries, including Brazil and Venezuela. However, in 1999 and 2000 the peso
strengthened against the U.S. dollar as a result of better economic
expectations, leading to inflows of capital. During 2001, the Mexican peso
continued to appreciate during the first eight months of the year, principally
as a result of inflows of capital. After the events of September 11th, the
volatility of the peso increased. In November and December 2001, however, the
peso's volatility subsided and the peso appreciated against the U.S. dollar.

      The Mexican peso remained stable during the first four months of 2002. Its
volatility increased, however, during the rest of the year. Growth in the
Mexican economy was sluggish in 2002 and the beginning of 2003, and the peso
depreciated by 12.2% against the U.S. dollar between December 31, 2001 and
December 31, 2002.

      The Mexican peso showed high levels of volatility during the first four
months of 2003; it appreciated and remained stable at the middle of the year and
in the last four months of the year the Mexican peso increased in its
volatility. Overall, the peso declined in 2003 and has continued to decline to
date.

      We cannot assure you that the Mexican government will maintain its current
policies with respect to the peso, or that the value of the peso will not
fluctuate significantly in the future.

      The following table sets forth for the periods indicated the high, low,
average and period-end exchange rates for the purchase and sale of U.S. dollars
(presented in each case as the average between such purchase and sale rates).

                                       4
<PAGE>

                                                 Exchange Rate(1)
                                         (in current pesos per U.S. dollar)
                                    ------------------------------------------
      Year Ended December 31,         High      Low    Average(2)  Period-End
                                    --------  -------  ----------  -----------
      1998 ......................     10.63      8.04      9.24       9.90
      1999 ......................     10.60      9.24      9.56       9.48
      2000 ......................     10.09      9.18      9.47       9.62
      2001 ......................      9.97      8.95      9.33       9.16
      2002 ......................     10.43      9.00      9.66      10.43
      2003 ......................     11.41     10.11     10.79      11.24

      ----------
      (1)   The exchange rates are the noon buying rates in New York City for
            cable transfers in pesos as certified for customs purposes by the
            Federal Reserve Bank of New York (the "noon buying rate").
      (2)   Average of month-end rates for each period shown.

                                      Exchange Rate(1)
                                     (in current pesos
                                      per U.S. dollar)
                                     -----------------
      Period                           High       Low
                                      ------    ------
      November 2003 ..............     11.40     10.98
      December 2003 ..............     11.17     11.41
      January 2004 ...............     11.10     10.81
      February 2004 ..............     10.91     11.25
      March 2004 .................     11.23     10.92
      April 2004 .................     11.43     11.16
      May 2004 ...................     11.64     11.38

      ----------
      (1)   The exchange rates are the noon buying rates in New York City for
            cable transfers in pesos as certified for customs purposes by the
            Federal Reserve Bank of New York.

Risk Factors

Risks Relating to Mexico, Other Emerging Market Countries and the U.S. Economy

      Economic and political developments in Mexico may adversely affect our
business

      Our business operations and assets are located in Mexico. As a result, our
business may be significantly affected by the general condition of the Mexican
economy, including devaluation of the peso or inflation and high interest rates
in Mexico, or by political developments in Mexico.

      Mexico has experienced adverse economic conditions

      Mexico has experienced a prolonged period of slow growth since 2001,
primarily as a result of the downturn in the U.S. economy. In 2002, Mexico's
gross domestic product, or GDP, increased by 0.9% and inflation increased to
5.7%. In 2003, GDP increased by 1.3% and inflation increased to 3.98%. For 2004,
the Mexican government has estimated that GDP growth will be 3.0% and inflation
will be between 3.0% and 4.0%, though these estimates may not prove to be
accurate.

      If the Mexican economy falls into a recession or if inflation and interest
rates increase significantly, consumers may find it difficult to pay for the
products we offer. This and other effects of

                                       5
<PAGE>

recession or increased inflation and interest rates could have serious adverse
consequences on our business, financial condition and results of operations.

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

      Due to both our purchase of feed ingredients in the United States and our
U.S. dollar-denominated indebtedness, we are affected by fluctuations in the
value of the peso against the U.S. dollar. In 2003, the peso depreciated against
the U.S. dollar by 7.3% at year-end, and the average value of the peso against
the U.S. dollar during 2003 was 10.5% lower than in 2002. In 2002, the peso
depreciated against the U.S. dollar by 12.2% at year-end, and the average value
of the peso against the U.S. dollar during 2002 was 5.0% lower than in 2001. In
2001, the peso appreciated against the U.S. dollar by 5.0% at year-end, and the
average value of the peso against the U.S. dollar during 2001 was 1.5% higher
than in 2000. The single largest component of our cost of sales, our feed, is
comprised partially of ingredients we purchase in the United States, where
prices are denominated in U.S. dollars. In addition, the prices of ingredients
we purchase in Mexico may be influenced by U.S. commodity markets. Therefore,
should the peso fall relative to the U.S. dollar, both the cost of our
operations and our debt payments would increase. Any future depreciation or
devaluation of the peso may result in further net foreign exchange losses.

      Severe devaluation or depreciation of the peso may also result in
disruption of the international foreign exchange markets and may limit our
ability to transfer or to convert pesos into U.S. dollars for the purpose of
making timely payments of interest and principal on our indebtedness. While the
Mexican government does not currently restrict, and for many years has not
restricted, the right or ability of Mexican or foreign persons or entities to
convert pesos into U.S. dollars or to transfer other currencies out of Mexico,
the government could institute restrictive exchange rate policies in the future.
Currency fluctuations will probably continue to affect our income and expenses.

      Furthermore, fluctuations in the exchange rate between the peso and the
U.S. dollar will also affect the U.S. dollar equivalent of the pesos price of
the Units (one "Series B Share" and one "Series L Share") on the Mexican Stock
Exchange and the price of American Depository Shares ("ADSs") on the New York
Stock Exchange. Because we pay cash dividends in pesos, exchange rate
fluctuations will affect the U.S. dollar amounts received by holders of American
Depository Receipts ("ADRs") upon conversion of such cash dividends by the
Depositary.

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

      Mexico has experienced high levels of inflation and high domestic interest
rates. The annual rate of inflation, as measured by changes in the National
Consumer Price Index was 3.98% in 2003, 5.7% in 2002 and 4.4% for 2001.
Inflation for the first four months of 2004 was 1.72% according to the Mexican
Central Bank. Interest rates on 28-day Mexican treasury bills, or Cetes,
averaged 6.23% during 2003, according to Banamex. On May 11, 2004, the 28-day
Cetes rate was 6.94%. High interest rates in Mexico could adversely affect our
costs. Our earnings may also be affected by changes in interest rates due to the
impact those changes have on our variable-rate debt instruments.

      Political events in Mexico, including the recent transition to a new
      presidential administration, could affect Mexican economic policy and our
      operations

      The national elections held in July 2000 ended 71 years of rule by the
Institutional Revolutionary Party ("PRI") with the election of President Vicente
Fox, a member of the National Action Party ("PAN"), and resulted in the
increased representation of opposition parties in the Mexican Congress and

                                       6
<PAGE>

in mayoral and gubernatorial positions. There has been a lack of alignment
between the legislature and the President that has resulted in deadlock and has
prevented the timely implementation of economic reforms, which we believe has
had an adverse impact on the Mexican economy. Further delays may continue to
materially adversely affect the Mexican economy and our business.

      Developments in other emerging market countries may adversely affect our
      business or the market price of our securities

      The market value of securities of Mexican companies is, to varying
degrees, affected by economic and market conditions in other emerging market
countries. Although economic conditions in such countries may differ
significantly from economic conditions in Mexico, investors' reactions to
developments in any of these other countries may have an adverse effect on the
market value of securities of Mexican issuers. The recent economic crisis in
Argentina did not have a significant adverse effect on the Mexican economy and
the value of Mexican securities. We cannot assure you that the market value of
our securities will not be adversely affected by events elsewhere, especially in
emerging markets.

      Developments in the U.S. economy may adversely affect our business

      Economic conditions in Mexico are heavily influenced by the condition of
the U.S. economy due to various factors, including commercial trade pursuant to
the North American Free Trade Agreement (NAFTA), U.S. investment in Mexico and
emigration from Mexico to the United States. Events and conditions affecting the
U.S. economy may adversely affect our business, results of operations, prospects
and financial condition.

Risks Relating to Our Organization

      The chicken industry is characterized by long-term price declines and
      cyclical periods

      The Mexican chicken industry, like the chicken industry in other
countries, has been characterized by a long-term decline in prices in real
terms. The industry has undergone cyclical periods of higher prices and
profitability, followed by overproduction, leading to periods of lower prices
and profitability. Real prices for eggs and swine in Mexico have also declined
over the long term and have varied cyclically. The market that we serve is
subject to volatility with respect to supply, which affects prices. We cannot
assure you that future cyclicality, excess supply and downturns in real prices
will not adversely affect our results.

      The price of feed ingredients is subject to significant volatility

      The largest single component of our cost of sales is the cost of
ingredients used to prepare feed, including sorghum, soybean meal, corn, fish
meal, meat meal and, for certain chicken products, marigold extract. The price
of most of our feed ingredients is subject to significant volatility resulting
from weather, the size of harvests, transportation and storage costs,
governmental agricultural policies, currency exchange rates and other factors.
Given the long-term declining trends in real chicken prices, we may experience
difficulty or delays in passing any increase in grain costs to customers.
Accordingly, increases in the prices of the main ingredients used in the
preparation of feed may have a material adverse effect on our margins and
results of operations. Since we purchase many feed ingredients in U.S. dollars,
from time to time we may acquire financial instruments to protect us against
exchange rate fluctuations.

                                       7
<PAGE>

      Our operations depend on raising animals and meat processing, which are
      subject to risks such as disease, contamination and adverse weather
      conditions

      Our operations involve raising animals and are subject to a variety of
risks, including disease, contamination and adverse weather conditions.
Chickens, in particular, are susceptible to infections by a variety of
microbiological agents. Since 1983, the avian influenza virus ("AIV") has been
widespread in the United States and in Mexico. During 2003 AIV was widespread in
Asian countries and the United States, and Mexico, to avoid having the disease
spread from the United States, imposed certain restrictions on the importation
of chicken from affected U.S. states. In the past we have experienced limited
outbreaks of various diseases that have resulted in higher mortality rates.

      Meat and eggs are subject to contamination during processing and
distribution. We do not believe that contamination of individual shipments
during distribution would have a material adverse effect on our operations.
Contamination during processing, however, could affect a larger number of our
poultry products and therefore could have a more significant impact on
operations.

      In 2002, we experienced loss of chickens at our Peninsula Complex due to
the effects of Hurricane Isidore. Future hurricanes or other adverse weather
conditions could result in additional losses of inventory and damage to our
plants and equipment. Our facilities near Mexico's coast are most subject to the
risk of severe weather.

      The use of nutritional supplements and possibility of contamination expose
      us to risk of loss of consumer confidence in the chicken industry

      To reduce contamination, we use specialized feedstock and nutritional
supplements that have been approved by the Mexican government and meet
international industry standards. We cannot assure you, however, that in the
future we will not be materially adversely affected by claims or consumer
concerns arising out of the use of these products in raising our animals.

      Our sales are entirely dependent on consumer preferences, and the loss of
consumer confidence in the products sold by Mexican meat and egg producers as a
result of disease, contamination or other reasons, even if not related to our
own products, could have a material adverse effect on our results of operations.

      We face significant competition from other chicken producers in all of our
      geographic markets and product lines

      We are Mexico's largest chicken producer, but we face significant
competition from other producers in all of the markets in which we sell our
products. In 2003, we accounted for approximately 28.6% of total chicken
production in Mexico. There are two other major vertically integrated chicken
producers in Mexico, which together with Bachoco account for more than 50.0% of
Mexican chicken production, with the balance distributed among approximately two
hundred small- and medium-sized integrated and non-integrated producers.

      Each of the two other major companies has substantial financial resources
and strengths in particular product lines and regions. We expect to continue to
face strong competition in every market, as our existing or new competitors are
likely to broaden their product lines and extend their geographic coverage.
Accordingly, we cannot assure you that our performance will not be adversely
affected by increased competition.

                                       8
<PAGE>

      We face increased competition from U.S. producers

      In January 2003, import quotas and most tariffs on poultry, eggs and swine
were eliminated, as required by the North American Free Trade Agreement
("NAFTA"). Poultry producers in the United States have developed extremely
low-cost production methods and have been successful in exporting primarily
frozen and further-processed poultry to other countries, especially in periods
of overcapacity in the United States. As tariff barriers decline under NAFTA,
U.S. producers can be expected to increase exports to Mexico, which could have a
material adverse effect on our performance.

      In January 2003 the Mexican government imposed temporary restrictions on
chicken leg quarters imported from the U.S. and both governments confirmed this
safeguard in July 2003. The safeguard consists of a five-year limited poultry
import measure. The measure, which became effective in 2003, includes quotas and
an initial tariff of 98.8% on chicken leg quarters which will slowly decrease
until it reaches 0% in 2008.

      We are a holding company with no substantial operations and depend on our
      subsidiaries for cash flow

      We are a holding company with no substantial operations and, consequently,
we are dependent on dividends and other payments from subsidiaries for virtually
all of our cash flow, including cash flow to pay taxes, service debt, make
equity investments, finance the growth of subsidiaries and pay dividends to
stockholders. Together with Mexican law, our ability to pay dividends may, in
the future, be limited by financial covenants in debt instruments that we, or
our subsidiaries, may acquire.

Risks Relating to the ADSs, the Units and the Shares

      The Robinson Bours family controls our management and their interests may
      differ from other security holders

      Certain members of the Robinson Bours family hold the power to elect a
majority of the members of our board of directors and have the power to
determine the outcome of certain other actions requiring the approval of our
stockholders, including whether or not dividends are to be paid and the amount
of such dividends. The Robinson Bours family has established two Mexican trusts,
which they control ("Control Trust"), that together hold 496,500,000 Shares
outstanding on December 31, 2003, including Units and B Units (consisting of two
"Series B Shares") representing approximately 65.5% of the Series L Shares and
88.5% of the Series B Shares outstanding.

      Future sales of Units by the controlling stockholders may affect
      prevailing market prices for the ADSs and the Units

      The prevailing market prices for the ADSs and the Units could decline if
either:

      o     the Robinson Bours family were to sell substantial amounts of the
            Units, whether

            o     directly, or

            o     indirectly, through the Mexican trusts through which they hold
                  the Units; or

      o     the perception arose that such a sale could occur.

                                       9
<PAGE>

      The protections afforded to minority stockholders in Mexico are different
      from those in the United States

      Under Mexican law, the protections afforded to minority stockholders 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 stockholder derivative actions, and there are different
procedural requirements for bringing stockholder lawsuits. As a result, in
practice it may be more difficult for our minority stockholders of Bachoco to
enforce their rights against us or our directors or our controlling stockholder
than it would be for stockholders of a U.S. company.

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

      As required by Mexican law, our bylaws provide that non-Mexican
stockholders shall be considered as Mexicans with respect to their ownership
interests in Bachoco and shall be deemed to have agreed not to invoke the
protection of their governments in certain circumstances. Under this provision,
a non-Mexican stockholder is deemed to have agreed not to invoke the protection
of its own government by asking such government to interpose a diplomatic claim
against the Mexican government with respect to the stockholder's rights as a
stockholder, but is not deemed to have waived any other rights it may have,
including any rights under the U.S. securities laws, with respect to its
investment in Bachoco. If you invoke such governmental protection in violation
of this agreement, your shares could be forfeited to the Mexican government.

      Our bylaws may only be enforced in Mexico

      Our bylaws provide that legal actions relating to the execution,
interpretation or performance of the bylaws may be brought only in Mexican
courts. As a result, it may be difficult for non-Mexican stockholders to enforce
their stockholder rights pursuant to the bylaws.

      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,
all of our assets and their assets are located in Mexico. As a result, it may be
difficult for investors to effect service of process within the United States on
such persons or to enforce judgments against them. This pertains also to any
action based on civil liabilities under the U.S. federal securities laws. There
is doubt as to the enforceability against such persons in Mexico, whether in
original actions or in actions to enforce judgments of U.S. courts, of
liabilities based solely on the U.S. federal securities laws.

      Holders of L Shares and L Share ADSs have limited voting rights

      Pursuant to our bylaws, holders of Series L Shares are entitled to vote
only with respect to certain limited matters specified therein.

      Holders of Series L Shares can only vote on certain matters specified in
our bylaws. With regard to those matters, holders of ADRs may instruct the
depositary as to the exercise of the voting rights pertaining to the Series L
Shares constituting the Units represented by the ADSs. Holders of Series L
Shares are generally not entitled to vote in the election of the board of
directors, but holders of Series L Shares do have the right to elect or appoint
two directors to the board, which was reduced in April 2003 to 10 members from
members of the Robinson Bours family with ownership interests in Bachoco

                                       10
<PAGE>

("Robinson Bours Stockholders") are the beneficial owners of 65.5% of the
outstanding Series L Shares and therefore have the power to elect or appoint the
two directors. In addition, holders of Series L Shares are not entitled to vote
on the declaration of dividends. Under Mexican law and our bylaws, the
declaration, amount and payment of annual dividends are determined at a meeting
of our stockholders by a majority vote of the holders of Series B Shares,
usually on the recommendation of the board of directors.

      Non-Mexican stockholders may not be entitled to participate in future
      preemptive rights offerings

      Under Mexican law and our bylaws, if we issue new shares for cash as a
part of a capital increase, we must grant our stockholders the right to purchase
a sufficient number of shares to maintain their existing ownership percentage in
the Company ("preemptive rights"). We can allow holders of ADSs in the United
States to exercise preemptive rights in any future capital increase only in one
of the following two circumstances:

      o     we file a registration statement with the Securities and Exchange
            Commission with respect to that future issuance of shares; or

      o     the offering qualifies for an exemption from the registration
            requirements of the Securities Act.

      We make no promises that we will file a registration statement with the
Securities and Exchange Commission to allow holders of ADSs in the United States
to participate in a preemptive rights offering. As a result, the equity
interests of such holders in the Company may be diluted proportionately. In
addition, under current Mexican law, it is not practicable for the depositary to
sell preemptive rights and distribute the proceeds from such sales to ADS
holders.

      Corporate disclosure and accounting in Mexico may differ from other
      countries

      There may be less, or different, publicly available information about
issuers of securities in Mexico than is regularly published by or about issuers
of securities in other countries with highly developed capital markets. In
addition, due to country-by-country differences in accounting and other
reporting principles and standards, our corporate disclosures may differ in
content from disclosures made under other principles and standards, such as U.S.
GAAP.

ITEM 4. Information on the Company

General

      Our legal name is Industrias Bachoco, S.A. de C.V., and we frequently
refer to ourselves commercially as Bachoco. We were incorporated in Mexico on
April 17, 1980. Our headquarters are located at Avenida Tecnologico No. 401,
Ciudad Industrial 38010, Celaya, Guanajuato, Mexico, telephone (011) (52) (461)
618-3500. We have four principal product lines: chicken, eggs, commercial animal
feed and swine.

      We are the largest poultry producer in Mexico. In 2003, we produced
approximately 7.0 million chickens per week and accounted for approximately
28.6% of total chicken production in Mexico. As a vertically integrated
producer, we control virtually all aspects of the production and distribution
process, which enables us to exercise cost controls and to maintain high
standards of quality, service and efficiency. With over 700 production and
distribution facilities dispersed throughout Mexico, our operations include the
following:

                                       11
<PAGE>

      o     preparing feed;

      o     breeding, hatching and growing chickens; and

      o     processing, packaging and distributing chicken products.

      Sales of chicken products accounted for 77.6% of our net revenues in
2003.

      We are also a significant producer of commercial animal feed. We sell our
feed both through distributors and directly to small producers. We began
producing feed in 2000 as a result of the acquisition of 100% of the stock of
Grupo Campi, S.A. de C.V. ("Grupo Campi") on December 22, 1999 for Ps.1,513.2
million.

      Operating principally in southeastern Mexico and the Yucatan Peninsula,
Grupo Campi was the fourth largest chicken producer in Mexico and an important
producer of animal feed. In 2003 we sold approximately 6,000 tonnes of feed per
week to external customers, which amounted to 7.1% of our total sales for that
year.

      In February 2001, we reached an agreement with Avicola Cotaxtla, a broiler
producer located in Veracruz, with a capacity of approximately 3 million
chickens per cycle. The agreement was in a part a lease of assets and in part a
contract grower agreement. As a result of this agreement, we strengthened our
presence in this region of the country.

      In September 2001, we acquired most of the assets of the egg operations of
both Avicola Nochistongo and Avicola Simon Bolivar, two important producers of
eggs in Mexico. With these acquisitions we emerged as one of the largest
producer of eggs in Mexico: we now produce approximately 3.5 million dozen eggs
per week. We are an innovator in packaging and marketing eggs. Egg sales
accounted for 11.1% of our net revenues in 2003.

      We also sell swine on the hoof to meat packers for pork product
production. In 2003, sales of swine accounted for 0.9% of our net revenues.

      The remaining portion of our net revenues in 2003 consisted of
miscellaneous poultry-related products.

      The following table sets forth, for each of the periods presented, the
volume of chicken, feed, eggs and swine that we sold.

                                              Bachoco Sales Volume
                                            (in thousands of tonnes)
                                            Year Ending December 31,
                                ----------------------------------------------
                                 1999      2000      2001      2002      2003
                                ------    ------    ------    ------    ------
Chicken ..................       415.7     601.1     662.2     665.4     655.5
Eggs .....................        67.5      70.0      85.6     131.7     132.1
Swine ....................         9.5       9.0       9.0       9.0       8.5
Feed .....................         0.0     292.4     346.0     324.7     316.2

                                       12
<PAGE>

      Due to acquisitions, internal growth and improved efficiency, the volume
of chicken we sold in 2003 showed an increase of 57.7 % over the volume we sold
in 1999 (compared to an increase of 28.3% in chicken production in Mexico
overall). Over the same period, our share of overall Mexican chicken production
increased from 23.3% to approximately 28.6%. We improved the efficiency of the
facilities we acquired to take full advantage of production capacity and
distribution opportunities.

      The Mexican poultry industry varies regionally, and few producers operate
in multiple regions. We believe we have the broadest geographic market coverage
in the Mexican poultry industry and that we are one of the largest poultry
suppliers in the Mexico City metropolitan region (which accounts for a
significant portion of overall Mexican chicken consumption). We currently sell
in every major product category and channel of distribution for poultry products
within the regions that we serve. We expect to continue to do so in order to
meet growing consumer demand.

Background and Ownership Structure

      Founded in 1952 by the Robinson Bours family as a small commercial egg
operation in the state of Sonora, we grew by expanding our existing facilities
and acquiring additional facilities from other poultry producers. In 1974, we
established operations in Celaya, located in the agricultural region of Bajio,
to begin serving the Mexico City metropolitan region. Beginning in 1988, our
management recognized the potential for growth in Mexican chicken consumption,
as well as the advantages of a large, vertically integrated operation. As a
result, we began to seek opportunities for geographic expansion and to increase
production capacity and market share. We extended our market coverage
(particularly in 1993 and 1994) by purchasing fixed assets and inventory from
major regional producers that faced financial difficulties. Following each
acquisition, we made substantial investments to apply our production and
distribution methods and reap the benefits of vertical integration and economies
of scale, improving the performance of the acquired facilities.

      In April 1995 Robinson Bours Stockholders created a trust (the "Control
Trust"), the principal purpose of which is to hold a controlling interest in our
Series B Shares. Our common stock ("Common Stock") consists of Series B Shares
("Series B Shares") and Series L Shares of limited voting stock ("Series L
Shares") (collectively, the "Shares"). The Shares are grouped into units. Each
Unit ("Unit") consists of one Series B Share and one Series L Share. Each B Unit
("B Unit") consists of two Series B Shares. The Shares constituting each Unit or
B Unit will not be separable until September 2007, at which time the Units and B
Units will automatically separate into their component shares.

      In September 1997, we made an initial public offering of Units
representing 17.25% of the outstanding Shares. Following such offering, the
Control Trust held Units and B Units representing 68.0% of the outstanding
Series B Shares. As of December 31, 2003, the Robinson Bours Stockholders owned
Units and B Units representing 89.0% of the Series B Shares outstanding. As a
result, the Robinson Bours Stockholders continue to have the power to control
our Company.

      Members of the Robinson Bours family, together with certain of our
executive officers, hold a majority of the seats on our board of directors. In
April 2002, Javier Robinson Bours Castelo assumed the position of Chairman of
the board of directors, replacing Enrique Robinson Bours Almada.

      In November 1998, we approved a stock repurchase plan (the "Repurchase
Plan"), under which we may repurchase up to 3% of the total Shares outstanding
and trading on the Mexican Stock Exchange (Bolsa Mexicana de Valores), in
accordance with Mexican securities laws. To execute the Repurchase Plan, we
created a reserve of Ps.258.4 million (expressed in constant pesos as of
December 31, 2003), which reduced retained earnings on our balance sheet. As of
May 14, 2004, we had repurchased 710,000 Units, representing 0.24% of the total
shares outstanding.

                                       13
<PAGE>

      On December 22, 1999, we acquired 100% of the stock of Grupo Campi for
Ps.1,513.2 million. The fourth largest chicken producer in Mexico and an
important producer of animal feed, Grupo Campi operates principally in the
southeastern region of Mexico and the Yucatan Peninsula. We made this
acquisition as part of our overall strategy to extend our distribution network
to cover the southern part of Mexico. Because the Grupo Campi production centers
are located in a region where we can grow broilers efficiently, we also
integrated two new complexes there. We have now completed the coordination and
integration of the operations at these new complexes with the operations at the
rest of our complexes.

      On September 20, 2001, we acquired most of the assets of the eggs business
of Avicola Nochistongo, one of the ten largest producers of eggs in Mexico with
operations located in the La Laguna region in north-central Mexico and a
capacity of about 3 million laying hens.

      At the end of September 2001, we acquired most of the assets of Avicola
Simon Bolivar, one of the fifteen largest producers of eggs in Mexico and a
producer of broilers, with operations located in the La Laguna region in
north-central Mexico with a production capacity of about 2 million laying hens
and approximately 120,000 chickens per week. The assets we acquired included
farms, a feed mill, a processing plant and several distribution centers.

      With these acquisitions we have become one of the largest producers and
distributors of eggs in Mexico with a market share of approximately 8.0% in
terms of volume, and we have also reinforced our leading position in the broiler
industry in Mexico.

      During 2003 we implemented two important projects to expand the facilities
at our Northwest Complex and Yucatan Peninsula Complex to increase production
capacity in our chicken business. Both of these projects are expected to be
completed by the end of the third quarter of 2004. These facilities are ideally
suited for the expansion projects due to their sanitary status and their
geographical location. Both complexes are being expanded to increase capacity by
approximately 50%, which will increase opportunities for potential future
exports as well as for meeting consumer demand in those regions and in other
regions in Mexico. The new facilities in both complexes have been equipped with
the best technology available. These projects have been financed with internal
resources generated by our own operations.

Business Strategy

      Over the past decade we have substantially increased our chicken
production, establishing ourselves in every major product category and
distribution channel for chicken and expanding to cover a geographic market in
Mexico that is more widespread than any other chicken producer. We have also
increased the efficiency of our production process and built a reputation for
the freshness of our chicken products and quality of our customer service.

      The Mexican poultry industry has experienced considerable consolidation in
recent years, in which we have participated. We continue to evaluate possible
acquisitions of other poultry producers or production facilities from time to
time and may pursue certain opportunities consistent with our business strategy.

      The key elements of our business strategy are as follows:

      o     Increased market penetration through expanded distribution. We have
            an extensive distribution network, supported by our own
            transportation fleet, superior knowledge of existing wholesale
            channels and strategically located cold storage warehouses and
            facilities. Since 1992, we have substantially increased our
            distribution routes. We plan to continue to

                                       14
<PAGE>

            develop and improve our distribution network and systems in every
            product category and throughout our expanded geographic coverage in
            Mexico.

      o     Increased service and market responsiveness. We seek to remain a
            leader in the Mexican poultry market by maintaining high standards
            of customer service and continuing to be responsive to the changing
            needs of varying market segments. As part of this strategy, we have
            structured our operations in such a way as to enable us to vary the
            size, weight and color of our chicken products, depending upon the
            particular demands of the market segment. In addition, we have
            decentralized order and sales services from our headquarters to our
            cold storage warehouses and facilities, which serve as midpoints in
            the distribution chain to wholesalers and local customers. This
            strategy allows us to stay closer to our customer base and to better
            cultivate growing customer segments, such as food-service operators,
            supermarkets and food wholesale clubs.

      o     Low-cost production and operating efficiency. We are among Mexico's
            lowest-cost producers and distributors of chicken, due in part to
            economies of scale and vertically integrated operations. We pursue
            on-going programs to increase operating efficiencies and reduce
            operating costs.

      o     Continued brand differentiation. We have developed a brand image for
            premium fresh chicken and eggs in Mexico. Building on the success of
            our branded products to date, we seek to continue to promote our
            brand name through billboards, packaging, special publicity
            campaigns and through development of brand loyalty among wholesale
            and retail distributors.

Capital Expenditures

      Over the last three years, we have financed our capital expenditures with
resources generated by our operations. We made the following capital
expenditures during the last three years:

      o     In 2001, we made capital expenditures of Ps.635.8 million net, with
            which we:

            o     financed the asset acquisitions of Avicola Nochistongo, one of
                  the 10 largest egg producers in Mexico with operations in La
                  Laguna area and of Avicola Simon Bolivar, one of the 15
                  largest egg producers in Mexico and a producer of chicken;

            o     continued to update our transportation fleet, processing
                  plants and feed mills; and

            o     improved our egg production farms.

      o     In 2002, we made capital expenditures of Ps.268.5 million net, with
            which we:

            o     continued to update our transportation fleet, farms,
                  processing plants and feed mills;

            o     improved our distribution network; and

            o     increased production capacity in our Northwest Complex, which
                  is located in Culiacan.

      o     In 2003, we made capital expenditures of Ps.751.8 million net, with
            which we:

                                       15
<PAGE>

            o     continued to update our transportation fleet, farms,
                  processing plants and feed mills;

            o     improved and expanded our distribution network; and

            o     increased production capacity in our Northwest Complex and
                  Yucatan Peninsula Complex.

Business Overview

Chicken Market

      Mexican consumers value distinct characteristics in their chicken.
Virtually all chicken sold by us and other major chicken producers in Mexico is
fresh. Fresh chicken is a central ingredient in many traditional Mexican dishes
and the leading meat consumed in Mexico according to data from UNA.
Further-processed chicken, such as heat-and-serve products, frozen dinners,
chicken nuggets and other similar foods, has found limited acceptance among
Mexican consumers due to historical consumer preferences for fresh chicken and
the fact that many Mexicans have limited freezer capacity and limited access to
microwave or other types of ovens.

      In the last four years, we have noticed an increased preference although
limited, among Mexican consumers for further-processed fresh chicken
products--mostly marinated and pre-formed chicken products. We participate
significantly in the provision of these products. We estimate that
further-processed chicken products currently account for approximately 5.0% of
the chicken sold in Mexico.

      Mexican consumers also generally prefer chicken with pronounced yellow
skin pigmentation, a characteristic found mainly in our public-market and
supermarket-broiler chicken products that we attain by including marigold
extract in our chicken feed. We have also noticed an increased demand for
smaller, whole, fresh chicken from various fast-food outlets, principally
chicken roasting shops (rosticerias and asaderos), which have developed rapidly
in recent years.

      According to data obtained from the UNA, total Mexican chicken consumption
per capita increased by 19.2% from 1999 to 2003. Chicken is the leading meat
consumed in Mexico, and it accounted for approximately 46.9% of all meat
produced in Mexico in 2003. The following table sets forth total Mexican
production of chicken, pork and beef for 1999 to 2003.

                  Mexican Production of Chicken, Beef and Pork
                            (in thousands of tonnes)*

                               1999     2000     2001     2002     2003
                              -----    -----    -----    -----    -----
Chicken ..................    1,784    1,936    2,067    2,187    2,290
Beef .....................    1,390    1,408    1,428    1,451    1,496
Pork .....................      994    1,034    1,065    1,085    1,100

*Sources: UNA for chicken and beef; USDA for pork.

      The Mexican chicken industry, like chicken industries in other countries,
is characterized by a long-term decline in real prices in conjunction with
cyclical periods of higher profitability leading to overproduction followed by
periods of lower prices and lower profitability. Prices fell in real terms, in
1997, 1998 and 1999. The price recovered slightly in 2000 due to reduced supply
in the first part of the year. During 2001, chicken prices declined as a result
of excess supply during the first half of the year, the economic slowdown
experienced by the country at the end of the year and a decrease in the cost of
the

                                       16
<PAGE>

main feed ingredients. In 2002, chicken prices increased slightly by
approximately 2.5% over 2001, as a result of the worldwide increase in the cost
of feed ingredients at the end of the year. In 2003, chicken prices decreased by
approximately 4.0% over 2002, mainly due to an oversupply in domestic production
that was present mainly in the second half of the year and a decrease in the
purchasing power of the average consumer. We believe that Mexican chicken prices
may decline further in real terms and that prices for chicken may also vary
cyclically.

      We believe that changes in Mexican chicken consumption correlate closely
with changing chicken prices and their effect on consumer purchasing power. In
1993 and 1994, when chicken prices were stable or declined only slightly, growth
in consumption was relatively slow. In 1995, when supply increased and real
prices fell, chicken consumption increased by 8.8%. Many smaller producers went
out of business during the economic crisis, causing supply to contract and
prices to rise in 1996 and resulting in a 2.2% decrease in chicken consumption.
Chicken consumption increased by 6.3%, 12.4%, 8.5%, in 1998, 1999 and 2000
respectively, due to declines in chicken prices, an increase in supply and
improved economic conditions in Mexico. Consumption increased further by 6.7% in
2001 due to further declines in chicken prices and increased supply. The trend
in increased consumption continued in 2002 with an increase of 5.8% due to
increased supply, and in 2003 with an increase of 6.1% due to a further increase
of supply coming mainly from domestic production.

Chicken Products

      Five principal product categories exist for fresh chicken in Mexico: live,
public market, rotisserie, chicken parts and supermarket broiler.

   "Live" chicken is delivered alive to small independent slaughtering
   operations or to wholesalers that contract with independent slaughtering
   operations for processing. The freshly slaughtered chicken is then sold to
   chicken shops and other specialized retailers for sale to consumers and in
   some areas is sold directly to consumers by the slaughterhouse. According to
   UNA, live chicken accounts for approximately 30.0% by volume of the chicken
   sold by producers in Mexico.

   "Public Market" chicken is a whole broiler presented uneviscerated, generally
   sold within 48 hours after slaughter in public markets throughout Mexico, but
   primarily concentrated in the Mexico City metropolitan region. According to
   UNA, public market chicken accounts for approximately 26.0% by volume of the
   chicken sold by producers in Mexico.

   "Rotisserie" chicken is a whole broiler presented eviscerated and ready to
   cook. Rotisserie chicken is sold by wholesalers and directly by producers to
   small shops, stands (rosticerias or asaderos) and supermarkets, which cook
   the chicken and sell it whole and freshly cooked to the end-consumer,
   providing an economical form of fast-food. According to UNA, rotisserie
   chicken accounts for approximately 23.0% by volume of the chicken sold by
   producers in Mexico.

   "Chicken Parts" refers to cut-up fresh chicken parts sold wrapped in trays or
   in bulk principally to supermarket chains, the fast-food industry and other
   institutional food-service providers. Producers generally sell directly to
   the supermarket chains and deliver the chicken directly to the outlet. Sales
   to the institutional market often require customized cutting and
   presentation. According to UNA, chicken parts account for approximately 11.0%
   by volume of the chicken sold by producers in Mexico.

   "Supermarket Broiler" chicken is a fresh whole broiler presented with the
   edible viscera packed separately. In most cases it is sold directly by
   producers to supermarkets and, in some regions, to other independent food
   shops. Mexican consumers' preference for freshness requires regular

                                       17
<PAGE>

   deliveries of chicken to supermarkets and other food shops. According to UNA,
   supermarket broiler chicken accounts for approximately 5.0% of the volume of
   the chicken sold by producers in Mexico.

      We also sell further-processed chicken products to supermarkets and other
retailers. The following table sets forth, for the periods indicated, the sales
volume in tonnes and as a percentage of the total volume of chicken sold for
each of our principal lines of chicken products.

<TABLE>
<CAPTION>
                                                                Year Ended December 31,
                              -------------------------------------------------------------------------------------------
                                   1999               2000               2001               2002               2003
                              ---------------    ---------------    ---------------    ---------------    ---------------
                                        % of               % of               % of               % of               % of
                              Volume   Total     Volume   Total     Volume   Total     Volume   Total     Volume   Total
                              ------   ------    ------   ------    ------   ------    ------   ------    ------   ------
                                                       (thousands of tonnes, except percentages)
<S>                            <C>      <C>       <C>      <C>       <C>      <C>       <C>      <C>       <C>      <C>
Public Market and
   Rotisserie .............    266.1     64.0     336.4     56.0     339.3     51.3     307.1     46.2     288.1     44.0
Supermarket Broiler,
   Chicken Parts and
   Other(1) ...............    110.0     26.5     138.7     23.0     151.3     22.8     191.6     28.8     194.9     29.7
Live ......................     39.7      9.5     126.0     21.0     171.6     25.9     166.7     25.0     172.5     26.3
                              ------   ------    ------   ------    ------   ------    ------   ------    ------   ------
Total .....................    415.8    100.0%    601.1    100.0%    662.2    100.0%    665.4    100.0%    655.5    100.0%
                              ======   ======    ======   ======    ======   ======    ======   ======    ======   ======
</TABLE>

----------
(1)   "Other" comprises sales of further-processed poultry products, viscera and
      other products.

