**SECURITIES AND EXCHANGE COMMISSION**

**WASHINGTON****, D.C. 20549**

**FORM 20-F**

(   )       REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR    (g)   OF THE SECURITIES EXCHANGE ACT OF 1934

OR

( **X** )      ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2005

OR

(   )       TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)    OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD    FROM            TO

OR

(   )       SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR    15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD    FROM           TO

COMMISSION FILE NUMBER 33-44756

**Controladora Comercial Mexicana, S.A. de C.V.**

(Exact    name of Registrant as specified in its charter)

N/A

(Translation    of Registrant’s name into English)

**United Mexican States**

(Jurisdiction    of incorporation or organization)

**Av.    Revolución No. 780 Módulo 2**

**Colonia    San Juan**

**03730 México, D.F.**

**México**

(Address    of principal executive offices)

Securities    registered or to be registered pursuant to Section 12(b) of the Act:
| **Title of each class**                                                       | **Name of each exchange on which registered**          |
|-------------------------------------------------------------------------------|--------------------------------------------------------|
| Series B Shares without par    value ("B Shares")                   | New York Stock Exchange (for    listing purposes only) |
| Series C Shares without par    value ("C Shares")                   | New York Stock Exchange (for    listing purposes only) |
| BC Units, each representing    three B shares and one C share                 | New York Stock Exchange (for listing purposes only)    |
| Global Depositary Shares ("GDSs"), each representing 20    BC Units | New York Stock Exchange                                |

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

None

Securities for    which there is a reporting obligation pursuant to Section 15(d) of the Act:

None

The    number of outstanding shares of each of the issuer’s classes of capital or common    stock as of December 31, 2005   was:

3,995,921,848 B    Shares

348,078,152 C Shares

 

Indicate by checkmark if the registrant is a well-known    seasoned issuer, as defined in Rule 405 of the Securities Act.   Yes    (   )        No    ( **X** )

Indicate by checkmark 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 (of for such shorter period    that he 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    checkmark which financial statement item the registrant has elected to follow.     Item 17   ( **X** )         Item 18    (   )

Indicate by checkmark whether the registrant is a large    accelerated filer, an accelerated filer, or a non-accelerated filer.       

( **X** )   Large Accelerated Filer         (   )   Accelerated Filer         (   )   Non-Accelerated Filer.

Indicate by    checkmark whether the registrant is a shell company (as defined in Rule 12-b of    the Exchange Act).   Yes    (   )         No    ( **X** )

 

| **TABLE OF  CONTENTS** |
|------------------------|
|                   |   |   | **Page** |
| PART I                 |   |   |   |
|                   | Item 1. | Identity of    Directors, Senior Management and Advisers | 4 |
|                   | Item 2. | Offer Statistics and  Expected Timetable | 4 |
|                   | Item 3. | Key Information | 4 |
|                   |   |         Selected Financial  Data | 4 |
|                   |   |         Dividends | 8 |
|                   |   |         Exchange Rate  Information | 8 |
|                   |   |         Risk Factors | 9 |
|                   |   |         Forward-Looking  Statements | 15 |
|                   | Item 4. | Information on the  Company | 16 |
|                   |   |         History and  Development of the Company | 16 |
|                   |   |         Capital Expenditures | 16 |
|                   |   |         Business Overview | 17 |
|                   |   |         Organizational  Structure | 29 |
|                   |   |         Property, Plant and  Equipment | 30 |
|                   | Item 5. | Operating and  Financial Review and Prospects | 31 |
|                   |   |         Results of Operations | 38 |
|                   | Item 6. | Directors, Senior  Management and Employees | 52 |
|                   |   |         Board Practices and  Audit Committee | 54 |
|                   |   |         Employees and Labor  Relations | 55 |
|                   | Item 7. | Major Shareholders  and Related Party Transactions | 56 |
|                   |   |         Major Shareholders | 56 |
|                   |   |         Related Party  Transactions | 57 |
|                   | Item 8. | Financial Information | 58 |
|                   | Item 9. | The Offer and Listing | 58 |
|                   | Item 10. | Other Information | 62 |
|                   |   |         Mexican Securities  Market Law | 62 |
|                   |   |         Bylaws | 65 |
|                   |   |         Material Contracts | 69 |
|                   |   |         Enforceability of  Civil Liabilities | 69 |
|                   |   |         Legal Proceedings | 70 |
|                   |   |         New York Stock  Exchange Corporate Governance Standards | 70 |
|                   |   |         Exchange Controls and  Restrictions on Foreign Investment | 72 |
|                   |   |         Taxation | 72 |
|                   |   |         Documents on Display | 76 |
|                   | Item 11. | Quantitative and  Qualitative Disclosures About Market Risk | 77 |
|                   | Item 12. | Description of  Securities Other than Equity Securities | 77 |
| PART II                |   |   |   |
|                   | Item 13. | Defaults, Dividend  Arrearages and Delinquencies | 78 |
|                   | Item 14. | Material  Modifications to the Rights of Security Holders and Use of Proceeds | 78 |
| PART III               |   |   |   |
|                   | Item 15. | Controls and  Procedures | 78 |
|                   | Item 16A. | Audit Committee  Financial Expert | 78 |
|                   | Item 16B. | Code of Ethics | 78 |
|                   | Item 16C. | Principal Accountant  Fees and Services | 78 |
|                   | Item 16D. | Exceptions From the  Listing Standards for Audit Committees | 79 |
|                   | Item 16E. | Purchases of Equity  Securities by the Issuer and Affiliated Purchasers | 79 |
| PART IV                |   |   |   |
|                   | Item 17. | Financial Statements | 79 |
|                   | Item 18. | Financial Statements | 79 |
|                   | Item 19. | Exhibits | 79 |

 

 

All references to "CCM," the "Company," "we," "us" and words of    similar effect refer to Controladora Comercial Mexicana, S.A. de C.V., and, unless the context requires otherwise, its consolidated    subsidiaries.

Unless otherwise specified, references herein to "U.S. Dollars,"    "Dollars," "US$" or "$" are to United States dollars, the legal currency of the    United States of America (the "United States"); references to "Pesos" or "Ps."    are to Mexican Pesos, the legal currency of Mexico. The *Unidad de Inversión*,    or UDI, is an inflation-indexed, Mexican Peso-denominated monetary unit that is    linked to, and adjusted daily to reflect changes in, the Mexican consumer price    index.

Unless otherwise indicated, all Peso information as of and for the    periods ended December 31, 2003, December 31, 2004, and December 31, 2005 is    stated in Pesos in purchasing power as of December 31, 2005 and the U.S. Dollar    equivalent at that date is determined by using the interbank free market    exchange rate, or the Interbank Rate, as reported by Banco Nacional de Mexico,    S.A., or Banamex, of Ps.10.627 per U.S. Dollar. 

Included elsewhere in this annual report are our audited    consolidated balance sheets as of December 31, 2004 and 2005 and the related    audited consolidated statements of income, changes in stockholders’ equity and    changes in financial position for the years ended December 31, 2003, 2004 and    2005. 

We maintain our books and records in Mexican Pesos, the official    currency of Mexico, and prepare our financial statements in constant Mexican    Pesos and in accordance with generally accepted accounting principles in Mexico, or Mexican GAAP. See Note 17 to our financial statements for a description of the    principal differences between Mexican GAAP and generally accepted accounting    principles in the United States, or U.S. GAAP, as they relate to us.

As required by Mexican GAAP, our financial statements are adjusted    to reflect changes in purchasing power of the Mexican Peso due to inflation.    These changes are based on the Mexican National Consumer Price Index, or NCPI.

Statistical information concerning our stores, including number of    stores, number of employees, square footage and statistical information derived    from this data, includes 100% of the operations of our joint venture with    Costco Wholesale Corporation. We report our investment in this joint venture    under the proportional consolidation method of accounting by consolidating 50%    of the operations of that joint venture in our financial statements.

Certain figures included in this annual report and in our financial    statements have been rounded for ease of presentation. Percentage figures    included in this annual report have not in all cases been calculated on the    basis of such rounded figures but on the basis of such amounts prior to    rounding. For this reason, percentage amounts in this annual report may vary    from those obtained by performing the same calculations using the figures in    our financial statements. Certain other amounts that appear in this annual    report may not sum due to rounding.

This annual report contains translations of    certain Mexican Peso amounts into U.S. Dollars at specified rates solely for    the convenience of the reader. The exchange rate translations contained in this    annual report should not be construed as representations that the Peso amounts    actually represent the U.S. Dollar amounts presented or that they could be    converted into U.S. Dollars at the rate indicated.

References in this annual report to "real" amounts are to    inflation-adjusted numbers and "nominal" amounts are to unadjusted numbers.    Unless otherwise indicated, all numbers are stated in "real" amounts.

As used herein, the term "billion" means one thousand million.

# 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 following tables present our selected    consolidated financial information as of the dates and for each of the periods    indicated.  This data is qualified in its entirety by reference to, and should    be read together with, our audited year-end financial statements.  The balance    sheet data as of December 31, 2004 and 2005, and the income statement data for    the years ended December 31, 2003, 2004 and 2005, are derived from the    financial statements appearing elsewhere in this annual report.  This data    should also be read together with "Operating and Financial Review and    Prospects."

Our financial statements have been prepared in    accordance with Mexican GAAP, which differs in significant respects from U.S.    GAAP. Note 17 to our financial statements appearing elsewhere in this annual    report 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 net    income and other items for the years ended December 31, 2003, 2004 and 2005 and    stockholders’ equity at December 31, 2003, 2004 and 2005.  Any reconciliation    to U.S. GAAP may reveal significant differences between our stockholders’    equity, net income and other items as reported under Mexican GAAP and U.S.    GAAP.  See "Risk Factors-Risk Factors Related to Mexico-Differences Between    Mexican GAAP and U.S. GAAP May Have an Impact on the Presentation of Our    Financial Information." 

We report our investment in the Costco de Mexico    Group joint venture under the proportional consolidation method of accounting    by consolidating 50% of the operations of that joint venture in our financial    statements.

The exchange rate used in translating Pesos into    U.S. Dollars in calculating the convenience translations included in the    following tables is determined by reference to the Interbank Rate, as reported    by Banamex, as of December 31, 2005, which was Ps.10.627 per U.S. Dollar.  The    exchange rate translations contained in this annual report should not be    construed as representations that the Peso amounts actually represent the U.S.    Dollar amounts presented or that they could be converted into U.S. Dollars at    the rate indicated.