      Our product mix varies from region to region, reflecting different
consumption and distribution patterns. Based on market demand, we believe that
fresh, rather than frozen, chicken will continue to dominate the Mexican market.
Furthermore, we believe that consumer demand for value-added fresh chicken
products, such as rotisserie chicken, supermarket broilers and chicken parts,
will increase over time. Accordingly, we continue to focus principally on
producing fresh chicken, including value-added fresh chicken products.

Chicken Marketing, Sales and Distribution

      We have developed an extensive distribution system that we believe is the
largest and most modern of any chicken or egg producer in Mexico. We use various
distribution channels in every major product category to service different
market segments. For example, in the Mexico City area, we transport most public
market chicken directly to wholesalers, who then transport the chicken to retail
sellers. We use our own fleet to transport the majority of rotisserie chickens,
supermarket broilers and other chicken products to our customers. We try to
cooperate with existing distribution channels and do not compete with wholesale
distributors, except in areas where we supply our own distribution capacity
where needed for market penetration.

      We distribute products from our seven processing plants (located in
Celaya, Culiacan, Puebla, Lagos de Moreno, Coatzacoalcos, Merida and Gomez
Palacio) to our cold-storage facilities and warehouses, which serve as a
mid-point in distribution to wholesalers and local customers. From our
cold-storage facilities, we service wholesalers (who in turn deliver to their
customers) and transport certain products directly to supermarkets and
food-service operations. Our distribution infrastructure includes 60
cold-storage warehouses and facilities and a large fleet of vehicles. The
decentralized sales force permits us to remain attuned to developments in the
regions we serve and to develop close relationships with customers.

      Through recent acquisitions and production agreements, we have expanded
our distribution network, which now covers almost all of Mexico:

                                       18
<PAGE>

      o     At the end of 1999, we strengthened our distribution network by
            acquiring Grupo Campi. The acquisition consolidated our presence in
            the southeastern region of Mexico and made new markets accessible,
            including the Yucatan Peninsula.

      o     In 2001, through an agreement with Avicola Cotaxtla, a broiler
            producer located in Veracruz, we strengthened our presence in that
            important region of the country.

      o     By means of the acquisition of most of the assets of both Avicola
            Nochistongo and Avicola Simon Bolivar in September 2001, we further
            expanded and consolidated our distribution network, mainly in the
            northeastern part of the country.

      o     In 2002, we consolidated our presence in the northeastern part of
            the country, mainly in the state of Nuevo Leon, due to the
            consolidation of our recent acquisitions, made at the end of 2001.

      o     During 2003 we implemented two important projects to expand the
            facilities at our Northwest Complex and Peninsula Complex to
            increase production capacity in our chicken business. These
            facilities are ideally suited for the expansion projects due to
            their sanitary status and their geographical location. Both
            complexes are being expanded by approximately 50%, which will
            increase opportunities for future exports as well as for meeting
            consumer demand in those regions and in other regions in Mexico.

      In the following paragraphs we provide a description of our marketing,
sales and distribution strategies for each of our major chicken products.

      o     Live chicken - We sell live chicken primarily to wholesalers, which
            contract out the processing to independent slaughterhouses and then
            resell the processed product as public market chicken. To a lesser
            extent, we sell to small independent slaughterhouses in the
            southeast, where live chicken continues to be the standard for
            consumption. Additionally, customers can purchase live chicken
            directly from us on our farms. However, we believe that the market
            as a whole is moving away from live chicken.

      o     Public market chicken - We believe that we are the largest producer
            of public market chicken in Mexico. This is supported by information
            published by UNA and our own internal information. We regularly sell
            to more than 50 of the approximately 200 whole fresh chicken
            wholesalers operating in the Mexico City region. Most of our
            wholesale customers rely primarily on us for public market chicken,
            although we have no exclusive supply agreements. Our principal focus
            in this market has been to provide superior distribution and service
            to selected wholesalers in order to maintain and further develop
            loyalty. Public market chicken is ordinarily sold to consumers
            without any packaging or other identification of the producer, but
            our distribution system encourages wholesalers to sell to retailers
            from our own "Bachoco" trailers, reinforcing our reputation for
            freshness and efficiency of service and fostering brand loyalty
            among retailers. We believe we have developed excellent
            relationships with the wholesalers we serve.

      o     Rotisserie chicken - Rotisserie chicken has been one of our fastest
            growing products since we first started producing it in 1988. We
            sell rotisserie chicken directly to rosticerias, asaderos and
            supermarkets. We attribute the growth in our sales of rotisserie
            chicken in large part to the rapid growth of the market for freshly
            cooked chicken sold by rosticerias and asaderos and in the
            rotisserie sections of supermarkets. We expect this market to
            continue to grow because of an ever-increasing consumer demand for

                                       19
<PAGE>

            convenient, low-priced and high-quality fast food. Success in
            supplying rotisserie chicken depends on consistency and good
            service, and only larger producers with more modern processing
            facilities and distribution capacity can compete in this market. We
            increased our market share by consistently providing high-quality
            products and by using our own trucking fleet to deliver directly to
            retailers on a punctual and dependable basis. We expect to expand
            sales of rotisserie chicken by leveraging our increasingly developed
            transportation and distribution network.

      o     Supermarket broiler chicken - We sell supermarket broilers, as well
            as chicken parts and eggs, directly to the principal supermarkets,
            convenience store chains and wholesale clubs in Mexico. In order to
            build consumer loyalty for our supermarket broiler chicken, we
            emphasize our brand image as well as our superior service,
            reinforced by frequent delivery to ensure freshness. Each chain
            negotiates purchases centrally, but we deliver directly to every
            point of sale, ordinarily at least once every 48 hours. We believe
            that we lead the market in frequency of deliveries to supermarkets.

      o     Chicken parts - We sell chicken parts principally to supermarkets,
            using the same marketing strategy that we use for supermarket
            broiler chicken. We are also an important supplier of chicken parts
            to the growing franchise fast-food and institutional food-service
            industries. We continue to develop custom-cutting processes to help
            meet demand from fast-food and institutional customers for a wider
            variety of chicken parts.

      o     Frozen and further-processed poultry

            o     Frozen, heat-and-serve and other further-processed poultry
                  products make up only a small proportion of total Mexican
                  poultry consumption today. Mexican consumers have a greater
                  preference for fresh chicken than their U.S. counterparts, and
                  they are less likely to have refrigerators or microwave or
                  regular ovens needed to store and cook frozen and processed
                  poultry. However, the potential for substantial growth in this
                  market is large, and we believe that our distribution network,
                  our large market share for supermarket chicken sales, our
                  brand name and our experience in a wide range of existing
                  Mexican distribution channels will be important competitive
                  strengths in this area.

            o     Our 2003 sales of fresh further-processed poultry products
                  increased approximately 20% over 2002 sales. We are moving to
                  produce and introduce various fresh further-processed poultry
                  products in Mexico, which we have developed in accordance with
                  Mexican customer preferences. We will continue to do so as
                  this market grows.

Eggs

      Annual per capita egg consumption in Mexico is relatively high compared to
other countries. In 2003, annual per capita consumption of eggs in Mexico was
approximately 19.05 kg, according to data from UNA. Mexican egg consumption per
capita increased 6.4% from 1998 to 2003. This high level of consumption is due
in part to the fact that eggs are a relatively cheap source of protein.

      The Mexican egg industry is more fragmented than the broiler industry but
has experienced some degree of consolidation in the last years, including
acquisitions by our own Company. According to UNA, the nine largest producers of
eggs in Mexico now account for approximately 34% of the market. As a result of
our September 2001 acquisitions of Avicola Nochistongo and Avicola Simon
Bolivar, two

                                       20
<PAGE>

of the 15 largest egg producers, we have become one of the largest egg producers
in Mexico with an estimated market share of 6.8% in 2003. Our marketing strategy
for egg products is to increase brand recognition by increasing sales of cartons
with the "Bachoco" brand printed on them. In addition, we aim to differentiate
our eggs by their high quality and freshness.

      Eggs in Mexico have traditionally been distributed in large 360-egg cases
through wholesalers to retailers. The retailers, which are typically small
grocery shops, in turn sell the eggs by weight to consumers. At present,
approximately 22.0% of the eggs sold in Mexico are sold in packaged form, 7% are
sold in processed form and approximately 71% are sold in bulk to wholesalers.
The trend in recent years has been towards packaged egg sales. We expect that
convenience, the development of brand loyalty and the growth of supermarket
chains will contribute to the continuance of this trend toward packaged eggs.

      We sell both brown and white eggs. Brown eggs presently account for
approximately 8.0% of Mexican egg consumption. The branded carton of brown eggs
is a premium product in the Mexican market. The Company believes that brown eggs
are less vulnerable to price fluctuations than white or unbranded eggs, because
consumers perceive them to be of higher quality. Brown eggs command a small
premium over white eggs. We are by far the leading producer of brown eggs in
Mexico and estimate that our production accounts for approximately 37.1% of the
Mexican brown egg market and 90.0% of the Mexican branded brown egg market.

      In some regions, however, we have reallocated part of our production from
brown eggs to white eggs due to local market preferences. In addition, the
recently acquired operations of Avicola Nochistongo and Avicola Simon Bolivar
produce mainly white eggs. Our main strategy in the eggs business is to
gradually move from bulk to packaged white eggs. Packaged eggs are less
vulnerable to price fluctuation and create brand loyalty.

      We have designed our egg distribution system to transport eggs from our
laying farms at Celaya, Los Mochis, Ciudad Obregon, Mexicali and La Laguna
regions to customers in all sales regions. We sell packaged eggs directly to all
of the principal supermarket chains in Mexico, with daily deliveries directly to
their outlets.

Feed

      According to Camara Nacional de la Industria de Transformacion
("CANACINTRA"), Mexican production of feed increased from 15.5 million tonnes in
1997 to 22.5 million tonnes in 2002. In 2002, Mexico was ranked the sixth
largest producer of feed in the world and the second largest in Latin America.

      Local production is composed of commercial and integrated manufacturers.
Commercial producers produce for the market, while integrated producers are
large producers that produce for themselves and occasionally for other
producers. Of the 396 registered producers in Mexico, 252 are classified as
integrated and 144 as commercial producers. Integrated producers account for
approximately 64.5% of total production. Imports of feed come almost entirely
from the United States and represent approximately 1.6% of the total consumption
in Mexico.

      We entered the feed business as a result of our acquisition of Grupo Campi
at the end of 1999. We sell to small livestock producers and through a network
of small distributors located mainly in central and southern Mexico. We have
benefited from economies of scale and synergies derived from producing feed both
for our own internal consumption and for sale to third parties. To propel this
business, in 2000 we opened a new mill in the state of Veracruz dedicated
exclusively to producing feed. We estimate that

                                       21
<PAGE>

our feed business comprises approximately 4.1% of the market share of the
commercial (non-integrated) feed business.

Swine

      We purchase breeder swine live from the United States and breed them at
facilities in Navojoa. We then raise swine to maturity at our farms in Celaya
and three other locations in Mexico. Mature swine is sold on the hoof to Mexican
swine meat packers for the production of pork products. In 2002, our swine
prices decreased by 21.3% as a result of an oversupply in the swine market due
primarily to increased imports from the United States. In 2003, swine prices
began to recover, increasing by 7.0%, due mostly to the fact that there was very
modest growth in domestic production and imports. Traditionally, Mexicans
consume less swine and swine products than chicken and other meats. We do not
currently intend to make material investments in this line of business.

Raw Materials

      We purchase our breeding stock for broilers and layers from high-quality
suppliers. All of our breeder swine currently come from one supplier, but we
have changed suppliers from time to time and have numerous alternative sources
of supply.

      The largest single component of our cost of sales is the cost of
ingredients used in the preparation of feed including, principally, sorghum, soy
meal, corn, fish meal, meat meal, and for certain chicken products, marigold
extract. The price of these ingredients is subject to significant volatility
resulting from weather, the size of harvests, transportation and storage costs,
governmental agricultural policies, currency exchange rates and other factors.
To reduce the potential adverse effect of grain price fluctuations, we vary the
composition of our feed to take advantage of current market prices for the
various types of ingredients used.

      Beginning in 1992, the Mexican government lifted various procedural
restrictions on importing grains, and it is currently eliminating price supports
in favor of direct subsidies for domestic farmers. Under NAFTA, the government
eliminated the tariff on sorghum effective January 1, 1994, and eliminated
tariffs on all other grains that we use except corn on January 1, 2003. Corn
tariffs will be eliminated by 2008. We expect these developments to have a
positive effect on our cost of production as the cost of our ingredients more
closely track prices in the international commodity markets.

      At present, we take advantage of lower cost feed ingredients from Mexican
sources, when available. In 2003, we obtained approximately 38.3% of our total
grain needs from the domestic market. We believe that the quality of local feed
ingredients, particularly sorghum, is superior to that of imported feed
ingredients. In addition, the use of local feed ingredients allows us to save on
transportation costs and import duties. However, in southern Mexico where Grupo
Campi's complexes are located, domestic crops and feed ingredients are not
available. As such, these complexes use mainly imported grain.

      We may, from time to time, engage in hedging of our feed costs in the
future.

Competition

Chicken

      Although we are Mexico's largest chicken producer, we face significant
competition from other producers in all of the markets in which we sell our
products. When combined with our two largest vertically integrated competitors,
we account for approximately 52.0% of total Mexican poultry

                                       22
<PAGE>

production; the balance is distributed among approximately two hundred small and
medium-sized integrated and non-integrated producers. Mexico's two other major
chicken producers are Pilgrim's Pride de Mexico, S.A. de C.V., a subsidiary of
the U.S. chicken producer Pilgrim's Pride Corporation, and Trasgo, S.A. de C.V.,
which since April 1994 has been controlled by the U.S. chicken producer Tyson
Foods, Inc. The major producers, including Bachoco, have substantial cost
advantages over smaller, non-integrated producers arising from economies of
scale and control of feed preparation. To varying degrees, each of these
companies has substantial financial resources and strengths in particular
product lines and regions. We believe, however, that we have substantial
competitive strengths over our competitors, including a broader range of chicken
products and broader geographic coverage.

      Furthermore, there are considerable barriers to entry into large-scale
chicken production and distribution in Mexico, including, among others, the
consumer preference for fresh chicken, the weaknesses of transportation
infrastructure and varying regional consumer preferences among the various
product categories. The channels for distribution of chicken products, in
particular, are highly specialized and varied, and they call for in-depth
experience in market practices.

      Nonetheless, we expect that we will continue to face strong competition in
every market and that existing or new competitors are likely to broaden their
product lines and to extend their geographic coverage.

      Poultry producers in the United States have developed low-cost production
techniques and have been successful in exporting primarily frozen and
further-processed poultry to other countries, especially in periods of
overcapacity in the United States. As tariff barriers have declined under NAFTA,
we have experienced increased competition from U.S. poultry producers. According
to UNA, in 2003, imports of chicken, turkey and other poultry increased by 1.7%
in volume over imports in 2002. This lower increase was caused in part by
short-term effects like temporary bans of imports by sanitary and health
authorities, and it may be reversed in future periods. Mechanically de-boned
poultry accounted for approximately 40.1% of the imports.

      We expect that competition from U.S. exporters will continue to increase.
However, Mexican consumer acceptance of frozen or frozen further-processed
poultry products is low, and we do not anticipate that it will grow
significantly in the near future or that fresh chicken can be distributed
throughout Mexico from processing facilities in the United States in a
cost-effective fashion.

Eggs

      We are one of the largest producers of eggs in Mexico, with approximately
6.8% of total Mexican egg production at the end of 2003. According to UNA, the
top nine producers together accounted for approximately 34.0% of total Mexican
egg production, with the balance distributed among hundreds of smaller
producers.

Feed

      Of the 396 registered producers of feed in Mexico, 252 are classified as
integrated and 144 as commercial producers. Integrated firms produce
approximately 64.5% of total production for their internal use, and the
remaining 35.5% is produced for sale to third parties. We estimate a market
share of approximately 4.1% in our feed product line.

                                       23
<PAGE>

Swine

      The Mexican swine industry is highly fragmented, and no producer has more
than 2.5% of the market. On December 31, 2003, we had less than 1.0% of the
Mexican market share in swine. U.S. producers already compete in this market in
Mexico because tariff barriers on swine are moderate.

Mexican Regulation

Mexican Import Regulation and Price Controls

      NAFTA became effective on January 1, 1994. Prior to NAFTA, the Mexican
poultry and egg markets were protected from foreign imports by a licensing and
quota system. Under NAFTA, Mexico implemented a transitional tariff rate quota
system for imports of poultry, eggs and swine from the United States. U.S.
exports to Mexico were duty-free up to the quota amount and were subject to an
ad valorem tax on all imports above that amount. As required by NAFTA, the
Mexican government eliminated all permanent quotas and tariffs on poultry, eggs
and swine in January 2003. With certain specific exceptions described below,
there are now no quotas or tariffs on imports of poultry, eggs and swine from
the U.S. We expect the elimination of these trade protections to stabilize the
level of imports over time and to permit improved private control over imports,
which may result in increased competition from importers.

      The pre-2003 scheme of quotas and tariffs, which has now been eliminated,
      was as follows:

            o     The quota for chicken was 120.3 thousand tonnes, which
                  represents 5.7% of national consumption. Above the quota,
                  imports were taxed ad valorem at 49.4%.

            o     Within the chicken quota, there were sub-quotas for whole
                  chicken (16.6 thousand tonnes), poultry parts (31.6 thousand
                  tonnes), whole turkeys, turkey parts, and de-boned chicken.
                  Imports above the quota were also taxed at 49.4%. There was no
                  quota amount for further-processed chicken; all imports were
                  taxed at 49.4%.

            o     The quota for eggs was 8.2 thousand tonnes, which is less than
                  1% of national consumption. Imports above the amount were
                  taxed at 9.5% ad valorem.

            o     Imports of swine were subject to a quota of 80.3 thousand
                  tonnes of fresh, frozen, and chilled meat, but were also taxed
                  2% on amounts below the quota (this tax was 4% in 2001).
                  Amounts above the quota were taxed at 10% in 2002.

      Import limits and short-term tariffs that remain after January 2003 are as
      follows:

      The Mexican government has put in place a number of short-term tariffs and
import limits on poultry, eggs and swine:

            o     In January 2003, the Mexican government announced a temporary
                  safeguard to stabilize the flow of poultry imports, which
                  included an initial tariff of 98.8% on imports of chicken leg
                  quarters. This safeguard was confirmed in July 2003 and will
                  decrease annually until it reaches 0% in 2008. All other
                  chicken products from the United States, including whole
                  chicken, chicken parts other than leg quarters and eggs remain
                  tariff-free.

                                       24
<PAGE>

            o     In late 2003, Mexico imposed temporary bans on chicken
                  products coming from certain states of the United States due
                  to avian influenza cases present in those states. Most of
                  these bans are still in effect.

            o     In the second half of 2002, Mexico imposed a ban, which is
                  still in effect, on chicken and egg products from California,
                  Arizona and certain other parts of the United States as a
                  result of disease problems in those areas.

            o     In October 1999, Mexico imposed an anti-dumping compensatory
                  duty of $ 0.351 per kilogram (48% ad valorem) on swine and
                  pork imports, in addition to the import tariff. The Mexican
                  government announced the elimination of this duty on May 23,
                  2003.

      In addition to NAFTA, Mexico has entered into free trade agreements with
several other countries including Chile, Europe, Colombia and Venezuela.
Although such agreements may result in lower tariffs on our own products, we
believe that imports from such countries will not increase substantially in the
future due to high transportation and distribution costs.

Antitrust Regulations

      The Ley Federal de Competencia Economica ("Mexican Economic Competition
Law"), which took effect on June 22, 1993, regulates monopolies and monopolistic
practices. Under this law, all companies (including Bachoco) are required to
notify the Comision Federal de Competencia ("Federal Competition Commission") of
all proposed transactions exceeding specified threshold amounts as set forth in
the Mexican Economic Competition Law. The Federal Competition Commission can
impose conditions on, and prevent or unwind, any such transactions by Mexican
companies. We have complied with all requirements under this law.

Environmental and Sanitary Regulation

      Our operations are subject to Mexican federal and state laws and
regulations relating to the protection of the environment. The principal laws
are Ley General de Equilibrio Ecologico y Proteccion Ambiental (General Law of
Ecological Balance and Environmental Protection--the "Environmental Law") and
Ley de Aguas Nacionales ("National Waters Law"). The Secretaria del Medio
Ambiente y Recursos Naturales (Ministry of Environment and Natural Resources,
or, "Semarnat"), administers the Environmental Law, and Comision Nacional del
Agua ("National Water Commission") administers the National Waters Law.

      The Environmental Law regulates water pollution, air pollution, noise
control and hazardous substances. Semarnat can bring administrative and criminal
proceedings against companies that violate environmental laws, and after certain
administrative procedures, it also has the power to close non-complying
facilities. Every company in Mexico is required to provide Semarnat with
periodic reports regarding compliance with the Environmental Law and the
regulations thereunder.

      The level of environmental regulation in Mexico has increased in recent
years, and enforcement of the law is improving. We expect this trend to continue
and to intensify with international agreements between Mexico and the United
States.

      In particular, Mexican environmental laws set forth standards for water
discharge that are applicable to poultry processing operations. Our processing
plants have water treatment facilities that comply with Mexican environmental
standards. We are implementing other investment projects in anticipation of
stricter environmental requirements in the future. We do not expect that
compliance with

                                       25
<PAGE>

those Mexican federal environmental laws or Mexican state environmental laws
will have a material effect on our financial condition or performance.

      The production, distribution and sale of chicken, eggs and swine are
subject to Mexican federal and state sanitary regulations. The principal
legislation is Ley General de Salud ("General Health Law") and Ley Federal de
Sanidad Animal ("Federal Animal Health Law"). The Federal Animal Health Law was
enacted in 1993, and, since then, we have been working closely with Mexican
authorities to develop regulatory standards and inspection methods for chicken
processing. Currently, Mexican authorities do not monitor production or inspect
products to the same degree as sanitary authorities in other countries, such as
the USDA in the United States. However, we believe that we are in compliance
with all applicable sanitary regulations.

Organizational Structure

      We are a holding company with no operations other than holding the stock
of our subsidiaries, all of which are incorporated in Mexico, and engaging in
transactions with our subsidiaries. Our principal operating subsidiary is BSACV,
which owns our principal operating assets, and which accounted for 94.6% of
consolidated total assets as of December 31, 2003, and 93.1% of our consolidated
revenues for the year ended December 31, 2003.

      The following table shows our main subsidiaries as of December 31, 2001,
2002 and 2003:

                                                      Percentage equity interest
                                                      --------------------------
                                                       2001      2002      2003
                                                      ------    ------    ------
Bachoco, S.A. de C.V. ("BSACV") ....................    100%      100%      100%
Operadora de Servicios de Personal, S.A. de C.V ....    100       100       100
Servicios de Personal Administrativo, S.A. de C.V ..    100       100       100
SECBA, S.A. de C.V .................................    100        --        --
SEPETEC, S. A. de C.V ..............................    100       100       100
Acuicola Bachoco, S.A. de C.V ......................    100       100       100
Huevo y Derivados, S.A. de C.V .....................     97        97        97
Pecuarius Laboratorios, S.A. de C.V ................     64        64        64
Aviser, S.A. de C.V ................................    100       100       100
Campi Comercial, S.A. de C.V .......................    100       100        --
Campi Alimentos, S.A. de C.V .......................     --        --       100

      In December 2003, Campi Comercial, S.A. de C.V. merged into BSACV (the
surviving company). After the merger, a spin-off from BSACV was approved to
create a new company known as Campi Alimentos, S.A. de C.V. These transactions
have had no effect on the consolidated amounts on our balance sheet.

      In April 2002, we sold our subsidiary, SECBA, S.A. de C.V., for Ps.5.3
million to a related party, generating a gain of Ps.0.8 million; consequently,
this subsidiary's figures were not consolidated from the date of sale. The
effects of the deconsolidation of this subsidiary are immaterial and do not
affect the comparability of the accompanying financial statements. SECBA, S.A.
de C.V. continues to render administrative services to the Company.

Property, Plants and Equipment

      Our production and storage facilities are located throughout the regions
we serve in order to ensure freshness and minimize transportation time and
costs. The most extensive facilities are grouped in seven complexes that include
farms and processing plants. The largest of our complexes is in Celaya,

                                       26
<PAGE>

where we have broiler grow-out farms, a broiler processing plant and egg
production farms. The complex at Culiacan includes broiler grow-out farms and a
broiler processing plant, as do the complexes located in Puebla, Lagos de
Moreno, Coatzacoalcos and Merida. There are smaller egg production farms at Los
Mochis, Ciudad Obregon and Mexicali. As a result of the acquisitions made in the
second half of 2001, a new complex was formed in Gomez Palacio, Durango (in La
Laguna Region). The complex consists of broiler grow-out farms, a broiler
processing plant and egg production farms representing more than half of our
total egg production capacity.

      The following table summarizes the types and number of each type of our
production facilities.

                          Bachoco Production Facilities

      Type                                                     Number
      ----                                                     ------
      Chicken breeding farms ................................   149
      Broiler grow-out farms ................................   430
      Broiler processing plants .............................     7
      Egg incubation plants .................................    18
      Egg production farms ..................................    96
      Swine breeding farms ..................................     1
      Swine grow-out farms ..................................    10
      Feed plants ...........................................    15

      On September 22, 2002, Hurricane Isidore hit the Yucatan Peninsula and
affected approximately 60% of our chicken growing farms in the region. The
remainder of our facilities in the area, including a poultry processing plant,
feed mills, breeder farms and incubator plants, suffered minor damages.

      The chicken growing farms in this region represent approximately 7% of our
total capacity in our chicken business. We were able to divert products from our
other facilities to maintain a consistent level of service to our customers in
this region.

      The Company repaired its Peninsula Complex on schedule and by the end of
2003 the complex had returned to the level of capacity maintained prior to
sustaining the damage caused by Hurricane Isidore. In 2003 the Company
implemented projects to expand the facilities at the Peninsula Complex as well
as the Northwest Complex. Both complexes are being expanded to increase capacity
by approximately 50% by the third quarter of 2004. These projects have been
financed with internal resources generated by our own operations.

      We currently operate 15 feed plants for our own chickens, feed sales to
third parties and egg and swine operations. The total production capacity of our
feed plants is approximately 290,000 tonnes per month. We estimate that we are
the largest producer of animal feed in Mexico.

      Our other facilities include two poultry manure-processing plants. Our
headquarters are located in Celaya, and we have 60 sales centers throughout the
regions we serve. While we own most of our facilities, we lease a limited number
of farms and sales centers. We also employ a network of contract growers.

      Our fleet of trucks carries feed from feed mills to farms, live chicken
from farms to processing plants, day-old chickens from egg incubation plants to
farms, eggs from farms to distribution centers and, ultimately, products from
distribution centers to customers.

                                       27
<PAGE>

ITEM 5. Operating and Financial Review and Prospects

      The following discussion should be read in conjunction with our
consolidated financial statements. The consolidated financial statements have
been prepared in accordance with Mexican GAAP, which differs in certain respects
from U.S. GAAP. Note 17 to the consolidated financial statements provides 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 total stockholders'
equity, net income and operating income, and a condensed statement of cash flows
under U.S. GAAP as of December 31, 2002 and 2003 and for the years ended
December 31, 2001, 2002 and 2003.

      In accordance with Mexican GAAP rules on price-level restatement of
financial statements, the financial statements included with this disclosure
recognize certain effects of inflation. In addition, the financial statements
and, unless otherwise specified, the other financial data included herein are
restated in constant pesos as of December 31, 2003. The effects of price-level
restatement in accordance with Mexican GAAP have not been reversed in the
reconciliation to U.S. GAAP.

General

      In the following discussion we describe various trends and how they
affected our results of operations for the years ended December 31, 2001, 2002
and 2003.

Mexican Economic Conditions

      In 2000, according to statistics from the Mexican Central Bank and the
Secretaria de Hacienda y Credito Publico ("Ministry of Finance"), Mexico's GDP
grew 6.9%. Interest rates on 28-day Cetes decreased to an average of 15.2%,
inflation decreased to a rate of 9.0% and the peso appreciated against the U.S.
dollar by approximately 1.4%. During 2001, the Mexican economy was affected by a
global economic slowdown, and in particular by the downturn in the U.S. economy
in the aftermath of the terrorist attacks on September 11, 2001. As a result, in
2001, Mexico's GDP fell by 0.3%. Interest rates on 28-day Cetes decreased to an
average of 11.3% (6.3% in the last month of the year), inflation decreased to a
rate of 4.4% and the peso appreciated against the U.S. dollar by 5.0%.

      During 2002, the Mexican economy continued to be sluggish due to the
effects on Mexico of the continuing slowdown in the U.S. economy. Mexico's GDP
increased 0.9% in 2002. Financial markets in Mexico remained relatively stable
most of the year, experiencing an increase in volatility in the last quarter.
Interest rates on 28-day Cetes in 2002 decreased to an average of 7.3%,
inflation increased to a rate of 5.7% and the peso depreciated against the U.S.
dollar by 12.2%. Most of the peso depreciation occurred at the end of the year.

      In 2003, the Mexican economy continued to show signs of slowdown; GDP
growth was 1.3%, which was lower than initial expectations. Interest rates on
28-days Cetes decreased to an average of 6.23% and inflation decreased to a rate
of 4.0%, and the peso depreciated against the U.S. dollar by 7.3%.

      In addition to the effects that the state of the Mexican economy has on
our business and results of operations, Mexican political events may
significantly affect our operations and the performance of Mexican securities
generally. See Item 3. "Key Information - Risk Factors." A downturn in Mexico's
economic conditions, civil unrest or other adverse social, political or economic
developments in or affecting Mexico could adversely affect our business, results
of operations, financial condition, ability to obtain financing and prospects.

      The Mexican economy and financial and securities markets are, to varying
degrees, influenced by economic conditions in other countries. Economic or
financial conditions in one country or region may

                                       28
<PAGE>

undermine investors' confidence in other countries, such as Mexico, and decrease
the attractiveness of securities investments in such countries. See Item 3. "Key
Information - Risk Factors."

Effects of Economic Conditions on the Company

      Mexican economic conditions have had a strong impact on Mexico's chicken
market. Feed costs constitute a substantial portion of the cost of goods sold
and are priced with reference to U.S. dollars. In 2001, average producer prices
decreased 13.8% due to a decline in the worldwide cost of feed ingredients, and
a 6.7% increase in domestic supply and oversupply conditions. In 2002, average
producer prices increased slightly by 2.5% as a result of a global increase in
the cost of feed ingredients at the end of the year, partially offset by a
slowing economy. In 2003, average producer prices increased significantly by
10.6%, due primarily to an increase in raw materials prices during most of the
year.

      We have liabilities denominated in U.S. dollars. On December 31, 2003,
3.0% of our outstanding indebtedness of Ps.150.9 million was denominated in U.S.
dollars, as compared to 46.1% on December 31, 2002. We have assets and
liabilities denominated in U.S. dollars, so future depreciation or devaluation
of the peso against the U.S. dollar may result in foreign exchange losses or
gains depending on our net position. In 2003, we had foreign exchange gains of
Ps.69.0 million due to fluctuations of the peso against the U.S. dollar, as
compared to a foreign exchange gain of Ps.43.1 million in 2002 and a foreign
exchange gain of Ps.14.1 million in 2001.

      Any erosion of the purchasing power of Mexican consumers may adversely
affect demand for our products and, as a result, our net revenues and
profitability. Inflation and changing prices affect our ability to raise prices
as well as consumer demand, supplier prices and other costs and expenses,
consumer purchasing power and competitive factors, all of which in turn affect
our net revenues and operating results. Peso devaluations and high inflation
levels could further adversely affect our operations and financial position.

Volume of Chicken Sold

      The volume of our chicken sold increased over the previous year by 10.2%
in 2001 and 0.5% in 2002, and decreased by 1.5% in 2003. The increase in 2001
resulted from increased production due to a lease of assets and a contract
grower agreement with Avicola Cotaxtla, the acquisition of most of the assets of
Avicola Simon Bolivar in the second half of 2001, as well as improved efficiency
at our other production complexes. The increase in the volume of chicken sold in
2002 was mainly due to productivity improvements made in our production
facilities. Such increase, however, was partially offset by the negative effects
of Hurricane Isidore that temporarily shut down production and resulted in
damages and loss of product at our Peninsula Complex during the last four months
of 2002. The decrease in volume in 2003 was mainly due to the effects of
Hurricane Isidore on our Peninsula Complex during most of 2003.

Trends in Product Prices

      Our results of operations are significantly affected by the cyclical and
volatile nature of Mexican prices for chicken, feed, eggs and swine. During
2001, the price of our chicken decreased by 10.5% as a result of a decline in
the price of our main raw materials and oversupply conditions in the chicken
market throughout most of the year. During 2002, our chicken prices decreased
0.8% due to the downturn in demand in our sales regions provoked by a slowing
economy, stable cost of feed ingredients throughout most of the year and
continued changes in our product mix. In 2003 the Company was affected by higher
feed ingredient costs and oversupply conditions due to an increase in domestic
production. The continued weakness of the Mexican economy affected the
purchasing power of customers, and as a result the

                                       29
<PAGE>

Company was unable to increase its prices. During 2003 our chicken prices
decreased 2.7% primarily as a result of oversupply conditions in the domestic
chicken market as well as a decrease in consumer purchasing power.

      Prices for feed tend to follow trends in prices of feed ingredients, which
we discuss below.

      After a three-year decline, egg prices began to improve in 2003. In 2000,
our egg prices in real terms declined slightly by 1.1%, due to oversupply
conditions in the domestic market. Egg prices declined in 2001 by 0.4% following
the decline in the price of feed ingredients, and in 2002 our egg prices
continued to decline by 17.1%, due to heavy oversupply conditions in the
domestic egg market. In 2003, egg prices increased by 17.5% mainly due to a
reduced supply of this product in the market. Bachoco continues to work to
improve its sales mix by introducing a packaged product with brand
identification with better profit margins.

      In 2001, the price of swine decreased by 6.1%, due to both a decrease in
the cost of feed ingredients and an increase in imports from the United States.
During 2002, our swine prices decreased by 21.3% as a result of an oversupply in
the swine market due primarily to increased import competition from the United
States. In 2003, swine prices began to recover, increasing by 7.0%, due mostly
to the fact that there was very modest growth in domestic production and
imports.

      We believe that, among other factors, industry price competition may
continue to exert downward pressure on real chicken prices, and that prices for
chicken, feed, eggs and swine are also likely to remain volatile and subject to
cyclical variation. Due to the time needed to complete the chicken growth cycle,
chicken producers generally cannot adjust production to respond immediately to
cyclical variations, and, accordingly, in times of oversupply, prices may
decline due to overproduction.

Trends in Prices of Feed Ingredients

      The single largest component of our cost of sales is the cost of
ingredients used to prepare feed, including sorghum, soy meal, corn, fish meal,
meat meal and, for certain chicken products, marigold extract. The prices of
these feed ingredients are subject to significant volatility due to a number of
variables, including, among other factors, weather, harvest size, transportation
and storage costs, government agricultural policies and currency exchange rates.
The price at which we may obtain feed ingredients from Mexican producers
relative to U.S. producers is also subject to volatility depending on these
variables.

      At present, Mexican feed prices tend to parallel U.S. and international
prices. From 1996 through 1999, we increased the percentage of feed ingredients
that we obtained from Mexican producers. In 2000, however, this trend reversed
with the acquisition of Grupo Campi because the Grupo Campi complexes are
located in regions with low corn production, and consequently they must look to
international markets for most of their supply of feed ingredients. The
percentage of feed ingredients that we purchased from Mexican producers in 2001
remained approximately at the same level as in 2000. In 2001, approximately 40%
of grain, our main feed ingredient, came from local markets. In 2002, the
percentage of feed purchased from local markets fell to 36%, with the remaining
feed ingredients imported primarily from the United States. In 2003 the
percentage of feed purchased in the foreign markets was 61.7%.

      In recent years, reductions in tariffs under NAFTA have favorably affected
our costs of importing feed ingredients. However, the cost of our feed
ingredients rose in 2003 compared to 2002 and we expect the cost of our feed
ingredients to continue to rise in 2004.

                                       30
<PAGE>

Acquisitions & Dispositions

      Our operations have been affected during the periods we discuss herein, by
a series of acquisitions and production arrangements that we have made in recent
years.

      o     In December 1999, we acquired Grupo Campi, which was at that time
            the fourth largest chicken producer in Mexico and an important
            producer of feed.

      o     In February 2001, we entered into an agreement consisting of a lease
            of assets and a contract grower agreement with Avicola Cotaxtla, a
            large producer of broiler chicken.

      o     In the second half of 2001, we acquired two significant egg and
            chicken producers. These producers are Avicola Nochistongo, one of
            the 10 largest egg producers in Mexico operating within the Laguna
            region, and Avicola Simon Bolivar, one of the 15 largest egg
            producers and a producer of chicken.

      During 2002, such acquisitions and production agreements contributed to
the expansion and consolidation of our leadership position in the egg and
chicken industries in Mexico. Through these acquisitions, we expanded our
distribution network throughout almost the entire country and increased our
market presence in both La Laguna and the northeastern regions of Mexico. We
financed these acquisitions through our own working capital resources.

      As a result of these acquisitions and production agreements, our results
of operations in 2001 and 2002 reflect increasing volumes of chicken and egg
sales and increased cost of sales due to higher volumes and changes in product
mix. Changes in the product mix continued to increase cost of sales in 2003. The
integration of these operations and the changes in product mix has also resulted
in an increase in selling, general and administrative expenses over all periods.