 

|                                                                                                                                    | **Year Ended December 31,**                                                                                                     |
|-----------------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                    | **2001**                                                                                                                        | **2002** | **2003** | **2004** | **2005** | **2005** |
|                                                                                                                                    | **(Millions of constant Pesos        as of December 31, 2005 and millions of U.S. Dollars, except for        percentages) (1)** |
| **Income Statement Data**                                                                                                               |                                                                                                                            |   |   |   |   |   |
| *Mexican GAAP:*                                                                                                                         |                                                                                                                            |   |   |   |   |   |
| Net sales.................................................................                                                              | Ps. 39,495                                                                                                                      | Ps. 36,223 | Ps. 38,004 | Ps. 38,842 | Ps. 40,309 | U.S.$ 3,793 |
| Gross profit............................................................                                                                | 7,513                                                                                                                           | 7,105 | 7,608 | 7,862 | 8,478 | 798 |
| Selling, general and administrative        expenses...........                                                                          | 6,286                                                                                                                           | 6,067 | 6,080 | 6,033 | 6,200 | 583 |
| Operating income...................................................                                                                     | 1,228                                                                                                                           | 1,040 | 1,527 | 1,828 | 2,278 | 214 |
| Integral results of financing ...................................                                                                       | 11                                                                                                                              | (67) | (203) | 182 | (621) | 58 |
|         Interest expense.................................................                                           | (307)                                                                                                                           | (260) | (356) | (300) | (432) | (41) |
|         Interest income (2)............................................                                             | 66                                                                                                                              | 49 | 46 | 79 | 64 | 6 |
|         Foreign-exchange (loss) gain, net.......................                                                    | 27                                                                                                                              | (247) | (108) | (7) | (87) | 8 |
|         Loss from repurchase of notes............................                                                   | -                                                                                                                               | (9) | (44) | - | - | - |
|         (Loss) gain from forward agreements..................                                                       | (48)                                                                                                                            | 56 | - | 91) | (576) | (54) |
|         Gain from monetary position.............................                                                    | 273                                                                                                                             | 344 | 259 | 319 | 236 | 22 |
| Other (expense) income, net (3)............................                                                                             | (21)                                                                                                                            | 5 | 67 | (19) | (520) | 49 |
| Provision for income taxes and employee        statutory profit sharing.....................................................            | 302                                                                                                                             | 79 | 261 | 208 | 333 | 31 |
| Interest of minority stockholders in        results of subsidiaries..........................................................           | (9)                                                                                                                             | (7) | (8) | (8) | (13) | (1) |
| Net income............................................................                                                                  | 906                                                                                                                             | 892 | 1,122 | 1,775 | 1,832 | 172 |
| Capital stock outstanding shares at end of period ..                                                                                    | 1,061,000                                                                                                                       | 1,078,000 | 1,080,000 | 1,086,000 | 1,086,000 |   |
| Net income per B Unit and BC Unit(4)..................                                                                                  | 0.85                                                                                                                            | 0.83 | 1.04 | 1.63 | 1.69 | 0.16 |
| Net income per GDS (5).........................................                                                                         | 17.0                                                                                                                            | 16.6 | 20.80 | 31.6 | 33.8 | 3.18 |
| Dividends per B Unit and BC Unit..........................                                                                              | 0.107                                                                                                                           | 0.107 | 0.107 | 0.1115 | 0.123 | 0.01 |
| Dividends per GDS (5)............................................                                                                       | 2.14                                                                                                                            | 2.14 | 2.14 | 2.23 | 2.46 | 0.23 |
| Weighted average B Units and BC Units        outstanding.............................................................                   | 1,061                                                                                                                           | 1,078 | 1,080 | 1,086 | 1,086 |   |
|                                                                                                                                    |                                                                                                                            |   |   |   |   |   |
| *U.S.**GAAP (6) (19):*                                                                                                                  |                                                                                                                            |   |   |   |   |   |
| Net sales................................................................                                                               | 33,140                                                                                                                          | 29,514 | 30,844 | 31,016 | 31,922 | 3,006 |
| Operating income ..................................................                                                                     | -                                                                                                                               | - | 1,535 | 1,879 | 2,283 | 215 |
| Net income............................................................                                                                  | 994                                                                                                                             | 954 | 857 | 1,603 | 371 | 35 |
| Net income per B Unit and BC Unit(4)..................                                                                                  | 0.94                                                                                                                            | 0.88 | 0.79 | 1.48 | 0.34 |   |
| Net income per GDS (5).........................................                                                                         | 18.8                                                                                                                            | 17.6 | 15.8 | 29.5 | 14.0 |   |
|                                                                                                                                    |                                                                                                                            |   |   |   |   |   |
| **Balance Sheet Data**                                                                                                                  |                                                                                                                            |   |   |   |   |   |
| *Mexican GAAP:*                                                                                                                         |                                                                                                                            |   |   |   |   |   |
| Cash and temporary investments............................                                                                              | 1,416                                                                                                                           | 970 | 1,325 | 1,291 | 1,621 | 153 |
| Current assets.........................................................                                                                 | 7,314                                                                                                                           | 8,350 | 9,541 | 9,909 | 8,597 | 809 |
| Property, equipment and leasehold and        owned building improvements, net................................                           | 17,567                                                                                                                          | 17,329 | 17,933 | 18,918 | 20,574 | 1,936 |
| Total assets............................................................                                                                | 25,297                                                                                                                          | 26,194 | 27,965 | 29,694 | 30,325 | 2,854 |
| Short-term debt......................................................                                                                   | -                                                                                                                               | 178 | - | - | 319 | 30 |
| Long-term debt......................................................                                                                    | 2,053                                                                                                                           | 1,979 | 2,285 | 2,197 | 2,216 | 209 |
| Total liabilities.......................................................                                                                | 12,365                                                                                                                          | 12,812 | 13,723 | 14,019 | 13,571 | 1,277 |
| Minority interest (7)..............................................                                                                     | 99                                                                                                                              | 94 | 101 | 100 | 106 | 10 |
| Majority stockholders’ equity.................................                                                                    | 12,833                                                                                                                          | 13,288 | 14,141 | 15,575 | 16,648 | 1,567 |
|                                                                                                                                    |                                                                                                                            |   |   |   |   |   |
| *U.S.**GAAP (6) (19):*                                                                                                                  |                                                                                                                            |   |   |   |   |   |
| Current assets .......................................................                                                                  | -                                                                                                                               | - | - | 10,389 | 9,708 | 914 |
| Total assets............................................................                                                                | 24,326                                                                                                                          | 25,353 | 26,815 | 31,265 | 32,053 | 3,016 |
| Current liabilities                                                                                                                     | -                                                                                                                               | - | - | 11,239 | 9,651 | 908 |
| Total liabilities.......................................................                                                                | 11,871                                                                                                                          | 12,382 | 13,209 | 16,299 | 16,908 | 1,591 |
| Stockholders’ equity...............................................                                                               | 12,434                                                                                                                          | 12,957 | 13,605 | 14,866 | 15,039 | 1,415 |
|                                                                                                                                    |                                                                                                                            |   |   |   |   |   |
| **Other        Data**                                                                                                                   |                                                                                                                            |   |   |   |   |   |
| *Mexican        GAAP*                                                                                                                   |                                                                                                                            |   |   |   |   |   |
| Net income............................................................                                                                  | 906                                                                                                                             | 892 | 1,122 | 1,775 | 1,832 | 172 |
| Net income        as a percentage of net sales..................                                                                        | 2.3%                                                                                                                            | 2.5% | 3.0% | 4.6% | 4.5% |   |
| Depreciation and amortization...............................                                                                            | 816                                                                                                                             | 819 | 736 | 702 | 711 | 67 |
| Capital expenditures (8).........................................                                                                       | 1,362                                                                                                                           | 839 | 1,670 | 2,104 | 2,684 | 253 |
| Total debt/capitalization (9)...................................                                                                        | 0.18                                                                                                                            | 0.18 | 0.17 | 0.14 | 0.15 |   |
| Working capital (10)..............................................                                                                      | 181                                                                                                                             | (22) | 374 | 471 | (457) | (43) |
|                                                                                                                                    |                                                                                                                            |   |   |   |   |   |
| **Operating Information**                                                                                                               |                                                                                                                            |   |   |   |   |   |
| *Store Information (11):*                                                                                                               |                                                                                                                            |   |   |   |   |   |
| Food sales (12).......................................................                                                                  | 63.3%                                                                                                                           | 64.9% | 66.3% | 68.9% | 66.8% |   |
| Non-food sales (12)................................................                                                                     | 36.7%                                                                                                                           | 35.1% | 33.7% | 31.1% | 33.2% |   |
| Average annual sales per store (millions)      (13).........                                                                            | Ps.    262                                                                                                            | Ps.    249 | Ps.    256 | Ps.    253 | Ps.    251 |   |
| Sales per retail square foot (thousands)      (13)............                                                                          | Ps.   3.73                                                                                                            | Ps.   3.73 | Ps.   3.47 | Ps.   3.39 | Ps.   3.13 |   |
| Sales per operating employee (thousands)      (13) (14).                                                                                | Ps. 1,651                                                                                                                       | Ps. 1,513 | Ps. 1,572 | Ps. 1,619 | Ps. 1,614 |   |
| Same store sales growth (15)...................................                                                                         | (3.3)%                                                                                                                          | (10.3)% | 0.3% | (0.1)% | 0.5% |   |
| Stores:                                                                                                                                 |                                                                                                                            |   |   |   |   |   |
|         Operating at end of period...............................                                                   | 172                                                                                                                             | 170 | 175 | 181 | 191 |   |
|         Opened during period......................................                                                  | 7                                                                                                                               | 3 | 8 | 8 | 15 |   |
|         Closed during period .......................................                                                | 2                                                                                                                               | 5 | 3 | 2 | 5 |   |
|         Remodeled during period (16)..........................                                                      | 14                                                                                                                              | 12 | 9 | 9 | 12 |   |
| Total retail square feet at end of period      (thousands) (17) ....................................................................... | 11,998                                                                                                                          | 12,098 | 13,037 | 13,551 | 14,472 |   |
| Number of employees (at end of period)      (18).........                                                                               | 31,955                                                                                                                          | 32,993 | 33,557 | 33,763 | 35,837 |   |

_________________

(1) Except operating information, percentages and    ratios.

(2) Interest income includes our income from    interest-bearing temporary investments

(3) Other (expense) income, net consists of    amortization of negative goodwill from our acquisition of the Mexican    operations of Auchan, S.A. in February 2003 and the write-off of certain fixed    assets. For the year ended December 31, 2001, also includes gain on sale of    marketable securities. For the years 2004 of Ps.217.9 million and year 2005    of Ps.243.9 million consisted of amortization of negative goodwill from our    acquisition of the Mexican operations of Auchan S.A.

(4) Computed by dividing the net income for the    year by the weighted average B Units and BC Units outstanding. 

(5) Each GDS represents 20 BC units. See "Major    Shareholders and Related Party Transactions - Capital Stock."

(6) For a description of the principal differences    between Mexican GAAP and U.S. GAAP, see Note 17 to our financial statements.

(7) Consists of interests held by minority    stockholders in our subsidiary that manufactures plastic bags and certain of    our subsidiaries that own shopping centers.

(8) Capital expenditures for all periods include    amounts contributed by us to the Costco de Mexico Group joint venture but    exclude amounts contributed to the joint venture by Costco.

(9) Total debt/capitalization is determined by    dividing the sum of short term debt and long term debt by stockholders’ equity.

(10) Working capital is current assets minus    current liabilities.

(11) Except as otherwise indicated, store information    relates to all of our stores, including those operated through the Costco de    Mexico Group joint venture (calculated on the basis of 100% of the amounts    attributable to the Costco membership warehouses). The information does not    include our restaurants.

(12) Food sales include sales of basic groceries    and perishables. Non-food sales include sales of general merchandise and    clothing. In each case, this information is presented as a percentage of net    sales of our stores. For this purpose, sales include only the net sales from    the Costco de Mexico Group joint venture that are included in our operating    results.

(13) In computing sales per retail square foot for    a period, we divide total store sales for the full period by the aggregate    retail square footage at the end of such period. Accordingly, stores that are    opened for less than the full period have the effect of decreasing store sales    per retail square foot, and stores that are closed prior to the end of the full    period have the opposite effect. Similarly, in computing average annual sales    per store, we divide total store sales for the full period by the number of    stores at the end of the period, and in computing sales per operating employee,    we divide total store sales for the full period by the number of operating    employees at the end of the period.

(14) Takes into account all employees at our    stores, including Costco membership warehouses and distribution centers but    excludes administrative employees and restaurant employees.

(15) See "Operating and Financial Review and    Prospects" for the calculation of same store sales.

(16) Includes conversions of stores from one format    to another format.

(17) Retail square footage means the square footage    of space in our stores from the cash registers (including accompanying    displays) to the back of our stores (excluding any warehouse space). Space for    cashiers constituted approximately 8.5% of the total selling area of our stores    at December 31, 2005.

(18) Takes into account all employees at our    stores, including Costco membership warehouses, restaurants and distribution    centers as well as our administrative employees.