      In April 2002, Secba, S.A. de C.V., a subsidiary of Industrias Bachoco,
S.A. de C.V., was sold for Ps.5.38 million to a related party generating a gain
of Ps.0.8 million, which is included in the consolidated financial statements
under the heading "Other income." We do not believe that this item materially
effects our financial statements or their comparability with previous years'
statements.

      During 2003, we implemented two important projects to expand the
facilities at our Northwest Complex and Peninsula Complex to increase production
capacity in our chicken business. These facilities are ideally suited for the
expansion projects due to their sanitary status and their geographical location.
Both complexes are being expanded to increase capacity by approximately 50% by
the third quarter of 2004, which will increase opportunities for future exports
as well as for meeting consumer demand in those regions and in other regions in
Mexico. The new facilities in both complexes have been equipped with the best
technology available.

Seasonality

      Our sales are moderately seasonal, with the highest levels of sales in the
second and fourth quarter due to higher chicken consumption during the holiday
season and lower sales levels earlier in the year during Lent (particularly in
the week prior to Easter).

                                       31
<PAGE>

Summary of Results of Operations

      The following table sets forth, for each of the periods indicated,
selected components of our results of operations as a percentage of net revenues
for each such period.

<TABLE>
<CAPTION>
                                                                      Year Ended December 31,
                                                                   ----------------------------
                                                                    2001       2002       2003
                                                                   ------     ------     ------
                                                                   (percentage of net revenues)
<S>                                                                   <C>        <C>        <C>
      Net revenues .............................................      100%       100%       100%
      Cost of sales ............................................    (73.2)     (74.2)     (81.3)
      Gross profit .............................................     26.8       25.8       18.7
      Operating income .........................................     13.4       12.0        4.0
      Comprehensive financing (cost) income ....................      1.1        0.1        1.2
      Income tax, asset tax and employee profit sharing ........     (3.3)       1.8        1.0
      Net income ...............................................     11.2       14.3        5.0
</TABLE>

      The following table sets forth, for each of the periods indicated, our net
revenues of chicken, feed, eggs, swine and other products as a percentage of
total net revenues in each period.

<TABLE>
<CAPTION>
                                                                      Year Ended December 31,
                                                                   ----------------------------
                                                                    2001       2002       2003
                                                                   ------     ------     ------
                                                                   (percentage of net revenues)
<S>                                                                   <C>        <C>        <C>
      Chicken ..................................................     82.4%      81.0%      77.7%
      Feed .....................................................      7.5%       6.9%       7.1%
      Eggs .....................................................      7.5%       9.4%      11.1%
      Swine ....................................................      1.2%       0.9%       0.9%
      Other products ...........................................      1.4%       1.8%       3.2%
                                                                     ----       ----       ----
      Total ....................................................      100%       100%       100%
                                                                     ====       ====       ====
</TABLE>

Results of Operations for the Years Ended December 31, 2002 and 2003

General

      In 2003, Mexico's economy continued to show signs of slowdown. The Mexican
GDP grew only slightly by 1%. From December 31, 2002 to December 31, 2003,
Mexico's inflation rate reached 3.98%, and the peso-U.S. dollar exchange rate
depreciated by 7.3%. This depreciation occurred primarily in the second part of
the year.

      According to UNA, the production volume of the Mexican chicken industry
grew approximately 5.4% in 2003. This increase in supply in the chicken
industry, combined with a sluggish economy, created an oversupply in chicken
products, which resulted in a decrease in chicken prices. Additionally, the
prices of our primary raw materials increased significantly, which increased the
cost of sales and negatively impacted operating income.

      These factors were not significantly offset by the fact that during 2003,
Mexico imposed import limits and tariffs on chicken legs and thighs from the
United States, which will be in effect until December 31, 2007.

                                       32
<PAGE>

      With respect to the egg industry, conditions improved in 2003 compared to
2002. Domestic production decreased by almost 4.1%, which helped reduce the
oversupply that existed during most of 2002.

      In spite of sluggish economic conditions, an oversupply in some of our
dominant product lines and a significant increase in certain raw material
prices, the Company was able to maintain most of its sales volume, market its
entire production, and have an operating margin of 4.0%.

Net revenues

      Consolidated net revenues during 2003 amounted to Ps.10,751.2 million, a
slight decrease of Ps.18.5 million (or 0.17% in constant pesos) from Ps.10,769.7
million in 2002. This decline was mostly due to the application of Bulletin E-1
and, to a lesser extent the result of reduction in chicken sales, which was only
partially offset by increases in the sales from the other businesses. For a
discussion of Bulletin E-1, see Note 2 to the consolidated financial statements.

      Our chicken sales decreased by 4.2%, due to price reduction and lower
volumes. Chicken prices suffered a reduction as a result of an excess of supply
in the domestic market and the continued slowdown in the Mexican economy, which
affected the purchasing power of customers.

      Our revenues from egg sales increased by 17.9% in 2003, as a result of a
17.5% price increase; sales volume increased by 0.3%. This increase in sales was
due to a more stable supply during most of the year as a result of lower
domestic production.

      Balanced-feed sales grew by 2.2% compared to 2002, mainly due to a 4.9%
price increase that was partially offset by a slight reduction in volume of
2.6%.

Cost of sales

      The consolidated cost of sales in 2003 was Ps.8,746.0 million,
representing an increase over 2002 of Ps.757.0 million, or 9.5%. The rise in
cost of sales resulted primarily from higher unit costs in chicken, which led to
an increase of Ps.532.7 million in the cost of chicken. The unit cost of eggs
also increased by Ps.62.8 million, while other lines and balanced feed had an
increase in unit costs of Ps.140.8 million and Ps.23.6 million, respectively.
This was partially offset by a reduction of Ps.2.9 million in cost of sales of
swine.

      The increase in the cost of sales was mostly due to a significant increase
in raw-material prices, including grain and soybean meal, during most of the
year. The cost of sales also increased as a result of an expansion of our
chicken product lines, which involve increased processing, and to a lesser
extent, to increased electricity and utility costs.

Gross profit

      Gross profit decreased by 27.9%, from Ps.2,780.7 million in 2002 to
Ps.2,005.2 million in 2003. As a percentage of net revenues, gross profit
decreased from 25.8% in 2002 to 18.7% in 2003. The decrease in our gross profit
and profit margins resulted mainly from price declines in chicken and the
increase in cost of sales of our main business lines.

Sales, general and administrative expenses

      Sales and administrative expenses in 2003 amounted to Ps.1,573.0 million,
representing a Ps.83.7 million increase (or 5.6%) over 2002. The higher sales
and administrative expenses were principally due

                                       33
<PAGE>

to higher sales volume and increased distribution costs, in part because we
increased our mix of product lines toward more processed products which require
greater administrative resources and additional distribution expenses. As a
percentage of net revenues, selling, general and administrative expenses
increased 14.6% in 2003, compared to 13.8% in 2002.

Operating income

      Consolidated operating income in 2003 decreased year-over-year by 66.5% to
Ps.432.1 million, as a result of the decrease in gross operating margin and
higher sales and administrative expenses. As a percentage of net revenues,
operating margin decreased from 12.0% in 2002 to 4.0% in 2003.

Comprehensive financing income (cost)

      Comprehensive financing income (cost) represents the net effect of
interest expense, interest income, foreign exchange gain (loss) and gain (loss)
on net monetary position, which arises from the effect of inflation on the
average net balance of monetary assets and liabilities. Comprehensive financing
income showed a gain of Ps.125.1 million in 2003, compared to a gain of Ps.14.9
million in 2002, due mainly to an increase result in interest income, lower
interest expenses and a lower result loss on our net monetary position.

Other income (expense), net

      Other income (expense) in both 2002 and 2003 was attributable to sales of
by-products, used equipment and miscellaneous services. It represented net
income of Ps.22.4 million in 2003 as compared to net income of Ps.42.0 million
in 2002. The decrease was mainly due to the fact that in 2002 we received
insurance proceeds for the damage caused to our Peninsula Complex as a result of
Hurricane Isidore that were included in other income in 2002.

Income before provision for income tax, asset tax, employee profit sharing and
cumulative effect of accounting change

      Income before provision for income tax, asset tax, employee profit sharing
and cumulative effect of accounting change decreased by 57% from Ps.1,348.3
million in 2002 to Ps.579.6 million in 2003, due primarily to a decline in
operating income.

Net Income

      Net income for 2003 decreased by 65% to Ps.539.5 million compared to
1,539.4 million in 2002. The decrease was mainly due to the reduction in our
operating income in 2003 and the application of Bulletin E-1. For a discussion
of Bulletin E-1, see Note 2 to the consolidated financial statements.

Results of Operations for the Years Ended December 31, 2001 and 2002

General

      In 2002, Mexico's economy was affected by a global economic slowdown,
particularly due to its trade relationship with the United States, which
continued to experience an economic slowdown. As a result, Mexico's GDP grew
only slightly by 0.9%. From December 31, 2001 to December 31, 2002, Mexico's
inflation rate reached 5.7% and the peso-U.S. dollar exchange rate depreciated
12.2%. This depreciation occurred primarily in the second part of the year.

                                       34
<PAGE>

      According to UNA, the sales volume of the Mexican chicken industry grew
approximately 5.9% in 2002, while the egg industry grew approximately 1.6%. Such
growth contributed to oversupply conditions in the egg market for most of the
year, leading to a steep reduction in prices.

      The chicken industry benefited from the low costs and price stability of
principal feed ingredients during the first part of the year. This situation
changed at the end of 2002, with the cost of feed ingredients increasing in line
with the general trend of increases in feed cost worldwide.

      During 2002, we continued to grow in terms of sales and sales volume. Our
operating margin, however, decreased to 12.0% as a result of sluggish economic
conditions and an oversupply in some of our product lines.

Net revenues

      In 2002, consolidated net revenues were Ps.10,769.7 million, representing
an increase of 1.5% in constant pesos over the consolidated net revenues of
Ps.10,607.9 million in 2001. This increase was mainly due to an increase in egg
sales of Ps.218.8 million or 27.5%, which was partially offset by decreases in
feed and swine sales. Our chicken sales remained at nearly the same level as in
2001.

      The increase in egg sales resulted from a 53.8% increase in the volume of
egg sales, which was partially offset by a steep reduction in prices. The large
volume increase reflects the integration of Avicola Simon Bolivar and Avicola
Nochistongo (both of which have substantial egg production operations), which we
acquired during the second half of 2001, and productivity improvements at our
other operations.

      Our chicken sales decreased only slightly by 0.3% or Ps.24.6 million. The
decrease in sales resulted from a slight decline in our chicken prices. The
price decline was partially offset by an increase of 0.5% in the volume chicken
sales, in spite of the effects of Hurricane Isidore on our Peninsula Complex,
which damaged production facilities and resulted in a loss of chicken supply.

      Our feed sales decreased by 7.5% or Ps.60.1 million, mainly due to a
reduction of 6.2% of the volume of feed sold. The remaining difference was due
to an increase of 9.8% or Ps.27.2 million in swine and other lines.

Cost of sales

      The consolidated cost of sales in 2002 was Ps.7,989.0 million,
representing an increase over 2001 of Ps.224.2 million, or 2.9%. The rise in
cost of sales resulted primarily from higher volumes of eggs sold, which led to
an increase of Ps.294.8 million in the cost of sales of eggs. This was partially
offset by reductions of Ps.88.6 million in cost of sales of chicken and Ps.26.6
million in the cost of sales of feed.

      In addition to the higher volume of eggs sold, the increase in cost of
sales was also due to higher per-unit cost of sales of feed. The increase was
partially offset by a reduction in the per-unit costs of chicken, eggs and
swine.

Gross profit

      Gross profit decreased by 2.2% from Ps.2,843.1 million in 2001 to
Ps.2,780.7 million in 2002. As a percentage of net revenues, gross profit
decreased from 26.8% in 2001 to 25.8% in 2002. The decrease in our gross profit
and profit margins resulted mainly from price declines in eggs and swine and

                                       35
<PAGE>

a lower gross margin in feed. The increase in the volume of egg sales and a
higher gross margin in chicken did not fully offset the price declines in eggs,
swine and feed.

Sales, general and administrative expenses

      Sales and administrative expenses in 2002 amounted to Ps.1,489.4 million,
representing a Ps.65.0 million increase (or 4.6%) over 2001. The higher expenses
were principally due to the integration of acquisitions and production
arrangements, made in 2001, which resulted in higher sales volumes, changes in
the mix of product lines toward product lines requiring greater administrative
resources, such as sales to supermarkets, and the expansion of our distribution
network. These integration efforts and changes in product lines required
additional sales and administrative resources. As a percentage of net revenue,
selling, general and administrative expenses increased to 13.8% in 2002,
compared to 13.4% in 2001.

Operating income

      Consolidated operating income in 2002 decreased year-over-year by Ps.127.4
million to Ps.1,291.4 million, as a result of the decrease in gross operating
income and higher sales and administrative expenses. As a percentage of net
revenues, operating income decreased from 13.4% in 2001 to 12.0% in 2002.

Comprehensive financing (cost) income

      Comprehensive financing (cost) income represents the net effect of
interest expense, interest income, foreign exchange gain (loss) and gain (loss)
on net monetary position, which arises from the effect of inflation on the
average net balance of monetary assets and liabilities. Comprehensive financing
income showed a gain of Ps.14.9 million in 2002, decreasing by Ps.106.5 million
from 2001. The decrease was due to a reduction in the results of our net
monetary position, which was partially offset by an increase in foreign exchange
gain.

Other income (expense), net

      Other income (expense) in both 2001 and 2002 was attributable to sales of
by-products, used equipment and miscellaneous services. It represented net
income of Ps.42.0 million in 2002 as compared to net expenses of Ps.6.9 million
in 2001. The increase was mainly due to the fact that in 2002 we received
insurance proceeds for the damage caused to our Peninsula Complex by Hurricane
Isidore.

Net Income

      Net income for 2002 increased year-over-year by 29.6% from Ps.1,187.8
million in 2001 to 1,539.4 million in 2002. This was primarily due to a credit
in income and asset tax of Ps. 192.6 million in 2002, compared to an income and
asset tax charge of Ps. 343.8 million in 2001.

Income before provision for income tax, asset tax, employee profit sharing and
cumulative effect of accounting change

      Income before provision for income tax, asset tax, employee profit sharing
and cumulative effect of accounting change decreased by 12.1% from Ps.1,533.3
million in 2001 to Ps.1,348.3 million in 2002, due to the declines in both
operating income and comprehensive financing income.

                                       36
<PAGE>

Income Tax, Asset Tax and Employee Profit Sharing

      We and each of our subsidiaries file individual tax returns and may be
subject to different tax regimes. Until December 31, 2001, BSACV, our principal
operating subsidiary, was subject to corporate income tax under the provisions
of the simplified statutory regime (the "Simplified Regime"), which was
applicable to a company engaged in agriculture and certain other activities that
derives no more than 10% of its net revenues from unrelated activities or from
the production of "processed" products, as defined in the statutory regime.

      On January 1, 2002, a new income tax law came into effect that
substantially modified the procedure for determining taxable income under the
simplified regime (the "New Simplified Regime"). Instead of determining income
tax solely based on certain types of transactions, such as dividend payments or
loans, the New Simplified Regime determines taxable income based on revenues
collected net of deductible expenses paid. This new tax base does not allow for
the deduction of the value of fixed assets as of December 31, 2001 or of
inventories existing as of December 31, 2001.

      The New Simplified Regime taxes corporate income at a rate of 35% for
2002, with a gradual yearly decrease of one percent, until the tax rate is
reduced to 32% in 2005; however, companies subject to the New Simplified Regime
also receive a 50% reduction on the above corporate rate. In order to transition
to the New Simplified Regime, companies paying taxes under the old regime had to
determine either the total amount of earnings of fiscal years prior to January
1, 2002 on which taxes need to be paid or the available tax loss carryforward.
As a result of this requirement, our subsidiary BSACV determined a tax loss
carryforward of Ps.3,086.9 million, as of January 1, 2002.

      In addition to income tax, we, along with our subsidiaries, are also
subject to an alternative minimum tax known as an asset tax, which is assessed
on the average value of most assets, net of certain liabilities. The general
asset tax rate is 1.8%; BSACV is subject to a 0.9% rate pursuant to the New
Simplified Regime (unchanged from the Simplified Regime). We benefit from
special rules that exclude a number of assets from the asset tax and from tax
incentives in connection with certain of our investments. We (together with our
subsidiaries) are subject to asset tax if the amount of asset tax exceeds the
computed income tax liability. Asset tax can be credited against income tax in
subsequent years (up to ten years). As of December 31, 2003, we had asset tax
payable in the amount of Ps.12.8 million. We credited against this amount the
income tax paid (Ps.11.3 million) and the difference was paid in cash.

      We and our subsidiaries are required to pay asset tax if the amount of
asset tax exceeds the computed income tax liability. Asset tax can be credited
against income tax in subsequent years (up to ten years). As of December 31,
2003, we had, at nominal value, Ps5.1 million in asset tax credits.

      In 2003, we recognized a total income tax and asset tax charge Ps.105.9
million, compared to a total income and asset tax credit of Ps.192.6 million in
2002.

      Neither Industrias Bachoco, S.A. de C.V. nor BSACV have employees, but
each of our other subsidiaries is required under Mexican law to pay employees,
in addition to their compensation and benefits, profit sharing in an aggregate
amount equal to 10% of such subsidiary's taxable income subject to certain
adjustments.

Liquidity and Capital Resources

      Our working capital (current assets less current liabilities) decreased
year-over-year from Ps.3,414.9 million on December 31, 2002 to Ps.3,341.3
million on December 31, 2003. We believe that

                                       37
<PAGE>

our working capital is sufficient for our present requirements. The ratio of
current assets to current liabilities on December 31, 2003 was 6.3, as compared
to the ratio of 7.2 on December 31, 2002. Cash and cash equivalents were
Ps.1,569.2 million on December 31, 2003, representing a decrease of Ps.194.2
million from the previous year primarily due to an increase in capital
expenditures.

      Inventories were Ps.1,541.6 million as of December 31, 2003, representing
an increase of Ps.229.3 million from the previous year.

      Notes payable to banks, including the current portion of long-term debt,
equaled Ps.150.9 million as of December 31, 2003, a decrease of Ps.47.7 million
from December 31, 2002. This decrease was mainly due to the payment of U.S.
dollar- and peso-denominated loans.

      Stockholders' equity increased to Ps.10,059.8 million on December 31, 2003
from Ps.9,850.8 million on December 31, 2002.

      Long-term debt on December 31, 2003 represented 0.9% of our
capitalization, as compared to 0.8% on December 31, 2002.

      In 2003, capital investments amounted to Ps.755.6 million, all of which
were financed from resources generated from our own operations. These capital
investments were allocated mainly to renew the transportation fleet,
productivity projects and to finance internal growing capacity.

      We are a holding company with no significant operations of our own. We
will have distributable profits and cash to pay dividends only to the extent
that we receive dividends from our subsidiaries, principally BSACV. The amount
of dividends payable by our subsidiaries and us is also subject to general
limitations under Mexican corporate law.

      We expect to finance our capital expenditures and debt service obligations
from our current liquidity and capital resources, cash flows and from additional
borrowings from our existing sources of debt financing, although we will also
consider other sources of debt financing if they are available on advantageous
terms.

      The following table summarizes certain contractual liabilities as of
December 31, 2003. The table does not include short-term debt, accounts payable
or pension liabilities.

<TABLE>
<CAPTION>
                                                              Payments Due by Period
                                                 (millions of constant pesos as of December 31, 2003)
                                         --------------------------------------------------------------------
                                                        Less than       1 to 3                      5 or more
   Contractual Obligations                 Total         1 year          years         4 years        years
------------------------------           ----------     ---------      ---------      ---------     ---------
<S>                                      <C>            <C>            <C>            <C>           <C>
Long-term debt.......................    Ps.  119.5     Ps.  26.6      Ps.  62.5      Ps.   9.9     Ps.  20.5
Operating leases.....................          57.4          16.3           32.1            4.5           4.5
                                         ----------     ---------      ---------      ---------     ---------
Total................................    Ps.  176.9     Ps.  42.9      Ps.  94.6      Ps.  14.4     Ps.  25.0
                                         ==========     =========      =========      =========     =========
</TABLE>

      Our major categories of indebtedness included the following:

            o     Notes payable to banks: Short-term peso-denominated unsecured
                  notes. As of December 31, 2003 we had Ps.31,450 thousand
                  outstanding. At December 31, 2003 the weighted average
                  interest rate on short-term notes payable was 2.50%.

                                       38
<PAGE>

            o     Long-term debt to banks: Peso-denominated secured debt and
                  U.S. dollar-denominated unsecured debt. As of December 31,
                  2003 we had Ps.92, 861 thousand outstanding maturing from 2005
                  to 2010. At December 31, 2003 the weighted average interest
                  rate on long term debt was 8.11%.

Off-Balance Sheet Arrangements

      We do not have any off-balance sheet arrangements of the type that we are
required to disclose under Item 5.E of Form 20-F.

Reconciliation to U.S. GAAP

      The principal differences between Mexican GAAP and U.S. GAAP, as they
relate to us, concern (i) deferred income taxes and employee profit sharing,
(ii) capitalization of financing costs, (iii) minority interest and (iv) the
amortization of goodwill (see Note 17 to the consolidated financial statements
for a detailed description). Each of these differences also affects our balance
sheet.

      Our consolidated net income under U.S. GAAP was Ps.1,202.5 million in
2001, Ps.1,557.3 million in 2002 and Ps.503.1 million in 2003, compared to
Ps.1,187.8 million, Ps.1,539.4 million and Ps.539.5 million, respectively, under
Mexican GAAP. For further explanation, please see Note 17 to the consolidated
financial statements.

Use of Estimates in Certain Accounting Policies

      In preparing our financial statements, we make estimates concerning a
variety of matters. Some of these matters are highly uncertain, and the
estimates involve judgments based on the information available to us. The
discussion below identifies matters for which the financial presentation would
be materially affected (a) if we relied on different estimates that we could
reasonably use, or (b) if in the future we change our estimates in response to
changes that are reasonably likely to occur.

      The discussion below addresses only those estimates that we consider most
important based on the degree of uncertainty and the likelihood of a material
impact if we used a different estimate. There are many other areas in which we
use estimates about uncertain matters, but the reasonably likely effect of
changed or different estimates would not be material to our financial
presentation.

Estimated Useful Lives of Property, Plant and Equipment

      We estimate the useful lives of our property, plant and equipment in order
to determine the amount of depreciation expense to be recorded in each period.
The current estimates of useful lives are based on estimates made by an
independent appraiser in 1996. Those estimates have been adjusted when
applicable, based on historical experience with similar assets that we own.
Comprehensive financing cost related to the construction of assets is
capitalized and then amortized over the estimated useful lives of the assets.
Accumulated depreciation expense for property, plant and equipment in 2003
amounted to Ps.4,364.4 million. As applied to our 2003 financial results, the
depreciation was Ps.365.3 million, or 0.3% of our net revenues. For further
explanation, see Notes 2 and 4 to the consolidated financial statements.

Allowance for Productivity Declines

      In estimating the inventory value of our breeder birds, swine and layers,
we make allowances for productivity declines. We estimate such allowances based
on expected future production and deduct

                                       39
<PAGE>

them from inventories. The estimates of future production are based on standards
for the breeder line and the performance of the most recent flocks. We refer to
the standards provided by the company that sells us the breeder line in
question. Each company that sells breeder lines publishes its own particular
standards for its proprietary breeder line. The allowance for productivity
declines in 2003 amounted to Ps.148.8 million or 1.7% of the total cost of
sales. The allowance for productivity decline in 2002 amounted to Ps.148.7
million or 1.9% of the total cost of sales.

Inventory Valuation

      Since January 1, 2003, for Mexican GAAP purposes, our inventories are
valued using market prices. For more detail, see "New Accounting Pronouncements"
in Note 2 to the consolidated financial statements.

ITEM 6. Directors, Senior Management and Employees

Directors

      The board of directors is responsible for the management of our business.
The board of directors consists of an odd number of directors, never less than
five, and corresponding alternate directors, each of whom is elected for a term
of one year. The holders of Series B Shares may elect directors and alternate
directors at a general ordinary stockholders' meeting. The holders of Series L
Shares have the right to appoint or elect two directors and two alternate
directors to the board of directors.

      Alternate directors elected by the holders of Series B Shares are
authorized to serve on the board of directors in place of directors who are
unable to attend meetings or otherwise participate in the activities of the
board of directors. Likewise, alternate directors appointed or elected by the
holders of Series L Shares are authorized to serve on the board of directors in
place of directors appointed or elected by the holders of Series L Shares who
are unable to attend meetings or otherwise participate in the activities of the
board of directors.

      The following table identifies our directors, alternate directors,
Honorary Chairman of the board and Secretary of the board as of December 31,
2003, their positions and their years of service.

                                       40
<PAGE>

<TABLE>
<CAPTION>
                                                                                                  Years as
Name                                             Position                                         Director
----                                             --------                                         ---------
<S>                                              <C>                                                 <C>
Enrique Robinson Bours Almada................... Honorary Chairman of the board                      50
Francisco Javier R. Bours Castelo............... Chairman of the board and Proprietary               22
                                                 Director
Mario Javier Robinson Bours Almada.............. Proprietary Director                                50
Juan Bautista Salvador Robinson Bours........... Proprietary Director                                50
Arturo Bours Griffith........................... Proprietary Director                                10
Jose Eduardo Robinson Bours Castelo............. Alternate Director                                  10
Jesus Enrique Robinson Bours Munoz.............. Proprietary Director                                10
Juan Salvador Robinson Bours Martinez........... Alternate Director                                  10
Jose Francisco Bours Griffith................... Alternate Director                                  10
Guillermo Pineda Cruz........................... Alternate Independent Director                      10
Ricardo Aguirre Borboa.......................... Independent Director                                10
Cristobal Mondragon Fragoso..................... Secretary of the board                               8
Avelino Fernandez Salido........................ Independent Director                                 1
Octavio Robinson Bours Griffith................. Proprietary Director                                 7
Humberto Schwarzbeck Noriega.................... Independent Director                                 1
Jesus Rodolfo Robinson Bours Munoz.............. Proprietary Director                                 2
</TABLE>

      Enrique Robinson Bours, Mario Javier Robinson Bours and Juan Bautista
Salvador Robinson Bours are brothers. Francisco Javier R. Bours Castelo and Jose
Eduardo Robinson Bours Castelo are sons of Mario Javier Robinson Bours. Arturo
Bours Griffith, Jose Francisco Bours Griffith and Octavio Robinson Bours are
nephews of Enrique Robinson Bours, Mario Javier Robinson Bours and Juan Bautista
Salvador Robinson Bours. Jesus Enrique Robinson Bours Munoz and Jesus Rodolfo
Robinson Bours Munoz are sons of Enrique Robinson Bours. Juan Salvador Robinson
Bours Martinez is the son of Juan Bautista Salvador Robinson Bours. Guillermo
Pineda Cruz is the son-in-law of Enrique Robinson Bours, and Ricardo Aguirre
Borboa is the son-in-law of Juan Bautista Salvador Robinson Bours.

      Our bylaws provide for the creation of an executive committee of the board
of directors, which may exercise certain of the board's powers in full, subject
to certain limitations. Our stockholders elect members of the executive
committee for one-year terms. In 2003, there were four members of the executive
committee: Francisco Javier R. Bours Castelo, Jesus Enrique Robinson Bours
Munoz, Arturo Bours Griffith and Juan Salvador Robinson Bours Martinez.

      In April 2002, we announced the retirement of Mr. Enrique Robinson Bours
Almada, Chairman of the board and co-founder of the Company. Mr. Bours led
Industrias Bachoco S. A. de C.V. for 50 years. The board named as his successor
Mr. Javier Robinson Bours Castelo, Mr. Enrique Robinson Bours's nephew. Mr.
Bours Castelo has been at Bachoco for 22 years as a member of the board and
served as Vice-Chairman for nine years. Mr. Bours Castelo was named Chairman of
the board in 2002.

      In order to fully comply with current Mexican Corporate and Securities
Market Laws as well as other recent regulatory amendments in the various markets
in which Bachoco's shares are traded, we appointed a new board of directors at
our ordinary stockholder meeting held on April 30, 2003. The board is composed
of the following members:

                                       41
<PAGE>

      Proprietary Directors:
      ----------------------
      Francisco Javier R. Bours Castelo (Chairman of the board of directors
      Mario Javier Robinson Bours Almada
      Juan Bautista S. Robinson Bours Almada
      Jesus Enrique Robinson Bours Munoz
      Jesus Rodolfo Robinson Bours Munoz
      Arturo Bours Griffith
      Octavio Robinson Bours Griffith

      Alternate Directors:
      --------------------
      Jose Eduardo Robinson Bours Castelo
      Juan Salvador Robinson Bours Martinez
      Jose Francisco Bours Griffith

      Independent Directors:
      ----------------------
      Ricardo Aguirre Borboa
      Avelino Fernandez Salido
      Humberto Schwarzbeck Noriega

      Alternate Independent Director:
      -------------------------------
      Guillermo Pineda Cruz

      Francisco Javier R. Bours Castelo, Chairman of the board of directors, has
been a member of the board for 22 years, and has been Chairman since April 2002.
Before that, he was Vice-Chairman for several years. Mr. Bours holds a degree in
Civil Engineering from the Instituto Tecnologico y de Estudios Superiores
Monterrey (ITESM). He currently serves as Chairman of the boards of directors
the following companies: Grupo Megacable, S.A. de C.V., Congeladora Horticola,
S.A. de C.V., Inmobiliaria Trento S.A. de C.V., Acuicola Boca S.A. de C.V.,
Autos y Accesorios S.A. de C.V., Maquinaria Agricola S.A. de C.V., Agriexport
S.A. de C.V., Fertilizantes de Sonora, Administracion Tecnica del Noroeste,
Nuevo Penasco Resort, S.A. de C.V., Taxis Aereos del Noroeste S.A. de C.V., San
Luis Corporacion S.A. de C.V., among others.

      Mario Javier Robinson Bours Almada, Propietary Director, has been a member
of the board for 50 years, and is a co-founder of Industrias Bachoco S.A. de
C.V. Mr. Robinson Bours is also member of the boards of directors of Banamex and
Bancomer.

      Juan Bautista S. Robinson Bours Almada, Propietary Director, has been a
member of the board for 50 years and is a co-founder of Industrias Bachoco S.A.
de C.V.

      Jesus Enrique Robinson Bours Munoz, Propietary Director, has been a member
of the board for 10 years, having previously served as Production Director and
Divisional Manager. Mr. Robinson Bours holds a degree in Engineering from the
University of Arizona. He is also member of the boards of directors of San Luis
Corporacion S.A. de C.V., Megacable S.A. de C.V. He has spent his entire career
in the agricultural sector.

      Jesus Rodolfo Robinson Bours Munoz, Propietary Director, has been a member
of the board for two years. Mr. Robinson Bours previously served in the Company
as Production Manager in the Northwest and Bajio divisions, Commercial Manager
in Northwest Division and Purchasing Manager at the Bajio Division. Mr. Robinson
Bours holds a degree in Agricultural Engineering from the University of Arizona.
He has business experience in agriculture and raising livestock with Agricola
Monte Cristo

                                       42
<PAGE>

S.A. de C.V., Agricola Rio Yaqui S.P.R. de R.L., Agricola Nacapul S.P.R. de R.L.
and Ganadera Cocorena S.P.R. de R.L.

      Arturo Bours Griffith, Propietary Director, has been a member of the board
for 10 years. He has experience in swine production.

      Octavio Robinson Bours Griffith, Propietary Director, has been a member of
the board for seven years. Mr. Robinson Bours holds a degree in Agricultural
Engineering from the Instituto Tecnologico y de Estudios Superiores de Monterrey
(ITESM). He has experience in producing swine.

      Jose Eduardo Robinson Bours Castelo, Alternate Director, has been a member
of the board for 10 years. Mr. Robinson Bours holds a degree in Industrial
Engineering from the Instituto Tecnologico y de Estudios Superiores de Monterrey
(ITESM). He was previously Commercial Director of Industrias Bachoco and is
currently a Senator of the Mexican Congress.

      Juan Salvador Robinson Bours Martinez, Alternate Director, has been a
member of the board for 10 years, and has served Bachoco as Purchasing Manager.
Mr. Robinson Bours holds a degree in Engineering from the Instituto Tecnologico
y de Estudios Superiores de Monterrey (ITESM). His other appointments include
Chairman of the board of directors of Llyasa.

      Jose Francisco Robinson Bours Griffith, Alternate Director, has been a
member of the board for 10 years. He holds a degree in Civil Engineering from
the Universidad Autonoma de Guadalajara. Mr. Robinson Bours has worked at
Bachoco as Engineering Manager, and is currently dedicated to our agricultural
operations.

      Ricardo Aguirre Borboa, Independent Director, has been a member of the
board for 10 years. He is also a member of the board of directors of the
newspaper El Debate and he holds a degree in Agricultural Engineering from the
Instituto Tecnologico y de Estudios Superiores Monterrey (ITESM). He has
experience and expertise in agriculture and pork production.

      Avelino Fernandez Salido, Independent Director, was named a member of the
board on April 30, 2003. He is also a member of the board of Banco Nacional de
Mexico, BBVA Bancomer, and Banca Serfin. His business experience is in the
marketing of grains.

      Fernando Schwarzbeck Noriega, Independent Director, was named a member of
the board on April 30, 2003.

      Guillermo Pineda Cruz, Alternate Independent Director, has been a member
of the board for 10 years. He is also a member of the board of directors of
Banamex and was a regional member of the board of directors of Grupo Financiero
Serfin, Inverlat and Invermexico. He holds several appointments in public
interest organizations, including President of the board of directors of Cajeme
2020 AC since 2000, President of the board of directors of Cruz Roja Mexicana en
Ciudad Obregon and a member of the Committee of Promocion Social del Valle
Yaqui, A.C. Mr. Pineda holds a degree in Civil Engineering from the Instituto
Tecnologico y de Estudios Superiores de Monterrey (ITESM) and a master's degree
in Business Administration from the Instituto Tecnologico y de Estudios
Superiores de Sonora (ITSON). He co-founded Edificadora Pi-Bo, S.A. de C.V. in
1983, and is its President and CEO.

      At the ordinary annual stockholders' meeting held on April 28, 2004 all of
the members of the board were ratified in their charges. Mr. Cristobal Mondragon
Fragoso was confirmed as Secretary of the board of directors and Mr. Felizardo
Gastelum Felix was appointed the Company's statutory auditor.

                                       43
<PAGE>

Executive Officers

Our executive officers as of December 31, 2003 are set forth in the table below.

Name                                    Position                          Age
----                                    --------                          ---
Cristobal Mondragon Fragoso.........    Chief Executive Officer            58
Daniel Salazar Ferrer...............    Chief Financial Officer            39
David Gastelum Cazares..............    Director of Marketing              52
Jose Luis Lopez Lepe................    Director of Personnel              56
Rodolfo Ramos Arvizu................    Director of Production             46
Carlos Huerta Suarez................    Director of Purchasing             46
Ernesto Salmon Castelo..............    Director of Industries             42
Francisco Javier Espinoza Teja......    Director of Supply Chain           36

      In June 2001, we announced the resignation of Arquimedes Celis Ordaz from
his position as Chief Executive Officer. Cristobal Mondragon Fragoso was named
to replace Mr. Ordaz as Chief Executive Officer of Bachoco. Mr. Mondragon joined
us in 1982 and held the position of Chief Financial Officer for many years.
After Mr. Mondragon was named to replace Mr. Ordaz, the position of CFO was left
temporarily vacant and during that time the Manager of Finance handled the CFO's
responsibilities. Starting in 2003, Mr. Daniel Salazar, former Manager of
Finance, was promoted to Chief Financial Officer. In the following paragraphs we
provide a brief biography of each of our executive officers.

      Cristobal Mondragon Fragoso, Chief Executive Officer, joined us in 1982
and assumed his current position in 2001. Previously, Mr. Mondragon served as
Administration Manager, as Manager of Corporate Finance and as Chief Financial
Officer. Before joining us, Mr. Mondragon worked as an accountant for three
years. Later he joined La Hacienda, S.A. de C.V. where he held the positions of
Auditor, Accountant, Head of Processing Systems, Audit Manager, Administration
Manager and Comptroller. Mr. Mondragon holds an Accounting degree from
Universidad Nacional Autonoma de Mexico (UNAM).

      Daniel Salazar Ferrer, Chief Financial Officer, joined us in 2000 and
assumed his current position in January 2003. Previously Mr. Salazar worked for
four years as Chief Financial Officer at Grupo Covarrubias and as Comptroller at
Negromex, a Company of Grupo Desc. Mr. Salazar holds an Accounting degree from
Universidad Tecnologica de Mexico and a master's degree in Business
Administration from Instituto Tecnologico de Estudios Superiores de Monterrey
(ITESM).

      David Gastelum Cazares, Director of Marketing, joined us in 1979 and
assumed his current position in 1992. Previously, Mr. Gastelum served as a
pullet salesman in the states of Sonora and Sinaloa, National Sales Manager of
Live Animals and Eggs, Manager of the Northwest Division, Manager of the Mexico
City Division and National Sales Manager. Before joining us, Mr. Gastelum worked
at La Hacienda, S.A. de C.V. as Technical Advisor and as Area Officer for the
Southeast Division. Mr. Gastelum holds a degree in Veterinary Medicine from the
school of Veterinary of Medicine of Universidad Nacional Autonoma de Mexico
(UNAM).

      Jose Luis Lopez Lepe, Director of Personnel, joined us in 1993.
Previously, Mr. Lopez worked as a teacher in several institutions as well as
with Grupo Condumex, where he was Director of Personnel. Mr. Lopez holds a
degree in Physics and Chemistry from the Escuela Normal Superior and a degree in
Business Administration from Instituto Tecnologico Autonomo de Mexico.