(19) For U.S. GAAP purposes, CCM has adopted to avail itself the SEC accommodation to omit reconciling differences related to the classification or display and instead provides summarized footnote disclosure of the amounts proportionally consolidated. See note 17 to the financial statements.

### Dividends

Our shares are currently held in B Units and in BC Units. Each B    Unit consists of four B Shares and each BC Unit consists of three B Shares and    one C Share. The table below sets forth the nominal amount of dividends per B    Unit and BC Unit paid in April of each year indicated. Peso amounts have been    translated into U.S. Dollars at the exchange rate on each of the respective    payment dates.

We paid aggregate dividends of Ps.128.8 million in 2003, Ps.129.4 million    in 2004, Ps.138.0 million in 2005 and Ps.149.6 million in 2006. Our    current policy is to pay annual aggregate dividends of between    U.S.$12.0 million and U.S.$15.0 million.

During our annual shareholders’ meeting on April 6, 2006 our    shareholders approved a dividend of Ps.0.138 for each BC Unit, in a single    payment, which was made to holders of record on April 18, 2006.

|  
**In        respect of** | **DividendIn nominal Pesos per B and BC Unit** | **DividendIn dollars per B and BC Unit** |
|---------------------------------|------------------------------------------------|------------------------------------------|
|                            |                                           |
| 2002                            | Ps. 0.107                                      | U.S. 0.00980                             |
| 2003                            | Ps. 0.107                                      | U.S. 0.01112                             |
| 2004                            | Ps. 0.1115                                     | U.S. 0.01252                             |
| 2005                            | Ps. 0.123                                      | U.S. 0.01372                             |
| 2006                            | Ps. 0.138                                      | U.S. 0.01467                             |

### Exchange Rate Information

Mexico has had a free market for foreign exchange    since November 1991 and the Mexican government allows the Peso to float freely    against the U.S. Dollar. There can be no assurance that the government will    maintain its current policies with regard to the Peso or that the Peso will not    further depreciate or appreciate significantly in the future.

The following table sets forth, for the periods indicated, the high,    low, average and period-end noon buying rate in New York City for cable    transfers in Pesos published by the Federal Reserve Bank of New York, expressed    in Pesos per U.S. Dollar. The rates have not been restated in constant    currency units and therefore represent nominal historical figures.
|                                                                                                  | **High** | **Low** | **Average(1)** | **Period      End** |
|-------------------------------------------------------------------------------------------------------|----------|---------|----------------|---------------------|
| **Period**                                                                                            |     |    |           |                |
| 2000.................................................................................                 | 10.09    | 9.18    | 9.47           | 9.62                |
| 2001.................................................................................                 | 9.97     | 8.95    | 9.33           | 9.16                |
| 2002.................................................................................                 | 10.42    | 9.00    | 9.75           | 10.42               |
| 2003.................................................................................                 | 11.41    | 10.11   | 10.80          | 11.24               |
| 2004.................................................................................                 | 11.63    | 10.80   | 11.31          | 11.15               |
| 2005.................................................................................                 | 11.41    | 10.41   | 10.94          | 10.63               |
| 2006:                                                                                                 |     |    |           |                |
|         January................................................................   | 10.64    | 10.44   | 10.54          | 10.44               |
|         February..............................................................    | 10.53    | 10.43   | 10.45          | 10.45               |
|         March.................................................................    | 10.95    | 10.46   | 10.75          | 10.90               |
|         April.................................................................... | 11.16    | 10.86   | 11.05          | 11.09               |
|         May.....................................................................  | 11.30    | 10.84   | 11.09          | 11.29               |
|         June....................................................................  | 11.48    | 11.24   | 11.40          | 11.34               |
|         July (through July 14, 2006).................................             | 11.25    | 10.98   | 11.05          | 10.98               |

______________

 (1) Average of month-end rates.

 

The Mexican economy has suffered balance of payment deficits and    shortages in foreign exchange reserves in the past. While the Mexican    government has not restricted for more than ten years the ability of Mexican or    foreign persons or entities to convert Pesos to U.S. Dollars, we cannot assure    you that the Mexican government will not institute restrictive exchange control    policies in the future. To the extent that the Mexican government institutes    restrictive exchange control policies in the future, our ability to transfer or    to convert Pesos into U.S. Dollars and other currencies for the purpose of    making timely payments of interest and principal of indebtedness, including the    notes, as well as to obtain imported goods would be adversely affected. See    "-Risk Factors-Risk Factors Related to Mexico-Currency Fluctuations or the    Devaluation and Depreciation of the Peso Could Limit Our Ability to Convert    Pesos into U.S. Dollars or into Other Currencies, Which Could Adversely Affect    Our Business, Financial Condition or Results of Operations."

On July 14, 2006, the noon buying rate    was Ps. 10.98 To U.S $1.00.

### Risk Factors

*The following is a discussion of risks associated with our Company    and an investment in our securities. Some of the risks of investing in our    securities are specific to our business. Other risks are general risks    associated with doing business in Mexico. The discussion below contains    information about the Mexican government and the Mexican economy obtained from    public sources. We have not independently verified this information. Any of    the following risks, if they actually occur, could materially and adversely    affect our business, financial condition, results of operations or the price of    our securities.*

**Risk Factors Related    to Our Business**

**We Participate    in a Very Competitive Market and Increased Competition May Adversely Affect Our    Business**

The retail industry in Mexico is characterized by intense    competition and increasing pressure on profit margins. The number and type of    competitors and the degree of competition experienced by individual stores vary    by location. Competition occurs principally on the basis of price and, to a    lesser extent, location, selection of merchandise, quality of merchandise (in    particular perishables), service, store conditions and promotions. We face    strong competition from other national and international operators of    supermarket and retail stores, including Walmex, Soriana, Chedraui (which    acquired in 2005, 29 Carrefour stores), Gigante and other U.S. and international retailers. The Costco membership warehouses also face competition    from Sam’s Club, a self-service warehouse club owned by Walmex. Additional U.S. and international retailers may enter the market in Mexico in the future either through joint    ventures or directly. One of our competitors, Walmex, is affiliated with a    large multinational retailer with significant financial resources. We also    compete with numerous local and regional supermarkets and self-service store    chains, as well as small, family-owned neighborhood stores and street markets,    in each region in which we do business. In addition, several of our stores,    which are located in the same shopping areas, compete with each other. The    restaurant business in Mexico is also highly competitive. Restaurantes California competes with numerous regional and national fast-food restaurant chains, local    restaurants and prepared food establishments and street markets. We face    strong competition from various U.S. fast-food restaurant chains, including    McDonalds, Burger King, Kentucky Fried Chicken, Dominos Pizza and Pizza Hut.    There can be no assurance that our performance will not be adversely affected    by increased competition, whether resulting from the competitors described    above or others. See "Information on the Company-Business Overview."

Other leading Mexican retailers, including Walmex and Soriana, are    better capitalized than we are and have greater market share than we have as    measured by net sales in 2005. Walmex has a pricing strategy of "Every Day Low    Prices," which in recent years has increased the pressure on our operating    margins and compelled us to lower the prices of certain of our products.    Recently, Walmex announced an aggressive expansion plan which involves opening    an additional 81 stores across Mexico in 2006. Other competitors have also    announced expansion and modernization plans. These actions by our competitors    are likely to cause us to respond by adopting more aggressive pricing policies    at affected store locations and by implementing our growth strategy more    rapidly. As Walmex and other retailers currently in the market in Mexico expand their operations, and as other U.S. and international retailers enter the market in Mexico, competition will continue to intensify and may adversely impact our performance.

**Our Growth    Strategy Is Dependent Upon the Continued Improvement of the Mexican Economy and    Generating Positive Cash Flow**

A major component of our future growth is expected to come from    adding new stores (including Costco membership warehouses) and restaurants and    remodeling our existing stores and restaurants. Our ability to carry out our    expansion and remodeling plans and our returns on our investment in expansion    and remodeling are dependent to a significant extent on the continued improvement    of Mexico’s economic performance and our ability to generate positive cash flow    given the Mexican economy. The Mexican economy has suffered severe downturns    in the past and may do so in the future. See "-Risk Factors Related to Mexico-Mexico Has Experienced Adverse Economic Conditions." There can be no assurance that we will    be able to open or remodel the number of stores (including Costco membership    warehouses) and restaurants currently intended, whether because of economic    conditions, availability of funds to make capital expenditures, availability of    suitable and affordable sites, the ability to attract and retain certain    qualified employees or otherwise. See "Operating and Financial Review and    Prospects" and "Information on the Company-Business Overview."

**Implementation    of Our Expansion Program Presents Additional Risks**

The growth in our net sales and net income depends to a substantial    degree on our expansion program. Successful execution of our expansion program    is dependent upon a number of factors, including our hiring and training of    qualified personnel, the level of existing and future competition in areas    where new stores are to be located, the availability of additional capital, our    ability to locate new store and restaurant sites on acceptable terms, our    ability to execute our retail concepts successfully in new markets and    favorable financial market and macroeconomic conditions in Mexico. We plan to    open new stores and restaurants both in areas in which we already operate and    in new areas in Mexico. We cannot assure you that our new store and restaurant    openings will not result in diversion of sales from our existing operations,    and we may be unable to locate sufficient properties to support our expansion    plans. Zoning restrictions, permit requirements and other regulations    restricting the construction of buildings of the type in which we operate our    various formats may also affect our ability to open new stores and restaurants.

If we are unable to open new stores and restaurants, our financial    performance could be adversely affected. In addition, if consumers in the    markets into which we expand are not receptive to our retail concepts, our    financial performance could be adversely affected.

**Our Joint Venture With Costco Is Jointly    Controlled and Is Subject to Termination in Certain Circumstances**

The Costco de Mexico Group joint venture is managed, on a day-to-day    basis, by officers appointed by Costco and approved by us pursuant to certain    management agreements between us, Costco and the Costco de Mexico Group joint    venture. The affirmative vote of a majority of the entire board of directors    of the joint venture is required to approve certain significant decisions    regarding the joint venture, including some revisions to the joint venture    business plan, entering into significant contracts, incurring significant    indebtedness not provided for in the business plan, the removal of any    management personnel, the election of officers and certain transfers of    ownership interests in the joint venture. Furthermore, some significant    decisions also require the approval of both members of an executive committee,    which consists of our chief executive officer and the chief executive officer    of Costco. Accordingly, although we expect Costco membership warehouses to be    an important part of our future growth, we do not have sole control over the    growth and operation of the Costco membership warehouse format. In addition,    the Costco de Mexico Group joint venture is subject to termination under some    circumstances. See "Information on the Company-Business Overview-Retail Store    Formats-Membership Warehouse Stores."

**Our Operations    Are Highly Concentrated in the Mexico City Metropolitan Area and in the Central    Region**

Although we operate nationwide, our principal properties and    operations are concentrated in the two most populated areas of Mexico, the Mexico City metropolitan area and the Central Region. At December 31, 2005, our stores    located in those areas accounted for approximately 72.0% of our total retail    square feet and 80.3% of our net sales for the year ended December 31, 2005.    Our restaurants located in those areas accounted for approximately 1.6% of our    net sales from restaurant sales for the year ended December 31, 2005. Although    we own stores and restaurants, and expect to develop or acquire additional    stores and restaurants, outside of the Mexico City metropolitan area and the    Central Region, we expect to continue to depend to a very large extent on    economic conditions in those areas. Therefore, an economic downturn in those    areas could have an adverse effect on our business, financial condition and    results of operations. In addition, in the Mexico City metropolitan area,    there is very limited availability of sites to acquire or lease for additional    stores. As competition intensifies, it will become increasingly difficult to    locate sufficient sites to support our expansion plans. If we are unable to    locate sufficient sites, we will be unable to implement our expansion plans and    our financial performance could be adversely affected.