                                       44
<PAGE>

      Rodolfo Ramos Arvizu, Director of Production, joined us in 1980.
Previously, Mr. Ramos held positions in the Egg Quality Control Training Program
and in Poultry Management as well as serving as Supervisor of the Commercial Egg
Production Training Program and as Manager of Raw Material Purchasing. Mr. Ramos
holds a degree in Agricultural Engineering from Instituto Tecnologico de
Estudios Superiores de Monterrey (ITESM).

      Carlos Huerta Suarez, Director of Purchasing, joined us in 1986 and
assumed his current position in 1995. Previously, Mr. Huerta served as
Administrative Manager of Pecuarius Laboratorios, S.A. de C.V., Manager of
Purchasing of the Bajio Division and Corporate Manager of Purchasing. Mr. Huerta
holds a degree in Education Sciences from Universidad de Monterrey and a
master's degree in Business Administration from Instituto Tecnologico de Sonora.
In March 2004, Mr. Huerta retired from the Company.

      Ernesto Salmon Castelo, Director of Industries, joined us in 1991 and
assumed his current position in 2000. Previously, Mr. Salmon worked for Gamesa,
S.A. de C.V. and for us as Sales Manager in Sonora, Northwestern Distribution
Manager, Manager of the Processing Plant in Celaya, Southeastern Division
Manager and Bajio Division Manager. Mr. Salmon holds a degree in Chemical
Engineering from Instituto Tecnologico de Sonora and a master's degree in
Business Administration from Instituto Tecnologico de Estudios Superiores de
Monterrey (ITESM).

      Francisco Javier Espinoza Teja, Director of Supply Chain, joined us in
2004. Previously, Mr. Espinoza worked at Procter & Gamble and at the Coca-Cola
Company in Mexico. He holds a Chemical Engineering degree from the Universidad
Autonoma de Guadalajara and a master's degree in International Finance from
Instituto Tecnologico de Estudios Superiores de Monterrey (ITESM).

Statutory Auditor

      The statutory auditor generally reviews our affairs and reports to the
stockholders at the ordinary general meeting as to the accuracy of the financial
information presented to them by the board of directors. The statutory auditor
is also authorized to do the following:

      (i)   call ordinary or extraordinary stockholders' meetings;

      (ii)  place items on the agenda for meetings of stockholders or the board
            of directors;

      (iii) attend meetings of stockholders or the board of directors (without
            the right to vote); and

      (iv)  request monthly reports from the board of directors regarding our
            financial condition, including statements of results of operations.

As of December 31, 2003, Francisco Jose Sanchez Gonzalez was the statutory
auditor. In April 2004, Felizardo Gastelum Felix replaced him as statutory
auditor.

Audit Committee

      In January 2001, a Mexican Commission of Business Leaders (Consejo
Coordinador Empresarial), with the support of the Comision Nacional Bancaria y
de Valores (Mexican Banking and Securities Commission, or, "CNBV"), issued a
Codigo de Mejores Practicas Corporativas ("Code of Best Practices") for publicly
traded Mexican companies, recommending certain actions with respect to various
areas of corporate governance. Subsequently, the Securities Market Law was
amended effective June 2001, to require that all publicly traded Mexican
companies have an audit committee.

                                       45
<PAGE>

      The mandate of the audit committee is to establish and monitor procedures
and controls in order to ensure that the financial information we distribute is
useful, appropriate and reliable and accurately reflects our financial position.
In particular, pursuant to our bylaws and Mexican law, the audit committee must
do the following:

      (a)   Submit an annual report to the board of directors;

      (b)   Provide the board of directors with its opinion regarding any
            transaction with a related party that is outside the ordinary course
            of our business (the board is required to seek the audit committee's
            opinion on such matters); and

      (c)   Assist the board of directors in selecting candidates for auditor
            and reviewing the scope and terms of the auditor's engagement.

      We formally created our audit committee on May 22, 2002. It was to be
comprised of five members of our board of directors but the selection of the
committee members was delayed due to the succession of the Chairman of the board
of directors. Between June 2001 and the appointment of the audit committee
members our executive committee, consisting of six members of the board, handled
the duties of the audit committee.

      In order to fully comply with current Mexican Corporate and Securities
Market Laws as well as other recent regulatory amendments in the various markets
in which Bachoco's shares are traded, we named an audit committee during our
annual ordinary stockholders' meeting on April 30, 2003. The audit committee is
currently comprised of the following four members:

      Ricardo Aguirre Borboa (President)
      Francisco Javier R. Bours Castelo
      Avelino Fernandez Salido
      Humberto Schwarzbeck Noriega

      This committee was named during our annual ordinary stockholders' meeting
held on April 28, 2004.

Compensation of Directors and Officers

      For the year ended December 31, 2003, we paid approximately Ps.22.8
million in aggregate compensation to our directors and executive officers, for
services they rendered in their respective capacities.

Board Practices

      In 2001, we began to review our board practices to bring them into
compliance with the recent requirements for companies listed on the Mexican
Stock Exchange. As a result of this review, we have changed the composition of
our board and appointed an audit committee. See "Directors" and "Audit
Committee."

Employees

      As of December 31, 2001, 2002 and 2003, we had approximately 18,482,
18,306 and 18,495 employees, respectively.

                                       46
<PAGE>

      In 2003, approximately 69% of employees were members of labor unions.
Labor relations with our employees are governed by 52 separate collective labor
agreements, each relating to a different group of employees and negotiated on
behalf of each such group by a different labor union. As is typical in Mexico,
wages are renegotiated every year while other terms and conditions of employment
are renegotiated every two years. We seek to attract dependable and responsible
employees to train at each of our plants and facilities. We offer our employees
attractive salary and benefit packages, including a pension and savings plan.

      We believe that we have good relations with our employees. We have not
experienced significant work stoppages as a result of labor problems.

Share Ownership

      To the best of our knowledge, no individual director holds share ownership
of more than one percent of any of the class Shares subject to this report. At
this time, we have not developed a share options plan for our employees.

Comparison of Our Corporate Governance Rules and the Rules of the NYSE
Applicable to U.S. Companies

      On November 4, 2003, the SEC approved the final corporate governance rules
of the NYSE. According to such rules, foreign private issuers are subject to a
more limited set of requirements regarding corporate governance than those
imposed on U.S. domestic issuers. As a foreign private issuer, we must comply
with three rules imposed by the NYSE:

      o     prior to July 31, 2005, we must comply with the requirements set
            forth by the SEC concerning audit committees;

      o     our CEO must promptly notify the SEC in writing after any executive
            officer becomes aware of any material non-compliance with any of the
            applicable NYSE corporate governance rules; and

      o     we shall provide a brief description disclosing any significant ways
            in which our corporate governance practices differ from those
            followed by U.S. companies under NYSE listing standards.

                                       47
<PAGE>

      The chart below provides a brief description of the significant
differences between our corporate governance practices and those followed by
U.S. companies under NYSE listing standards.

NYSE Corporate Governance Rules for        Our Corporate Governance Practices
          Domestic Issuers

Director Independence. Majority of        Pursuant to the Mexican Securities
board of directors must be                Market Law and our bylaws, our
independent. "Controlled companies,"      stockholders are required to appoint
which would include our company if        a board of directors of between five
it were a U.S. issuer, are exempt         and 20 members, 25% of whom must be
from this requirement.                    independent. Our board of directors
                                          is not required to make a
                                          determination as to the independence
                                          of our directors.

A director is not independent if          Under Article 14 Bis of the Mexican
such director is:                         Securities Market Law, a director is
                                          not independent if such director is:

(i) a person who the board                (i) an employee or officer of the
determines has a material direct or       company (one-year cooling off
indirect relationship with the            period);
company, its parent or a
consolidated subsidiary;

(ii) an employee, or an immediate         (ii) a stockholder that, without
family member of an executive             being an employee or officer of the
officer, of the company, its parent       company, has influence or authority
or a consolidated subsidiary, other       over the company's officers;
than employment as interim chairman
or CEO;

(iii) a person who receives, or           (iii) a consultant, or partner or
whose immediate family member             employee of a consultant, to the
receives, more than $100,000 per          company or its affiliates, where the
year in direct compensation from the      income from the company represents
company, its parent or a                  10% or more of the overall income of
consolidated subsidiary, other than       such consultant;
director and committee fees or
deferred compensation for prior
services only (and other than
compensation for service as interim
chairman or CEO or received by an
immediate family member for service
as a non-executive employee);

(iv) a person who is affiliated with      (iv) an important client, supplier,
or employed, or whose immediate           debtor or creditor (or a partner,
family member is affiliated with or       director or employee thereof). A
employed in a professional capacity,      client and supplier is considered
by a present or former internal or        important where its sales to or
external auditor of the company, its      purchases from the company represent
parent or a consolidated subsidiary;      more than 10% of the client's or
                                          supplier's total sales or purchases.
                                          A debtor or creditor is considered
                                          important whenever its sales to or
                                          purchases from to the company
                                          represent more than 15% of the
                                          debtor's or creditor's total sales
                                          or purchases;

                                       48
<PAGE>

NYSE Corporate Governance Rules for        Our Corporate Governance Practices
          Domestic Issuers

(v) an executive officer, or an           (v) an employee of a non-profit
immediate family member of an             entity that receives contributions
executive officer, of another             from the company that represent more
company whose compensation                than 15% of the total contributions
committee's membership includes an        received;
executive officer of the listed
company, its parent or a
consolidated subsidiary; or

(vi) an executive officer or              (vi) a CEO or other high ranking
employee of a company, or an              officer of another company in which
immediate family member of an             the issuer's CEO or other high
executive officer of a company, that      ranking officer is a member of the
makes payments to, or receives            board of directors; or
payments from, the listed company,
its parent or a consolidated
subsidiary for property or services
in an amount which, in any single
fiscal year, exceeds the greater of
$1 million or 2% of such other
company's consolidated gross
revenues (charities are not
included, but any such payments must
be disclosed in the company's proxy
(or, if no proxy is prepared, its
Form 10-K / Annual Report)).

(vii) "Immediate family member"           (vii) a "family member" related to
includes a person's spouse, parents,      any of the persons mentioned above
children, siblings, mothers and           in (i) through (vi). "Family member"
fathers-in-law, sons and                  includes a person's spouse,
daughters-in-law and anyone (other        concubine or other relative of up to
than domestic employees) who shares       three degrees of consanguinity and
the person's home. Individuals who        affinity, in the case of (i) and
are no longer immediate family            (ii) above, and a spouse, concubine
members due to legal separation,          or other relative of up to one
divorce or death (or incapacity) are      degree of consanguinity or affinity
excluded. ss.303A.02(b)                   in the case of (iii) through (vi)
                                          above.

Executive Sessions. Non-management        There is no similar requirement
directors must meet regularly in          under our bylaws or applicable
executive sessions without                Mexican law.
management. Independent directors
should meet alone in an executive
session at least once a
year.ss.303A.03

Audit committee. Audit committee          We expect to comply with Rule 10A-3
satisfying the independence and           by July 31, 2005. The members of our
other requirements of Rule 10A-3          audit committee are independent as
under the Exchange Act and the more       independence is defined by Rule
stringent requirements under the          10A-3. The members of our audit
NYSE standards is required.               committee are not required to
ss.ss.303A.06, 303A.07                    satisfy the NYSE independence and
                                          other audit committee standards that
                                          are not prescribed by Rule 10A-3.

                                          Our audit committee complies with
                                          the requirements of the Mexican
                                          Securities Market Law and has the
                                          following attributes:

                                       49
<PAGE>

NYSE Corporate Governance Rules for        Our Corporate Governance Practices
          Domestic Issuers

                                          o     We have a four-member audit
                                                committee, which is composed
                                                of one proprietary director
                                                and three proprietary
                                                independent directors.

                                          o     The president of the audit
                                                committee and two members are
                                                independent. Under the Mexican
                                                Securities Market Law, the
                                                president and the majority of
                                                the members of the audit
                                                committee must be independent.

                                          o     Our audit committee operates
                                                pursuant to a written charter
                                                adopted by our board of
                                                directors. For a detailed
                                                description of the duties of
                                                our audit committee, see Item
                                                6 of our annual report on Form
                                                20-F.

                                          o     Pursuant to our bylaws and
                                                Mexican law, our audit
                                                committee submits an annual
                                                report regarding its
                                                activities to our board of
                                                directors.

Nominating/corporate governance           We are not required to have a
committee. Nominating/corporate           nominating/corporate governance
governance committee of independent       committee, and it is not expressly
directors is required. The committee      recommended by the Mexican Code of
must have a charter specifying the        Best Corporate Practices.
purpose, duties and evaluation
procedures of the committee.
"Controlled companies," which would
include our company if it were a
U.S. issuer, are exempt from these
requirements. ss.303A.04

Compensation committee. Compensation      We are not required to have a
committee of independent directors        compensation committee. As
is required, which must approve           recommended by the Mexican Code of
executive officer compensation. The       Best Corporate Practices, we have an
committee must have a charter             evaluation mechanism for assisting
specifying the purpose, duties and        the board of directors in approving
evaluation procedures of the              executive officer compensation.
committee. "Controlled companies,"
which would include our company if
it were a U.S. issuer, are exempt
from this requirement. ss.303A.05

Equity compensation plans. Equity         Stockholder approval is not
compensation plans require                expressly required under Mexican law
stockholder approval, subject to          or our bylaws for the adoption and
limited exemptions. ss.303A.08            amendment of an equity-compensation
                                          plan. However, regulations of the
                                          Mexican Banking and Securities
                                          Commission

                                       50
<PAGE>

NYSE Corporate Governance Rules for        Our Corporate Governance Practices
          Domestic Issuers

                                           require stockholder approval under
                                           certain circumstances. We currently
                                           do not have any equity-compensation
                                           plans in place.

Code of Ethics. Corporate governance       We have adopted a code of ethics,
guidelines and a code of business          which has been accepted by to our
conduct and ethics is required, with       chief executive officer, chief
disclosure of any waiver for               financial officer, controller and
directors or executive officers.           persons performing similar
ss.303A.10                                 functions, as well as to other
                                           officers and employees. We are
                                           required by Item 16B of Form 20-F to
                                           disclose any waivers granted to our
                                           chief executive officer, chief
                                           financial officer, principal
                                           accounting officer and persons
                                           performing similar functions. We
                                           have no such waivers in place.

ITEM 7. Major Stockholders and Related Party Transactions.

      Our Common Stock consists of 450,000,000 Series B Shares and 150,000,000
Series L Shares. Holders of Series B Shares are entitled to one vote at any
general meeting of our stockholders for each Series B Share held. Holders of
Series L Shares are entitled to one vote for each Series L Share held, but only
with respect to certain matters. Each Unit consists of one Series B Share and
one Series L Share. Each B Unit consists of two Series B Shares. In April 1995,
the Robinson Bours Stockholders created the Control Trust to hold certain Units
owned by members of the Robinson Bours family. The Robinson Bours Stockholders,
through the Control Trust and a separate trust established in connection with
our 1997 initial public offering (the "Family Trust"), owned Units and B Units
representing approximately 65.5% of the Series L Shares and 88.5% of the Series
B Shares outstanding on December 31, 2003. In total, the Control Trust and the
Family Trust owned 496,500,000 Shares outstanding on December 31, 2003.

      The table below sets forth certain information regarding the direct or
indirect ownership of outstanding Shares by the Control Trust and the Family
Trust as of December 31, 2003.

<TABLE>
<CAPTION>
      Title of Class             Identity of Group              Amount Owned       Percent of Class
------------------------   -----------------------------      ----------------     ----------------
<S>                        <C>                                   <C>                    <C>
Series B(1)                Control Trust and Family Trust        398,250,000            88.5%

Series L(2)                Control Trust and Family Trust         98,250,000            65.5%

All Classes(3)             Control Trust and Family Trust        496,500,000            82.8%
</TABLE>

----------
(1)   Percentage is based on 450,000,000 Series B Shares, including 300,000,000
      Shares not registered under Section 12 of the Securities and Exchange Act
      of 1934.
(2)   Percentage is based on 150,000,000 Series L Shares.
(3)   Percentage is based on 600,000,000 Shares.

      Except as set forth in the table above, we are not aware of any person who
owns 10% or more of our Common Stock.

                                       51
<PAGE>

      In November 1998, in accordance with rules established by the CNBV, we
established a reserve in the amount of Ps.180.0 million (Ps.258.4 million in
constant pesos as of December 31, 2003 purchasing power) for the repurchase of
shares. We may repurchase our shares in the Mexican Stock Exchange at prevailing
prices to the extent of the balance remaining in the reserve account or up to 3%
of the total shares outstanding. Any shares so repurchased will not be deemed to
be outstanding for purposes of calculating a quorum or for voting at any
stockholders' meeting during the time that we own the shares. During our
stockholders' meeting of April 30, 2004, we capped the share repurchase program
for 2004 to a maximum amount of Ps.132.3 million, equivalent to approximately
6.2 million units UBL (or 1.0 million ADS). As of May 7, 2004, we had
repurchased a total of 710,000 units UBL, representing 0.24% of the total shares
outstanding.

Interest of Management in Certain Transactions

      It is our policy not to engage in any transaction with or for the benefit
of any stockholder or member of the board of directors, or any entity controlled
by such a person or in which such a person has a substantial economic interest,
unless (i) the transaction is related to our business and (ii) the price and
other terms are at least as favorable to us as those that could be obtained on
an arm's-length basis from a third party.

      We have engaged in a variety of transactions with entities owned by
members of the Robinson Bours family, all of which we believe were consistent
with this policy and not material to our business and results of operations. All
of these transactions are described below. See Note 8 to the consolidated
financial statements. We expect to engage in similar transactions in the future.

      We regularly purchase vehicles and related equipment from distributors
owned by various members of the Robinson Bours family. The total amount spent on
such purchases was Ps.34.3 million, Ps.50.0 million and Ps.47.3 million for the
years ended December 31, 2001, 2002 and 2003, respectively. The distribution of
vehicles and related equipment is a highly competitive aspect of business in the
areas in which we operate. We are not dependent on affiliated distributors and
are able to ensure that the pricing and service we obtain from affiliated
distributors are competitive with those available from other suppliers.

      The Robinson Bours Stockholders own Taxis Aereos del Noroeste, S.A. de
C.V. ("TAN"), an air transport company that provides transportation for members
of the board of directors to and from meetings at our headquarters in Celaya. We
paid TAN Ps.2.8 million, Ps.3.5 million and Ps.4.5 million for the years ended
December 31, 2001, 2002 and 2003, respectively, for such transportation.

      We purchased feed and packaging materials from enterprises owned by the
family of Enrique Robinson Bours and the family of Juan Bautista Robinson Bours.
The cost of such purchases was Ps.147.7 million, Ps.101.8 million and Ps.153.2
million for the years ended December 31, 2001, 2002 and 2003, respectively.

      Our accounts payable to related parties totaled Ps.21.0 million and Ps.2.5
million for the years ended December 31, 2002 and 2003, respectively. These
transactions took place among companies owned by the same set of stockholders.
See Note 8 to the consolidated financial statements.

      Neither we nor our subsidiaries have loaned any money to any of our
directors or officers.

                                       52
<PAGE>

ITEM 8. Financial Information

      Our consolidated financial statements are included in Item 18. The
financial statements were audited by an independent auditor and are accompanied
by an audit report.

      The financial statements include a consolidated balanced sheet,
consolidated statements of income, consolidated statements of changes in
stockholders' equity, consolidated statements of changes in financial position
and Notes relating to the consolidated financial statements.

      The consolidated financial statements have been prepared in accordance
with Mexican GAAP, which differs in certain respects from U.S. GAAP. Note 17 to
the consolidated financial statements provides 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 total stockholders' equity, operating income and
net income, and a condensed cash flow statement under U.S. GAAP as of December
31, 2002 and 2003, and for the years ended December 31, 2001, 2002 and 2003.

Legal Proceedings

      We are a party to certain legal proceedings in the ordinary course of our
business. We believe that none of these proceedings, individually or in the
aggregate, is likely to have a material adverse effect on us.

Dividends Policy

      Pursuant to Mexican law and our bylaws, the declaration, amount and
payment of annual dividends are determined by a majority vote of the holders of
Series B Shares, generally but not necessarily on the recommendation of the
board of directors. Holders of Series L Shares are not entitled to vote with
respect to the declaration of dividends.

      We declared and paid dividends in nominal pesos of Ps.313.2 million in
2001, Ps.267.8 million in 2002 and Ps.297.7 million in 2003.

      Although there can be no assurance as to the amount or timing of future
dividends, we expect to pay an annual dividend pro rata to holders of
outstanding Shares in an amount up to approximately 20% of the prior year's net
income. The declaration and payment of dividends will depend on our results of
operations, financial condition, cash requirements, future prospects and other
factors deemed relevant by the board of directors and the holders of Series B
Shares, including debt instruments which may limit our ability to pay dividends.

      Because we are a holding company with no significant operations of our
own, we will have distributable profits and cash to pay dividends only to the
extent that we receive dividends from our subsidiaries, principally BSACV.
Accordingly, there can be no assurance that we will pay dividends or of the
amount of any such dividends. BSACV, our principal operating subsidiary, could,
in the future, enter into loan agreements containing covenants whose terms limit
its ability to pay dividends under certain circumstances.

      Mexican law requires that 5% of our net income each year (after profit
sharing and other deductions required by Mexican law) be allocated to a legal
reserve fund until such fund reaches an amount equal to at least 20% of our
capital stock. Mexican corporations may pay dividends only out of earnings
(including retained earnings after all losses have been absorbed or paid up) and
only after such

                                       53
<PAGE>

allocation to the legal reserve fund. The level of earnings available for the
payment of dividends is determined under Mexican GAAP.

Significant Changes

      On January 1, 2003, the Company adopted the requirements of the new
Bulletin E-1 under Mexican GAAP. The Bulletin changes the way biological assets,
including animals like chicken and swine, are treated under Mexican GAAP.
Starting in January 2003, changes in the fair market value of these assets must
be included as a potential profit in a company's financial statements before
they are harvested. We have to estimate the potential profit for these animals
at a reasonable market price minus expected costs and operating expenses. That
estimate may be higher or lower than the actual profits realized. The effect of
Bulletin E-1 may be positive or negative for any particular period, depending on
the price and inventories of animals in that period. The cumulative effect of
the adoption of Bulletin E-1 on January 1, 2003 resulted in an increase of
Ps.80.5 million (Ps.67.6 million net of taxes), which is presented in our income
statement as a cumulative effect of accounting change. The Ps.21.5 million
difference between fair values of beginning and ending inventories was
recognized under net revenues.

      For U.S. GAAP purposes, biological asset and agricultural products are
valued at cost. Therefore, the 2003 reconciliation shows the reversal of
biological assets valuation at fair value resulting in a net charge of Ps.58.9,
leaving inventories of biological assets and agricultural products stated at
average cost of production, which approximates estimated replacement cost, not
in excess of net realizable value.

      On April 30, 2003 in order to fully comply with the current Mexican
Corporate and Securities Market Laws as well as other recent regulatory
amendments in the various markets in which Bachoco's shares are traded, we named
a new board of directors, which was ratified on April 28, 2004 during the annual
ordinary stockholders' meeting. See "Item 6--Directors, Senior Management and
Employees."

ITEM 9. The Offer and Listing

      The Units (each comprised of one Series B Share and one Series L Share)
are listed on the Mexican Stock Exchange, and the American Depositary Shares
("ADSs," each comprised of six Units) are listed on the New York Stock Exchange.
The ADSs are evidenced by American Depositary Receipts ("ADRs") issued by The
Bank of New York, as Depositary under a Deposit Agreement among the Company, the
Depositary and the holders from time to time of ADRs. On December 31, 2003,
there were 3,997,223 ADSs outstanding, representing 5.3% of the outstanding
Series B Shares and 16.1% of the outstanding Series L Shares, which were held by
five holders (including the Depositary Trust Company) with registered addresses
in the United States.

      The Units and the ADSs commenced trading on September 19, 1997. The
following tables set forth for each year from 2000 to 2003, for each quarter
from 2002 and 2003 and for each complete month from December 2003 to May 2004,
the high, low and period end sales prices of the Units on the Mexican Stock
Exchange as reported by the Mexican Stock Exchange and the high, low and period
end sales price of the ADSs on the New York Stock Exchange as reported by the
New York Stock Exchange.

                                       54
<PAGE>

                             Mexican Stock Exchange
                            (Nominal pesos per Unit)

           Year                               High          Low         Close
         --------                           --------     --------     --------
1999 .................................        16.09         9.60        16.00
2000 .................................        16.06         9.51        10.19
2001 .................................        13.00         8.17        11.10
2002 .................................        16.00        10.98        14.50
2003 .................................        19.30        14.00         18.9

                             New York Stock Exchange
                                 (U.S.$ per ADS)

           Year                               High          Low         Close
         --------                           --------     --------     --------
1999 .................................        11.25         6.50        10.75
2000 .................................        10.75         6.50         7.06
2001 .................................         8.60         5.45         7.35
2002 .................................        10.00         7.15         8.52
2003 .................................        10.78         7.73        10.45

                             Mexican Stock Exchange
                            (Nominal pesos per Unit)

           Year                               High          Low         Close
         --------                           --------     --------     --------
First Quarter 2002 ...................        15.00        10.98        14.50
Second Quarter 2002 ..................        16.00        14.36        15.00
Third Quarter 2002 ...................        16.00        14.50        14.50
Fourth Quarter 2002 ..................        14.50        13.49        14.50
First Quarter 2003 ...................        14.80        14.00        14.70
Second Quarter 2003 ..................        17.50        14.70        17.09
Third Quarter 2003 ...................        17.40        16.40        16.90
Fourth Quarter 2003 ..................        19.30        17.30        18.90

                             New York Stock Exchange
                                 (U.S.$ per ADS)

           Year                               High          Low         Close
         --------                           --------     --------     --------
First Quarter 2002 ...................        10.00         7.15         9.85
Second Quarter 2002 ..................         9.95         9.15         9.40
Third Quarter 2002 ...................         9.77         8.38         8.50
Fourth Quarter 2002 ..................         8.65         7.75         8.52
First Quarter 2003 ...................         8.85         7.74         8.05
Second Quarter 2003 ..................        10.90         9.20        10.35
Third Quarter 2003 ...................        10.40         9.60         9.95
Fourth Quarter 2003 ..................        10.71         9.40        10.30

                             Mexican Stock Exchange
                            (Nominal pesos per Unit)

           Year                               High          Low         Close
         --------                           --------     --------     --------
December 2003 ........................        19.03        18.50        18.90
January 2004 .........................        20.32        19.50        20.32
February 2004 ........................        24.00        21.20        23.00
March 2004 ...........................        23.30        20.50        21.30
April 2004 ...........................        21.25        20.00        20.00
May 2004..............................        20.00        17.00        18.00

                                       55
<PAGE>

                             New York Stock Exchange
                                 (U.S.$ per ADS)

           Year                               High          Low         Close
         --------                           --------     --------     --------
December 2003 ........................        10.41        11.27        11.15
January 2004 .........................        11.04        10.71        11.04
February 2004 ........................        13.28        11.49        12.54
March 2004 ...........................        12.75        10.92        11.40
April 2004 ...........................        11.44         9.75         9.75
May 2004 .............................         9.85         8.80         9.85

Trading on the Mexican Stock Exchange

      The Mexican Stock Exchange, located in Mexico City, is the only stock
exchange in Mexico. Founded in 1894, the Mexican Stock Exchange is organized as
a corporation whose shares are held by brokerage houses, which are currently the
only entities allowed to own them. These brokerage houses are currently the only
entities authorized to trade on the floor of the Mexican Stock Exchange. Trading
on the Mexican Stock Exchange takes place principally through an automated
inter-dealer quotation system known as SENTRA, which is open for trading between
the hours of 8:30 a.m. and 3:00 p.m., Mexico City time, each business day. Each
trading day is divided into six trading sessions with ten-minute periods
separating each session. Trades in securities listed on the Mexican Stock
Exchange can, subject to certain requirements, also be realized off the
Exchange. Due primarily to Mexican tax considerations, however, most
transactions in listed securities are effected through 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
Units 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 are on deposit with S.D. Indeval, S.A. de C.V.,
Institucion para el Deposito de Valores (Central Securities Depository for the
Mexican Securities Market, or, "Indeval"), a privately-owned central securities
depositary that acts as a clearing house, depositary, custodian and registrar
for Mexican Stock Exchange transactions, eliminating the need for physical
transfer of securities.

      The Mexican Stock Exchange is one of Latin America's largest exchanges in
terms of market capitalization, but it remains relatively small and illiquid
compared to major world markets and is therefore subject to greater volatility.
There is no formal over-the-counter market for securities in Mexico.

      The market value of securities of Mexican companies is, to varying
degrees, affected by economic and market conditions in other emerging market
countries.

Market Regulation

      The predecessor of the CNBV was established in 1946 to regulate stock
market activity. The Ley del Mercado de Valores ("Securities Market Law") of
1975, as amended, regulates the securities markets and brokerage houses and sets
standards for the registration of brokers in the Intermediaries Section of the
Registro Nacional de Valores e Intermediarios (National Registry of Securities
and Intermediaries, or, "RNVI"), a prerequisite to becoming a member of the
Mexican Stock Exchange. Prior to registration in

                                       56
<PAGE>

the RNVI, the brokerage houses must be authorized by the Ministry of Finance
upon the recommendation of the CNBV. Legislative provisions under NAFTA allow
foreign securities firms in a NAFTA country to establish and control brokerage
firms in Mexico. There are several foreign brokerage houses authorized to
operate in Mexico. In addition, a number of other foreign brokerage firms have
submitted preliminary applications to be authorized to operate in the Mexican
Stock Exchange. The Securities Market Law also empowers the CNBV to regulate the
public offering and trading of securities. The governing committee of the CNBV
is composed of representatives of the Ministry of Finance, the Mexican Central
Bank, the Comision Nacional de Seguros y Fianzas ("National Insurance and
Bonding Commission"), the Comision Nacional del Sistema de Ahorro para el Retiro
("National Retirement Savings Fund Commission") and the CNBV.

      Under the Mexican Securities Market Law, the CNBV must be notified before
stockholders of a company listed on the Mexican Stock Exchange effect one or
more simultaneous or successive transactions resulting in the transfer of 10% or
more of such company's capital stock. The holders of the shares being
transferred in the transactions are also obligated to inform the CNBV of the
results of the transactions within three days of completion of the last
transaction, or that the transactions have not been completed. The CNBV will
notify the Mexican Stock Exchange of such transactions, without specifying the
names of the parties involved.

      The CNBV and the Mexican Stock Exchange must also be notified in the event
of any of the following contingencies:

      o     on the following day of operation if any stockholder of a company
            listed on the Mexican Stock Exchange effects one or more
            transactions resulting in the ownership of more than 10% and less of
            30% of capital stock;

      o     on the following day of operation if any Related Person increases
            his ownership of the stock of a company; and

      o     at least 15 days before the operation becomes effective if any
            stockholder of a company listed on the Mexican Stock Exchange,
            undertakes in a Public Offering one or more transactions resulting
            in the ownership of more than 30% and less than 50% of capital
            stock.

ITEM 10. Additional Information

Memorandum and Articles of Association

      Information regarding the memorandum and articles of association was
included in the Initial Registration Form F-1, submitted on September 1997. In
April 2002, we made changes to our bylaws, which were reported in our annual
report for year 2002. In December 2003 we made further changes; the majority of
which are summarized below. Aside from these changes, the information contained
the Initial Registration Form F-1 is applicable to this Annual Report.

      The discussion set forth below contains information concerning our capital
stock and a brief summary of the material provisions of the bylaws and
applicable Mexican law. This summary does not purport to be complete and is
qualified in its entirety by reference to the bylaws and the applicable
provisions of Mexican law.

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<PAGE>

General

      Industrias Bachoco, S.A. de C.V., was incorporated on April 17, 1980, as a
variable capital corporation (sociedad anonima de capital variable) under the
laws of Mexico.

      In 1995, our stockholders authorized the issuance of up to 15,525,000
additional Series B Shares and 15,525,000 additional Series L Shares, all
constituting fixed capital, to be issued in connection with the global offering
of shares that took place on September 19, 1997 (the "Global Offering").

      On April 21, 1997 we restructured our capital by (i) declaring a
four-to-one stock split of the 106,678,125 Series B Shares and 35,559,375 Series
L Shares outstanding, (ii) converting 7,762,500 Series L Shares (on a post-split
basis) into Series B Shares and (iii) combining all of the 434,475,000 Series B
Shares and 134,475,000 Series L Shares outstanding (in each case, on a
post-split basis) into 134,475,000 Units and 150,000,000 B Units. Each Unit
consists of one Series B Share and one Series L Share. Holders of Units will be
entitled to exercise all the rights of holders of the Series B Shares and Series
L Shares underlying their Units. Each B Unit consists of two Series B Shares. B
Units entitle the holders thereof to exercise all the rights of holders of the
Series B Shares underlying such B Units. Immediately prior to the Global
Offering, our outstanding capital stock consisted of 434,475,000 Series B Shares
and 134,475,000 Series L Shares, all of which were duly authorized, validly
issued and are fully paid and non-assessable.

      For a period of 10 years after the Global Offering, the Series B Shares
will be issuable only in the form of Units and B Units, and the Series L Shares
will be issuable only in the form of Units. Commencing 10 years from the date of
the Global Offering, Units will automatically separate into their component
Series B Shares and Series L Shares, B Units will automatically separate into
their component Series B Shares, and each Series L Share underlying the Units
will automatically convert into one Series B Share.

      The Series B Shares generally will represent at least 75% of our Common
Stock and will have full voting rights. See "--Foreign Investment Legislation."
The Series L Shares may not represent more than 25% of our capital stock. As
further described below, the Series B Shares and the Series L Shares have the
same economic rights. Each Series B Share entitles the holder thereof to one
vote at any general meeting of the stockholders. The Series L Shares are
entitled to vote only with respect to certain limited matters as described under
"--Voting Rights and Stockholders' Meetings."

      The Robinson Bours Stockholders have advised us that they intend to ensure
that the Control Trust will hold at least 51% of the Series B Shares at any time
outstanding. See "--Foreign Investment Legislation."

Registration and Transfer

      The Units and B Units are evidenced by certificates in registered form,
which may have dividend coupons attached. We maintain a registry and, in
accordance with Mexican law, we recognize as stockholders only those holders
listed in the stock registry. Stockholders may hold their Units or B Units in
the form of physical certificates (which, together with notations made in our
stock registry, evidence ownership of the Units and B Units) or through book
entries with institutions that have accounts with Indeval. Indeval is the holder
of record in respect of Units and B Units held through it. Accounts may be
maintained at Indeval by brokerage houses, banks and other entities approved by
the CNBV. Ownership of Units and B Units maintained at Indeval is evidenced
through Indeval's records and through lists kept by Indeval participants. See
"Description of American Depositary Receipts."

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<PAGE>

      In accordance with Article 130 of the Ley General de Sociedades
Mercantiles ("Mexican Companies Law"), the board of directors must authorize any
transfer of stock, or any securities based on such stock, when the number of
shares sought to be transferred in one act or a succession of acts, without
limit of time or from one group of interrelated stockholders or stockholders who
act in concert, constitutes 10% or more of the voting stock issued by the
Company. If the board of directors refuses to authorize such a transfer, the
board must designate one or more purchasers of the stock, who must pay the
interested party the prevailing price on the Mexican Stock Exchange. If the
shares are not registered with Indeval the price will be determined in
accordance with Article 130 of the Mexican Companies Law. If any person
participates in a transaction that would have resulted in the acquisition of 10%
or more voting stock of the Company without having obtained the board's prior
approval they must pay the Company a fine equal to the market value of the
shares.

      Any person who participates in an act that violate the terms of Article
130 discussed in the preceding paragraph will be obligated to pay the Company a
fine in an amount equal to the value of the shares owned directly or indirectly
by the stockholder, or the value of the shares involved in the prohibited
transaction, if such person does not own shares issued by the Company. In the
case of a prohibited transaction that would have result in the acquisition of
10% or more of the voting stock of the Company, the fine will be equal to the
market value of those shares, provided that board authorization was not obtained
in advance.

      According to our bylaws, a majority of the members of the board of
directors must authorize in writing, by a resolution made at a board of
directors' meeting, any change in the control of the Company. Our board of
directors has the right to decide if a person or a group of persons is acting
for the purpose of acquiring control of the Company.

Voting Rights and Stockholders' Meetings

      Each Series B Share entitles the holder thereof to one vote at any general
meeting of the stockholders. Holders of Series B Shares are currently entitled
to elect all members of the board of directors, with the exception of those
members that holders of Series L Shares are entitled to elect. Our bylaws
provide that the board of directors shall consist of at least 5 members, which
minimum number may be decreased at an extraordinary general meeting of
stockholders by majority vote of the holders of Series B Shares. At year-end
2002, the board of directors consisted of 15 members. Our board was reformed in
April 2003, and now consists of seven proprietary Directors and three
independent Directors. The stockholders also appointed four alternate directors
to the board of directors, three of whom are proprietary and one of whom is
independent.

      Each Series L Share entitles the holder thereof to the following rights:

      (i)   the rights described below with respect to the appointment or
            election of up to two directors;

      (ii)  one vote at a special stockholders' meeting with respect to the
            cancellation of the registration of the Series L Shares with the
            RNVI or with any Mexican or foreign stock exchange; and

      (iii) one vote at an extraordinary general stockholders' meeting with
            respect to the following matters only:

            (a)   transformation of the Company from one type of corporate form
                  to another;

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<PAGE>

            (b)   any merger of the Company with another company where we are
                  not the surviving entity;

            (c)   cancellation of the registration of the Shares with the RNVI
                  or in any Mexican or foreign stock exchange; and

            (d)   amendment to the controlling stockholders' obligation under
                  the bylaws to repurchase Shares and certain other provisions
                  in the event of delisting.