**Our Acquisition    of the Mexican Operations of Auchan Is Dependent on Payment of the Purchase    Price Due and Failure to Pay Will Result in Forfeiture of Auchan Properties and    All Amounts Paid**

In February 2003, we acquired Auchan’s operations in Mexico, consisting of five hypermarket stores located in the Central Region. We now    operate these stores under the Mega format. The purchase price for this    acquisition consists of six installment payments. We paid U.S.$15.0 million    in 2003, U.S.$20.0 million in 2004, U.S.$25 million in 2005 and    U.S.$20 million in 2006. We are required to make additional payments of    U.S.$20.0 million in each of 2007 and 2008. The stock of the Mexican    corporations that hold the fixed assets of these stores are presently held in    an escrow. The stock will not be released from this escrow, and we will not    acquire title to the stock, until the purchase price is paid in full to the    sellers. If we do not pay the purchase price in full when due, we will not    obtain title to the stock and will have no right to be repaid the amounts we    previously paid to Auchan. In addition, there are certain restrictive    covenants that limit the operations of the business until the purchase price is    paid to the seller. See "Information on the Company-Business Overview-New    Initiatives-Acquisition of Auchan’s Mexican Operations."

**Our Markets Are    Undergoing Rapid Consolidation**

Over the last several years, the retail sector in Mexico has been undergoing consolidation as large retail chains have gained market share at the    expense of small, independently owned and operated stores. Recently, Walmex    announced an aggressive expansion plan which involves opening an additional 81    stores across Mexico in 2006. We believe that further consolidation will    likely occur as competition intensifies and economies of scale become    increasingly important. Future consolidation may occur rapidly and materially    alter the current competitive situation in Mexico. Walmex and Soriana are    larger and better capitalized than we are and as a result are likely to be    better positioned than we are to take advantage of strategic acquisition and    consolidation opportunities. There can be no assurance that any further market    consolidation will not be detrimental to our market position or will not    materially and adversely affect our business, financial condition and results    of operations.

**Compliance with new rules and regulations concerning corporate governance may be costly, time consuming, and difficult to achieve, which could harm our operating results and business.**

Changing laws, regulations and standards relating    to corporate governance and public disclosure, including the Sarbanes-Oxley Act    of 2002 and related regulations implemented by the SEC and the Public Company    Accounting Oversight Board, or PCAOB, are creating uncertainty for public    companies, increasing legal and financial compliance costs and making some    activities more time consuming. We will be evaluating our internal control over    financial reporting to allow management to report on, and our registered    independent public accounting firm to attest to, our internal controls over    financial reporting. We will be performing the system and process evaluation    and testing (and any necessary remediation) required to comply with the    management certification and auditor attestation requirements of Section 404 of    the Sarbanes-Oxley Act, which we are required to comply within our annual    report which we will file in 2007 for our 2006 fiscal year. As a result, we    expect to incur substantial additional expenses and diversion of management’s    time. While we anticipate being able to fully implement the requirements    relating to internal controls and all other aspects of Section 404 by our    deadline, we cannot be certain as to the timing of completion of our    evaluation, testing and any remediation actions or the impact of the same on    our operations since there is presently no precedent available by which to    measure compliance adequacy. If we are not able to implement the requirements    of Section 404 in a timely manner or with adequate compliance, we might be    subject to sanctions or investigation by regulatory authorities such as the SEC    or the PCAOB. Any such action could adversely affect our financial results or    investors’ confidence in our company and could cause the price of our    securities to fall. In addition, if we fail to develop and maintain effective    controls and procedures, we may be unable to provide the financial information    in a timely and reliable manner.

 

**Risk Factors Related to Mexico**

**Economic and    Political Developments in Mexico Could Affect Mexican Economic Policy and Our    Business, Financial Condition And Results Of Operations**

CCM is a Mexican corporation and all of its operations and assets    are located in Mexico. As a result, our business, financial condition and    results of operations may be affected by the general condition of the Mexican    economy, the devaluation of the Peso as compared to the U.S. Dollar, price    instability, inflation, interest rates, regulation, taxation, social    instability and other political, social and economic developments in or    affecting Mexico over which we have no control.

The Mexican government has exercised, and continues to exercise,    significant influence over the Mexican economy. Mexican governmental actions    concerning the economy and state-owned enterprises could have a significant    effect on Mexican private sector entities in general, and us in particular, and    on market conditions, prices and returns on Mexican securities, including our    securities.

Although the Mexican economy has exhibited signs of    improvement, general economic sluggishness continues. This continuing sluggishness    in the Mexican economy, combined with recent political events, has slowed    economic reform and progress.

Presidential and federal congress elections in Mexico were held on July 2, 2006 and Felipe Calderon, a member of the incumbent political party, was elected in a highly contested election. Controversies sourrounding the election could lead to further friction among    political parties and the executive branch officers, which could potentially    cause additional political and economic instability. Additionally, as a result of the election of Felipe Calderon and new representatives to congress, there could be significant changes    in laws, public policies and government programs, which could have a material    adverse effect on the Mexican economic and political situation which, in turn    may adversely affect our business, financial condition and results of    operations.

National politicians are currently focused on the 2006 election controversies and    crucial reforms regarding fiscal and labor policies, gas, electricity, social    security and oil have not been and may not be approved.  The effects on the social and political situation in Mexico, including the 2006 presidential elections and presidential succession, could    adversely affect the Mexican economy, including the stability of its currency,    which in turn could have a material adverse effect on our business, financial    condition and results of operations, as well as market conditions and prices    for our securities.

**Mexico Has Experienced Adverse Economic Conditions**

Mexico has historically experienced uneven periods    of economic growth. In 2001, Mexico’s gross domestic product, or GDP,    decreased 0.3% primarily as a result of the downturn in the U.S. economy. Mexican GDP increased 0.9% in 2002, 1.3% in 2003, 4.4% in 2004, 3.0% in 2005 and 4.1%    in the first quarter 2006. GDP growth fell short of Mexican government    estimates in 2005.

If the Mexican economy should fall into a recession, our business,    financial condition and results of operations may be adversely affected.

**Developments in    Other Emerging Market Countries or in the United States May Affect Us and the    Prices for our Debt Securities**

The market value of securities of Mexican companies, the economic    and political situation in Mexico and our financial condition and results of    operations are, to varying degrees, affected by economic and market conditions    in other emerging market countries and in the United States. Although economic    conditions in other emerging market countries and in the United States 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 or trading price of securities of Mexican issuers, including    our debt securities, or in our business.

In particular, Argentina’s continued insolvency and default on its    public debt could adversely affect Mexico, the market value of our debt    securities or our business. Although a majority of the foreign holders of Argentina’s indebtedness have agreed to exchange their securities in connection with Argentina’s restructuring, holders of a substantial amount of the country’s indebtedness    have refused such exchange. To the extent that the Argentine government is    unsuccessful in preventing further economic decline, the crisis may also    adversely affect Mexico, the price of our securities or our business.

In addition, the political and economic future of Venezuela remains uncertain. A nationwide general strike that occurred between December 2002 and    January 2003 caused a significant reduction in oil production in Venezuela, and has had a material adverse effect on Venezuela’s oil-dependent economy. In February    2003, Venezuelan authorities imposed foreign exchange and price controls on    specified products. Inflation continues to grow despite price controls and the    political and economic environment has continued to deteriorate. Venezuela has experienced increasing social instability and massive public demonstrations    against President Chavez. We cannot predict what effect, if any, the decisions    of the Venezuelan government will have on the economies of other emerging    market countries, including Mexico, the price of our debt securities or our    business.

Brazil has also not achieved institutional    and economic stability and political crises in Brazil in the past have affected    the development of its economy. For example, Brazil has historically    experienced extremely high rates of inflation, including rates as high as 5,000    percent a year during the late 1980s. Inflation and certain of the Brazilian    government’s measures taken in the attempt to curb inflation have had    significant negative effects on the Brazilian economy. The Brazilian    government’s actions to control inflation and affect other policies have often    involved wage and price controls, currency devaluations, capital controls, and    limits on imports, among other things. Uncertainty as to future government    policies may contribute to an increase in the volatility the Brazilian economy.    The Brazilian economy grew 2.3% in 2005, 4.9% in 2004 and 0.5% in 2003. Due to    the limited economic growth in recent years, it is not certain whether the    current economic policy will prevail.

Our operations, including demand for our products or services, and    the price of our debt securities, have also historically been adversely    affected by increases in interest rates in the United States and elsewhere.    The U.S. Federal Reserve Bank has signaled that it will continue implementing    "measured" increases in interest rates in 2005. As interest rates rise, the prices    of our debt securities may fall.

**Military    Operations in Iraq and Elsewhere Have Negatively Affected Industry and Economic    Conditions Globally, and These Conditions Have Had, and May Continue to Have, a    Negative Effect on Our Business**

Military operations in Iraq have depressed economic activity in the United States and globally, including the Mexican economy. Since the invasion of Iraq, there have been terrorist attacks abroad, like the terrorist attacks in Madrid on March 11,    2004, as well as ongoing threats of future terrorist attacks in the United States and abroad. Although it is not possible at this time to determine the    long-term effect of these terrorist threats and attacks and the consequent    response by the United States, there can be no assurance that there will not be    other attacks or threats in the United States or abroad that will lead to a    further economic contraction in the United States or any other major markets.    In the short term, however, terrorist activity against the United States and    the U.S. military operations in Iraq have contributed to the uncertainty of the    stability of the U.S. economy as well as global capital markets. It is not    certain how long these economic conditions will continue. If terrorist attacks    continue or become more prevalent or serious, if the economic conditions in the    United States decline or if a global recession materializes, our business,    financial condition and results of operations may be materially and adversely    affected.

**Currency    Fluctuations or the Devaluation and Depreciation of the Peso Could Limit Our    Ability to Convert Pesos into U.S. Dollars or into Other Currencies, Which    Could Adversely Affect Our Business, Financial Condition or Results of    Operations**

A substantial portion of our indebtedness is U.S.    Dollar-denominated. In addition, some of our costs, principally the costs of    products from international suppliers, are U.S. Dollar and other foreign    currency denominated. However, all of our revenues are Peso-denominated. As a    result, decreases in the value of the Peso against the U.S. Dollar and other    foreign currencies could cause us to incur foreign exchange losses, which would    adversely affect our financial condition and reduce our net income.

Severe devaluation or depreciation of the Peso may also result in    governmental intervention, as has resulted in Argentina, or disruption of    international foreign exchange markets. This may adversely affect our ability    to transfer or convert Pesos into U.S. Dollars for the purpose of making timely    payments of interest and principal on our indebtedness and may adversely affect    our ability to transfer or convert Pesos into U.S. Dollars and other currencies    to obtain imported goods. The Mexican economy has suffered balance of payment    deficits and shortages in foreign exchange reserves in the past. While the    Mexican government has not restricted for more than ten years the ability of    Mexican or foreign persons or entities to convert Pesos to U.S. Dollars, we    cannot assure you that the Mexican government will not institute restrictive    exchange control policies in the future. To the extent that the Mexican    government institutes restrictive exchange control policies in the future, our    ability to transfer or to convert Pesos into U.S. Dollars and other currencies    for the purpose of making timely payments of interest and principal of    indebtedness, including the notes, as well as to obtain imported goods would be    adversely affected. Devaluation or depreciation of the Peso against the U.S.    Dollar or other currencies may also adversely affect U.S. Dollar or other    currency prices for our debt securities or the cost of imported goods.

**High Inflation    Rates in Mexico May Adversely Affect Our Results of Operations and Financial    Condition**

Mexico historically has experienced high levels of    inflation, although the rates have been lower in recent years. The annual rate    of inflation, as measured by changes in the NCPI, was 4.4% in 2001, 5.7% for    2002, 4.0% for 2003, 5.2% for 2004 and 3.3% in 2005. Mexico’s current level of inflation remains higher than the annual inflation rates of its main    trading partners. High inflation rates can adversely affect our business,    financial condition and results of operations in the following ways:
> 
- inflation can adversely      affect consumer purchasing power, thereby adversely affecting consumer demand      for our products and services; and

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

 

**High Interest    Rates in Mexico Could Increase Our Financing Costs**

Mexico historically has had, and may continue to    have, high interest rates. The interest rates on 28-day Mexican government    treasury securities averaged 7.1% for 2002, 6.2% for 2003, 6.8% for 2004 and    8.0% in 2005. Accordingly, if we have to incur Peso-denominated debt in the    future, it will likely be at higher interest rates. High interest rates in Mexico could increase our financing costs and thereby impair our financial condition,    results of operations and cash flows.

**Mexican    Antitrust Laws May Limit Our Ability to Expand Through Acquisitions or Joint    Ventures**

Mexico’s federal antitrust laws and regulations    may affect some of our activities, including our ability to introduce new    products and services, to enter into new or complementary businesses or joint    ventures and to complete acquisitions. In addition, the federal antitrust laws    and regulations may adversely affect our ability to determine the rates we    charge for our services and products. Approval of the *Comisión Federal de    Competencia*, or Mexican Antitrust Commission, is required for us to acquire    and sell significant businesses or to enter into significant joint ventures.    The Mexican Antitrust Commission may not approve any proposed future    acquisition or joint venture that we may pursue.

At the end of 2003, three of the main retail companies in Mexico, CCM, Gigante and Soriana, formed Sinergia de Autoservicios, S. de R.L. de C.V., or    Sinergia, a limited liability company created to improve procurement for the    three companies by combining their purchasing power. After an extensive    process, the Mexican Antitrust Commission granted approval for the formation    and operation of Sinergia but imposed certain conditions to prevent    monopolistic practices. Among these conditions, Sinergia is subject to certain    ongoing reporting obligations to the Mexican Antitrust Commission regarding its    internal systems and procedures. Sinergia also is required to disclose to the    Mexican Antitrust Commission on an ongoing basis the economic benefits being    obtained by its members. There can be no assurance that there will not be any    further challenge to Sinergia on antitrust grounds or otherwise. Without the    benefits of Sinergia, our cost of sales may increase. These higher costs could    have an adverse effect on our results of operations.

**Differences    Between Mexican GAAP and U.S. GAAP May Have an Impact on the Presentation of    Our Financial Information**

A principal objective of the securities laws of the United States, Mexico and other countries is to promote full and fair disclosure of all material    corporate information. However, there may be less publicly available    information about foreign issuers of securities listed in the United States than is regularly published by or about domestic issuers of listed securities. In    addition, our financial statements are prepared in accordance with Mexican    GAAP, which differs from U.S. GAAP and accounting procedures adapted in other    countries in a number of respects. For example, most Mexican companies, including    our company, must incorporate the effects of inflation directly in accounting    records and in their published financial statements. Thus, financial    statements and reported earnings of Mexican companies may differ from those of    companies in other countries with the same financial performance. Note 17 to    our financial statements provides a description of the principal differences    between Mexican GAAP and U.S. GAAP as they relate to us. 

 

**Risk Factors Related    to Our Principal Shareholders**

**Our Principal    Shareholders Have Substantial Influence Over Our Management and the Interests of    Our Principal Shareholders May Differ from Those of Other Shareholders**

As of December 31, 2005, approximately 73.9% of our outstanding B    Shares were beneficially owned, directly or indirectly, by a trust, the    beneficiaries of whom are primarily members of the González Family. The B    Shares are the only class of our capital stock that is entitled to elect our    board of directors. As our controlling shareholder, this trust controls our    business through its power to elect a majority of our board of directors and to    determine the outcome of almost all actions that require shareholder approval.    For example, the trust has the ability to cause us to declare dividends. The    trust was established by five corporations and the beneficiaries of the trust    are members of the González family. For a description of this trust, see    "Major Shareholders and Related Party Transactions." In addition to their    indirect ownership interest in our company, Mr. Guillermo González Nova,    Mr. Jaime González Nova, Mr. Carlos González Zabalegui,    Ms. Elena González Guerra, and Mr. Pablo González Guerra, who are    members of the González family, are directors. Mr. Guillermo González Nova    also serves as our Chairman of the Board, Mr. Jaime González Nova serves    as our Vice-Chairman and Mr. Carlos González Zabalegui serves as our    Vice-Chairman and Chief Executive Officer. See "Major Shareholders and Related    Party Transactions."

**Forward-Looking Statements**

Some of the statements in this annual report constitute    "forward-looking statements" within the meaning of the Private Securities    Litigation Reform Act of 1995. These forward-looking statements include    references to future capital expenditures and the amount and nature of these    expenditures, business strategies and measures to implement these strategies,    competitive strengths and the impact of competition, goals, expansion and    growth of our business and operations, plans and references to our future    success and expectations regarding future operating results and liquidity.    Words like "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 these statements.

Forward-looking statements involve inherent risks and uncertainties.    We caution you that a number of important factors could cause actual results to    differ materially from the plans, objectives, expectations, estimates and    intentions expressed in these forward-looking statements. These factors, some    of which are discussed under "-Risk Factors," include economic and political    conditions and government policies in Mexico or elsewhere, inflation rates,    exchange rates, regulatory developments, changes in our product mix and pricing    strategies, difficulty in acquiring new land for development, difficulty in    completing proposed store openings, customer demand, technology implementation,    industry consolidation and competition. You should evaluate any statements    made by us in light of these important factors. We also caution you that the    foregoing list of factors is not exclusive and that other risks and    uncertainties may cause actual results to differ materially from those in    forward-looking statements.

Forward-looking statements speak only as of the date they are made,    and we do not undertake any obligation to update them in light of new    information or future developments.

## Item 4. Information on the Company

###     History and Development of the Company

CCM is a *sociedad anónima de capital variable*,    or a limited liability variable stock corporation, organized under the laws of Mexico. Our principal offices are located at Av. Revolución No. 780, Módulo 2, Colonia San    Juan, C.P. 03730 México, D.F. and our telephone number is (52) (55) 5270 9312.

We trace our history to 1930 when Antonino    González Abascal and his son founded their first store, which primarily sold    textiles, in Mexico City. The first combination supermarket/general    merchandise store under the name Comercial Mexicana was opened in Mexico City in 1962, and 20 additional stores were established during the 1970’s. During the    1980’s we continued to expand through the acquisition of the chain of Sumesa    stores and the opening of 51 Comercial Mexicana stores. The first Restaurante California commenced operations in 1982, and the first Bodega opened in    1989. We entered into the joint venture with Costco Wholesale Corporation in    June 1991, and the first Costco membership warehouse opened in February 1992.    In 1993, we introduced the Mega format, which combines features of both    department stores and supermarkets. In February 2003, we acquired Auchan, S.A.’s operations in Mexico. As of March 2006, the Company inaugurated the first    unit of its new format named City Market.

CCM was wholly owned by the González family until    April 1991, when shares of capital stock of CCM were listed in the Mexican    Stock Exchange and offered publicly in Mexico. In 1996, GDSs representing    shares of capital stock of CCM were listed on the New York Stock Exchange and    the GDSs and the underlying shares were offered publicly in Mexico, the United States and elsewhere outside of Mexico.

Our deed of incorporation was executed on    December 9, 1988, and we were registered in the Public Registry of Commerce in Mexico City on February 21, 1989, under the number 60562. The term of our company is 99    years beginning on May 11, 1989.

### Capital Expenditures

Capital expenditures reflect our strategy of    growth through expansion and acquisition as well as our emphasis on    self-development and ownership of real estate, and on improvements in logistics    and technology. We believe that continued capital spending in technology    focusing on store operations, logistics, manufacturing procurement, category    management, merchandising and buying practices, should reduce merchandising    costs as a percent of sales.

The following table sets forth our capital expenditures for each of    the three years ended December 31, 2003, 2004, 2005 and the budgeted capital    expenditures for the year ended December 31, 2006:
|                                                                                             | **Year ended December 31,(1)**                                                                                        |
|--------------------------------------------------------------------------------------------------|-----------------------------------------------------------------------------------------------------------------------|
|                                                                                             | **2003**                                                                                                              | **2004** | **2005** | **2006 (2)** |
|                                                                                             | **(Millions of constant Pesos          as of December 31, 2005,except for 2006 amounts, which are in nominal Pesos)** |
| Real estate (3) ...........................................................................      | Ps.    625.9                                                                                           | Ps. 1,335.8 | Ps. 1,694.1 | Ps.2,089.6 |
| Store fixtures (4) ........................................................................      | 974.0                                                                                                                 | 697.8 | 915.6 | 913.5 |
| Information systems.....................................................................         | 69.7                                                                                                                  | 70.0 | 74.0 | 79.9 |
| Total .......................................................................................... | Ps. 1,669.6                                                                                                           | Ps. 2,103.6 | 2,683.7 | Ps. 3,083.0 |

______________

(1) Capital expenditures include,    Ps.354.1 in 2003, Ps.455.0 in 2004 and Ps.515.9 in 2005 contributed by us to    the Costco de Mexico Group joint venture.

(2) Represents budgeted amounts    for the year ending December 31, 2006.

(3) Not including our acquisition    of Auchan’s operations.

(4) Represents new units, store    fixtures, remodeling and other equipment expenditures.

 

Capital expenditures including 2005 Auchan’s operations payment was    Ps.2,969.5 million in 2005 and were funded with cash from operations. Our    plans for 2006 could change depending on the economic situation in Mexico, our financial results and our ability to generate sufficient cash flow to fund such    expenditures.

We expect to open 22 units in 2006 as follows: one City Market, five    Bodegas, seven Megas, three Costco membership warehouses, two Sumesa and four    Restaurantes California. We intend to continue remodeling units.

Capital expenditures reflect our strategy of growth through    expansion and acquisition as well as our emphasis on self-development and    ownership of real estate, and on improvements in logistics and technology. We    believe that continued capital spending in technology, focusing on store    operations, logistics, manufacturing procurement, category management,    merchandising and buying practices, should reduce merchandising costs as a    percent of sales. During 2006, we expect capital spending to be approximately    U.S.$300 million. We intend to use primarily cash flow from operations to    finance capital expenditure requirements.

We currently plan to finance all 2006 capital expenditures primarily    with cash flow from operations.Although we believe that sufficient financing    will be available to us, we cannot assure you that we will have sufficient cash    flow from operations to make all of our planned capital expenditures when    scheduled or, if necessary, that we will be able to obtain, or what the terms may    be of, any bank or other financing. We are also responsible for financing 50%    of new Costco membership warehouses. See "Information on the Company-Property,    Plant, and Equipment" and "Key Information-Risk Factors-Risk Factors Related to    Our Business-Our Growth Strategy Is Dependent Upon the Continued Improvement of    the Mexican Economy and Generating Positive Cash Flow."

###  

### Business Overview

We operate one of the largest retail companies in Mexico as well as a chain of family-style restaurants under the name Restaurantes California. Our    retail operations include a 50% interest in a joint venture with Costco    Wholesale Corporation, or Costco, which we refer to as the Costco de Mexico    Group joint venture. The Costco de Mexico Group joint venture operates a chain    of warehouse clubs in Mexico.

We carry out our business through five retailing store formats and    one chain of family-style restaurants. These formats and restaurants are    divided into three segments:
> 
- the CM Group, which comprises our core business and includes our Comercial Mexicana and Bodega supermarkets and Mega hypermarkets;

- the Costco de Mexico Group, which consists of our 50% interest in the joint venture      with Costco; and

- the Other Group, which includes our Sumesa stores and Restaurantes California.