      Holders of Series L Shares are not entitled to attend or to address
stockholders' meetings at which they are not entitled to vote.

      Under Mexican law, the holders of Shares of any series are also entitled
to vote at a special meeting on any action that would prejudice the rights of
such holders, and such a holder would be entitled to judicial relief against any
such action taken without the approval of holders at such a meeting. Special
meetings are meetings called by holders of a certain series, like the L Series,
in order to reach a consensus on an issue or issues prior to an extraordinary
meeting. Any determination that an action does not require a vote at a special
meeting would be subject to judicial challenge by an affected stockholder, and a
Mexican court of competent jurisdiction would determine whether the challenged
action required a vote at a special meeting. Mexican law does not provide
extensive guidance on the criteria to be applied in making such a determination.

      General stockholders' meetings may be ordinary or extraordinary meetings.
Extraordinary general meetings are meetings called to consider the matters
specified in Article 182 of the Mexican Companies Law and the bylaws including
changes in the fixed portion of the capital stock and other amendments to the
bylaws, liquidation, merger, transformation from one type of corporate form to
another, change in nationality, change of corporate purpose and those other
matters on which the holders of the Series L Shares are entitled to vote.
General meetings called to consider all other matters, including election of
directors and the statutory auditor, are ordinary meetings. An ordinary general
meeting of the Company must be held at least annually during the four months
following the end of the preceding fiscal year to consider certain matters
specified in Article 181 of the Mexican Companies Law, including, principally,
the election of directors and the statutory auditor, the approval of the report
of the board of directors regarding their company's performance, the company's
financial statements for the preceding fiscal year and the allocation of the
profits and losses of the preceding year.

      Any holder or group of holders of Series L Shares representing 10% or more
of our outstanding capital stock has the right to appoint one member and one
alternate member of the board of directors by written notice delivered to the
Chairman or the Secretary of the board at least two days prior to the date of a
general stockholders' meeting to be held for the election of directors. If no
directors are so appointed, holders of Series L Shares are entitled to vote at a
special stockholders' meeting to elect two members and two alternate members of
the board of directors; similarly, if only one director is so appointed, holders
of Series L Shares are entitled to vote at a special stockholders' meeting to
elect one additional member and one alternate member of the board of directors.
The holders of Series L Shares can only revoke the appointment of a member of
the board that they elected, but only if the appointment of all the other
members of the board is also revoked. Other than the Robinson Bours
Stockholders, no person or persons own Series L Shares representing 10% or more
of our outstanding capital stock.

      Under our bylaws, the quorum on first call for a general ordinary meeting
is at least 50% of the outstanding Series B Shares, and action may be taken by a
majority of the Series B Shares present. If a quorum is not available on first
call, a second meeting may be called at which action may be taken by a majority
of the Series B Shares present, regardless of the number of such shares. The
quorum on first call

                                       60
<PAGE>

for a general extraordinary meeting or a special meeting is 75% of the
outstanding Shares with voting rights on the matters to be addressed in that
meeting. If a quorum is not available on first call, a second meeting may be
called, provided that at least 50% of the outstanding Shares with voting rights
on the matters to be addressed in that meeting are represented.

      Whether on first or subsequent call, adoption of a resolution at a general
extraordinary meeting requires the favorable vote of the holders of at least 50%
of the outstanding Shares with voting rights on the matters to be addressed by
that extraordinary meeting. In addition, any action taken at an extraordinary
general meeting, on first or subsequent call, at which holders of Series L
Shares are entitled to vote, requires the favorable vote of the holders of the
majority of the outstanding Series B Shares voting separately as a class, and
any action taken at an extraordinary general meeting, on first or subsequent
call, with respect to the cancellation of the registration of the Series L
Shares with the RNVI or with any Mexican or foreign stock exchange, requires the
favorable vote of the holders of Series L Shares at a special meeting. Whether
on a first or subsequent call, for a special meeting to take action, the
favorable vote of at least 50% of the outstanding Shares of the corresponding
Series is required; provided, however, that special meetings of holders of
Series L Shares which are called to elect and remove directors and to vote with
respect to the cancellation of the registration of the Series L Shares with the
RNVI or with any Mexican or foreign stock exchange do not have a quorum
requirement and action may be taken by a majority of the Series L Shares
present, regardless of the number of such shares.

      Our bylaws require the approval of holders of at least 95% of the
outstanding Shares and the approval of the CNBV for the amendment of the
controlling stockholders' obligation under the bylaws to repurchase Shares and
certain other provisions in the event of delisting. See "--Other
Provisions--Repurchase in the Event of Delisting."

      Holders of ADRs are entitled to instruct the Depositary as to the exercise
of the voting rights pertaining to the Series B Shares and the Series L Shares
constituting the Units represented by the ADSs. See "Description of American
Depositary Receipts--Voting of Deposited Securities."

      According to our bylaws, stockholders with a right to vote, including a
limited right to vote, who hold at least 10% of the shares represented in a
stockholders' meeting, may ask to postpone a vote on any matters on which they
believe they do not have enough information as defined by Article 199 of the
Mexican Companies Law. Stockholders with a right to vote, including a limited
right to vote, who hold at least 20% of the capital stock, may legally object to
the decisions of a general stockholder's meeting, with respect to matters in
which they have rights, as defined by Articles 201 and 202 of the Mexican
Companies Law.

      In addition, stockholders with or without a right to vote, representing at
least 10% of the stockholders equity, can appoint a commissary. They can revoke
the commissary they appointed, but only when all others commissaries are
revoked.

      The board of directors, the Chairman of the board of directors, the
Secretary of the board of directors, the statutory auditor or any Mexican court
of competent jurisdiction may call a stockholders' meeting. The board of
directors or the statutory auditor may be required to call a meeting of
stockholders by holders of at least 10% of the Series B Shares or, in the case
of a stockholders' meeting at which holders of Series L Shares would be entitled
to vote, by the holders of at least 10% of our outstanding capital stock. In
addition, the board of directors or the statutory auditor must call a
stockholders' meeting at the written request of any holder of Series B Shares if
no ordinary general stockholders' meeting has been held for two consecutive
years or if in any meetings held during such a period the stockholders have not
considered the items mentioned in Article 181 of the Mexican Companies Law,
discussed above.

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<PAGE>

      The board of directors or the statutory auditor must call a stockholders'
meeting at the written request of any holder of Series L Shares if no ordinary
general stockholders' meeting has been held for two consecutive years for the
election of directors. In the event that a meeting is not called within 15 days
following the date of such a request, a Mexican court may require such meeting
to be called. At least 15 days prior to the meeting, notice of the meeting must
be published in the Diario Oficial de la Federacion ("Official Gazette") or in a
newspaper of general circulation in Mexico City. Stockholders' meetings may be
held without such publication provided that 100.0% of the outstanding Shares
with voting rights on the matters to be addressed by such meeting are
represented.

      From the moment that a call for a stockholders' meeting is made public,
all the information related to the meeting must be available to the
stockholders. In order to attend a stockholders' meeting, a stockholder must
request and obtain an admission card by furnishing, at least 24 hours before the
time set for holding the stockholders' meeting, appropriate evidence of
ownership of Shares in us and depositing such Shares with our corporate
secretary or with an institution authorized to accept such deposit. If so
entitled to attend the meeting, a stockholder may be represented by proxy signed
before two witnesses. Additionally, the stockholder may be represented at the
stockholders' meetings by a person named by proxy, on a printed form that we
issue, which, under Mexican law, must identify our company and indicate clearly
the matters to be addressed in the meeting, with enough space for the
instructions that the stockholder specifies. We are obliged to make information
on the upcoming meeting available to the intermediaries in the stock market, for
the time specified in Article 173 of the Mexican Law, in order to give the
intermediaries time to send it to the stockholders they represent. The Secretary
of the board of directors must verify that this requirement is met and report on
this matter at the stockholders meeting. See "--Registration and Transfer."

Members of the Board

      Under the Mexican Companies Law, a board of directors must conform to the
following requirements:

      (i)   The board must have at least five and no more than 20 proprietary
            directors;

      (ii)  For every member of the board, an alternate member of the board must
            be named; an alternate director of an independent proprietary
            director must be also independent;

      (iii) At least 25% of the members of the board must be independents
            according to the article 14 Bis 3 of the Ley del Mercado de Valores
            ("Securities Market Law").

      Apart from satisfying all of the requirements mentioned above, failure to
meet these standards for any reason will not constitute grounds for judicial
action challenging any act, contract, or agreement undertaken by the board, an
intermediate committee or other delegated authority. Furthermore, such standards
will not be mandatory for the validity or existence of such acts.

      The board of directors must meet at least every three months at our
address or any other place in Mexico and on the dates that the board determines.
Meetings previously scheduled in accordance with a schedule pre-approved by the
board do not need to be called. Meetings must be called by at least 25% of the
members of the board of directors, the Chairman of the board of directors, the
Vice-Chairman of the board of directors or in the case of a commissary, the
Secretary or the alternate Secretary of the board. Members of the board must be
notified via e-mail or in writing at least five calendar days in advance of a
meeting. The Commissaries must be called to every meeting of the board, where
they have the right to speak, but not the right to vote.

                                       62
<PAGE>

Statutory Auditor

      As determined by Mexican law, the statutory auditor's role is to verify
information on the company, to audit its operations and to report on the company
to stockholders at the annual stockholders' meeting. Any stockholder with at
least 10% of our capital stock-even a stockholder without the right to vote-has
the right to designate a statutory auditor. In the case of a statutory auditor
appointed by a minority of stockholders, the majority may revoke that
appointment provided that it revokes the appointment of all other statutory
auditors as well. A statutory auditor does not need to be a stockholder and
maintains his or her position for one year, but may continue to fulfill his or
her duties until the replacement takes over the position. A statutory auditor
may be reelected. A substitute statutory auditor may assume the duties of any
statutory auditor who, for any reason, cannot perform his or her duties.

Dividends and Distributions

      At the annual ordinary general stockholders' meeting, the board of
directors submits our financial statements for the previous fiscal year,
together with a report thereon by the board, to the holders of Series B Shares
for their consideration. The holders of Series B Shares, once they have approved
the financial statements, determine the allocation of our net profits, if any,
for the preceding year. They are required by law to allocate 5% of such net
profits to a legal reserve, which is not thereafter available for distribution
until the amount of the legal reserve equals 20% of our historical capital stock
(before giving effect to the restatement thereof in constant pesos). As of
December 31, 2003, our legal reserve fund was equal to at least 20% of our
paid-in capital stock. Amounts in excess of those allocated to the legal reserve
fund may be allocated to other reserve funds as the stockholders determine,
including a reserve for the repurchase of our Shares. The remaining balance of
net profits, if any, is available for distribution as dividends. No dividends
may be paid, however, unless losses for prior fiscal years have been paid or
absorbed.

      Holders of Units and B Units and, accordingly, holders of ADSs will have
equal rights, on a per Share basis, to dividends and other distributions,
including any distributions we make upon liquidation. Partially paid Units or
Shares participate in any distribution to the extent that such Units or Shares
have been paid at the time of the distribution or, if not paid, only with
respect to the proportion paid.

Changes in Capital Stock

      An increase of capital stock may generally be effected through the
issuance of new Units or Shares for payment in cash or in kind, by
capitalization of indebtedness or by capitalization of certain items of
stockholders' equity. An increase of capital stock generally may not be realized
until all previously issued and subscribed Units or Shares of capital stock have
been fully paid. Generally, a reduction of capital stock may be effected to
absorb losses, to redeem Units or Shares, or to release stockholders from
payments not made. A reduction of capital stock to redeem Units or Shares is
effected by reimbursing holders of Units or Shares pro rata or by lot.
Stockholders may also approve the redemption of fully paid Units or Shares with
retained earnings. Such a redemption would be effected by a repurchase of Units
or Shares on the Mexican Stock Exchange (in the case of Units or Shares listed
thereon) and would be subject to the limitation that the Series L Shares may not
at any time represent more than 25% of our capital stock.

      Except under limited circumstances, the bylaws require that any capital
increase effected pursuant to a capital contribution be represented by new
Series B Shares and Series L Shares in proportion to the number of Shares of
each such Series outstanding.

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<PAGE>

      The fixed portion of our capital stock may only be increased or decreased
by resolution of a general extraordinary meeting and an amendment to the bylaws,
whereas the variable portion of our capital stock may be increased or decreased
by resolution of a general ordinary meeting. See "Other Provisions--Fixed and
Variable Capital."

      No resolution by the stockholders is required for decreases in capital
stock resulting from exercise of our right to withdraw variable shares or from
our repurchase of our own Shares or for increases in capital stock resulting
from our sale of Shares we previously purchased. See "Other Provisions--Purchase
by the Company of its Shares" and "Other Provisions--Appraisal Rights."

      In order for any capital increase for payment in cash to take place,
holders of at least 85% of the Trust Shares must instruct the trustee of the
Control Trust to vote in favor of such capital increase.

Preemptive Rights

      Except in certain limited circumstances, in the event of a capital
increase through the issuance of new Shares for payment in cash or in kind, a
holder of existing Shares of a given Series at the time of the capital increase
has a preferential right to subscribe for a sufficient number of new Shares of
the same Series to maintain the holder's existing proportionate holdings of
Shares of that Series or, in the event of a capital increase through the
issuance of limited-voting or non-voting stock only, to subscribe for a
sufficient number of the shares to be issued to maintain the holder's existing
proportionate holdings of our capital stock. Preemptive rights must be exercised
within 15 days following the publication of notice of the capital increase in
the Diario Oficial de la Federacion (Official Gazette) or following the date of
the stockholders' meeting at which the capital increase was approved if all
stockholders were represented at such meeting; otherwise such rights will lapse.
Under Mexican law, preemptive rights cannot be waived in advance by a
stockholder, except under limited circumstances and cannot be represented by an
instrument that is negotiable separately from the corresponding share. The
Robinson Bours Stockholders, including the Selling Stockholders, have waived all
preemptive rights with respect to the Series B Shares and Series L Shares
comprised in the Units underlying the ADSs being offered in the Global Offering.
Holders of ADRs that are U.S. citizens or are located in the United States may
be restricted in their ability to participate in the exercise of preemptive
rights. See "Description of American Depositary Receipts--Dividends, Other
Distributions and Rights."

Foreign Investment Legislation

      Ownership by foreigners of shares of Mexican companies is regulated by the
Ley de Inversion Extranjera ("Foreign Investment Law") and by the Reglamento de
la Ley para Promover la Inversion Mexicana y Regular la Inversion Extranjera
("Foreign Investment Regulations"). The Ministry of Commerce and Industrial
Development and the Foreign Investment Commission are responsible for the
administration of the Foreign Investment Law.

      The Foreign Investment Law reserves certain economic activities
exclusively for the Mexican state and certain other activities exclusively for
Mexican individuals or Mexican corporations and limits the participation of
foreign investors to certain percentages in regard to enterprises engaged in
activities specified therein. Foreign investors may own up to 100% of the
capital stock of Mexican companies or entities, except for companies (i) engaged
in reserved activities as referred to above or (ii) with assets exceeding an
amount to be established annually by the Foreign Investment Commission (which
has been set at Ps.394 million), in which case an approval from the Foreign
Investment Commission will be necessary in order for foreign investment to
exceed 49% of the capital stock. Mexican and non-Mexican nationals will be
entitled to hold and to exercise the rights of a holder of the Units, the Series
B Shares and the Series L Shares. The Robinson Bours Stockholders have advised
us that they intend to maintain a

                                       64
<PAGE>

control position directly in the form of B Units. Pursuant to our bylaws,
foreigners may only own Series B Shares up to 49% of such series.

Other Provisions

      Fixed and Variable Capital. As a sociedad anonima de capital variable, we
are permitted to issue shares constituting fixed capital and shares constituting
variable capital. The issuance of variable capital shares, unlike the issuance
of fixed capital shares, does not require an amendment of the bylaws, although
it does require approval at a general ordinary stockholders' meeting.

      No shares representing variable capital are currently outstanding or will
be issued in connection with the Global Offering. The outstanding variable
capital shares, if any, may be fully withdrawn by the holders thereof. Except as
otherwise provided under "--Appraisal Rights" below, the Minimum Capital cannot
be withdrawn. A holder of variable capital stock that wishes to effect a total
or partial withdrawal of such stock is required to notify us in an authenticated
written notice to that effect. If notice of withdrawal is received prior to the
last quarter of the fiscal year, the withdrawal becomes effective at the end of
the fiscal year in which the notice was given. Otherwise, the withdrawal becomes
effective at the end of the following fiscal year.

      Redemption of our variable capital stock is made at the lower of (i) 95%
of the average share price quoted on the Mexican Stock Exchange during the 30
business days prior to the date on which the withdrawal is to become effective
or if the number of the days that the shares were negotiated is less than 30
days we will consider only the days in when the shares were effectively
negotiated (ii) the book value per variable capital share as calculated from our
consolidated balance sheets (as approved at a general ordinary stockholders'
meeting) for the previous fiscal year in which the withdrawal became effective.
Any such amount to be paid by us would become due on the day following the
general ordinary stockholders' meeting referred to in clause (ii) above.

      Forfeiture of Shares. As required by Mexican law, our bylaws provide that
our current and future foreign stockholders are formally bound to the Mexican
Secretaria de Relaciones Exteriores ("Ministry of Foreign Relations") to
consider themselves as Mexican nationals with respect to our Units and Shares
that they may acquire or of which they may be owners, and with respect to the
property, rights, concessions, participations or interests that we may own or
rights and obligations that are based on contracts to which we are party with
the Mexican authorities, and not to invoke the protection of their government
under penalty, should they do so, of forfeiting to the Mexican State the
corporate participation that they may have acquired. In the opinion of Franck,
Galicia, Duclaud & Robles, S.C., our special Mexican counsel, under this
provision a non-Mexican stockholder (including a non-Mexican holder of ADSs) is
deemed to have agreed not to invoke the protection of his own government by
requesting such government to interpose a diplomatic claim against the Mexican
government with respect to the stockholder's rights as a stockholder, but is not
deemed to have waived any other rights it may have with respect to its
investment in us, including any rights under U.S. securities laws. If the
stockholder should invoke such governmental protection in violation of this
agreement, its Units could be forfeited to the Mexican State. Mexican law
requires that such a provision be included in the bylaws of all Mexican
corporations unless such bylaws prohibit ownership of capital stock by foreign
investors.

      Exclusive Jurisdiction. Our bylaws provide that legal actions relating to
any conflict between our stockholders and us, or among the stockholders in
connection with matters related to us, may be brought only in courts in Mexico
City. Therefore, our stockholders are restricted to the courts of Mexico City.

      Duration. The duration of our existence under our bylaws is indefinite.

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<PAGE>

      Repurchase of our own Shares. We may repurchase our Units on the Mexican
Stock Exchange at any time at the then-prevailing market price. Any repurchases
will be charged to the Stockholders Equity as long as these shares belong to the
same company, or to the Capital Stock in the event that we convert these shares
to treasury stock, and in this last case no resolution of the stockholders'
meeting is required. At each annual ordinary stockholders' meeting, the maximum
amount of resources that may be used to repurchase shares will be expressly
defined. The board of directors will name the persons responsible for the
operation of the repurchase process. The shares that belong to the Treasury
Stock or us can be resold among the public stockholders; in the latter case, no
resolution of a stockholders meeting is necessary for an increase in capital.
The economic and voting rights corresponding to such repurchased Units or Shares
may not be exercised during the period in which such Units or Shares are owned
by us, and such Units or Shares are not deemed to be outstanding for purposes of
calculating any quorum or vote at any stockholders' meeting during such period.
Any repurchase of our own Units or Shares is subject to the limitation that the
Series L Shares may not at any time represent more than 25% of our capital
stock.

      Repurchase in the Event of Delisting. Our shares are registered with the
National Registry for Securities, as required under the Securities Market Law
and regulations issued by the CNBV. If we wish to cancel our registration, or if
it is cancelled by the CNBV, the stockholders having the majority of the
ordinary shares or that may, on any basis, impose decisions at stockholders'
meetings, or appoint the majority of the board of directors of the Company at
that time, will be required to make a public offer to purchase all outstanding
shares prior to such cancellation. Under our bylaws, if after the public offer
is concluded there are still outstanding shares held by the general public, the
stockholders that control the Company will be required to create a trust for a
minimum period of six months, into which such controlling stockholders will be
required to contribute funds in an amount sufficient to purchase, at the same
price as the offer price, the number of outstanding shares held by the general
public.

      Non-Subscribed Shares. With prior authorization of the CNBV, we may issue
non-subscribed shares provided that such shares will be held by a depositary
institution and that there is compliance with the conditions of Article 81 of
the Ley del Mercado de Valores ("Mexican Securities Law"). In any extraordinary
stockholders' meeting at which this issuance of non-subscribed Shares is
approved, the preference rights established by Article 132 of the Mexican
Companies Law must be respected. With a quorum at the meeting, the approval of
the issuance will take effect, even with respect to stockholders that were not
present at the meeting, such that we will be free to issue these shares with no
prior publication. When a minority of stockholders representing at least 25% of
the voting capital stock, vote against the issuance of these shares, such
issuance can not be made. Any stockholder that votes against this issuance at
the stockholders meeting will have the right to request that we sell its shares
before issuing the new non-subscribed shares. In such event, we will have the
obligation to sell first the shares belonging to such stockholders, at the same
price that the non-subscribed shares are to be offered to the public.

      Stockholder Conflicts of Interest. Under Mexican law, any stockholder that
has a conflict of interest with respect to any transaction must abstain from
voting thereon at the relevant stockholders' meeting. A stockholder that votes
on a business transaction in which its interest conflicts with that of ours may
be liable for damages if the transaction would not have been approved without
such stockholder's vote.

      Board Member Conflicts of Interest. Under Mexican law, any member of the
board of directors who has a conflict of interest with us in any transaction
must disclose such fact to the other members of the board of directors and
abstain from voting. Any member of the board of directors who violates such
provision may be liable for damages caused to us. Additionally, members of the
board of directors and statutory auditors may not represent other stockholders
at any stockholders' meeting.

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<PAGE>

      Appraisal Rights. Whenever the stockholders approve a change of corporate
purpose, a change in our nationality or transformation from one type of
corporate form to another, any stockholder entitled to vote on such change or
transformation who has voted against it has the right to withdraw from us and
receive the amount calculated as specified under Mexican law attributable to its
Shares, provided such stockholder exercises its right to withdraw within 15 days
following the adjournment of the meeting at which the change or transformation
was approved. Under Mexican law, the amount that a withdrawing stockholder is
entitled to receive is equal to its proportionate interest in our capital stock
according to the most recent balance sheet that has been approved by an ordinary
general meeting of stockholders. Because the Series L Shares may not vote with
respect to a change of corporate purpose or change of nationality, appraisal
rights with respect to such changes are not available to holders of Series L
Shares.

      Actions Against Directors. Under Mexican law, an action for civil
liabilities against members of the board of directors may be initiated by
resolution of an ordinary stockholders' meeting. In the event the ordinary
stockholders' meeting decides to bring such an action, the persons against whom
such action is brought will immediately cease to be members of the board of
directors. Additionally, stockholders representing not less than 33.0% of our
outstanding Shares may directly take such action against members of the board of
directors, provided that (i) such stockholders have not voted against taking
such action at the relevant stockholders' meeting and (ii) the claim in question
covers damage alleged to have been caused to us and not merely to the individual
plaintiffs. Any recovery of damages with respect to such action will be for our
benefit and not for the stockholders bringing the action.

Audit Committee

      Under our bylaws the board of directors is required to create an audit
committee under the terms and conditions outlined below:

      1)    The audit committee will consist of members of the board. The
            President of the audit committee and a majority of the audit
            committee members must be independent, as independence is defined
            under the Mexican Securities Market Law. In addition, the audit
            committee must have auditors who attend every meeting and have the
            right to participate but not to vote.

      2)    The audit committee will have, among others, the following
            functions:

            a)    To prepare a report about its activities and present it to the
                  board of directors.

            b)    Provide its opinion regarding any transaction with related
                  parties, which is outside the scope of ordinary business.

            c)    Recommend independent consultants or auditors to provide their
                  opinion regarding any transactions with related parties that
                  are outside the scope of ordinary business, which the Company
                  or any of its subsidiaries seek to engage in.

      Transactions that depart from the ordinary course of business and which
would be entered into by and between subsidiaries of the Company and its
stockholders, with persons who form part of the management of the Company's
subsidiaries or with those with whom such persons maintain monetary ties or, if
applicable, have a family relationship of consanguinity or affinity up to the
second degree, a spouse or concubine; which represent the purchase or sale of
10% or more of assets; the granting of guaranties in an amount in excess of 30%
of assets, as well as transactions other than the foregoing which represent more
than 1% of the Company's assets, shall be submitted for the opinion of the
Company's audit committee and for approval by the Company's board of directors.

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Exchange Controls

      Ownership by foreigners of Mexican companies is regulated by Foreign
Investment Law and by the Foreign Investment Regulations. The Ministry of
Commerce and Industrial Development and the Foreign Investment Commission are
responsible for the administration of the Foreign Investment Law.

      The Foreign Investment Law reserves certain economic activities
exclusively for the Mexican state and certain other activities exclusively for
Mexican individuals or Mexican corporations and limits the participation of
foreign investors to certain percentages in regard to enterprises engaged in
activities specified therein. Foreign investors may own 100% of the capital
stock of Mexican companies or entities, except for companies (i) engaged in
reserved activities as referred to above or (ii) with assets exceeding an amount
to be established annually by the Foreign Investment Commission (which has been
set at Ps.411.3 million), in which case an approval from the Foreign Investment
Commission shall be necessary in order for foreign investment to exceed 49% of
the capital stock. Mexican and non-Mexican nationals will be entitled to hold
and to exercise the rights of a holder of the Units, the Series B Shares and the
Series L Shares. The Robinson Bours Stockholders have advised us that they
intend to maintain a control position directly in the form of B Units. Pursuant
to our bylaws, foreigners may only own Series B Shares up to 49% of such Series.

Taxation

      The following is a general summary of the principal U.S. federal tax
consequences of the acquisition, ownership and disposition of Units or ADSs to a
holder that is a citizen or resident of the United States or a U.S. domestic
corporation or a person that is otherwise subject to U.S. federal income tax on
a net income basis in respect of the Units or ADSs (a "U.S. Holder"). This
discussion also summarizes the principal Mexican federal tax consequences of the
acquisition, ownership and disposition of units or ADSs by a holder that is not
a Mexican Resident (as defined below). This discussion does not purport to be a
comprehensive description of all of the tax considerations that may be relevant
to a decision to purchase Units or ADSs. In particular, the summary deals only
with U.S. Holders that will hold Units or ADSs as capital assets and does not
address the tax treatment of U.S. Holders that own (or are deemed to own) 10% or
more of our voting shares or that may be subject to special tax rules, such as
banks, insurance companies, dealers in securities or currencies, persons that
will hold Units or ADSs as a position in a "straddle" for tax purposes and
persons that have a "functional currency" other than the U.S. dollar.

      The summary is based upon tax laws of the United States and Mexico as in
effect on the date hereof, which are subject to change, and such changes may
have retroactive effect. Prospective purchasers of Units or ADSs should consult
their own tax advisors as to the U.S., Mexican or other tax consequences of the
purchase, ownership and disposition of Units or ADSs, including, in particular,
the effect of any foreign, state or local tax laws.

      A Convention for the Avoidance of Double Taxation and the Prevention of
Fiscal Evasion with Respect to Taxes on Income, and a Protocol thereto, between
the United States and Mexico (the "Tax Treaty") took effect on January 1, 1994.
The Tax Treaty was amended by a second Protocol signed November 26, 2002, the
provisions of which took effect in part on September 1, 2003, and in part on
January 1, 2004. The United States and Mexico have also entered into an
agreement concerning the exchange of information with respect to tax matters.

      In general, for U.S. federal income tax purposes, holders of ADRs
evidencing ADSs will be treated as the beneficial owners of the Units
represented by those ADSs.

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Taxation of Dividends

      U.S. Tax Considerations. Cash dividends paid with respect to Units or
Units represented by ADSs to the extent paid out of our earnings and profits (as
determined under U.S. federal income tax principles) 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 Units, or the
Depositary, in the case of Units 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 (the "Code"). Dividends paid in pesos will be
included in the income of a U.S. Holder in a U.S. dollar amount calculated by
reference to the exchange rate in effect on the day they are received by the
U.S. Holder, in the case of Units, or the Depositary, in the case of Units
represented by ADSs (regardless of whether such pesos are in fact converted into
U.S. dollars on such date). If such dividends are converted into U.S. dollars on
the date of receipt, a U.S. holder generally should not be required to recognize
foreign currency gain or loss in respect of the dividends. U.S. Holders should
consult their own tax advisors regarding the treatment of foreign currency gain
or loss, if any, on any pesos received which are converted into U.S. dollars on
a date subsequent to receipt.

      Subject to certain exceptions for short-term and hedged positions, the
U.S. dollar amount of dividends received by an individual prior to January 1,
2009 with respect to the ADSs will be subject to taxation at a maximum rate of
15% if the dividends are "qualified dividends." Dividends paid on the ADSs will
be treated as qualified dividends if (i) the ADSs are readily tradable on an
established securities market in the United States and (ii) the Company was not,
in the year prior to the year in which the dividend was paid, and is not, in the
year in which the dividend is paid, a passive foreign investment company
("PFIC"), foreign personal holding company ("FPHC") or foreign investment
company ("FIC"). The ADSs are listed on the New York Stock Exchange, and will
qualify as readily tradable on an established securities market in the United
States so long as they are so listed. Based on the Company's audited financial
statements and relevant market and stockholder data, the Company believes that
it was not treated as a PFIC, FPHC or FIC for U.S. federal income tax purposes
with respect to its 2003 taxable year. In addition, based on the Company's
audited financial statements and its current expectations regarding the value
and nature of its assets, the sources and nature of its income, and relevant
market and stockholder data, the Company does not anticipate becoming a PFIC,
FPHC or FIC for its 2004 taxable year.

      Based on existing guidance, it is not entirely clear whether dividends
received with respect to the common shares will be treated as qualified
dividends, because the common shares are not themselves listed on a U.S.
exchange. In addition, the U.S. Treasury has announced its intention to
promulgate rules pursuant to which holders of ADSs or common stock and
intermediaries though whom such securities are held will be permitted to rely on
certifications from issuers to establish that dividends are treated as qualified
dividends. Because such procedures have not yet been issued, it is not clear
whether the Company will be able to comply with them. Holders of ADSs and common
shares should consult their own tax advisers regarding the availability of the
reduced dividend tax rate in the light of their own particular circumstances.

      Distributions to U.S. Holders of additional Units or preemptive rights
relating to Units with respect to their Units or ADSs that are made as part of a
pro rata distribution to all of our stockholders generally will not be subject
to U.S. federal income tax.

      A holder of Units or ADSs that is, with respect to the United States, a
foreign corporation or nonresident alien individual (a "Non-U.S. Holder")
generally will not be subject to U.S. federal income or withholding tax on
dividends received on such Units or such ADSs, unless such income is effectively
connected with the conduct by such holder of a trade or business in the United
States.

                                       69
<PAGE>

      Mexican Tax Considerations. Dividends, either in cash or in any other
form, paid with respect to the Shares constituting the Units or the ADSs will
not be subject to Mexican withholding tax.

Taxation of Capital Gains

      U.S. Tax Considerations. Gain or loss realized by a U.S. Holder on the
sale or other disposition of Units or ADSs generally will be subject to U.S.
federal income taxation as capital gain or loss in an amount equal to the
difference between such U.S. Holder's basis in the Units or ADSs and the amount
realized on the disposition. Gain or loss recognized by a U.S. Holder on the
sale or other disposition of Units or ADSs will generally be long-term gain or
loss if, at the time of disposition, the U.S. Holder has held the Units or ADSs
for more than one year.

      Long-term capital gain recognized by a U.S. holder that is an individual
is subject to a reduced rate of taxation. The deduction of a capital loss is
subject to limitations for U.S. federal income tax purposes.

      Gain realized by a U.S. Holder on a sale or other disposition of Units or
ADSs generally 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 the Units, a U.S. holder that does not receive significant
foreign source income from other sources may not be able to derive effective
U.S. foreign tax credit benefits in respect of these Mexican taxes. U.S. holders
should consult their own tax advisors regarding the application of the foreign
tax credit rules to their investment in, and disposition of, the Units.

      Deposits and withdrawals of Units 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.

      A Non-U.S. Holder of Units or ADSs will not be subject to U.S. federal
income or withholding tax on gain realized on the sale of Units or ADSs, unless
(i) such gain is effectively connected with the conduct by such 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, such 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.

      Mexican Tax Considerations. Gain on the sale or other disposition of ADSs
by holders who are not Mexican Residents (as defined below) will not be subject
to Mexican income tax. Deposits of Units in exchange for ADSs and withdrawals of
Units in exchange for ADSs will not give rise to Mexican income tax.

      Gain on the sale of Units by a holder who is not a Mexican Resident (as
defined below) will not be subject to Mexican tax if the transaction is carried
out through the Mexican Stock Exchange or other securities markets approved by
the Mexican Ministry of Finance, and provided certain requirements set forth by
the Mexican Income Tax Law are complied with. Sales or other dispositions of
Units made in other circumstances generally would be subject to Mexican tax,
except to the extent that a holder is eligible for benefits under an income tax
treaty to which Mexico is a party. Under the Tax Treaty, gain on the sale or
other disposition of Units by a U.S. resident (if eligible for benefits under
the Tax Treaty) who is a holder of less than 25% of our capital stock during the
12-month period preceding such sale or disposition will not be subject to
Mexican tax, unless (i) 50% or more of the fair market value of our assets
consist of "immovable property" (as defined in the Tax Treaty) situated in
Mexico, or (ii) such gains are attributable to a permanent establishment or
fixed base of such U.S. resident in Mexico.

                                       70
<PAGE>

      For a holder that is not a Mexican Resident and that does not meet the
requirements referred to above, gross income realized on the sale of Units will
be subject to a 5% Mexican withholding tax if the transaction is carried out
through the Mexican Stock Exchange. Alternatively, a holder that is not a
Mexican Resident can choose to be subject to a 20% withholding rate on the net
gain obtained, as calculated pursuant to Mexican Income Tax Law provisions.

      The Mexican tax rules governing the taxation of gains of holders who are
not Mexican Residents on dispositions of their shares or ADSs were amended
during 2002. Holders who are not Mexican Residents who disposed of their Units
or ADSs during 2003 should consult their own Mexican tax advisors on the Mexican
tax treatment of such dispositions.

      For purposes of Mexican taxation (Ley del Impuesto sobre la renta), an
individual is a resident of Mexico (a "Mexican Resident") if he or she has
established his or her home in Mexico, unless he or she has resided in another
country for more than 183 days, whether consecutive or not, during a calendar
year and can demonstrate that he or she has become a resident of that country
for tax purposes. A legal entity is a Mexican Resident if it has been
incorporated under Mexican law. A company is also considered to be a Mexican
Resident if its headquarters are located in Mexico. A Mexican citizen is
presumed to be a resident of Mexico for tax purposes unless such person can
demonstrate otherwise. If a person is deemed to have a permanent establishment
or fixed base in Mexico for tax purposes, such permanent establishment or fixed
base shall be required to pay taxes in Mexico on income attributable to such
permanent establishment or fixed base, in accordance with applicable tax laws.

U.S. Backup Withholding and Information Reporting

      A U.S. Holder of Units or ADSs may, under certain circumstances, be
subject to "backup withholding" with respect to certain payments to such U.S.
Holder, such as dividends paid by us or the proceeds of a sale of Units or ADSs,
unless such holder (i) is a corporation or comes within certain other 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 will be
creditable against the U.S. 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.

Other Mexican Taxes

      There are no Mexican inheritance, succession or similar taxes applicable
to the ownership, transfer or disposition of ADSs or Units by holders that are
not Mexican Residents; provided, however, that gratuitous transfers of Units may
in certain circumstances cause a Mexican federal tax to be imposed on the
recipient. There are no Mexican stamp, issue, registration or similar taxes or
duties payable by holders of ADSs or Units. Brokerage fees on securities
transactions carried out through the Mexican Stock Exchange are subject to a 15%
valued added tax.

Documents on Display

      The documents concerning us which are referred to in this document are
available at the our company headquarters, located at Ave. Tecnologico No.401,
Cd. Industrial, Celaya, Guanajuato, 38010, Mexico, for any inspection required.
Part of this information is available on our web page, at www.bachoco.com.mx.

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ITEM 11. Quantitative and Qualitative Disclosures About Market Risk

      In the normal course of our business, we hold or issue various financial
instruments that expose us to financial risks involving fluctuations in currency
exchange rates and interest rates. Also, we are exposed to commodity price risk
in connection with fluctuations in the prices for our feed ingredients.

Currency Fluctuation

      Our exposure to market risk associated with changes in foreign currency
exchange rates relates primarily our debt obligations and other expenses which
are denominated in U.S. dollars. Since we have significant liabilities
denominated in U.S. dollars, we are exposed to foreign exchange losses when the
peso declines in value against the U.S. dollar. The peso has been subject to
significant volatility in the past and may be subject to significant
fluctuations in the future.

      All of our sales are priced in Mexican pesos, and we have significant
expenses in U.S. dollars. A significant portion of our feed purchases is priced
in U.S. dollars, and other purchases may be influenced by U.S. dollar prices. A
devaluation of the peso will accordingly affect our earnings. In addition, the
Mexican peso exchange rate can directly and indirectly impact our results of
operations and financial position in several manners, including potential
economic recession in Mexico resulting from a devalued peso.