Our stores sell a wide variety of food items, including basic    groceries and perishables, as well as non-food items, including general    merchandise and clothing. Food items represented 66.8% of our net sales from    our stores in 2005. At December 31, 2005, we had 191 stores operating under    our five retailing store formats, with a total selling area of approximately 14.5 million    square feet. Our stores are concentrated primarily in the Mexico City    metropolitan area and in the central Mexico region, including Guadalajara, or    the Central Region.

Historically, the Mexican retail sector has been fragmented, with    consumers served by a number of formats, including traditional formats like    independent grocery stores and food specialists, modern formats like    supermarkets, department stores and hypermarkets, as well as informal outlets    like street vendors and markets. Hypermarkets are large stores that include    features of both supermarkets and department stores. In recent years, the    Mexican retail sector has experienced consolidation and the entry of large    international retailers like Wal-Mart Stores Inc., which controls Walmex. We    believe that there is considerable potential for growth as the Mexican retail    sector continues its process of modernization. We believe that consumer    preferences are shifting away from smaller, traditional and informal outlets    toward larger, standardized supermarket and hypermarket chains. These chains    offer consumers superior value through greater merchandise selection, convenience    and better prices through the chains’ greater purchasing power. Additionally,    we believe that the recovery of consumers’ purchasing power in Mexico and favorable demographics, which is expected to lead to increased numbers of    consumers, should benefit the retail sector in the short and long terms. We    believe our business strategy is designed to capitalize on this trend toward    larger supermarket and hypermarket chains.

Our chain of family-style restaurants serves a wide variety of    Mexican and continental cuisines for breakfast, lunch and dinner. Our    restaurants emphasize high quality, homemade-style food with fast service at    low prices, with an average lunch costing less than Ps.85.00, or approximately    U.S.$7.61. At December 31, 2005, we had 62 restaurants located in 18    cities in Mexico, concentrated primarily in the Mexico City metropolitan area.

**Our Business Strategy**

The key elements of our business strategy include the following:
> 
- ***Controlled      growth***. Our growth strategy has two principal components:

„   continued improvements in same store sales        growth through enhanced merchandising techniques, attractive promotions,        remodeling of our stores and expansion of selling area; and

„   new store openings in areas where we already        have a significant presence and in areas with high potential but that are        currently underserved by modern retail formats.

Although there are many external market variables that affect the      performance of same store sales, we believe our new store formats and low      prices will help reduce the impact of factors that are beyond our control.      Despite increased competition in certain areas, we believe the Mexican market      continues to be underserved, leaving significant room for additional store      growth. During 2004 and 2005, we dedicated a great deal of time and resources      in identifying attractive locations for new stores, our expansion plan for 2006      includes the opening of 18 new stores and four restaurants as well as the      remodeling of ten stores across Mexico. We expect to derive the required funds      primarily from internally generated cash flow. Through this expansion plan, we      intend to reinforce our presence in the Mexico City metropolitan area and in      the Central Region, capitalizing on our existing presence and strong reputation      in those markets. We also intend to expand our operations in other regions.

- ***Continue      with our everyday low price strategy instead of frequent promotions***. We      adopted a low pricing strategy in 2002 with the principal objective of      attracting a more loyal customer base. We believe that our historical strategy      of offering promotions and deep discounts from time to time was effective in      the historical Mexican macroeconomic environment, which was characterized by      high inflation. As the Mexican economy became more stable, consumers became      more aware of price differences and started comparing them among different      retailers. The introduction by Walmex, our principal competitor, of the "Every      Day Low Prices" concept was also well received by consumers. We believe that      we have been successful in communicating our competitive prices to our      customers, thus increasing customer loyalty as well as our customer base in      general.

- ***Focus      on operating margins.*** We seek to improve our operating margins by:

„   streamlining our distribution channels through        the use of our new distribution center that services our Comercial Mexicana, Mega, Bodega and Sumesa store formats; and

„   continuing to grow our Mega store format, which        has higher margins than our other businesses.

Because many of our suppliers offer generic product brand names, we      are able to negotiate better terms and conditions with these suppliers than      those that we would be able to obtain from suppliers that, due to their      popularity and the high demand for their brand of products, have stronger      negotiating power. By leveraging our market presence and establishing      relationships with new product suppliers, we intend to maintain our low pricing      strategy while trying to improve our operating margins. Our distribution      centers that service the Comercial Mexicana, Mega, Bodega and Sumesa store      formats allow us to negotiate better prices with our suppliers, shorten the      distance over which our goods are shipped and achieve efficiency gains in our      inventory management and turnover. Of the 18 new stores we intend to open      during 2006, seven are Mega formats.

- ***Focus      on differentiation***. Competition occurs principally on the basis of      price and, to a lesser extent, location, selection of merchandise, quality of      merchandise (in particular perishables), service, store conditions and      promotions. We believe that competition based solely on low pricing will      ultimately result in decreased margins and low customer loyalty. We intend to      attract and retain customers by providing a more enjoyable shopping environment      and improving their overall shopping experience through the use of new, modern      and exclusive product offerings, innovative promotions and improved marketing      techniques. For example, in 2005, we launched "Kitchenware," which was a      promotion of stickers that could be exchange for cookware products at very low      prices. In 2005, we launched "Spanish week," which consisted of several      promotions involving groceries, cheese, wine and other Spanish products. Sales      in our stores also typically increase during the "Julio Regalado" special      promotion occurring each July and during the Christmas season. We have also      been a market leader in introducing convenient new services for our customers,      like providing them with facilities for the convenient payment of third party      services and local taxes. We believe that these marketing strategies have been      successful. We expect to continue launching new and innovative promotions to      continue to attract customers. Additionally, we try to differentiate ourselves      in our product offerings as we offer unique products that are unlikely to be      found in our competitors’ selling floor. We believe that we are recognized as      a high quality supplier of perishables and will continue to focus on delivering      high quality perishable products.

- ***Increase      efficiency.*** We intend to increase productivity and customer service      through investments in information technology and the increased utilization of      our new distribution center which opened in August 2003. In recent years, we      have made significant investments in computer systems focused primarily on      improving inventory efficiency, supply levels and controls. Innovative      technologies used by our stores include point of sales systems, a unit      inventory control system, data warehouse category management, fiber optic      communications networks and electronic communication systems to submit purchase      orders to suppliers. We believe that continued upgrading of our systems will      allow us to further increase efficiency, reduce expenses and provide the necessary      product and sales information to enhance merchandising decisions at each      store. We continue to increase the utilization of our distribution centers      which has increased our storage capacity and has improved our ability to supply      our stores with a more efficient product mix by utilizing a centralized      location for distribution. The Costco de Mexico Group joint venture is      currently being serviced by a distribution center that is located in the Mexico City metropolitan area.

- ***Merchandising      and market segmentation.*** Our merchandising and market segmentation      strategy emphasizes competition on the basis of price, selection of      merchandise, quality of merchandise (in particular perishables) and service.      We target specific consumer segments, preferences and demographics by using      distinct retail formats, which differ in store size, service level and product      range. As Mexican consumer preferences have shifted toward large supermarkets      and hypermarkets, we have sought to meet this demand by growing our Mega format.      Net sales of the Mega format accounted for approximately 31.5% of our net sales      in 2005.

- ***Location*.** In opening new stores, we select the type of retail store and offer the      merchandise and service mix that we consider most appropriate for each location’s      anticipated customer base. We determine a location’s anticipated customer base      by analyzing a number of factors, including the current and expected future      population density, income levels and competitive conditions surrounding that      location. We believe that this analysis allows our new stores to provide      better services to our customers and improves our stores’ success rate. From      January 1, 2005 through December 31, 2005 we purchased approximately 4.3 million      square feet of unimproved land using part of it for new stores and the rest for      our land reserve of 7.0 million square feet. We intend to continue to      explore the possibility of additional strategic land acquisitions in desirable      locations. Decisions with respect to opening new Costco membership warehouses      are made by the Costco de Mexico Group joint venture.

- ***Lower* Pricing      Strategy.**Historically, we based our pricing      strategy cyclical promotions and discounts offered from time-to-time. This      strategy proved successful in a market with high inflation rates. As prices      changed often, consumers did not have the opportunity to compare prices among      different retailers.

As the result of the decrease in inflation we have moved      away from this strategy toward a strategy of offering consistently low prices,      retaining only the most popular promotions, including the "Julio Regalado," in      order to attract customer traffic. The lower pricing strategy was implemented      in August 2002.

When we started with the "low prices" strategy in 2002, we      experienced an initial 13.1% decrease in sales and decrease in number of      customers and ticket amount per customer, but by 2003 the number of customers      had increased by 6.0%, in 2004 the number of customers increased by 2.1% and an      increase of 2.9% in 2005.

- ***Sinergia.***At the end of 2003, three of the main retail companies in México,      Gigante, Soriana, and us formed Sinergia, a limited liability company created      to improve the purchase procurement for the three companies. Through Sinergia,      CCM, Gigante and Soriana negotiate as a group with some of the large common      suppliers of our businesses and the businesses of Gigante and Soriana.      Currently, a small portion of our total purchases are negotiated through      Sinergia. By forming a negotiating group with two other large retailers, we benefit      from increased purchasing power as a whole, and corresponding lower cost of      goods. See "Key Information-Risk Factors-Risk Factors Related to      Mexico-Mexican Antitrust Laws May Limit Our Ability to Expand Through      Acquisitions or Joint Ventures."

**Operations**

At December 31, 2005, we had 191 stores operating under five    retailing formats with a total selling area of approximately 14.5 million    square feet. Although we operate nationwide, our stores are concentrated in    the two most populated areas of Mexico, the Mexico City metropolitan area and    the Central Region. Our stores located in those areas accounted for    approximately 72.0% of our total retail floor space at December 31, 2005. At    December 31, 2005, we had 62 Restaurantes California located in 18 cities in Mexico, 33 of which were located in the Mexico City metropolitan area.

The percentage breakdown of our total selling area and number of    stores by geographic region at December 31, 2005, is set forth in the    following table:
|                                                                                                                           | **At December 31, 2005**            |
|--------------------------------------------------------------------------------------------------------------------------------|-------------------------------------|
|                                                                                                                           | **Percentage ofTotal Selling Area** | **Number ofStores** |
| Mexico City metropolitan area.............................................................................                     | 37.7 %                              | 86 |
| Central region.........................................................................................................        | 34.3                      | 60 |
| Northwest region...................................................................................................            | 13.4                      | 21 |
| Northeast region....................................................................................................           | 2.4                       | 3 |
| Southeast region....................................................................................................           | 8.4                       | 13 |
| Southwest region...................................................................................................            | 3.8                       | 8 |
| Total......................................................................................................................... | 100.0 %                             | 191 |

The number of restaurants by geographic region at December 31, 2005    is set forth in the following table:
|                                                                                                                                         | **At December 31, 2005** |
|----------------------------------------------------------------------------------------------------------------------------------------------|--------------------------|
|                                                                                                                                         | **Number ofRestaurants** |
| Mexico City metropolitan area............................................................................................                    | 33                       |
| Central region........................................................................................................................       | 20                       |
| Northwest region..................................................................................................................           | 2                        |
| Northeast region...................................................................................................................          | -                        |
| Southeast region..................................................................................................................           | 5                        |
| Southwest region.................................................................................................................            | 2                        |
| Total....................................................................................................................................... | 62                       |

The percentage breakdown of the contribution of our store formats    (including the Costco membership warehouses) and our restaurants to total sales    is set forth below for each of the three years ended December 31, 2003, 2004    and 2005.
|                                                               | **Year Ended December 31,** |
|--------------------------------------------------------------------|-----------------------------|
|                                                               | **2003**                    | **2004** | **2005** |
| Comercial Mexicana...................................              | 36.3%                       | 32.9% | 29.7% |
| Bodega.........................................................    | 14.4              | 13.7     | 13.3     |
| Mega............................................................   | 26.3              | 28.8     | 31.5     |
| Sumesa.........................................................    | 2.3               | 2.5     | 2.8     |
| Costco..........................................................   | 18.9              | 20.1     | 20.8     |
| Restaurantes California.............................               | 1.6               | 1.6     | 1.6     |
| Miscellaneous Income...............................                | 0.2               | 0.3     | 0.3     |
| Total............................................................. | 100.0%                      | 100.0% | 100.0% |

Except for Sumesas, which offer primarily food items, stores    operated by us offer a combination of food and non-food items. Management    classifies our store sales into four main product lines. The percentage    contribution to total sales of each of these product lines is set forth below    for each of the three years ended December 31, 2003, 2004 and 2005.
|                                                                 | **Year Ended December 31,** |
|----------------------------------------------------------------------|-----------------------------|
|                                                                 | **2003**                    | **2004** | **2005** |
| Perishables....................................................      | 25.6%                       | 27.7% | 28.7% |
| Groceries.......................................................     | 40.7              | 41.2     | 38.2     |
| General Merchandise..................................                | 24.1              | 21.9     | 25.6     |
| Clothing.........................................................    | 9.5               | 9.2     | 7.5     |
| Total............................................................... | 100.0%                      | 100.0% | 100.0% |

Our management believes that in recent years Mexican consumers have    increasingly preferred stores that offer a combination of the wide variety of    food items carried by conventional supermarkets as well as a variety of    non-food items, like general merchandise, clothing, household items and home    improvement products. In response to this change in consumer preferences, our    newer stores offer expanded perishable departments, prepared foods, tortilla    presses and bakery goods as well as wider selections of health, beauty and    pharmaceutical products.