      Part of our debt is denominated in U.S. dollars. We experienced foreign
exchange gains of Ps.14.1 million in 2001, Ps.43.1 million in 2002 and Ps.69.0
million in 2003, due to the net position of our liabilities and assets that are
denominated in U.S. dollars.

      No assurance can be given as to the future valuation of the Mexican peso
and how further movements in the peso could affect our future earnings.

      We manage our exchange rate exposure primarily through management of our
financial structure, specifically by maintaining most of our debt through
long-term debt instruments. We engage in only limited hedging of our exposure to
foreign exchange risk, since hedging instruments have historically not been
economically feasible. We plan over a six-month period into the future and,
depending on the expected uncertainty for that period, decide if it is
economically advisable to purchase or sell any hedging instrument.

      We entered into put options of Mexican peso futures in the Chicago market
that expired in December 2002. As a result of the expiration and exercise of
such options, as of December 31, 2002, we had a short position on 250 Mexican
peso futures contracts that expired in June 2003 with a market value gain of
$190,000 and a long position on 250 Mexican peso futures contracts that expired
in January 2003 with a market value loss of $171,000. The positive difference
was credited to results of operations as part of the comprehensive cost of
financing.

      During the year, the Company has observed different strategies with
respect to derivatives, which involve call and put options in U.S. dollars.

      As of December 31, 2003, the Company has entered into exchange-rate
options that expire in 2004. As of the date of the financial statements, the
Company has a call option of $33.5 million for which the Company paid a premium
of Ps.16.9 million, as well as put options of $84.6 million for which the
Company received a premium of Ps.21.0 million. Considering the fair value of
these transactions, the closing in call-option position was Ps.17.1 million and
the put-option position was Ps.15.0 million, thus giving rise to a gain of
Ps.6.3 million, which was recorded in the caption net exchange gain. These

                                       72
<PAGE>

financial instruments were valued at fair value, since they do not qualify as
exchange hedges in conformity with Bulletin C-2.

      Based on our position in December 2003, we estimate that a hypothetical
10% devaluation of the Mexican peso against the U.S. dollar would result in
exchange losses of Ps.0.5 million and an increase of Ps.0.04 million in our
annual interest expenses.

Interest Rates

      Our earnings may also be affected by changes in interest rates due to the
impact those changes have on our variable-rate debt instruments. As of December
31, 2003, we had borrowings of approximately Ps.151.0 million pursuant to
variable rate debt instruments, representing approximately 1.2% of our total
assets.

      Based on our position on December 31, 2003, we estimate that a
hypothetical interest rate variation of 250 basis points on our U.S. dollar
denominated debt would result in increased interest expenses of approximately
Ps.0.011 million per annum. Any such increase would likely be offset by an
increase in interest income due to our significant cash and cash equivalent
position.

Feed Ingredients

      The largest single component of our cost of sales is the cost of
ingredients used to prepare feed, including principally, sorghum, soy meal,
corn, fish meal, meat meal and, for certain chicken products, marigold extract.
The price of these ingredients is subject to significant volatility resulting,
among other factors, from weather, the size of harvests, transportation and
storage costs, governmental agricultural policies and currency exchange rates.
In order to reduce the potential adverse effect of grain price fluctuations, we
vary the composition of our feed to take advantage of current market prices for
the various types of ingredients used.

      Previously, we took advantage of the lower cost of feed ingredients
available from Mexican sources and increased the portion of our total needs that
we source locally, from approximately 40% in 1995 to approximately 60% in 1999.
We believe that local feed, particularly sorghum, is of superior quality
compared to imported feed ingredients. In addition, the use of local feed allows
us to save on transportation costs and import duties. Our feed costs were
favorably affected by changes in the Mexican government's agricultural policy,
beginning in 1991, that eliminated price supports for domestic farmers and
reduced procedural restrictions on importing grains, and by the reduction in
tariffs with the implementation of NAFTA beginning in 1994.

      However, this trend reversed in 2000, when only 45.0% of feed ingredients
were purchased from local sources. The change occurred mainly because grain for
the acquired Grupo Campi complexes is supplied from international markets due to
a lack of domestic supply in southern Mexico. In general, costs of domestic feed
ingredients tend to follow the international markets, although cost adjustments
do not occur simultaneously. In 2001, we purchased approximately 40.6% of feed
ingredients from local sources, while in 2002 we purchased approximately 30.1%
of feed ingredients from local sources. In 2003, approximately 38.3% of our feed
ingredients were bought in the local market.

      Based on results for 2003, we estimate that a hypothetical variation of
10% in the cost of our main feed ingredients would have an impact of Ps.382.6
million, or 4.4%, on total cost of sales.

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ITEM 12. Description of Securities Other Than Equity Securities

      Not applicable.

PART II.

ITEM 13. Default, Dividend, Arrearages and Delinquencies

      None.

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

      None.

ITEM 15. Controls and Procedures

      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 as of December 31, 2003. 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 is recorded, processed, summarized and
reported as and when required.

      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 16. [Reserved]

ITEM 16A. Audit Committee Financial Expert

      Currently, no member of our audit committee possesses all the
characteristics included in the definition of an "audit committee financial
expert" within the meaning of this Item 16A. Pursuant to local law, we have a
statutory auditor who is responsible for reviewing financial matters and,
beginning in 2005, will be responsible for reviewing and analyzing all financial
data provided to our audit committee. We believe that our statutory auditor will
provide many of the same benefits intended to be provided by an audit committee
financial expert.

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, controller and
persons performing similar functions, as well as to other officers and
employees. Our code of ethics is available free of charge upon request through
our website www.bachoco.com.mx. If we amend the provisions of our code of ethics
that apply to our Chief

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<PAGE>

Executive Officer, Chief Financial Officer, controller and persons performing
similar functions, or if we grant any waiver of such provisions, we will
disclose such amendment or waiver on our website at the same address.

ITEM 16C. Principal Accountant Fees and Services

Audit and Non-Audit Fees

      The following table sets forth the fees billed to us by our independent
auditors, Mancera, S.C., a member practice of Ernst & Young Global independent
public accountants, during the fiscal years ended December 31, 2002 and 2003:

                                                    Year ended December 31,
                                                --------------------------------
                                                    2003               2002
                                                -------------      -------------
Audit fees...................................   Ps. 3,322,566      Ps. 2,559,603
Audit-related fees...........................              --                 --
Tax fees.....................................         657,167            559,908
Other fees...................................              --                 --
                                                -------------      -------------
Total fees...................................   Ps. 3,979,733      Ps. 3,119,511
                                                =============      =============

      Audit fees in the above table are the aggregate fees billed by Mancera,
S.C. in connection with the audit of our annual financial statements and
statutory and regulatory audits.

      Tax fees in the above table are fees billed by Mancera, S.C. for services
related to tax refund claims.

Audit Committee Approval Policies and Procedures

      Our audit committee has not established pre-approval policies and
procedures for the engagement of our independent auditors for services. Our
audit committee expressly approves on a case-by-case basis any engagement of our
independent auditors for audit and non-audit services provided to our
subsidiaries or to us.

Item 16D. Exemptions from the Listing Standards for Audit Committees.

      Not applicable.

Item 16E. Purchases of Equity Securities by the Issuer and Affiliated
          Purchasers.

      Not applicable.

PART III.

ITEM 17. Financial Statements

      Not applicable.

ITEM 18. Financial Statements

      See pages F-1 through F-41, incorporated herein by reference.

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<PAGE>

ITEM 19. Exhibits

      Documents filed as exhibits to this Form 20-F:

Exhibit
  No.                                 Description
-------                               -----------

1.1         Bylaws (estatutos sociales) of Industrias Bachoco, S.A. de C.V.
            (together with an English translation).

2.1         Form of Deposit Agreement, among Industrias Bachoco, S.A. de C.V.,
            the Depositary and holders from time to time of American Depositary
            Receipts issued thereunder, including the form of American
            Depositary Receipt (incorporated by reference on our registration
            statement on Form F-1 filed on August 22, 1997 (File No. 333-7472)).

2.2         Trust Agreement, dated April 1, 1995, among Banco Internacional,
            S.A., Institucion de Banca Multiple, Grupo Financiero Prime
            Internacional, as trustee, and the stockholders of the Company named
            therein, together with an English translation, (incorporated by
            reference on our registration statement on Form F-1 filed on August
            22, 1997 (File No. 333-7472)).

2.3         Trust Agreement, dated August 20, 1997, among Banco Internacional,
            S.A., Institucion de Banca Multiple, Grupo Financiero Bital, as
            trustee, and the stockholders of the Company named therein, together
            with an English translation, (incorporated by reference on our
            registration statement on Form F-1 filed on August 22, 1997 (File
            No. 333-7472)).

8.1         List of subsidiaries.

12.1        Certification of the Chief Financial Officer pursuant to Section 302
            of the Sarbanes-Oxley Act of 2002.

12.2        Certification of the Chief Executive Officer pursuant to Section 302
            of the Sarbanes-Oxley Act of 2002.

13.1        Certification pursuant to Section 906 of the Sarbanes-Oxley Act of
            2002.

                                       76
<PAGE>

                                    SIGNATURE

      Pursuant to the requirements of Section 12 of the Securities Exchanges Act
of 1934, the registrant certifies that it meets all 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.

                                             INDUSTRIAS BACHOCO, S.A. de C.V.

                                             By: /s/ DANIEL SALAZAR FERRER
                                                 -----------------------------
                                                 Daniel Salazar Ferrer
                                                 Chief Financial Officer

Date: June 29, 2004

                                       77
<PAGE>

Index of Exhibits

Documents filed as exhibits to this Annual Report:

Exhibit
  No.                                 Description
-------                               -----------

1.1         Bylaws (estatutos sociales) of Industrias Bachoco, S.A. de C.V.
            (together with an English translation).

2.1         Form of Deposit Agreement, among Industrias Bachoco, S.A. de C.V.,
            the Depositary and holders from time to time of American Depositary
            Receipts issued thereunder, including the form of American
            Depositary Receipt (incorporated by reference on our registration
            statement on Form F-1 filed on August 22, 1997 (File No. 333-7472)).

2.2         Trust Agreement, dated April 1, 1995, among Banco Internacional,
            S.A., Institucion de Banca Multiple, Grupo Financiero Prime
            Internacional, as trustee, and the stockholders of the Company named
            therein, together with an English translation, (incorporated by
            reference on our registration statement on Form F-1 filed on August
            22, 1997 (File No. 333-7472)).

2.3         Trust Agreement, dated August 20, 1997, among Banco Internacional,
            S.A., Institucion de Banca Multiple, Grupo Financiero Bital, as
            trustee, and the stockholders of the Company named therein, together
            with an English translation, (incorporated by reference on our
            registration statement on Form F-1 filed on August 22, 1997 (File
            No. 333-7472)).

8.1         List of subsidiaries.

12.1        Certification of the Chief Financial Officer pursuant to Section 302
            of the Sarbanes-Oxley Act of 2002.

12.2        Certification of the Chief Executive Officer pursuant to Section 302
            of the Sarbanes-Oxley Act of 2002.

13.1        Certification pursuant to Section 906 of the Sarbanes-Oxley Act of
            2002.

                                       78

<PAGE>

                        INDUSTRIAS BACHOCO, S.A. DE C.V.
                                AND SUBSIDIARIES

                        Consolidated Financial Statements

                                   Years ended
                        December 31, 2001, 2002 and 2003
                       With Report of Independent Auditors

                                      F-1
<PAGE>

                         Report of Independent Auditors

To the Stockholders of
Industrias Bachoco, S.A. de C.V.

We have  audited the  accompanying  consolidated  balance  sheets of  Industrias
Bachoco, S.A. de C.V. and subsidiaries as of December 31, 2002 and 2003, and the
related consolidated  statements of income,  changes in stockholders' equity and
changes in  financial  position  for each of the three years in the period ended
December 31, 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 accordance with the standards of the Public Company  Accounting
Oversight Board (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 and are prepared in conformity with
accounting principles generally accepted in Mexico. An audit includes examining,
on a  test  basis,  evidence  supporting  the  amounts  and  disclosures  in the
financial statements. An audit also includes assessing the accounting principles
used and  significant  estimates made by  management,  as well as evaluating the
overall financial statement  presentation.  We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly,  in all  material  respects,  the  consolidated  financial  position  of
Industrias  Bachoco,  S.A. de C.V.,  and  subsidiaries  at December 31, 2002 and
2003,  and the  consolidated  results  of their  operations,  their  changes  in
stockholders'  equity and changes in their  financial  position  for each of the
three years in the period ended December 31, 2003, in conformity with accounting
principles  generally accepted in Mexico,  which differ in certain respects from
those followed in the United States of America (see Note 17).

As  mentioned  in  Note 2 to  accompanying  consolidated  financial  statements,
effective  January 1, 2003, the Company adopted the new  requirements of Mexican
accounting Bulletin E-1, Agriculture,  issued by the Mexican Institute of Public
Accountants. The effects are described in Note 3.

                                              Mancera, S.C.
                                           A Member practice of
                                           Ernst & Young Global

                                       C.P.C. Felizardo Gastelum Felix

Mexico City, Mexico
March 19, 2004

                                      F-2
<PAGE>

                INDUSTRIAS BACHOCO, S.A. DE C.V. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS

          (Thousands of constant Mexican pesos as of December 31, 2003)

<TABLE>
<CAPTION>
                                                                                December 31,
                                                             -------------------------------------------------
                                                                                                (Thousands of
                                                                                                U.S. dollars)
                                                                                                   (Note 2)
                                                             -------------------------------------------------
                                                                   2002             2003            2003
                                                             -------------------------------------------------
<S>                                                          <C>              <C>                <C>
ASSETS

Current assets:
Cash and cash equivalents                                    Ps  1,763,435    Ps  1,569,204      $   139,583
                                                             -------------------------------------------------
Accounts receivable:
  Trade, net                                                       396,482          400,681           35,641
  Value added and other recoverable taxes                          174,893          224,096           19,934
                                                             -------------------------------------------------
Total accounts receivable                                          571,375          624,777           55,575
                                                             -------------------------------------------------
Inventories, net - Note 3                                        1,312,256        1,541,576          137,126
Biological current assets - Note 3                                 157,703          164,505           14,633
Prepaid expenses and other current assets                          160,662           71,841            6,389
                                                             -------------------------------------------------
Total current assets                                             3,965,431        3,971,903          353,306
                                                             -------------------------------------------------

Property, plant and equipment, net - Note 4                      7,414,512        7,804,858          694,259
Biological non-current assets - Note 3                             322,706          329,653           29,324
Other assets                                                        15,195           11,424            1,016
Intangible assets by labor obligations - Note 10                    15,170           12,366            1,100
Goodwill, net - Note 5                                             291,324          274,587           24,425
                                                             -------------------------------------------------
TOTAL ASSETS                                                 Ps 12,024,338    Ps 12,404,791      $ 1,103,430
                                                             =================================================

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
Notes payable to banks - Note 6                              Ps     25,994    Ps     31,450      $     2,797
Current portion of long-term debt - Note 6                          96,400           26,609            2,367
Accounts payable                                                   272,731          408,743           36,357
Related parties - Note 8                                            20,963            2,495              222
Income tax                                                          13,815           15,480            1,377
Other taxes payable and other accruals - Note 9                    120,673          145,815           12,971
                                                             -------------------------------------------------
Total current liabilities                                          550,576          630,592           56,091
                                                             -------------------------------------------------

Long-term liabilities:
Long-term debt - Note 6                                             76,214           92,861            8,260
Deferred income tax - Note 13                                    1,516,817        1,590,940          141,518
Labor obligations - Note 10                                         29,977           30,585            2,720
                                                             -------------------------------------------------
TOTAL LIABILITIES                                                2,173,584        2,344,978          208,589
                                                             -------------------------------------------------
COMMITMENTS AND CONTINGENCIES- Note 11

STOCKHOLDERS' EQUITY - Note 12
Majority stockholders' equity
Capital stock                                                    1,954,278        1,955,572          173,952
Paid-in capital                                                    555,335          604,280           53,752
Reserve for repurchase of company's own share                      173,364          168,032           14,947
Retained earnings                                                9,606,288       10,838,547          964,112
Net income for the year                                          1,537,302          535,197           47,607
Minimum seniority premium liability adjustment Note 10                (710)          (1,814)            (161)
Deficit from restatement of stockholders' equity                (2,812,110)      (2,875,630)        (255,794)
Cumulative effect of deferred income tax -Note 13               (1,205,730)      (1,205,730)        (107,253)
                                                             -------------------------------------------------
Total majority stockholders' equity                              9,808,017       10,018,454          891,162
                                                             -------------------------------------------------

Minority interest                                                   42,737           41,359            3,679
                                                             -------------------------------------------------
Total stockholders' equity                                       9,850,754       10,059,813          894,841
                                                             -------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS'
  EQUITY                                                     Ps 12,024,338    Ps 12,404,791      $ 1,103,430
                                                             =================================================
</TABLE>

See accompanying notes.

                                      F-3
<PAGE>

                INDUSTRIAS BACHOCO, S.A. DE C.V. AND SUBSIDIARIES

                        CONSOLIDATED STATEMENTS OF INCOME

          (Thousands of constant Mexican pesos as of December 31, 2003)

<TABLE>
<CAPTION>
                                                                    Years ended December 31,
                                              --------------------------------------------------------------------
                                                                                                       (Thousands
                                                                                                         of U.S.
                                                                                                         dollars)
                                                                                                         (Note 2)
                                              --------------------------------------------------------------------
                                                        2001              2002            2003             2003
                                              --------------------------------------------------------------------
<S>                                               <C>              <C>              <C>                <C>
Net revenues                                      Ps 10,607,932    Ps 10,769,730    Ps 10,751,218      $   956,344
Cost of sales                                        (7,764,845)      (7,988,990)      (8,746,039)        (777,979)
                                              --------------------------------------------------------------------
Gross profit                                          2,843,087        2,780,740        2,005,179          178,365
Selling, general and administrative expenses         (1,424,336)      (1,489,351)      (1,573,031)        (139,924)
                                              --------------------------------------------------------------------
Operating income                                      1,418,751        1,291,389          432,148           38,441

Comprehensive financing income:
  Interest income                                       152,022          112,322          154,787           13,769
  Interest expense                                      (74,253)         (32,627)         (24,737)          (2,200)
                                              --------------------------------------------------------------------
  Net                                                    77,769           79,695          130,050           11,569
  Foreign exchange gain, net                             14,090           43,116           68,995            6,137
  Gain (loss) on net monetary position                   29,583         (107,900)         (73,973)          (6,580)
                                              --------------------------------------------------------------------
                                                        121,442           14,911          125,072           11,126
                                              --------------------------------------------------------------------

Other (expense) income, net                              (6,865)          42,016           22,355            1,988
                                              --------------------------------------------------------------------

Income before income tax, asset tax, employee
profit sharing and cumulative effect of
accounting change                                     1,533,328        1,348,316          579,575           51,555

Income tax and asset tax - Note 13                     (343,833)         192,554         (105,914)          (9,421)
Employee profit sharing - Note 13                        (1,711)          (1,492)          (1,787)            (159)
                                              --------------------------------------------------------------------

Income before cumulative effect of
  accounting change                                   1,187,784        1,539,378          471,874           41,975

Cumulative effect of accounting
  change, net of taxes - Note 3                              --               --           67,585            6,011
                                              --------------------------------------------------------------------
NET INCOME                                        Ps  1,187,784    Ps  1,539,378    Ps    539,459      $    47,986
                                              ====================================================================

Majority interest                                 Ps  1,183,674    Ps  1,537,302    Ps    535,197      $    47,607
Minority interest                                         4,110            2,076            4,262              379
                                              --------------------------------------------------------------------
NET INCOME                                        Ps  1,187,784    Ps  1,539,378    Ps    539,459      $    47,986
                                              ====================================================================

Weighted average units outstanding
  (in thousands)                                        297,454          297,898          299,369          299,369
                                              --------------------------------------------------------------------

NET MAJORITY INCOME PER UNIT                      Ps       3.98    Ps       5.16    Ps       1.79      $       .16
                                              ====================================================================
</TABLE>

See accompanying notes.

                                      F-4
<PAGE>

                INDUSTRIAS BACHOCO, S.A. DE C.V. AND SUBSIDIARIES

           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

                  Years ended December 31, 2001, 2002 and 2003
          (Thousands of constant Mexican pesos as of December 31, 2003)

<TABLE>
<CAPTION>
                                         Number of                                     Reserve for
                                         units of                                       repurchase                          Net
                                       capital stock                       Paid-in     of company's      Retained        income for
                                        (thousands)   Capital stock        capital      own shares       Earnings         the year
                                      ----------------------------------------------------------------------------------------------
<S>                                        <C>         <C>               <C>            <C>           <C>              <C>
Balance at December 31, 2000               297,452     Ps 1,954,234      Ps 527,095     Ps 205,278    Ps  7,665,677    Ps 1,398,872

Transfer of prior year's net income             --               --              --             --        1,398,872      (1,398,872)
Repurchase of stock                         (1,846)          (2,189)             --        (29,162)              --              --
Sales of repurchased stock                   2,548            2,597              --         35,411              807              --
Cash dividends paid                             --               --              --             --         (353,583)             --
Comprehensive income, net of tax                --               --              --             --               --       1,183,674
                                      ---------------------------------------------------------------------------------------------
Balance at December 31, 2001               298,154        1,954,642         527,095        211,527        8,711,773       1,183,674

Transfer of prior year's net income             --               --              --             --        1,183,674      (1,183,674)
Repurchase of stock                         (2,534)          (1,339)             --        (38,163)            (368)             --
Sales of repurchased stock                   1,846              975          28,240             --               --              --
Cash dividends paid                             --               --              --             --         (288,791)             --
Comprehensive income, net of tax                --               --              --             --               --       1,537,302
                                      ---------------------------------------------------------------------------------------------
Balance at December 31, 2002               297,466        1,954,278         555,335        173,364        9,606,288       1,537,302

Transfer of prior year's net income             --               --              --             --        1,537,302      (1,537,302)
Repurchase of stock                           (300)            (150)             --         (5,332)              --              --
Sales of repurchased stock                   2,834            1,444          48,945             --               --              --
Cash dividends paid                             --               --              --             --         (305,043)             --
Comprehensive income, net of tax                --               --              --             --               --         535,197
                                      ---------------------------------------------------------------------------------------------
Balance at December 31, 2003
(Note 12)                                  300,000     Ps 1,955,572      Ps 604,280     Ps 168,032    Ps 10,838,547    Ps   535,197
                                      =============================================================================================
</TABLE>

See accompanying notes.

                                      F-5
<PAGE>

                INDUSTRIAS BACHOCO, S.A. DE C.V. AND SUBSIDIARIES

           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

                  Years ended December 31, 2001, 2002 and 2003
          (Thousands of constant Mexican pesos as of December 31, 2003)

<TABLE>
<CAPTION>
                                        Minimum
                                       seniority     Deficit from     Cumulative       Total
                                        premium     restatement of     effect in       Majority                         Total
                                       liability     stockholders'      deferred    stockholders'      Minority      stockholders'
                                       adjustment       equity        income tax       equity          interest         equity
                                     ----------------------------------------------------------------------------------------------
<S>                                   <C>          <C>             <C>             <C>               <C>            <C>
Balance at December 31, 2000                  --   Ps (2,557,178)  Ps (1,205,730)  Ps  7,988,248     Ps  43,097     Ps  8,031,345

Transfer of prior year's net income           --              --              --              --             --                --
Repurchase of stock                           --              --              --         (31,351)            --           (31,351)
Sales of repurchased stock                    --              --              --          38,815             --            38,815
Cash dividends paid                           --              --              --        (353,583)            --          (353,583)
Comprehensive income, net of tax            (689)       (188,264)             --         994,721            791           995,512
                                     --------------------------------------------------------------------------------------------
Balance at December 31, 2001                (689)     (2,745,442)     (1,205,730)      8,636,850         43,888         8,680,738

Transfer of prior year's net income           --              --              --              --             --                --
Repurchase of stock                           --              --              --         (39,870)            --           (39,870)
Sales of repurchased stock                    --              --              --          29,215             --            29,215
Cash dividends paid                           --              --              --        (288,791)            --          (288,791)
Comprehensive income, net of tax             (21)        (66,668)             --       1,470,613         (1,151)        1,469,462
                                     --------------------------------------------------------------------------------------------
Balance at December 31, 2002                (710)     (2,812,110)     (1,205,730)      9,808,017         42,737         9,850,754

Transfer of prior year's net income           --              --              --              --             --                --
Repurchase of stock                           --              --              --          (5,482)            --            (5,482)
Sales of repurchased stock                    --              --              --          50,389             --            50,389
Cash dividends paid                           --              --              --        (305,043)            --          (305,043)
Comprehensive income, net of tax          (1,104)        (63,520)             --         470,573         (1,378)          469,195
                                     --------------------------------------------------------------------------------------------
Balance at December 31, 2003
(Note 12)                             Ps  (1,814)  Ps (2,875,630)  Ps (1,205,730)  Ps 10,018,454     Ps  41,359     Ps 10,059,813
                                     ============================================================================================
</TABLE>

                                      F-6
<PAGE>

                INDUSTRIAS BACHOCO, S.A. DE C.V. AND SUBSIDIARIES

            CONSOLIDATED STATEMENTS OF CHANGES IN FINANCIAL POSITION

          (Thousands of constant Mexican pesos as of December 31, 2003)

<TABLE>
<CAPTION>
                                                                     Years ended December 31
                                                -----------------------------------------------------------------
                                                                                                       (Thousands
                                                                                                        of U.S.
                                                                                                        dollars)
                                                                                                        (Note 2)
                                                -----------------------------------------------------------------
                                                           2001            2002            2003            2003
                                                -----------------------------------------------------------------
<S>                                                  <C>             <C>             <C>              <C>
OPERATING ACTIVITIES:
Net income                                           Ps 1,187,784    Ps 1,539,378    Ps   539,459      $   47,986
Adjustments to reconcile net income to
  Resources provided by operating activities:
  Depreciation                                            308,945         329,609         365,260          32,491
  Deferred income tax                                     300,624        (244,361)         65,972           5,868
  Goodwill amortization                                    16,758          16,639          16,737           1,489
                                                -----------------------------------------------------------------
                                                        1,814,111       1,641,265         987,428          87,834

Changes in operating assets and liabilities:
  Accounts receivable                                    (117,005)         41,619         (53,402)         (4,750)
  Inventories and biological assets                      (442,619)       (106,251)       (304,079)        (27,050)
  Prepaid expenses and other current assets                60,402        (107,553)         88,821           7,901
  Accounts payable                                        110,603        (169,755)        136,012          12,099
  Related parties                                          (8,489)          3,739         (18,468)         (1,643)
  Taxes payable and other accruals                          7,440        (113,283)         26,807           2,384
   Labor obligations, net                                   9,733          (8,014)          2,308             205
                                                -----------------------------------------------------------------
RESOURCES PROVIDED BY OPERATING
  ACTIVITIES                                            1,434,176       1,181,767         865,427          76,980

FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt                       --              --          39,014           3,470
Proceeds from issuance of notes payable to banks          902,558          51,988          73,401           6,530
Repayment of long-term debt and notes payable          (1,403,224)       (169,772)       (152,507)        (13,566)
Constant pesos effect on notes payable to banks
  and long term-debt                                      (36,772)        (18,036)         (7,596)           (676)
Cash dividends paid                                      (353,583)       (288,791)       (305,043)        (27,134)
Sales (repurchases) of Company's own stock, net             7,464         (10,655)         44,907           3,995
                                                -----------------------------------------------------------------
RESOURCES USED IN FINANCING ACTIVITIES
                                                         (883,557)       (435,266)       (307,824)        (27,381)

INVESTING ACTIVITIES:
Acquisition of property, plant and equipment, net        (599,437)       (274,446)       (755,606)        (67,213)
Other assets                                              (36,460)          5,865           3,772             336
                                                -----------------------------------------------------------------
RESOURCES USED IN INVESTING
  ACTIVITIES                                             (635,897)       (268,581)       (751,834)        (66,877)
                                                -----------------------------------------------------------------

NET (DECREASE) INCREASE IN CASH
  AND CASH EQUIVALENTS                                    (85,278)        477,920        (194,231)        (17,278)
CASH AND CASH EQUIVALENTS AT
  BEGINNING OF YEAR                                     1,370,793       1,285,515       1,763,435         156,861
                                                -----------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT
  END OF YEAR                                        Ps 1,285,515    Ps 1,763,435    Ps 1,569,204      $  139,583
                                                =================================================================
</TABLE>

See accompanying notes.

                                      F-7
<PAGE>

                        INDUSTRIAS BACHOCO, S.A. DE C.V.
                                AND SUBSIDIARIES

                 Notes to the Consolidated Financial Statements

                  Years ended December 31, 2001, 2002 and 2003

                   (Thousands of constant Mexican pesos as of
                   December 31, 2003, except per unit amounts)

1. Organization and Business Activity

Industrias Bachoco, S.A. de C.V. and subsidiaries (collectively "Bachoco" or the
"Company")  are engaged in the  breeding,  processing  and  marketing of poultry
(chicken and eggs) swine and other products  (principally  feed).  Poultry sales
represent  90%,  90% and 89% of net sales for the year ended  December 31, 2001,
2002 and 2003. All sales  activities  are carried out in Mexico,  mainly through
retailers, wholesalers and self-service outlets.

2. Accounting Policies and Practices

The accompanying  consolidated  financial  statements are prepared in conformity
with accounting  principles  generally  accepted in Mexico ("Mexican GAAP"). The
accounting  policies and practices followed by Bachoco in the preparation of its
consolidated financial statements are the following:

a) Estimates in financial statements

The preparation of financial  statements in conformity  with generally  accepted
accounting  principles requires the use of estimates and assumptions that affect
the amounts reported in the financial  statements and accompanying notes. Actual
results could differ from those estimates.

b) Concentration of Risk

The Company  invests a portion of its surplus cash in cash deposits in financial
institutions with strong credit ratings and has established  guidelines  related
to diversification and maturities that the Company believes maintains safety and
liquidity.  The Company has not experienced any losses on its cash  equivalents.
The Company does not believe it has significant  concentrations  of credit risks
in  its  accounts   receivable,   because  the   Company's   customer   base  is
geographically diverse, thus spreading the credit risk.

c) Consolidation

The consolidated  financial  statements  include the accounts of the Company and
all of  its  majority-owned  subsidiaries.  The  ownership  interests  of  other
stockholders  in  such   subsidiaries   are  reflected  as  minority   interest.
Intercompany  balances,  investments  and  transactions  have been eliminated in
consolidation.

                                      F-8
<PAGE>

The  accompanying   consolidated  financial  statements  include  the  following
consolidated subsidiaries as of December 31, 2001, 2002 and 2003:

                                                    Percentage equity interest
                                                    --------------------------
                                                     2001      2002      2003
                                                    --------------------------
                                                       %         %         %
Acuicola Bachoco, S.A. de C.V.                        100       100       100
Aviser, S.A. de C.V.                                  100       100       100
Bachoco, S.A. de C.V. ("BSACV")                       100       100       100
Campi Alimentos, S.A. de C.V.                          --        --       100
Campi Comercial, S.A. de C.V                          100       100        --
Huevo y Derivados, S.A. de C.V.                        97        97        97
Operadora de Servicios de Personal, S.A. de C.V.      100       100       100
Pecuarius Laboratorios, S.A. de C.V.                   64        64        64
SECBA, S.A. de C.V.                                   100        --        --
SEPETEC, S. A. De C.V.                                100       100       100
Servicios de Personal Administrativo, S.A. de C.V.    100       100       100

In December 2003, Campi Comercial, S.A. de C.V. merged into BSACV (the surviving
company).  After the merger,  a spin-off from BSACV was approved to create a new
company known as Campi  Alimentos,  S.A. de C.V. The  aforementioned  operations
have no effect on the consolidated amounts.

In April 2002,  the  subsidiary  Secba,  S.A. de C.V. was sold for Ps 5,277 to a
related  party  generating a gain of Ps 751,  which is included in other income;
consequently,  this subsidiary's  figures were not consolidated from the date of
sale.

Secba, S.A. de C.V. continues to render administrative  services to the Company.
The effects of the  deconsolidation of this subsidiary are immaterial and do not
affect the comparability of the accompanying financial statements.

d) Recognition of the effects of inflation on financial information

The Company  recognizes  the effects of inflation on  financial  information  as
required by Mexican Accounting Principles Bulletin B-10, "Accounting Recognition
of the Effects of  Inflation on  Financial  Information",  issued by the Mexican
Institute of Public  Accountants (the "Mexican  Institute").  Consequently,  the
amounts shown in the  accompanying  financial  statements and in these notes are
expressed in thousands of constant  Mexican  pesos as of December 31, 2003.  The
December 31, 2003  restatement  factor  applied to the  financial  statements at
December 31, 2002 and 2001 was 1.0397 % and 1.057 %, which represent the rate of
inflation  from December 31, 2002 and December 31, 2001 up to December 31, 2003,
respectively,  based  on  the  Mexican  National  Consumer  Price  Index  (NCPI)
published by Banco de Mexico (the Central Bank).

Property,  plant and  equipment  were carried at  replacement  cost,  determined
annually by an  independent  appraiser,  through  1996.  The fifth  amendment to
Bulletin B-10 (as  modified),  which is applicable to financial  statements  for
periods beginning on or after January 1, 1997,  disallows the use of appraisals.
Based on such  amendment,  the Company  restated the appraisal value at December
31, 1996 and property,  plant and equipment  purchases since January 1, 1997 are
carried at cost adjusted by the NCPI.  Comprehensive  financing  cost related to
the  construction  in  progress,  is  capitalized  during  the  installation  or
preoperating period and amortized over the estimated useful lives of the assets.

                                      F-9
<PAGE>

Inventories  are valued at average  cost of  acquisition  or  production,  which
approximates estimated replacement cost, not in excess of net realizable value.

Other  nonmonetary  assets were restated using adjustment  factors obtained from
the NCPI.

Capital stock, paid-in capital, reserve for stock repurchase of Company's own
shares and retained earnings were restated using adjustment factors obtained
from the NCPI.

The deficit from  restatement  of  stockholders'  equity,  which consists of the
accumulated  monetary  position loss at the time the provisions of Bulletin B-10
were first  applied and the  subsequent  gain or loss from  holding  nonmonetary
assets,  principally  property,  plant and equipment and inventories.  A gain or
loss from holding  nonmonetary  assets  originates when the replacement  cost of
these  assets is higher or lower than the cost of these  assets  restated by the
NCPI.

The net  monetary  gain (loss)  represents  the impact of  inflation on monetary
assets and liabilities. The net monetary gain (loss) of each year is included in
the statements of income as a part of the comprehensive financing cost.

The comprehensive financing income includes interest earned and paid, as well as
the results of exchange differences and the gain or loss on monetary position.

Foreign  exchange  gains and losses on  transactions  denominated  in a currency
other than the Mexican peso result from  fluctuations in exchange rates from the
date transactions occur to the time of settlement or valuation of the receivable
or payable using the corresponding rate of exchange at the end of the period.

Bulletin  B-12,  "Statement  of Changes in Financial  Position",  specifies  the
appropriate presentation of the statement of changes in financial position based
on financial  statements  restated in constant pesos in accordance with Bulletin
B-10.  Bulletin  B-12  identifies  the sources  and  applications  of  resources
representing  differences  between  beginning  and  ending  financial  statement
balances in constant  pesos.  In  accordance  with this  bulletin,  monetary and
foreign  exchange  gains and  losses are not  treated  as  noncash  items in the
determination of resources provided by operations.

e) Cash equivalents

Cash equivalents are carried at cost plus accrued interest,  which  approximates
market value.  Cash  equivalents are highly liquid and have maturities of ninety
days or less when acquired.

f) Accounts receivable

The Company periodically and systematically  reviews the aging and collection of
its accounts  receivable.  As a result of this procedure,  the Company set up an
allowance  for  doubtful  accounts of Ps 32,962 and Ps 38,126 as of December 31,
2002 and 2003, respectively.

The recoverable  value added tax roll forward is related to purchases of certain
raw materials,  property, plant and equipment and services charged by suppliers,
which is subject to reimbursement.

                                      F-10
<PAGE>

g) Labor obligations

Under  Mexican  labor law,  employees  are  entitled to a  compensation  payment
("seniority  premium") upon death,  dismissal or at retirement  after 15 or more
years of service.  Bachoco  accounts  for this  obligation  in  accordance  with
Bulletin D-3 Labor Obligations  issued by the Mexican  Institute;  consequently,
seniority premium costs are recognized  periodically during the years of service
by employees, based on actuarial computations.

Also, in accordance  with Mexican labor law the Company is  contingently  liable
for  severance  payments to  employees  who are  unjustifiably  dismissed.  Such
payments  are charged to income in the year in which the  decision to dismiss an
employee is made.

Bachoco has  established a defined benefit pension plan which has been accounted
for in accordance with the requirements of Bulletin D-3. This Bulletin  defines,
among other things, the accounting treatment of pensions and seniority premiums.

h) Income taxes and employee profit sharing

The company  recognizes  deferred taxes on all temporary  differences in balance
sheet  accounts for  financial  and tax  reporting  purposes,  using the enacted
income tax rate at the balance  sheet date of the lastest  financial  statements
issued,  as required by of Mexican  accounting  Bulletin  D-4,  "Accounting  for
Income  Tax,  Asset Tax and  Employee  Profit  Sharing",  issued by the  Mexican
Institute,.

Due to the change in tax legislation  mentioned in Note 13, effective January 1,
2002,  the annual change in the deferred tax liability is to be presented in the
statement of operations,  except for the portion that corresponds to the holding
of non-monetary  assets,  which is to be presented under  stockholders'  equity.
Through  December 31, 2001,  the current year  deferred tax was presented in the
statement of  operations  and  represented  the amount  necessary  for the total
amount  of the  current  year tax and the  deferred  tax to be  21.21% of pretax
income,  except for the portion that  corresponds to the holding of non-monetary
assets,  which is presented in stockholders  equity.  The difference between the
deferred  tax  amount  taken to income and the net  change in the  deferred  tax
balance was  allocated to  stockholders'  equity,  and has been  included in the
deficit from holding non-monetary assets.

Current  year income tax is charged to results of  operations  and  represents a
liability due and payable in less than one year net of advances.

The Company  evaluates  periodically the possibility of recovering  deferred tax
assets and if necessary, adjusts the related reserve.

Bulletin  D-4  requires  that asset tax be included in the  deferred  income tax
balance, after consideration of its recovery.

In conformity  with this Bulletin,  deferred  employee  profit sharing should be
recognized only on temporary  differences  determined in the  reconciliation  of
current year net income for financial and tax reporting purposes, provided there
is no indication that the related liability or asset will not be realized in the
future.

Current year employee  profit  sharing is charged to results of  operations  and
represents a liability due and payable in a period of less than one year.

The  accumulated  deferred income tax effect  included in  stockholders'  equity
corresponds to the deferred  income tax determined at the time the  requirements
of Bulletin D-4 were first applied, which was Ps 1,205,730.

                                      F-11
<PAGE>

i) Revenue recognition

Revenue is recognized as earned, when all of the following criteria are met:

- Persuasive evidence of an arrangement exists
- Delivery has occurred
- The seller's price to the buyer is fixed or determinable
- Collectibility is reasonably assured

j) Net income per unit

Net income per unit has been  computed  based on majority  net income and on the
weighted average number of units outstanding.

k) Comprehensive income

Requirements of the new Mexican accounting Bulletin B-4, Reporting Comprehensive
Income,  went into  effect  on  January  1,  2001.  Bulletin  B-4  requires  the
disclosure of comprehensive  income in the statement of changes in shareholders'
equity. Comprehensive income represents current year net income plus those items
that are  reflected  directly in  shareholders'  equity  that do not  constitute
capital contributions, distributions or reductions.

Comprehensive  income includes  minority  interest,  minimum  seniority  premium
liability  adjustment,  the deficit from restatement of stockholders' equity and
its corresponding deferred taxes.

l) Financial instruments

Bulletin C-2  "Financial  Instruments",  sets general rules for the  assessment,
presentation,  and disclosure of financial information that issuers or investors
in financial  instruments  should  follow.  Among those rules are the conditions
that  have  to be met in  order  to be  able  to  offset  financial  assets  and
liabilities.  This Bulletin  establishes  that financial  instruments  should be
measured  at their  fair  value,  with the  exception  of those  that  have been
classified as being held until their  maturity and those that qualify as hedges.
The latter  should be valued at their cost of  acquisition.  The market value of
financial  instruments  has  been  included  in  cash  equivalents  due  to  its
immateriality (Ps 2,196 in 2001, Ps 202 in 2002 and Ps 6,288 in 2003).

m) Capitalized Software

The Company capitalizes  software development when the product under development
has reached  technological  feasibility or if there are alternative future uses.
Costs incurred  prior to the  establishment  of  technological  feasibility  are
charged to product development expense.

The Company  capitalizes  qualifying internal and external costs incurred during
the application development stage. Costs incurred during the preliminary project
stage and post implementation stage/operation stage are expensed as incurred.

n) Goodwill

Goodwill  represents  the  excess  of  the  purchase  price  paid  for  acquired
subsidiaries  and  affiliates  over the fair value of the net  assets  acquired.
Goodwill is amortized using the straight-line method over a twenty-year period.

                                      F-12
<PAGE>

o) New Accounting Pronouncements

Agriculture

Effective  January 1, 2003,  the  Company  adopted the  requirements  of Mexican
accounting   Bulletin  E-1,   Agriculture,   which  establishes  the  rules  for
recognizing,   valuing,   presenting  and  disclosing   biological   assets  and
agricultural  products;  it  also  establishes  the  treatment  to be  given  to
government subsidies on biological assets.

This bulletin establishes that biological assets and agricultural  products (the
latter at the time of their  harvesting)  are to be valued at their fair  value,
net of estimated  costs at point of sale.  Also, the Bulletin  establishes  that
whenever  the fair value  cannot be  determined  in a reliable,  verifiable  and
objective  manner,  the assets are to be valued at their production cost, net of
accumulated impairment.

The Company's  biological  assets  consists of poultry in its different  stages,
incubatable eggs and breeding pigs. Agricultural products are processed chicken,
commercial eggs and commercial pigs.

Biological  assets - poultry being  fattened (only birds less than 6.5 weeks old
are included),  incubatable eggs for fattening, pigs and laying hens, are valued
at production  cost since it is not possible to determine  their fair value in a
reliable, verifiable and objective manner.

Poultry being fattened, from age 6.5 weeks to the time birds are ready for sale,
is valued at fair value net of estimated costs at point of sale, considering the
sales price per kilogram of processed chicken at the date of valuation.

Laying hens are depreciated based on eggs produced using an estimated factor for
productive useful life.

Agricultural  products,  which are processed  chicken and  commercial  eggs, are
valued at their fair value net of costs at point of sale,  considering the sales
price per kilogram of  processed  chicken and  commercial  eggs at the time such
items are  considered  agricultural  products,  from this date, the valuation is
considered  to be cost up to the time of sale,  not in excess of net  realizable
value.

The  Company  is  exposed  to  financial  risks due to  changes  in the price of
chicken.  The Company does not expect any  significant  decrease in the price of
chicken in the future; therefore it has not contracted any financial instruments
(derivatives) or any other hedges against the risk of a decrease in the price of
chicken.

The Company frequently reviews the prices of chicken to determine the need for a
financial asset to address the risk.

The Company's  biological  assets are protected with insurance  policies against
natural disasters and for consequential damages, which their loss would cause.

                                      F-13
<PAGE>

With the adoption of the  requirements  of Bulletin E-1,  biological  assets and
agricultural   products  were  classified  as  current  and  non-current  assets
depending on their availability and the business cycle.

Through  December  31,  2002,  biological  assets and  agricultural  assets were
presented  in current  assets  under  inventories,  those  assets were valued at
average cost of acquisition or production. The effect of this new classification
is included in the balance sheet as of December 31, 2002.

Intangible assets.

Effective  January 1, 2003,  the  Company  adopted the  requirements  of the new
Mexican  accounting  Bulletin  C-8,  Intangible  Assets  issued  by the  Mexican
Institute,  which, among other things,  specifies that project development costs
are to be capitalized if they meet certain established requirements with respect
to their recognition as assets.  Pre-operating  costs are to be recognized as an
expense of the period and intangible assets with indefinite useful lives are not
to be amortized,  but instead  evaluated  annually for  impairment.  Unamortized
balances of pre-operating expenses capitalized in terms of the previous Bulletin
C-8 are to be amortized as specified in such bulletin. The adoption of these new
rules  did  not  and  will  not  have  any  effect  on the  Company's  financial
statements.

Liabilities, provisions, contingent assets and liabilities and commitments

Effective  January 1, 2003, the Company also adopted the requirements of the new
Mexican accounting Bulletin C-9, Liabilities,  Provisions, Contingent Assets and
Liabilities  and  Commitments,  issued by the  Mexican  Institute  which is more
precise in defining provisions,  accrued liabilities and contingent liabilities,
and it contains new  requirements  with respect to the recording of  provisions,
the use of the present  value and the early  retirement  of debt  securities  or
their replacement by a new issues. Bulletin C-9 also specifies the rules for the
valuation,  presentation  and  disclosure of  liabilities  and  provisions.  The
adoption  of these  new  rules  did not and will  not  have  any  effect  on the
Company's financial statements

Segments

Requirements  of Bulletin  B-5,  Segments,  issued by the Mexican  Institute  of
Public  Accountants,  went into effect in April 2003. This bulletin  establishes
the rules for disclosing financial information by segment.  Bulletin B-5 cancels
the  supplementary  requirements of  International  Accounting  Standard No. 14,
which applied  through  December 31, 2002. In the case of the Company,  Bulletin
B-5 and the International Accounting Standard are the same.

Financial  information by segment is prepared based on a management's  approach,
in  conformity  with  Bulletin  B-5,  considering  a segment to be an  operating
component  that is subject to risks and benefits that are  different  from other
business segments.

The  financial  information  by activity is disclosed in Note 14. The  financial
information  related to clients is not  disclosed,  as such  information  is not
available.

                                      F-14
<PAGE>

Accounting for the impairment or disposal of long-lived assets

In March 2003, the Mexican  Institute  issued Bulletin C-15,  Accounting for the
Impairment or Disposal of Long-Lived  Assets, the effective date of which is for
fiscal years  beginning on or after  January 1, 2004.  Bulletin C-15 defines the
rules for the computation and recognition of asset  impairment  losses and their
reversal,  as well as for the  presentation  and disclosure of both assets whose
values have been impaired and of discontinued operations.  The Company, does not
believe that the impact of adoption of this new Bulletin in 2004,  will have any
impact on the Company's financial position or results of operations.

Financial instruments

In April 2003, the Mexican Institute of Public Accountants issued Bulletin C-12,
Accounting  for  Certain  Financial  Instruments  with  Characteristics  of both
Liabilities  and Equity,  the  objective of which is to specify the  differences
between  liabilities  and equity.  Bulletin C-12 also  establishes the rules for
classifying and valuing the initial recognition of the components of liabilities
and equity of combined  instruments,  as well as the rules for  disclosing  such
financial instruments.  The observance of Bulletin C-12 is compulsory for fiscal
years  beginning on or after  January 1, 2004,  although  earlier  observance is
recommended.  Company  management  has  concluded  that the adoption of this new
accounting  pronouncement  will not have any effect on the  Company's  financial
position or on its results of operations, since the Company has not entered into
any agreements involving financial instruments.

p) Convenience translation

United States dollar amounts as of December 31, 2003,  shown in the accompanying
consolidated financial statements, have been included solely for the convenience
of the reader and are translated from Mexican pesos to US dollars as a matter of
arithmetic  computation  only,  at an  exchange  rate of Ps  11.242  to one U.S.
dollar,  which was the  exchange  rate at December 31,  2003.  Such  translation
should not be construed as a representation  that the Mexican peso amounts could
have been or could be converted into U.S. dollars at this or any other rate.

q) Reclassifications

Some  amounts  shown  in the  2001  and  2002  financial  statements  have  been
reclassified for uniformity of presentation with 2003.

3. Inventories and biological assets

Inventories consist of the following:

                                                    2002            2003
                                           ---------------------------------
  Raw materials and byproducts               Ps   654,617    Ps   657,096
  Medicine, materials and spare parts             180,724         227,030
  Finished feed                                    29,823          33,810
                                           ---------------------------------
                                                  865,164         917,936
                                           ---------------------------------
Agricultural products
  Live chicken                                    265,546         401,424
  Processed chicken                               159,112         202,117
  Commercial egg                                   22,434          20,099
                                           ---------------------------------
                                                  447,092         623,640
                                           ---------------------------------
Total                                        Ps 1,312,256    Ps 1,541,576
                                           ==================================

                                      F-15
<PAGE>

Biological assets at December 31 2002 and 2003 consist of the following:

Current biological assets                              2002             2003
                                             --------------------------------
   Breeder chicken                               Ps   91,157      Ps   97,575
   Breeder Pigs                                       18,857           17,367
   Incubatable eggs for fattening                     47,689           49,563
                                             --------------------------------
Total current biological assets                      157,703          164,505
                                             --------------------------------

Non-current biological assets
   Laying and breeder hens                            49,865           35,523
   Incubatable eggs for laying hens                    1,635            1,398
   Pigs                                               22,924           25,048
   Laying hens                                       396,975          416,518
   Allowance for productivity declines              (148,693)        (148,834)
                                             --------------------------------
Total non-current biological assets                  322,706          329,653
                                             --------------------------------
Total inventories and biological assets          $ 1,792,665      $ 2,035,734
                                             ================================

The  cumulative  effect of the  adoption of Mexican  accounting  Bulletin E-1 at
January 1, 2003 resulted in an increase of  biological  assets for Ps 80,458 (Ps
67,585 net of taxes),  which is presented in the income  statement as cumulative
effect of accounting change.

The  increase  in the  historical  cost of  biological  assets and  agricultural
products to bring them to their fair value at December  31, 2003  aggregated  Ps
58,925.  The difference  between fair values of beginning and ending inventories
of Ps 21,533 was recognized in the net revenues caption.

Had  Bulletin  E-1  been  in  force  before   January  1,  2001,  the  unaudited
presentation would be as follows:

<TABLE>
<CAPTION>
                                                      2001             2002             2003
                                              ----------------------------------------------------
<S>                                                <C>              <C>              <C>
Net revenues as reported                        Ps 10,607,932    Ps 10,769,730    Ps 10,751,218
Effect of valuation at fair value
   of biological assets and agricultural
   products                                           (11,158)         (11,921)              --
                                              ----------------------------------------------------
Net revenues pro forma                          Ps 10,596,774    Ps 10,757,809    Ps 10,751,218
                                              ====================================================

Net income as presented                         Ps  1,187,784    Ps  1,539,378    Ps    539,459
Effect of valuation at fair value
   of biological assets and agricultural
   products net of taxes                               (9,373)         (11,243)              --
Minority interest                                      (4,110)          (2,076)              --
                                              ----------------------------------------------------
Net income pro forma                            Ps  1,174,301    Ps  1,526,059    Ps    539,459
                                              ====================================================

Net income per unit as report                            3.98             5.16             1.79
Net income per unit pro forma                            3.95             5.13             1.79
</TABLE>

The cumulative effect of adoption as December 31, 2000, was Ps 57,379.

                                      F-16
<PAGE>

4. Property, Plant and Equipment

Property, plant and equipment consists of the following as of December 31:

                                    Useful
                                     lives            2002             2003
                                   ---------------------------------------------
Land                                     --     Ps   638,333     Ps   654,322
Buildings, farm structures and       9-29
  Equipment                           years        9,426,103       10,004,330
Office, furniture and equipment           2          195,796          202,056
Transportation equipment                  8          990,600        1,037,352
                                              ----------------------------------
                                                  11,250,832       11,898,560
Accumulated depreciation                          (4,163,497)      (4,364,400)
                                              ----------------------------------
Net                                                7,087,335        7,534,160
Construction in progress                             327,177          270,698
                                              ----------------------------------
Total                                           Ps 7,414,512     Ps 7,804,858
                                              ==================================

As described in Note 2, the Company capitalizes  comprehensive financing cost on
assets under  construction  during the  construction  period.  In 2001, 2002 and
2003, there was no capitalization of net financing cost.

Depreciation  expense for the years ended December 31, 2001,  2002 and 2003, was
Ps 308,945, Ps 329,609 and Ps 365,260, respectively.

5. Goodwill

Goodwill  was  generated in 1999,  as a result of acquiring  the shares of Grupo
Campi,  S.A.  de C.V.,  for the amount of Ps 341,561.  At December  31, 2002 and
2003, accumulated amortization aggregates Ps 50,237 and Ps 66,974, respectively.

Amortization  expense for the years ended December 31, 2001,  2002 and 2003, was
Ps 16,758, Ps 16,639 and Ps 16,737, respectively.

6. Notes Payable to Banks and Long-term Debt

Notes  payable to banks and long-term  debt, as of December 31,  consists of the
following:

                                                      2002        2003
                                                ----------------------------
Notes payable to banks unsecured:
Denominated in Mexican pesos, interest
  rate  2002: CETES FIRA rate
  less 3.5 points; 2003: CETES FIRA rate
  less 3.5 points                                   Ps 25,994   Ps 31,450

                                      F-17
<PAGE>

The weighted  average  interest rate on short-term notes payable at December 31,
2002 and 2003 was 4.02% and 2.50%, respectively.

                                                           2002         2003
                                                    ----------------------------
Long-term debt to banks:
Secured by equipment:
    Denominated in Mexican pesos,
    repayable in monthly instalments:
    Through 2010, at CETES rate plus 2 points          Ps 68,208    Ps 60,900

    Maturing in 2005, at interbank equilibrium
    (TIIE) rate plus 4 points or CETES rate plus 2
    points                                                12,828        8,226

    Maturing in 2007,hold rate of 10.45%                      --       45,833

Unsecured:
    Denominated in US dollar
    Maturing in 2003
    TIIE rate plus .5 points                              54,036           --
    LIBOR rate plus 20%                                   30,678           --
    LIBOR rate plus 35%                                    2,524           --

    Maturing in 2004
    LIBOR rate plus 20%                                    3,951        4,107

    Maturing in 2005
    LIBOR rate plus 20%                                      389          404
                                                    ----------------------------
Total                                                    172,614      119,470
Less current portion                                     (96,400)     (26,609)
                                                    ----------------------------
Total long-term debt                                   Ps 76,214    Ps 92,861
                                                    ============================

Weighted  average interest rates on long-term debt at December 31, 2002 and 2003
were approximately 5.62% and 8.11%, respectively.  The weighted average interest
rate on the  Company's  total debt at  December  31, 2002 and 2003 was 5.41% and
6.94%, respectively.

Maturities of long-term debt as of December 31, 2003 are as follows:

                           Year                   Amount
                   -----------------------------------------
                   2005                       Ps    24,215
                   2006                             20,694
                   2007                             17,552
                   2008                              9,900
                   2009                             10,000
                   2010 and thereafter              10,500
                                              --------------
                                              Ps    92,861
                                              ==============

                                      F-18
<PAGE>

At December 31, 2002 and 2003,  unused lines of credit  totaled Ps 2,123,995 and
Ps 1,204,262 respectively. In 2002 and 2003, the Company did not pay any fee for
unused lines of credit.

The book  value of  assets  collateralizing  long-term  debt was Ps  486,777  at
December 31, 2002 and Ps 239,661 at December 31, 2003.

7. Financial instruments

In order to finance  imports of raw materials,  the Company entered into two put
options for the  acquisition  and sale of Mexican  pesos  futures in the Chicago
market that matured in December  2002. At the date of maturity both options were
exercised  and as a result,  at  December  31,  2002,  the  Company  had a short
position on 250 Mexican pesos futures  contracts that expired in June 2003, with
a market value gain of $ 190,  thousands and a long position on 250 Mexican peso
futures  contracts  that  expired in January  2003 with a market value loss of $
171,  thousands.  The net  gain of $ 18,  thousands  (Ps 202)  was  credited  to
exchange gain in the income  statement.  These instruments were valued at market
because they did not quality for hedge accounting under Bulletin C-2.

During the year, the Company has observed  different  strategies with respect to
derivatives, which involve call and put options in US dollars.

At December 31, 2003, the Company has entered into exchange-rate  options, which
expire during 2004. At the date of the financial  statements,  the Company has a
call option of $ 33,500  (thousand),  for which the Company paid a premium of Ps
16,884,  as well as put  options of $ 84,646  (thousand),  for which the Company
received  a  premium  of  Ps  21,020.   Considering  the  fair  value  of  these
transactions,  the closing in  call-option  position  was Ps 17,149 and the put-
option position was Ps 14,997, thus giving rise to a gain of Ps 6,288, which was
recorded in the caption net exchange  gain.  These  financial  instruments  were
valued at fair value, since they do not qualify as exchange hedges in conformity
with Bulletin C-2.

8. Related Parties

a) A summary of related party accounts payable as of December 31, is as follows:

                                       Relation            2002          2003
                                    --------------------------------------------

Llantas y Accesorios, S.A. de C.V.     Affiliate       Ps   1,502
Maquinaria Agricola, S.A. de C.V.      Afiliate             1,148
Qualyplast, S.A. de C.V.               Afiliate               113
Vimifos, S.A. de C.V.                  Afiliate             7,649     Ps 2,436
Autos y Accesorios, S.A. de C.V.       Afiliate             1,207           59
Secba, S.A. de C.V.                    Afiliate             8,465           --
Others                                                        879           --
                                                       -------------------------
                                                       Ps  20,963     Ps 2,495
                                                       =========================

All of these companies are considered as related parties,  as the Company's main
shareholders  are also directly or indirectly,  shareholders of these companies.
All transactions are of a business nature.

                                      F-19
<PAGE>

b) For the years ended  December  31, 2001,  2002 and 2003,  the Company had the
following transactions with related parties:

<TABLE>
<CAPTION>
                                                     2001            2002           2003
                                                ---------------------------------------------
<S>                                               <C>            <C>            <C>
Airplane leasing expenses                         Ps   2,871     Ps   3,519     Ps   4,540
Purchases of vehicles, tires and spare parts          34,305         49,964         47,331
Purchases of feed, raw materials and
  packing supplies                                   147,734        101,804        153,158
Administrative services                                   --        318,658        333,542
</TABLE>

c) BSACV has entered into a contract for an undefined period of time with Secba,
S.A. de C.V., in which the latter  renders  administrative  services,  including
management and operating services. The amount of the consideration is determined
in  accordance  with the  expenses  incurred  by  Secba,  S.A.  de C.V.  for the
rendering of the service.

9. Other taxes payable and other accruals

a) An analysis  of other  taxes  payable  and other  accruals  presented  in the
financial statements is as follows:

                                       2002          2003
                               -------------------------------

Expenses payable                  Ps  78,552    Ps  98,124
Interest payable                       1,856           225
Tax payable                               --         2,194
Salaries payable                       6,845         8,403
Rights payable                        12,780        13,678
Social Securities                     16,043        16,593
Employee profit sharing                2,076         2,333
Other accounts payable                 2,521         4,265
                               -------------------------------
Total                             Ps 120,673    Ps 145,815
                               ===============================

b) Other  accounts  payable at December 31,  2003,  include  expense  provisions
analysed as follows:

<TABLE>
<CAPTION>
                                     Balances at   Increases                    Balances at
                                    December 31,   during the                   December 31,
                                        2002          year        Payments          2003
                                    ----------------------------------------------------------
<S>                                 <C>             <C>              <C>               <C>
Office expenses (light and
power, water, telephone)            Ps  78,552   Ps   456,849   Ps  438,973     Ps   96,428
Fees                                        --         27,771        26,075           1,696
                                    ----------------------------------------------------------
                                    Ps  78,552   Ps  484,620    Ps   465,048    Ps   98,124
                                    ==========================================================
</TABLE>

                                      F-20
<PAGE>

10. Labor Obligations

Bachoco  implemented a defined benefit  retirement  pension plan that covers all
non-unionized  employees.  Participating employees are required to contribute 1%
of their salary.  Such  percentage may be increased based on years of service up
to a maximum of 5%. The contributions to the plan are considered  deductible for
income tax purposes.  Bachoco recognizes these labor obligations on the basis of
independent actuarial computations,  using the projected unit-credit method, and
the provisions of Bulletin D-3.

Seniority  premiums  accruing  to  employees  are  recognized  on the  basis  of
independent  actuarial  computations,  following the  methodology  prescribed in
Bulletin D-3.

The  analysis  of the net period  cost,  the funded  status and the  assumptions
considered in the pension plan and the seniority premium  obligation at December
31, 2002 and 2003 is as follows:

<TABLE>
<CAPTION>
                                                                       Pension plan
                                                             2001          2002          2003
                                                       -------------------------------------------
<S>                                                     <C>            <C>           <C>
Net period cost:
Labor cost                                              Ps     7,777   Ps   3,404    Ps    3,408
Return on plan assets                                         (2,446)        (916)        (1,215)
Amortization of past service costs                             2,570          529            425
Interest cost                                                  4,618        1,264          1,343
                                                       -------------------------------------------
Net period cost                                         Ps    12,519   Ps   4,281    Ps    3,961
                                                       ===========================================

Labor obligations:
Accumulated benefit obligation                                         Ps  20,570    Ps   21,570
                                                                     -----------------------------
Projected benefit obligation                                           Ps  24,748    Ps   24,939
Plan assets                                                               (15,420)       (21,282)
Unrecognized prior service cost                                            (4,071)        (3,844)
Actuarial gains                                                             7,869         12,999
Unrecognized changes or improvements                                       (8,845)        (8,831)
                                                                     -----------------------------
Net projected benefit obligation                                            4,281          3,981
                                                                     -----------------------------

                                                                     -----------------------------
Unfunded accumulated benefit obligation                                Ps   5,151    Ps      698
                                                                     -----------------------------

Unfunded accumulated benefit obligation less than
net projected seniority premium in same
subsidiaries                                                                   --          3,352
                                                                     -----------------------------

Additional liability                                                   Ps     870    Ps       69
                                                                     -----------------------------
Intangible assets                                                      Ps     870    Ps       69
                                                                     -----------------------------
</TABLE>

                                      F-21
<PAGE>

Change in benefit obligation:
Benefit obligation at beginning of year                Ps 102,893    Ps  24,748
Deconsolidation of the subsidiary Secba                   (87,519)           --
                                                    ---------------------------
                                                           15,374        24,748
Service cost                                                3,404         3,408
Interest cost                                               1,264         1,343
Actuarial differences                                       4,856        (3,924)
Benefits paid                                                (150)         (636)
                                                    ---------------------------
Projected benefit obligation at end of year            $   24,748    $   24,939
                                                    ===========================

Changes in plan assets:
Fair value of plan assets at beginning
  of the year                                          Ps  42,079    Ps  15,420
Deconsolidation of the subsidiary Secba                   (39,940)           --
                                                    ---------------------------
                                                            2,139        15,420
Actual return on plan assets                                  916         1,215
Employer contribution                                       3,658         3,517
Actuarial differences                                       8,857         1,766
Benefits paid                                                (150)         (636)
                                                    ---------------------------
Fair value of plan assets at end of year               Ps  15,420    Ps  21,282
                                                    ===========================

                                                    Seniority premium
                                              2001         2002         2003
                                           ------------------------------------
Net period cost:
Labor cost                                 Ps  2,132   Ps   2,343    Ps   2,384
Amortization of past service costs             1,269        1,610         2,014
Interest cost                                  1,283        1,349         1,420
                                           ------------------------------------
Net period cost                            Ps  4,684   Ps   5,302    Ps   5,818
                                           ====================================

Labor obligations:
Accumulated benefit obligation                         Ps  24,826    Ps  26,535
                                                    ---------------------------

Projected benefit obligation                           Ps  27,553    Ps  30,567
Unrecognized prior service cost                            (7,122)       (6,677)
Actuarial losses                                           (3,316)       (5,628)
Unrecognized improvements to the plan                      (7,298)       (5,837)
                                                    ---------------------------
Net projected seniority premium                             9,817        12,425
                                                    ---------------------------

Unfunded accumulated benefit obligation                Ps  24,826    Ps  26,535
                                                    ---------------------------

Additional liability                                   Ps  15,010    Ps  14,110
Intangible assets                                      Ps  14,300    Ps  12,296
                                                    ---------------------------
Minimum seniority premium liability
  Adjustment                                           Ps    (710)   Ps  (1,814)
                                                    ===========================

                                      F-22
<PAGE>

Change in benefit obligation:
Benefit obligation at beginning of year                Ps 28,836     Ps 27,554
Deconsolidation of the subsidiary Secba                   (2,855)           --
                                                    ---------------------------
                                                          25,981        27,554
Service cost                                               2,343         2,384
Interest cost                                              1,349         1,420
Actuarial differences                                      1,377         2,556
Benefits paid                                             (3,496)       (3,347)
                                                    ---------------------------
Projected benefit obligation at end of year            Ps 27,554     Ps 30,567
                                                    ===========================

We use a December 31, 2001 2002 and 2003  measurement  date for pension plan and
seniority premium.

The  prior  service  cost,  the past  service  costs and  actuarial  differences
assumptions  will be  amortized  over a period  ranging from 21 to 25 years (the
average remaining working life of employees).

The asset allocation for our plan pension plan at the end of 2001, 2002 and 2003
and the target allocation for 2004 by asset category are as follows:

                                                                        Target
                                     Percentage of plan at year end   allocation
                                        2001      2002      2003         2004
                                     -------------------------------------------

Fixed-income securities                  83%       85%       76%          80%
Fixed-variable income securities         17%       15%       24%          20%

Our target asset allocations  reflect our investment  strategy of maximizing the
rate of  return  on plan  assets  and the  resulting  funded  status,  within an
appropiate level of risk.

The rates  considered  in the  actuarial  study  were in 2001,  2002 and 2003 as
follows:

                                           2001          2002           2003
                                      ------------------------------------------
Labor obligations discount                5.50%          5.50%         5.25%
Future salary increases                   2.50%          2.50%         1.50%
Return on assets                          6.50%          6.50%         6.00%

Information  about the  expected  cash flow for the  pension  benefit  plant and
seniority premium follows:

                                                              Seniority
                                            Pension plan       preminum
                                            ------------------------------
Expected employer contributions:
         2004                                Ps    3,276              --
                                            ------------------------------

Expected benefit payment:
         2004                                Ps      612     Ps    3,789
         2005                                        711           4,032
         2006                                        829           4,167
         2007                                        962           4,222
         2008                                      1,112           4,200
         2009-2013                                 8,394          21,158
                                            ------------------------------
         Total                               Ps   12,620     Ps   41,568
                                            ==============================

                                      F-23
<PAGE>

The above table reflects the total benefits expected to be paid from the plan.

11.  Contingencies and Commitments

a) Bachoco has entered into  operating  leases for certain  offices,  production
sites,  and in 2000 for automotive and computer  equipment.  Most leases contain
renewal options. Rental expense was as follows:

                                             Year ended
                                             December 31
                                             -----------
                   2001                       Ps 51,850
                   2002                          31,800
                   2003                          22,975

b) Future minimum annual rental  payments under existing  operating  leases with
initial terms in excess of one year as of December 31, 2003, are as follow:

                                             Year ended
                                             December 31
                                             -----------
                   2004                       Ps 16,351
                   2005                          14,675
                   2006                          11,497
                   2007                           5,786
                   2008                           4,523
                   2009and thereafter             4,523
                                             -----------
                            Total             Ps 57,355
                                             ===========

12. Stockholders' Equity

a) In April 1997,  Bachoco had a stock split and created  so-called  "BL" units,
which  consist of one series "B" share and one series "L" share,  and  so-called
"BB"  units,  which  consist  of two series "B"  shares.Series  "L" shares  have
limited voting rights.

b) In 2001,  2002 and 2003,  the Company  declared  and paid cash  dividends  at
nominal  values of Ps  313,189,  Ps  267,834  and Ps  297,738  respectively  (Ps
353,583,  Ps 288,791 and Ps 305,043,  in constant  Mexican pesos) or Ps 1.05, Ps
..90 and Ps .99 respectively, per unit in nominal pesos.

c) The  Mexican  Corporation  Act  requires  that at least 5% of each year's net
income be appropriated to increase the legal reserve until such reserve is equal
to 20% of capital stock issued and outstanding. The balance of the legal reserve
at December 31, 2002 and 2003, included in retained earnings, was Ps 175,312.

d) The Company  approved a stock repurchase plan in 1998, in conformity with the
Mexican  Securities  Trading Act,  providing a stock repurchase reserve for that
purpose of Ps 180,000 (Ps 258,928  expressed in constant  Mexican pesos) through
the  appropriation of retained earnings in 1998. During 2001, 2002 and 2003, the
Company repurchased 1,846 thousand, 2,534 thousand and 300 thousand units for Ps
31,351, Ps 39,870 and Ps 5,482, respectively. In 2001, 2002 and 2003 the Company
sold 2,548 thousand,  1,846 thousand and 2,834 thousand of units,  respectively,
previously repurchased; the sale value of latter was for Ps 38,815 Ps 29,215 and
Ps 50,389.

                                      F-24
<PAGE>

e) The Company is required to pay taxes on dividends distributed to stockholders
only to the extent the  payment  made  exceeds the balance of the net tax profit
account  (CUFIN),  which is used to  control  earnings  on which  income tax has
already been paid.

Income tax paid on dividends  refers to a tax payable by corporate  entities and
not by  individuals.  Additionally,  from January 1, 1999  through  December 31,
2001, cash dividends paid to individuals as  stockholders  were subject not only
to the income tax payable by corporate  entities but also a tax  withholding  of
approximately 7.70%.

The Company  obtains the majority of its  revenues and net profit from  Bachoco,
S.A. de C.V. ("BSACV"). For the years 2001 through 2003, pretax income of BSACV,
represented between 90% and 92% of Bachoco's consolidated pretax income.

Dividends  on which BSACV has paid income tax will be credited to the  Company's
"CUFIN" account and,  accordingly,  no further income tax will be paid when such
amounts are distributed as dividends to the Company's stockholders.

f) The  corporate  income tax rate for the year was 34% in 2003 (35% in 2001 and
2002).  However,  from 1999 through 2001,  corporate taxpayers had the option of
deferring a portion so that the tax payable  represented  30% of taxable income.
The  earnings on which there was a deferral of taxes had to be  controlled  in a
so-called "net reinvested tax profit account" ("CUFINRE"). This was basically to
clearly  identify the earnings on which the taxpayer had opted to defer  payment
of corporate income tax.

Since the Company opted for this tax deferral, earnings will be considered to be
distributed  first from the  "CUFINRE"  account and any excess will be paid from
the  "net  tax  profit  account"  ("CUFIN")  so as to pay the 5%  deferred  tax.
Effective January 1, 2002, the above-mentioned  option of deferring a portion of
income tax was eliminated.

13. Income Tax, Asset Tax and Employee Profit Sharing

a) The Company and each of its  subsidiaries  file separate  income tax returns.
BSACV, the Company's  principal operating  subsidiary,  is subject to payment of
corporate  income tax under the  provisions of the simplified  regime,  which is
applicable to companies  engaged  exclusively  in  agriculture,  cattle-raising,
fishing,  forestry and certain other  activities  the Law  establishes  that are
exclusive when the companies  obtain no more than 10% of their revenues from the
production of processed products, with which rule BSACV has complied.

Effective January 1, 2002, the Mexican Congress passed a new Income Tax Law that
substantially  modified the procedure for  determining  taxable  income of those
entities that pay taxes under the previous simplified regime.

The new  simplified  regime  continues  to be  applicable  to  entities  engaged
exclusively in agriculture,  cattle-raising, fishing, forestry and certain other
activities,  but  instead  of  paying  income  tax  on  only  certain  types  of
transactions,  such as dividends,  non-deductible  expenses,  or the granting of
loans as was in  effect  through  2001,  the new Law  establishes  a system  for
determining  a taxable  income based on revenues  collected,  net of  deductible
expenses  paid.  This new tax base does not allow for the deduction of the value
of fixed assets and  inventories  as of December 31,  2001,  because  these were
deducted  in  conformity  with  the  transition  provisions  established  in the
referenced new Law, of its effective date.

                                      F-25
<PAGE>

The new Income Tax Law establishes an initial  corporate income tax rate of 35%,
with a gradual one-percentage point annual decrease beginning in 2003, until the
tax rate is reduced to 32% in 2005, and further  establishes  that the companies
engaged exclusively in agriculture,  cattle-raising, fishing and forestry have a
reduction of 50% in the tax payable.  Under the new Law,  entities  paying taxes
under the old regime in force through 2001,  must  determine the total amount of
earnings of prior years on which taxes need to be paid or the available tax loss
carryforward  at the  date  on  which  it  was  enacted.  As a  result  of  this
requirement,  the Company determined a tax loss carryforward in the amount of Ps
3,086,931, as of January 1, 2002.

b) In addition to income tax, the Company and its  subsidiaries are also subject
to an  alternative  minimum tax known as the asset tax, which is assessed on the
average value of most assets, net of certain liabilities.  The general asset tax
rate is 1.8%. This Asset Tax Law permits companies that have the right to reduce
their  income  tax to reduce  the asset tax in the same  proportion;  therefore,
BSACV is subject to a 0.9% rate and to special rules  excluding many assets from
the  determination of asset tax and a tax incentive  derived from the investment
in assets. The asset tax in 2001, 2002 and 2003 amounted to Ps 14,431, Ps 13,476
and Ps 12,832,  respectively.  In each three years the Company  credited against
these amounts the income tax paid in such years for Ps 14,208,  Ps 10,101 and Ps
11,258 respectively the difference was paid in cash.

The Company and its  subsidiaries are required to pay asset tax if the amount of
asset tax  exceeds  the  computed  income tax  liability.  Asset tax paid can be
credited against income tax in subsequent  years (up to ten years).  At December
31, 2003, the Company had, at nominal value, Ps 5,116 in asset tax credits.

c) For the years ended  December  31,  2001,  2002 and 2003,  income tax charged
(credited) to results of operations was as follows:

                                        2001          2002          2003
                                   ------------------------------------------
Current year income tax            Ps   42,986   Ps    48,432   Ps   38,368
Current year asset tax                     223          3,375         1,574
Deferred income tax                    300,624       (244,361)       65,972
                                   ------------------------------------------
Total income tax                   Ps  343,833   Ps  (192,554)  Ps  105,914
                                   ==========================================

As  explained  above,  the  Company's  main  subsidiary  pays  taxes  under  the
simplified regime.  Effective January 1, 2002, the related income tax is payable
on the basis of revenues  collected net of deductible  expenses paid, as well as
on  dividends  paid,  to the extent they exceed the net tax profit  account (see
Note 12 e). Consequently, the computation of deferred income tax using the asset
and  liability  method of Bulletin D-4 is now allowed.  The effects of temporary
differences at December 31, 2002 and 2003 are as follows:

                                                      2002           2003
                                              -------------------------------
Assets:
Accounts payable                                 Ps  (66,776)    Ps  (98,398)
Recoverable asset tax                                 (4,804)         (5,116)
Tax loss carry forward allowed for change
  to new regime                                     (286,844)       (165,263)
                                              -------------------------------
                                                    (358,424)       (268,777)
                                              -------------------------------

                                      F-26
<PAGE>

                                                      2002           2003
                                              -------------------------------
Liabilities:
Inventories                                         255,659          364,176
Accounts receivable                                  66,816           64,132
Fixed assets                                      1,192,618        1,214,876
Additional liability from stockholders equity       360,148          216,533
                                              -------------------------------
                                                  1,875,241        1,859,717
                                              -------------------------------
Total deferred income tax liability, net       Ps 1,516,817     Ps 1,590,940
                                              ===============================

As described above, the Company's principal  operating  subsidiary was under the
simplified  regime  for the  calculation  of  income  tax in  previous  years in
accordance with the former Income Tax Law. Until December 31, 2001, such tax was
payable only on certain types of  transactions  such as the payment of dividends
and other  nondeductible  payments.  Therefore,  the only  temporary  difference
identified was the earned capital not distributed  which may be subject to taxes
in the future.