**Retail Store Formats**

We carry out our business through five retail store formats: Comercial Mexicana, Bodega, Mega, Sumesa and Costco membership warehouses (through the Costco de    Mexico Group joint venture). Through these formats, we are able to target    nearly all the population segments in the Mexico City metropolitan area and the    other are as which we serve. In March 2006 the Company opened a new format    named City Market for the high income level basically with sales mix of    perishables and high quality groceries.

In opening new stores, we select the retail store format that offers    the merchandise and service mix we consider most appropriate for each location’s    anticipated customer base. We determine a location’s anticipated customer base    by referring to a number of factors, including the current and expected future    population density, income levels and competitive conditions surrounding that    location. Decisions with respect to opening new Costco membership warehouses    are made by the Costco de Mexico Group joint venture. From 2002 to 2005 the    Company has opened 31 stores and 11 Restaurantes California.

We believe in changing the retailing format of our retail stores    when appropriate, based on changing demographics and competitive    characteristics of the location surrounding an established store. For example,    from 2001 to 2005, nine Comercial Mexicana stores were converted into Megas,    five Comercial Mexicana stores were converted into Bodegas and one Bodega was    converted into a Comercial Mexicana store. In addition, since acquiring the    Sumesa chain in 1981, we have converted six Sumesas into other formats. The    conversion costs typically ranged from U.S.$2.1 million to    U.S.$5.0 million per store, averaging approximately U.S.$3.1 million    per store. Besides the convertions, the Company had closed from 2002 to 2005    ten stores and three Restaurantes Califonia due to reasons of low profitability    or ending leased contracts.While we currently expect to continue using our five    retailing formats, we may experiment with additional formats in the future.

***Combination Supermarket/General    Merchandise Stores***

**Comercial Mexicana.** At December 31, 2005,    we operated 61 Comercial Mexicana stores, including 18 in the Mexico City metropolitan area, 25 in the Central Region (including Guadalajara), eleven in    the northwest region (including Tijuana), none in the northeast region, two in    the southeast region and five in the southwest region. Comercial Mexicana stores are targeted at middle and upper-income customers.

 Comercial Mexicana stores carry an extensive line of    food items and non-food items. Food items include meats, poultry, fish, fresh    fruits and vegetables, dairy products, baked goods, frozen goods, canned goods,    prepared foods, delicatessen, wines and liquors and imported foods. Non-food    items include men’s, women’s and children’s clothing and shoes, paper products,    office supplies, books and magazines, health and beauty products, garden    supplies, automotive supplies, photographic supplies, electric appliances,    sporting goods, toys and gifts and numerous household items. All Comercial Mexicana stores have one or more specialty departments, like a bakery or tortilla press.    All Comercial Mexicana stores have pharmacies offering prescription and    non-prescription medications. A typical Comercial Mexicana store offers more than 55,000 products.

Most Comercial Mexicana stores are located in neighborhood shopping    centers. Comercial Mexicana stores require large parking lots and access to    roads to allow customers to drive to the stores.

 Comercial Mexicana stores offer, at competitive    prices, locally and nationally advertised and distributed brands of    merchandise, together with some food items, general merchandise and clothing    product lines that are sold under our own private label names. Comercial Mexicana stores incorporate merchandising techniques, like bright lighting,    wider-than-usual aisles and store layouts, that are designed to encourage    greater spending per customer. All Comercial Mexicana stores are identified by an easily recognizable pelican logo.

A Comercial Mexicana store remodeling generally involves the    installation of new services, lighting, decorations, freezers and    refrigerators, as well as the replacement of fixtures, painting and necessary    repairs and changes in store layout that are intended to make the stores more    attractive to customers. At the same time, we upgrade the information    technology in our Comercial Mexicana stores to improve operating efficiencies    and to allow the introduction of new services. We remodeled six Comercial Mexicana stores in 2003, five in 2004 and two in 2005.

 Comercial Mexicana stores generally range in size from    approximately 43,000 to 100,000 square feet of selling area, with an average of approximately 68,000 square feet. Comercial Mexicana stores employed 9,228 individuals at December 31, 2005.

 Comercial Mexicana stores have experienced a decline    in the number of customers in the last three years. We believe this is mainly    a result of our conversion of 5 Comercial Mexicana stores into Megas in 2003, 2004 and 2005, thereby reducing the number of Comercial Mexicana stores available for shopping, as well as increased competition in the    market. We have developed several strategies in response to these    developments, including reorganization of the Comercial Mexicana employee structure, construction of a new distribution center servicing all    store formats, including Comercial Mexicana, and the institution of a new    pricing strategy of every day low prices instead of one-time promotions and    discounts.

**Bodega.** At December 31, 2005, we    operated 36 Bodegas, including 27 in the Mexico City metropolitan area, seven    in the Central Region, one in the southeast region and one in the southwest    region. Bodegas target lower-income customers.

Bodegas are warehouse stores, which offer more than 30,000 products,    mainly food items, pharmaceutical items and general merchandise of the type    sold in Comercial Mexicana stores but with less selection in terms of brands    and sizes of items offered.

Bodegas have lower operating costs as a percentage of sales than Comercial Mexicana stores. Lower operating costs are obtained primarily because Bodegas use less    advertising and a lower level of customer service, fewer amenities, less    decoration and reduced storage costs because items are stocked on display on    the sales floor. In addition, Bodegas have fewer promotions and product    introductions. All Bodegas have a tortilla press, a bakery and/or other    specialty departments. Because customers who patronize Bodegas generally do    not have cars, Bodegas are within walking distance of residential areas or    accessible by public transportation. Bodegas also are identified by the same    easily recognizable pelican logo as Comercial Mexicana stores.

Bodegas range in size from approximately 24,000 to 65,000 square feet of selling area, with an average of approximately 50,600 square feet. Bodegas employed 4,193 individuals at December 31, 2005.

**Mega.** Under the Mega format, we    currently operate our largest combination stores. As of December 31, 2005, we    operated 45 Megas, including 18 in the Mexico City metropolitan area, 15 in the Central Region, four in the northern region and six in the southern region. The Mega    format targets a broad range of economic groups.

We introduced the Mega format in 1993 to take advantage of the    perceived potential of, and as a competitive response to, the supercenter and    hypermarket formats that had begun to appear in Mexico. Prices in Megas are    generally lower than those in Comercial Mexicana stores, but not as low as in Bodegas. Megas offer approximately 60,000 products, which is broader than that    offered in Comercial Mexicana stores. The different types of merchandise    carried by Megas are separated into distinct areas or departments. Each Mega    contains a bakery, a pharmacy and other complementary services operated by us,    just as in Comercial Mexicana stores. In addition, Megas contain separate    specialty retail facilities leased to and operated by third-party tenants, like    banks, key makers, jewelry shops, shoe repair shops, photo developers and    optical centers. Megas contain a wide center aisle that, in connection with    the location of most perishables and groceries at the rear of the store, is    intended to draw customers into the store past special advertising displays, as    well as past the clothing and general merchandise areas.

Megas generally range in size from 110,000 to 140,000 square feet selling area, with an average of approximately 120,000 square feet. Megas employed 8,734 individuals at December 31, 2005.

In February 2003, we acquired Auchan’s operations in Mexico, consisting of five hypermarket stores located in the Central Region. We now    operate these stores under the Mega format. The purchase price for this    acquisition consists of six installment payments. We paid    U.S.$15.0 million in 2003, U.S.$20.0 million in 2004, U.S.$25 million    in 2005 and U.S.$20.0 million in 2006. We are required to make additional    payments of U.S.$20.0 million in each of 2007 and 2008. The stock of the    Mexican corporations that hold the fixed assets of these stores are presently    held in an escrow. The stock will not be released from this escrow, and we    will not acquire title to the stock, until the purchase price is paid in full    to the sellers. If we do not pay the purchase price in full when due, we will    not obtain title to the stock and will have no rights to be repaid the amounts    we previously paid to Auchan. In addition, there are certain restrictive    covenants that limit the operations of the business until the purchase price is    paid to the seller. See "Key Information-Risk Factors-Risk Factors Related to    Our Business-Our Acquisition of Auchan is Dependent on Payment of the Purchase    Price Due and Failure to Pay Will Result in Forfeiture of Auchan Properties and    All Amounts Paid."

***Supermarkets***

**Sumesa.** At December 31, 2005, we had 21    Sumesas in operation. Except for four Sumesas in Cuernavaca, all Sumesas are    located in the Mexico City metropolitan area. Sumesas target upper-middle to    upper income customers.

Sumesas are designed to serve their surrounding neighborhoods, which    are typically densely populated. Sumesas are smaller in size than Comercial Mexicana stores and Bodegas. Developed as neighborhood stand-alone supermarkets,    Sumesas emphasize sales of quality groceries and perishables and generally    carry more than 8,000 products. Most Sumesas include pharmacies as well as    bakeries and tortilla presses.

We intend to remodel all of the existing Sumesas to update their    appearance and, to the extent that space at existing locations permits, to    include specialty departments.

Sumesas generally range in size from approximately 7,000 to 11,800 square feet of selling area, with an average of approximately 8,600 square feet. Sumesa employed 954 individuals at December 31, 2005. We opened two of the    Sumesas in Cuernavaca in 2005.

***Membership    Warehouse Stores***

**Costco Membership Warehouses.** In June    1991, CCM and Costco formed a joint venture to develop the membership    warehouse-style stores that are popular in the United States and Canada. The first Costco membership warehouse was opened in a suburb of Mexico City in    February 1992. At December 31, 2005, the Costco de Mexico Group joint venture    was operating 28 Costco membership warehouses, six of which were located in the    Mexico City metropolitan area, nine were located in the Central Region    (including one in Guadalajara), six were located in the northwest region, two    was located in the northeast region, four in the southeast region and one in    the southwest region.

Costco membership warehouses are self-service warehouse clubs, which    offer members low prices on volume purchases of a limited selection of branded    and private label products in a wide range of merchandise categories designed    to produce rapid inventory turnover and high sales volumes. This rapid    inventory turnover, combined with the operating efficiencies achieved by direct    volume purchasing from manufacturers and no-frills merchandise displays, enable    the Costco de Mexico Group joint venture to operate profitably albeit at lower    gross margins than traditional wholesalers, retailers or supermarkets. Costco    membership warehouses carry a selection of approximately 3,500 local and    imported items, together with general merchandise products, offering a limited    selection in each product line and are generally located in easily accessible    locations. All of the Costco membership warehouses offer bakeries and a    selection of high quality meats and other perishables.