The effects of temporary  differences giving rise to the deferred tax liability,
taking into  consideration only the difference on earned capital at December 31,
2002 and 2003, were as follows:

                                                      2002           2003
                                              -------------------------------
Effect of simplified regimes                   Ps 1,496,070     Ps 1,521,252
Other effect outside simplified regimes              20,747           69,688
                                              -------------------------------
Deferred income tax liability                  Ps 1,516,817     Ps 1,590,940
                                              ===============================

As of December 31, 2002 and 2003, the deferred tax liability determined based on
the  difference  between the book and the tax value of  stockholders'  equity is
greater than that determined using the asset and liability method. Consequently,
the Company recognized an additional  liability in the amount of Ps 216,533, (Ps
360,148 in 2002),  so as to recognize  the greater of the amount of the deferred
tax determined by the asset and liability  method,  and the amount determined by
considering the capital earned, as the only temporary item.

The most  significant  items that gave rise to a  difference  between  the total
amount of current year income tax and the current year  deferred tax  determined
at the statutory rate are as follows:

<TABLE>
<CAPTION>
                                                       2001          2002          2003
                                                  ------------------------------------------
                                                        %              %             %
<S>                                                    <C>            <C>          <C>
Statutory income tax rate                              21.21          17.5         17.00
Effect of companies outside simplified regime           1.21          1.48          1.27
Effect of non-taxable book items                          --         (4.63)           --
Benefit derived from change in law effective
  in 2002 and changes in tax rate                         --        (28.63)           --
                                                  ------------------------------------------
Effective income tax rate                              22.42        (14.28)        18.27
                                                  ==========================================
</TABLE>

In conformity with applicable  requirements  through December 31, 2001, deferred
taxes were  determined  based on differences  between  stockholders'  equity for
financial and tax reporting purposes, at the rate of 21.21%.

                                      F-27
<PAGE>

At December 31, 2002 and 2003, the tax value of the company's equity, which will
not be subject to taxation, is comprised of the following:

                                                      2002           2003
                                              -------------------------------
Restated contributed capital (CUCA)             Ps 1,599,939    Ps 1,599,939
Net tax profit (CUFIN) and net reinvested
tax profit (CUFINRE)                                 389,877         147,911
                                              -------------------------------
Total                                           Ps 1,989,816    Ps 1,747,850
                                              ===============================

The Company and BSACV have no  employees,  but each of the  subsidiaries  of the
Company is required  under  Mexican law to pay  employees,  in addition to their
compensation and benefits, profit sharing in an aggregate amount equal to 10% of
such subsidiary's taxable income subject to certain adjustments.

14. Segments

During 2001, 2002 and 2003, there were no intersegment transactions that need to
be  eliminated.  The  information  included in the column  "Others" is basically
related to swine and feed. The disclosures required are as follow:

<TABLE>
<CAPTION>
                                                                2001
                                        ---------------------------------------------------
                                             Poultry          Others             Total
                                        ---------------------------------------------------
<S>                                       <C>              <C>              <C>
Net revenues                              Ps  9,532,205    Ps  1,075,727    Ps 10,607,932
Cost of sales                                 6,883,015          881,830        7,764,845
Gross profit                                  2,649,190          193,897        2,843,087
Interest income                                 141,653           10,369          152,022
Interest expense                                 69,189            5,064           74,253
Gain on net monetary position                    27,566            2,017           29,583
Income tax and asset tax                        320,384           23,449          343,833
Majority net income                           1,102,948           80,726        1,183,674
Property, plant and equipment, net            7,330,532          140,252        7,470,784
Total Assets                                 11,397,914          174,286       11,572,200
Total Liabilities                             2,839,897           51,563        2,891,460
Capital expenditures                            599,437               --          599,437
Expenses not requiring cash
  disbursement:
  Depreciation                                  300,885            8,060          308,945
</TABLE>

<TABLE>
<CAPTION>
                                                                2002
                                        ---------------------------------------------------
                                             Poultry          Others             Total
                                        ---------------------------------------------------
<S>                                       <C>              <C>              <C>
Net revenues                              Ps  9,726,693    Ps  1,043,037    Ps 10,769,730
Cost of sales                                 7,091,277          897,713        7,988,990
Gross Profit                                  2,635,415          145,325        2,780,740
Interest income                                 106,536            5,786          112,322
Interest expense                                 30,941            1,686           32,627
Gain on net monetary position                   107,269              631          107,900
Income tax and asset tax                       (234,942)          42,388         (192,554)
Majority net income                           1,456,961           80,341        1,537,302
Property, plant and equipment, net            7,112,990          302,630        7,415,620
Total Assets                                 11,498,959          525,379       12,024,338
Total Liabilities                             2,101,568           72,016        2,173,584
Capital expenditures                            274,446               --          274,446
Expenses not requiring cash
  disbursement:
  Depreciation                                  318,161           11,448          329,609
</TABLE>

                                      F-28
<PAGE>

<TABLE>
<CAPTION>
                                                                2003
                                        ---------------------------------------------------
                                             Poultry          Others             Total
                                        ---------------------------------------------------
<S>                                       <C>              <C>              <C>
Net revenues                              Ps  9,545,998    Ps  1,205,220    Ps 10,751,218
Cost of sales                                 7,655,103        1,090,936        8,746,039
Gross Profit                                  1,890,894          114,285        2,005,179
Interest income                                 203,093          (48,306)         154,787
Interest expense                                 21,114            3,623           24,737
Loss on net monetary position                    72,806            1,167           73,973
Income tax and asset tax                         85,377           20,537          105,914
Majority net income                             507,222           27,975          535,197
Property, plant and equipment, net            7,420,356          384,502        7,804,858
Total Assets                                 11,921,458          483,333       12,404,791
Total Liabilities                             2,207,965          137,013        2,344,978
Capital expenditures                            755,606               --          755,606
Expenses not requiring cash
  disbursement:
  Depreciation                                  350,317           14,943          365,260
</TABLE>

<TABLE>
<CAPTION>
                                                                2001
                                        ---------------------------------------------------
                                             Chicken            Egg              Total
                                        ---------------------------------------------------
<S>                                       <C>              <C>              <C>
Net revenues                              Ps  8,735,877    Ps    796,328    Ps  9,532,205
</TABLE>

<TABLE>
<CAPTION>
                                                                2002
                                        ---------------------------------------------------
                                             Chicken            Egg              Total
                                        ---------------------------------------------------
<S>                                       <C>              <C>              <C>
Net revenues                              Ps  8,711,171    Ps  1,015,522    Ps  9,726,693
</TABLE>

<TABLE>
<CAPTION>
                                                                2003
                                        ---------------------------------------------------
                                             Chicken            Egg              Total
                                        ---------------------------------------------------
<S>                                       <C>              <C>              <C>
Net revenues                              Ps  8,348,932    Ps  1,197,066    Ps  9,545,998
</TABLE>

15.  Foreign Currency Position

A summary of Bachoco's  assets and liabilities  denominated in U.S. dollars (the
only foreign currency) as of December 31:

                                                 (Thousands U.S. dollars)
                                                   2002              2003
                                            ---------------------------------
Assets:
  Cash and cash equivalents                    $    10,394      $    60,928
   Advances to suppliers                            18,427           19,062
                                            ---------------------------------
                                                    28,821           79,990
Liabilities:
  Notes payable to banks and long-term
   Debt                                             (8,810)            (401)
  Suppliers                                        (15,238)         (11,914)
                                            ---------------------------------
                                                   (24,048)         (12,315)
                                            ---------------------------------
Net long position                              $     4,773      $    67,675
                                            =================================

As of December 31, 2002 and 2003,  the exchange rate was Ps 10.394 and Ps 11.230
per dollar, respectively.

                                      F-29
<PAGE>

Assets from foreign  origin  included in the  consolidated  balance sheets as of
December 31, 2002 and 2003, were:

                                                 (Thousands U.S. dollars)
                                                   2002              2003
                                            ---------------------------------
Inventories                                    $    19,604      $    18,444
Property, plant and equipment                      117,340          117,206

Imported raw materials,  in thousands of U.S. Dollars, were $ 199,429 in 2001, $
137,233 in 2002 and $ 84,633 in 2003.  Interest  expense,  in  thousands of U.S.
dollars from debt denominated in U.S. dollars was $ 2,726 in 2001, $ 363 in 2002
and $ 93 in 2003.

16.  Hurricane Isidore

In September of 2002,  hurricane  Isidore affected the company's complex located
in the  peninsula  of  Yucatan,  and  approximately  60% of  the  chicken  farms
operating in that region.  The Company started the repair of their farms in this
area  immediately  and,  according to its plan,  this was finished  during 2003.
Other  facilities  as breeder  farms,  processing  plant and balance feed plants
suffered no material damage.

The assets were duly covered under an insurance  policy,  so in 2002 the Company
credited  Ps 20,764 to results of  operations  under the caption  Other  income.
During 2003, Bachoco concluded  negotiations with the insurance company and as a
result of these  negotiations,  the  Company  recognized  in 2003 an  additional
credit to results of operations of Ps 20,071.

17. Differences Between Mexican and United States Generally Accepted
    Accounting Principles

Bachoco's  consolidated  financial  statements  are prepared in accordance  with
"Mexican GAAP",  which differ in certain  respects from United States  generally
accepted accounting principles ("U.S. GAAP").

The  accompanying  reconciliation  to U.S. GAAP does not include the reversal of
the  adjustments  to the  financial  statements  for the  effects  of  inflation
required under Bulletin  B-10, as amended,  because the  application of Bulletin
B-10 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  for both  Mexican  and U.S.
accounting principles.

The principal  differences between Mexican GAAP and U.S. GAAP, as they relate to
the  Company,   are  described  below  together  with  an   explanation,   where
appropriate,  of the  method  used to  determine  the  adjustments  that  affect
consolidated  operating income, net income,  stockholders' equity and changes in
financial position for each of the three years ended December 31, 2001, 2002 and
2003.

                                      F-30
<PAGE>

Deferred income tax and employee profit sharing

The  Company  follows  the  requirements  of Mexican  accounting  Bulletin  D-4,
"Accounting  for Income Tax, Asset Tax and Employee Profit  Sharing",  issued by
the IMCP.  Bulletin  D-4  requires  the  recognition  of  deferred  taxes on all
temporary  differences in balance sheet accounts for financial and tax reporting
purposes, using the enacted income tax rate at the time the financial statements
are issued.

Bachoco  has  applied  Statement  of  Financial  Accounting  Standards  No. 109,
Accounting  for Income  Taxes" ("SFAS 109"),  for all periods  presented,  which
requires that deferred income taxes be determined using the liability method for
all temporary  differences between financial reporting amounts and the tax basis
of assets  and  liabilities,  and that  deferred  taxes on such  differences  be
measured  at the  enacted  income tax rates for the year in which such taxes are
expected to be payable or refundable.

In the  Company's  case  the  application  of  both  rules  did not  generate  a
reconciling difference in 2001, 2002 and 2003; therefore, there is no difference
between Mexican and US GAAP in those years.

In addition,  as described in Note 13, under  Mexican  labor law, the Company is
required to pay employee profit sharing. As of December 31, 2001, 2002 and 2003,
the Company did not recognize  deferred  employee  profit sharing as required by
SFAS 109, due to its  immateriality.  Employee  profit sharing  expense has been
included in operating expenses for US GAAP presentation purposes.

The  deferred tax  adjustment  included in net income and  stockholders'  equity
reconciliations,  represent  the effect of  deferred  taxes on other  U.S.  GAAP
adjustments reflected in the respective summaries.

Capitalized financing cost

Under Mexican GAAP,  capitalization  of  comprehensive  financing cost on assets
under  construction or in the  pre-operating  stage is allowed but not required.
Bachoco has elected to capitalize such comprehensive  financing cost. Under U.S.
GAAP,  interest expense  incurred during the  construction  period on qualifying
expenditures must be considered an additional cost to be capitalized. Under U.S.
GAAP when financing is in Mexican  pesos,  the monetary gain is included in this
computation; when financing is denominated in U.S. dollars, only the interest is
capitalized and exchange losses are not included.  The amount of interest or net
financing cost  capitalized  for US GAAP purposes was determined by reference to
the Companies average cost of outstanding debt.

Minority interest

Under  Mexican  GAAP,   minority   interest  is  presented  as  a  component  of
stockholders'  equity,  immediately after total majority  stockholders'  equity.
Under US GAAP, this concept is generally presented out of stockholders'  equity.
For  US  GAAP  purposes  the  Company   reclassified   minority   interest  from
stockholders' equity, decreasing its total stockholders' equity by Ps 42,737 and
Ps 41,359 at December 31, 2002 and 2003 respectively,  and reclassified minority
interest from the income  statement  decreasing net income by Ps 4,110, Ps 2,076
and Ps 4,262 for the years ended December 31, 2001, 2002 and 2003, respectively.

                                      F-31
<PAGE>

Effect of inflation accounting on U.S. GAAP adjustments

To  determine  the  net  effect  on the  consolidated  financial  statements  of
recognizing U.S. GAAP  adjustments,  it is necessary to recognize the effects of
applying Mexican GAAP inflation accounting  provisions  (described in Note 2) to
the U.S. GAAP adjustments.

Reporting comprehensive income

The Company has adopted for purposes of the U.S. GAAP  reconciliation  Statement
of  Financial  Accounting  Standards  (SFAS) No. 130,  "Reporting  Comprehensive
Income" (SFAS 130). SFAS 130 establishes  rules for the reporting and disclosure
of  comprehensive  income and its  components.  SFAS 130  requires  the  minimum
seniority  premium  liability  adjustment,   the  deficit  from  restatement  of
stockholders'  equity, and deferred taxes on the difference between indexed cost
and replacement cost and on the minimum seniority premium liability  adjustment,
to be  included in other  comprehensive  income.  The U.S.  GAAP  statements  of
changes in stockholders' equity include the disclosure requirements of SFAS 130.

Cumulative  amounts of the deficit from restatement of stockholder's  equity net
of tax and the minimum seniority premium liability  adjustment included in other
comprehensive  income decreased  stockholders' equity at December 31, 2003 by Ps
3,966,920 and Ps 1,814, respectively.

Disclosure about fair value of financial instruments

In  accordance  with SFAS No. 107,  "Disclosures  about Fair Value of  Financial
Instruments",  information is provided about the fair value of certain financial
instruments for which it is practicable to estimate that value.

The carrying amounts of cash and cash equivalents, accounts receivable, accounts
payable,  notes payable and accrued  liabilities  approximate their fair values,
due to the short maturity of these instruments.

The fair value of long-term debt,  based on quoted market prices for the same or
similar  issues or on the current  rates  offered to the Company for debt of the
same remaining maturities, approximates their carrying amounts.

Effect of Statement 133

Bulletin C-2 ("Financial  Instruments"),  effective  beginning  January 1, 2001,
sets general rules for the assessment, presentation, and disclosure of financial
information  that issuers or investors in financial  instruments  should follow.
Among said rules are the  conditions  that have to be met in order to be able to
offset  financial  assets and  liabilities.  Likewise,  it is  established  that
financial instruments should be assessed at their fair value, with the exception
of those that have been  classified  as held to maturity.  The latter  should be
valued at their cost of acquisition.

                                      F-32
<PAGE>

SFAS No. 133,  "Accounting for Derivative  Instruments  and Hedging  Activities"
(SFAS 133)  requires the Company to  recognize  all  derivatives  on the balance
sheet at fair  value.  Derivatives  that are not hedges must be adjusted to fair
value through income.  If the derivative is a hedge,  depending on the nature of
the hedge,  changes in the fair value of  derivatives  are either offset against
the change in fair value of assets,  liabilities,  or firm  commitments  through
earnings or  recognized in other  comprehensive  income until the hedged item is
recognized in earnings.  The ineffective  portion of a derivate's change in fair
value will be immediately recognized in earnings.

Since all derivative  instruments  held by the company at December 31, 2003, are
considered of a speculative nature; therefore,  there are no differences between
the  Mexican  and US GAAP  accounting  treatment  for the  Company's  derivative
instruments.  As all financial  instruments  were measured at market value,  and
taken to income.

Business combinations

In June 2001, the FASB issued Statements of Financial  Accounting  Standards No.
141, "Business  Combinations"  (Statement 141), and No. 142, "Goodwill and Other
Intangible  Assets" (SFAS 142).  Statement 141 requires that the purchase method
of accounting  be used for all business  combinations  initiated  after June 30,
2001.  Statement  141 also  includes  guidance  on the initial  recognition  and
measurement  of goodwill  and other  intangible  assets  arising  from  business
combinations  completed after June 30, 2001. SFAS 142 prohibits the amortization
of goodwill and intangible  assets with indefinite  useful lives.  Statement 142
requires  that  these  assets be  reviewed  for  impairment  at least  annually.
Intangible  assets with finite lives will  continue to be  amortized  over their
estimated  useful  lives.  Additionally,  Statement  142 requires  that goodwill
included  in the  carrying  value of  equity  method  investments  no  longer be
amortized.

The  Company  adopted  the   requirements  of  SFAS  142  on  January  1,  2002.
Consequently,  in 2002 the Company  performed  impairment tests at the beginning
and at the end of the year and  determined  that its goodwill was not  impaired.
For 2003,  this test was  performed  as of the end of the year  resulting  in no
impairment charges for goodwill.

Under Mexican GAAP, Goodwill is amortized using the straight-line  method over a
twenty-year  period. The 2002 and 2003  reconciliation  shows the application of
the non amortization  provisions  applied to goodwill,  resulting a credit of Ps
16,639 and Ps 16,737 respectively.

Asset Retirement Obligations

In June 2001, the FASB issued Statements of Financial  Accounting  Standards No.
143,  "Accounting  for  Asset  Retirement  Obligations"  (SFAS  143),  which  is
effective for fiscal years beginning after June 15, 2002, The Statement requires
legal  obligations  associated  with the  retirement of long-lived  assets to be
recognized  at  the  time  that  the  obligations  are  incurred.  Upon  initial
recognition  of a  liability,  that cost  should be  capitalized  as part of the
related  long-lived  asset and  allocated to expense over the useful life of the
asset.  Effective  January 1, 2003, the Company adopted the requirements of SFAS
143,  without  any  effects on either the  financial  position  or on results of
operations, as it does not have any asset retirement obligations.

                                      F-33
<PAGE>

Impairment of Assets

In August 2001, the FASB issued Statement of Financial  Accounting Standards No.
144,  "Accounting  for the  Impairment or Disposal of  Long-Lived  Assets" (SFAS
144), which addresses  financial  accounting and reporting for the impairment or
disposal of long-lived assets and supersedes  Statement No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of"
(SFAS 121), and the  accounting and reporting  provisions of APB Opinion No. 30,
Reporting the Results of  Operations  for a disposal of a segment of a business.
SFAS 144 is effective for fiscal years that begun after  December 15, 2001.  The
Company adopted the requirements of Statement 144 on January 1, 2002 and did not
record any adjustments to the book value of its long lived assets.

Agriculture

Effective  January 1, 2003,  the  Company  adopted the  requirements  of the new
Mexican accounting  Bulletin E-1,  Agriculture,  which establishes the rules for
recognizing,   valuing,   presenting  and  disclosing   biological   assets  and
agricultural  products;  it  also  establishes  the  treatment  to be  given  to
government subsidies on biological assets.

This bulletin  establishes that biological assets and the agricultural  products
(the  latter at the time of their  harvesting)  are to be  valued at their  fair
value, net of estimated costs at point of sale.  Also, the Bulletin  establishes
that whenever the fair value cannot be determined in a reliable,  verifiable and
objective  manner,  the assets are to be valued at their production cost, net of
accumulated impairment, if any.

For US GAAP purposes,  biological asset and agricultural  products are valued at
cost. Therefore, the 2003 reconciliation shows the reversal of biological assets
valuation  at  fair  value  resulting  in a net  charge  of Ps  58,925,  leaving
inventories of biological  assets and  agricultural  products  stated at average
cost of production,  which  approximates  estimated  replacement cost and not in
excess of net realizable value.

Pro forma net income

Had the same rules been applied for the amortization of the goodwill, since 2001
the results under US GAAP would have been as follows:

                                                Years ended December 31,
                                      ------------------------------------------
                                           2001           2002          2003
                                      ------------------------------------------

US GAAP net income as presented       Ps  1,202,549  Ps  1,557,336  Ps  510,224
Amortization goodwill                        16,758             --           --
                                      ------------------------------------------
US GAAP net income pro forma          Ps  1,219,307  Ps  1,557,336  Ps  510,224
                                      ==========================================

                                      F-34
<PAGE>

Recent Accounting Pronouncements

In December 2003, the FASB issued  Statement of Financial  Accounting  Standards
No.  132  (revised  2003)  "Employers'  Disclosures  about  Pensions  and  Other
Postretirement  Benefits."  SFAS  132  (revised  2003)  retains  the  disclosure
requirements  of SFAS  132,  which  it  replaces,  and  addresses  the  need for
additional  annual  disclosures  related  to  a  company's  pensions  and  other
postretirement benefits. SFAS 132 (revised 2003) does not change the measurement
or recognition  criteria of SFAS 87, "Employers'  Accounting for Pensions," SFAS
88,  "Employers'  Accounting for Settlements and Curtailments of Defined Benefit
Pension Plans and for Termination Benefits," or SFAS 106, "Employers' Accounting
for  Postretirement  Benefits  Other Than  Pensions."  SFAS 132  (revised  2003)
requires  new  annual  disclosures  about the types of plan  assets,  investment
strategy,  measurement  date,  plan  obligations  and cash  flows  related  to a
company's  pensions  and  other  postretirement   benefits.   It  also  requires
disclosure of the components of net periodic  benefit cost recognized in interim
periods and, if significantly  different from previously  disclosed amounts, the
projected  contributions to fund pension and other postretirement benefit plans.
The Company  adopted the disclosure  requirements  of SFAS 132 (revised 2003) in
December 2003.

In January 2003, the FASB issued FIN No. 46, "Consolidation of Variable Interest
Entities,"  an   interpretation  of  Accounting   Research   Bulleting  No.  51,
"Consolidated  Financial  Statements"  and in  December  2003,  issued a revised
interpretation (FIN No. 46-R). FIN No. 46, as revised, requires certain variable
interest entities to be consolidated by the primary beneficiary of the entity if
the  equity  investors  in the  entity  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.  The  provisions  of FIN No.  46-R are  effective
immediately  for all  arrangements  entered into after  January 31, 2003.  Since
January 31,  2003,  the Company has not invested in any entities it believes are
variable interest entities for which the Company is the primary beneficiary. For
arrangements  entered into prior to February 1, 2003, the Company is required to
adopt the  provisions of FIN No. 46-R in the first quarter of 2004.  The Company
does not believe the adoption of FIN No. 46-R will have a material impact on its
financial position, results of operations or cash flows.

In April 2003, the FASB issued Statement of Financial  Accounting  Standards No.
149 (SFAS 149),  "Amendment  of  Statement  133 on  Derivative  Instruments  and
Hedging  Activities."  SFAS 149  amends  SFAS 133,  "Accounting  for  Derivative
Instruments and Hedging  Activities" to provide  clarification  on the financial
accounting and reporting for derivative  instruments and hedging  activities and
requires   similar   accounting   treatment   for  contracts   with   comparable
characteristics.  The adoption of SFAS 149,  effective  primarily  for contracts
entered  into or modified  after June 30,  2003,  and for hedging  relationships
designated after June 30, 2003, had no impact on our financial statements.

                                      F-35
<PAGE>

In May 2003,  the FASB issued SFAS No. 150,  "Accounting  for Certain  Financial
Instruments  with  Characteristic  of Both Liabilities and Equity." SFAS No. 150
establishes  standards  for  how  an  issuer  classifies  and  measures  certain
financial  instrument with  characteristics  of both liabilities and equity.  It
requires that an issuer classify a financial instrument that is within its scope
as a  liability  (or as assets  in some  circumstances).  SFAS No.  150 is to be
implemented  by reporting  the  cumulative  effect of a change in an  accounting
principle for the financial  instrument  created before  November 2003 and still
existing at the beginning of the interim period of adoption.  Restatement is not
permitted. The Company does not believe that the adoption of this statement will
have a material impact on its financial position,  results of operations or cash
flows.

Other  pronouncements  issued  by the  FASB or  other  authoritative  accounting
standards  groups with future  effective  dates are either not applicable or not
significant to our financial statements.

Cash flow information

Under Mexican GAAP, the Company presents  consolidated  statements of changes in
financial position, as described in Note 2.

In accordance with Mexican GAAP, the change in current and long-term debt due to
restatements  in  constant  Mexican  pesos,  including  the  effect of  exchange
differences,  is presented in the statements of changes in financial position in
the financing activities section.

The gain from monetary  position and the exchange gain or loss are not presented
in the operating  activities section as a reconciling  adjustments,  as they are
included in the  respective  monetary  asset or  liability  line.  Statement  of
Financial  Accounting  Standards No. 95 ("SFAS 95"),  "Statement of Cash Flows",
does not  provide  guidance  with  respect  to  price-level  restated  financial
statements.

The Company has adopted,  for its US GAAP presentation of cash flow information,
the  guidance  issued  by the AICPA SEC  Regulations  Committee's  International
Practices Task Force in its meeting held on November 24, 1998, requiring foreign
registrants that file price level adjusted financial  statements to provide cash
flow statements that show separately the effects of inflation on cash flows.

<TABLE>
<CAPTION>
           Cash Flow Information                                  Years ended December 31,
                                                   ----------------------------------------------------
                                                           2001              2002            2003
                                                   ----------------------------------------------------
<S>                                                   <C>              <C>              <C>
OPERATING ACTIVITIES:
Net income                                            Ps  1,202,549    Ps  1,557,336    Ps    503,065
Adjustments to reconcile net income to
  resources provided by operating
   activities:
Depreciation                                                309,024          331,080          366,865
Deferred income tax                                         296,256         (245,775)          62,942
Goodwill amortization                                        16,758               --               --
                                                   ----------------------------------------------------
                                                          1,824,587        1,642,641          932,872
Changes in assets and liabilities:
Accounts receivable                                        (142,609)           8,789          (76,845)
Inventories                                                (615,780)        (356,563)        (422,944)
</TABLE>

                                      F-36
<PAGE>

<TABLE>
<CAPTION>
                                                   ----------------------------------------------------
                                                           2001              2002            2003
                                                   ----------------------------------------------------
<S>                                                   <C>              <C>              <C>
Prepaid expenses and other accounts
Receivable                                                   56,739         (113,370)          84,424
Accounts payable                                            127,121         (149,792)         149,538
Related parties                                              (5,660)           4,794          (18,040)
Other taxes payable and other accruals                       18,664         (102,593)          32,626
Labor obligations, net                                       13,881           (7,025)          (4,063)
Loss (gain) on net monetary position                        (29,583)         107,982           74,093
                                                   ----------------------------------------------------
Resources provided by operating activities                1,247,360        1,034,863          751,661

FINANCING ACTIVITIES:
Proceeds from issuance of notes payable
   to banks                                                 968,848           59,949          133,714
Repayment of long-term debt and notes
   Payable                                               (1,506,286)        (195,768)        (181,402)
Cash dividends paid                                        (353,583)        (288,791)        (305,043)
Repurchase (sale) of stock                                    7,464          (10,655)          44,907
                                                   ----------------------------------------------------
Resources used in financing activities                     (883,557)        (435,265)        (307,824)

INVESTING ACTIVITIES:
Acquisition of property, plant and
  Equipment                                                (625,389)        (277,981)        (764,357)
Other assets                                                (36,460)           5,865            3,772
                                                   ----------------------------------------------------
Resources used in investing activities                     (661,849)        (272,116)        (760,585)
                                                   ----------------------------------------------------

                                                   ----------------------------------------------------
Effect of inflation accounting                              212,768          150,438          122,517
                                                   ----------------------------------------------------

Net (decrease) increase in cash
 And cash equivalents                                       (85,278)         477,920         (194,231)
Cash and cash equivalents at
  beginning of year                                       1,370,793        1,285,515        1,763,435
                                                   ----------------------------------------------------
Cash and cash equivalents at
  end of year                                         Ps  1,285,515    Ps  1,763,435    Ps  1,569,204
                                                   ====================================================

Interest paid                                         Ps     50,226    Ps     12,376    Ps      7,699
Income tax paid                                              42,986           60,787           38,368
Asset tax paid                                                1,872            1,807            1,575
Employee profit sharing paid                                  2,303            2,396            1,787
</TABLE>

                                      F-37
<PAGE>

Summary of adjustments to reconcile Mexican GAAP and U.S. GAAP

The following is a summary of net income  adjusted to take into account  certain
material differences between Mexican GAAP and U.S. GAAP.

<TABLE>
<CAPTION>
                                                                  Years ended December 31,
                                                   ----------------------------------------------------
                                                           2001              2002            2003
                                                   ----------------------------------------------------
<S>                                                   <C>              <C>              <C>
Net income as reported under Mexican GAAP             Ps  1,187,784    Ps  1,539,378    Ps    539,459
Adjustments to reconcile net income to
  U.S. GAAP:
Interest cost capitalized                                    25,951            3,534            8,751
Depreciation of capitalized interest                            (79)          (1,471)          (1,605)
Deferred income tax on USGAAP
  Adjustments                                                (6,997)           1,414            3,030
Amortization goodwill                                            --           16,639           16,737
Effect of inflation accounting on
  USGAAP adjustments                                             --              (82)            (120)
Biological assets and agricultural
  products valuation at fair value                               --               --          (58,925)
Minority interest                                            (4,110)          (2,076)          (4,262)
                                                   ----------------------------------------------------
Net income under U.S. GAAP                            Ps  1,202,549    Ps  1,557,336    Ps    503,065
                                                   ----------------------------------------------------
Weighted average number of units
  outstanding (thousands)                                   297,454          297,898          299,369
Net income per unit                                   Ps       4.04    Ps       5.23    Ps       1.68
</TABLE>

After the foregoing adjustment for the depreciation of capitalized interest, the
reclassification of employee profit sharing, the non amortization of goodwill in
2002 and 2003 and biological assets and agricultural  products valuation at fair
value in 2003  operating  income  under  U.S.  GAAP  would be Ps  1,416,961,  Ps
1,305,065 and Ps 467,026 in 2001, 2002 and 2003, respectively.

Total assets under U.S.  GAAP were Ps  12,075,866  in 2002 and Ps  12,421,277 in
2003 The  difference  in total  assets  between  Mexican  GAAP and U.S.  GAAP is
comprised of the foreign  exchange  loss and the  monetary  gain on financing in
U.S.  dollars  capitalized  in  assets  under  construction  net of  accumulated
depreciation and the amortization of goodwill.

                                      F-38
<PAGE>

The reconciliation of the stockholders'  equity between Mexican GAAP and US GAAP
is as follows:

<TABLE>
<CAPTION>
                                                                  Years ended December 31
                                                              ---------------------------------
                                                                    2002             2003
                                                              ---------------------------------
<S>                                                            <C>              <C>
Majority stockholders' equity as reported under
Mexican GAAP                                                   Ps  9,808,017    Ps 10,018,454

Adjustments to reconcile majority stockholders'
  equity to U.S. GAAP:
Accumulated differences between the financing cost
  capitalized for Mexican GAAP and U.S. GAAP
   purposes                                                           40,048           48,799
Accumulated depreciation on the above items                           (5,159)          (6,764)
Deferred income taxes on USGAAP adjustments                           (5,668)          (2,758)
Amortization goodwill                                                 16,639           33,376
Biological assets and agricultural products valuation at
  fair value                                                                          (58,925)
                                                              ---------------------------------
Majority stockholders' equity as reported under U.S.
  GAAP                                                         Ps  9,853,877    Ps 10,032,182
                                                              =================================
</TABLE>

The  effects  of the  above  adjustments  do not have  any  impact  on  minority
interest.

                                      F-39
<PAGE>

The  consolidated  statements of changes in  stockholders'  equity in accordance
with U.S. GAAP is as follows:

<TABLE>
<CAPTION>
                                                                                                Stock
                                                                                              repurchase
                                                          Capital stock    Paid in capital      reserve
                                                        -------------------------------------------------
<S>                                                        <C>              <C>             <C>
Balance at December 31, 2000                               Ps 1,954,234     Ps  527,095     Ps  205,278
Repurchase of stock                                              (2,189)             --         (29,162)
Sales of repurchased stock                                        2,597              --          35,411
Cash dividends paid                                                  --              --              --
Comprehensive income
  Net income for the year                                            --              --              --
  Components of other comprehensive income:                          --              --              --
  Deficit from holding of non monetary assets                        --              --              --
Minimum seniority premium liability adjustment                       --              --              --
Other comprehensive income, net of taxes                             --              --              --
Comprehensive income                                                 --              --              --
                                                       --------------------------------------------------
Balance at December 31, 2001                                  1,954,642         527,095         211,527
Repurchase of stock                                              (1,339)             --         (38,163)
Sales of repurchased stock                                          975          28,240              --
Cash dividends paid                                                  --              --              --
Comprehensive income                                                 --              --              --
  Net income for the year                                            --              --              --
  Components of other comprehensive income:                          --              --              --
  Deficit from holding of non monetary assets                        --              --              --
Minimum seniority premium liability adjustment                       --              --              --
Other comprehensive income, net of taxes                             --              --              --
Comprehensive income                                                 --              --              --
                                                        -------------------------------------------------
Balance at December 31, 2002                                  1,954,278         555,335         173,364
Repurchase of stock                                                (150)             --          (5,332)
Sales of repurchased stock                                        1,444          48,945              --
Cash dividends paid                                                  --              --              --
Comprehensive income                                                 --              --              --
  Net income for the year                                            --              --              --
  Components of other comprehensive income:                          --              --              --
  Deficit from holding of non monetary assets                        --              --              --
  Minimum seniority premium liability adjustment                     --              --              --
Other comprehensive income, net of taxes                             --              --              --
Comprehensive income                                                 --              --              --
                                                                     --              --              --
                                                        -------------------------------------------------
Balance at December 31, 2003                               Ps 1,955,572     Ps  604,280     Ps  168,032
                                                        =================================================
</TABLE>

                                      F-40
<PAGE>

The  consolidated  statements of changes in  stockholders'  equity in accordance
with U.S. GAAP is as follows:

<TABLE>
<CAPTION>
                                                                                  Other                               Total
                                                              Retained        comprehensive    Comprehensive      stockholders
                                                              earnings           income            income            equity
                                                         -----------------------------------------------------------------------
<S>                                                        <C>               <C>                <C>              <C>
Balance at December 31, 2000                               Ps  8,957,060     Ps (3,648,468)               --     Ps  7,995,199
Repurchase of stock                                                   --                --                --           (31,351)
Sales of repurchased stock                                           807                --                --            38,815
Cash dividends paid                                             (353,583)               --                --          (353,583)
Comprehensive income                                                                                      --
  Net income for the year                                      1,202,549                --      $  1,202,549         1,202,549
  Components of other comprehensive income:                           --                --                --
  Deficit from holding of non monetary assets                         --          (188,264)         (188,264)         (188,264)
Minimum seniority premium liability adjustment                        --              (689)             (689)             (689)
                                                                                               --------------
Other comprehensive income, net of taxes                              --                --          (188,953)
Comprehensive income                                                  --                --      Ps 1,013,596
                                                                                               ==============
                                                         -----------------------------------------------------------------------
Balance at December 31, 2001                                   9,806,833        (3,837,421)               --         8,662,676
Repurchase of stock                                                 (368)               --                --           (39,870)
Sales of repurchased stock                                            --                                  --            29,215
Cash dividends paid                                             (288,791)               --                --          (288,791)
Comprehensive income                                                  --                --                --
  Net income for the year                                      1,557,336                --         1,557,336         1,557,336
  Components of other comprehensive income:                           --                --                --
  Deficit from holding of non monetary assets                         --           (66,668)          (66,668)          (66,668)
Minimum seniority premium liability adjustment                        --               (21)              (21)              (21)
                                                                                               --------------
Other comprehensive income, net of taxes                              --                --           (66,689)
Comprehensive income                                                  --                --         1,490,647
                                                                                               ==============
                                                         -----------------------------------------------------------------------
Balance at December 31, 2002                                  11,075,010        (3,904,110)               --         9,853,877
Repurchase of stock                                                   --                --                --            (5,482)
Sales of repurchased stock                                            --                --                              50,389
Cash dividends paid                                             (305,043)               --                --          (305,043)
Comprehensive income                                                  --                --                --
  Net income for the year                                        503,065                --           503,065           503,065

  Components of other comprehensive income:                           --                --                --
  Deficit from holding of non monetary assets                         --           (63,520)          (63,520)          (63,520)
  Minimum seniority premium liability adjustment                      --            (1,104)           (1,104)           (1,104)
                                                                                               --------------
Other comprehensive income, net of taxes                              --                --           (64,624)
                                                                                               --------------
Comprehensive income                                                  --                --      $    438,441
                                                                                               ==============
                                                                      --                --
                                                         ------------------------------------                  -----------------
Balance at December 31, 2003                               Ps 11,273,032     Ps (3,968,734)                      Ps 10,032,182
                                                         ====================================                  =================
</TABLE>

                                      F-41