Although membership is available to the general public, typically    only businesses and professionals purchase memberships due to the related    costs. A primary membership, including two affiliate memberships, currently    costs Ps.350.0 (approximately U.S.$31.16) per year and each additional    affiliate membership costs Ps.100.0 (approximately U.S.$8.90) per year. Costco    membership warehouses seek to meet the needs of business customers who might    otherwise pay a premium for small purchases or who cannot otherwise obtain the    full range of their product requirements from any single source. In addition,    these business members often combine personal shopping with their business    purchases. In 2005, 73% of our existing memberships were renewed for an    additional year. Membership income in 2005 accounted for 1.6% of net sales.

Costco membership warehouses range in size from approximately 90,000    to 120,000 square feet of selling area, with an average of 100,000 square feet, and are designed with minimal amenities and decorations. Floor plans are    designed for economical and efficient use of space and inventory control.    Members push flatbed carts or large basket-style shopping carts through the    warehouses, selecting products for their business or personal use, or for    resale. Merchandise is generally offered in case, carton, or multiple-pack    quantities or in single, jumbo-sized packages, and is displayed and stored in    packing cartons on pallets and steel racks separated by extra-wide aisles. The    standard no-frills facility design, direct manufacturer purchasing and rapid    inventory turnover, combined with extensive cost controls and low mark-ups,    result in substantial savings to the customer as compared to most other    traditional sources of merchandise. Costco membership warehouses employed 8,398    individuals at December 31, 2005.

The joint venture is governed by a board of directors consisting of    six members, three of whom are appointed by us (including the chairman of the    board of the joint venture) and three of whom are appointed by Costco. The    Costco de Mexico Group joint venture is managed, on a day-to-day basis, by    officers appointed by Costco and approved by us pursuant to certain management    agreements between us, Costco and the Costco de Mexico Group joint venture.    The management agreements may be terminated by either Costco or the Costco de    Mexico Group joint venture at any time, and any termination initiated by the    joint venture must be approved by a majority (at least four directors    consisting of two representatives of each of CCM and Costco) of its board of    directors. The affirmative vote of a majority of the entire board of directors    of the joint venture is required to approve certain significant decisions    regarding the joint venture, including certain revisions to the joint venture    business plan, obligations or acquisitions of real estate or certain other    fixed assets not otherwise provided for in the business plan, the removal of    any of the management personnel appointed by Costco and certain transfers of    ownership interests in the joint venture. In addition, a unanimous vote of    both members of a two-person executive committee consisting of the chief    executive officers of Costco and us is required to approve certain obligations    not otherwise provided for in the business plan and other significant decisions    regarding the joint venture which are not specifically reserved for the board    of directors.

The funding requirements of the joint venture are shared by Costco    and us, as determined from time to time by the parties. We and Costco each    contributed with Ps.354.1 million in 2003, Ps.445.9 million in 2004 and    Ps.159.4 million in 2005 to the Costco de Mexico Group joint venture. In 2006,    we and Costco each agreed to contribute U.S.$15.0 million to the Costco de    Mexico Group joint venture. In the event that either party defaults on its    obligations to provide its portion of the funding for the joint venture, the    other party, at its option, may, among other things, exercise its right to buy    out the defaulting party’s interest at fair market value. The joint venture    agreement contains limitations on competition in the membership warehouse    format by Costco and us. The joint venture has a duration of 99 years, ending    2090. However, the joint venture agreement may be terminated and the joint    venture dissolved, (i) by mutual agreement of Costco and us, or (ii) upon a    sale by either party of its entire interest in the joint venture by written    agreement. We or Costco may purchase the other party’s interest in the joint    venture at a price determined by reference to the fair market value of that    interest in the event that the other party (i) fails to provide its portion of    the financing to the joint venture, (ii) fails to provide or maintain a    guarantee as required by the joint venture agreement, (iii) transfers its    interest to an unaffiliated third party without the consent of the majority of    the board of directors of the joint venture, (iv) is unable to resolve with the    other party within a prescribed period a deadlock of the board of directors,    (v) is in default of its obligations under the joint venture agreement, or (vi)    is insolvent or bankrupt.

**Marketing**

We seek to attract customers to our stores by emphasizing customer    service; offering a wide selection of private label goods; facilitating    purchases by customers through our "captive" credit card issued by Banamex,    which extends and assumes all of the credit and credit risk under these cards;    vouchers for payment; and a lay-away system under which customers can purchase    general merchandise by agreed-upon partial payments. Another marketing    initiative includes promotions every Wednesday on fresh fruit and vegetables at    Comercial Mexicana, Bodegas and Megas, which has helped make Wednesday one of    the busiest days of the week in our stores. We intend to maintain advertising    expenditures in 2006 substantially in line with the amount spent in 2005, which    was 1.0% of our net sales.

We emphasize customer service by (i) offering the product and    service mix that we believe customers find most appealing, (ii) maintaining    clean, well-lit stores with attractive, modern decor, (iii) training employees    to be courteous and helpful, (iv) changing the mix of products to include a variety    of imported goods and (v) in recent years, by offering butcher’s shops,    bakeries, pharmacies, tortilla presses and other specialty departments. Many    stores have electric carts to enable elderly or disabled individuals to shop    without assistance and shopping carts with infant seats to allow parents to    shop with young children. The specialty departments, like the butcher’s shops    and bakeries, offer products and individual service comparable to those offered    in independent specialty stores. In addition, all stores with bar-code    scanners have price verifiers located conveniently throughout the stores to    allow customers to check the prices on goods. See "-Information Systems."

In recent years, we have begun to emphasize our own private label    merchandise, including specialty products prepared by us, including baked    goods, tortillas and prepared foods. We currently offer approximately 450    private label products, principally groceries. As of December 31, 2005, we    offered approximately 180 medicines under the "Farmacon" brand name. These    medicines fully comply with the Ministry of Health Regulations. In addition,    we offer private label men’s, women’s and children’s clothing, household,    automotive and gardening products. Each of our private label brands reflects a    special image and delivers high quality merchandise at prices lower than brand    name products. Sales of private label products as percentage of total store    sales were approximately 12.2% in 2003 11.4% in 2004 and 12.8% in 2005. Our    margins on private label products are similar to those on brand name products,    although prices on private label products are lower to the consumer.

Our store sales are paid in either cash, through credit cards or    with vouchers. We have a captive credit card under the name "Comercial    Mexicana." Our captive credit card can be used only for purchases at our stores    and restaurants, including Costco membership warehouses. The Comercial Mexicana credit cards are issued by Banamex, which extends and assumes all of the    credit and credit risk under these cards. In addition, we offer our customers    the option to acquire certain big-ticket items on credit through an instore    program known as Credicomer. This program, offered with Banco BBVA-Bancomer    S.A., or BBVA-Bancomer, does not require a down payment and may be paid over a    period up to 12 months. BBVA-Bancomer extends the credit and assumes all of    the credit risk. We receive an amount equal to the purchase price from    BBVA-Bancomer by the end of the business day on which the merchandise is    purchased. We also offer customers a layaway system under which customers can    purchase general merchandise by paying through installments, without interest,    with delivery of the merchandise to customers upon full payment of the purchase    price. We believe that our relationships and discount arrangements with    credit-issuing banks are among the best in the market. The vouchers are issued    by us and by certain independent companies, and are generally accepted in all    of our stores. Employers distribute vouchers to their employees as a    tax-advantaged part of the employee’s compensation. The vouchers issued by us    are sold at a discount to third-party employers and are, in effect, prepaid    sales. The vouchers issued by independent companies are honored by us and then    collected and presented (usually between one and seven days) to the issuing    company for payment. Our "Thirteen Month Interest-Free" promotion offers    customers 13 months of interest-free credit for certain large purchases when    they use participating credit cards. The cost of the program is shared between    us and the supplier.

As part of our marketing strategy, we promote our stores and the    merchandising and services which they offer. Our advertising strategy and    campaigns focus on communicating the image of our stores, particularly Comercial Mexicana stores, as being newer, cleaner stores, that offer superior customer    service. In addition, we use advertising to publicize the merchandise carried    in our stores. We use third-party advertising agencies to formulate and    implement our advertising campaigns. The single largest advertising medium    used by us is radio, but we also advertise on television and promotional    flyers, as well as in our stores at the point of sale. We employ cooperative    advertising with suppliers and suppliers participate in special programs with    us, particularly in connection with new store openings. Each July, Comercial Mexicana and Mega stores run the "Julio Regalado" special promotion to increase sales    for that month.

In February 2005, we launched a new advertising campaign focusing on    the experience of shopping at Comercial Mexicana stores. This campaign is running concurrently with our continuing "Low Price" marketing strategy.

The Costco de Mexico Group joint venture does not generally use    media advertising, except newspaper announcements of new Costco membership    warehouse openings. When a new warehouse is opened, the Costco de Mexico Group    joint venture’s marketing efforts include canvassing businesses in the area by    marketing teams and direct mailings to potential members in the area.

**Distribution**

We opened a new distribution center in the Mexico City metropolitan    area in August 2003. The distribution center has a storage capacity of 538,195 square feet. The distribution center allows us to negotiate better prices with suppliers,    who can deliver their products in one centralized location rather than in    several different locations. The Costco membership warehouses are not served    by this distribution center. We distribute approximately 40% of all our    products (excluding Costco membership warehouse products) from this    distribution center.

We also currently operate a 377,000 square feet distribution center in the Mexico City metropolitan area for perishable items,    which we plan to replace when we open a new distribution center. The site for    this new distribution center has been acquired and we expect construction to    start in 2006. We currently distribute from this existing center, and intend    to distribute from the new distribution center, approximately 20% of all our    products (excluding Costco membership warehouse products).

Our suppliers currently distribute 40% of all our products    (excluding Costco membership warehouse products) directly to our stores.

The Costco de Mexico Group joint venture operates a 538,000 square feet distribution center in the Mexico City metropolitan area. In the Costco de    Mexico Group joint venture, approximately 75% of all the merchandise is    supplied from that distribution center.

**Information    Systems**

We have placed special emphasis in recent years on the development    of our management information system, particularly a unitary inventory control    system that allows us to track sales flow and turnover of specific product    lines or items. The unitary inventory control system has been installed in all    Comercial Mexicanas, Bodegas, Sumesas and Megas. As a part of this system,    these stores are linked through a common computer network that facilitates the    flow of information through communications among the stores and to our    management. This system provides us with information that enables us to (i)    optimize inventory levels by identifying products with low sales volumes and by    maintaining perpetual inventory booking, (ii) minimize shrinkage, (iii) reduce    the frequency of out-of-stock products, (iv) allow our buyers to negotiate more    effectively with suppliers and (v) otherwise improve operating efficiency.    This system is currently being used with substantially all of the suppliers    that supply our stores. Related projects have focused on introducing advanced    computer technology to the stores particularly at the point of sale, and have    included the installation of improved cash registers with bar-code scanner    systems and electronic scales, state-of-the-art credit card and debit card    approval systems to track sales and reduce the check-out time for customers,    and, in the stores, state-of-the-art point of sale computers which provide the    customers additional information regarding the items being purchased and the    relevant promotions and savings, as well as equipping stores with portable    scanners to expedite the process of checking shipments from suppliers and to    aid in price audits and taking inventory. Costco membership warehouses are    linked, and transmit similar information, by satellite to Costco in San Diego,  California and Seattle, Washington. This linkage and transmission, in turn,    provide us with information on the operations of Costco membership warehouses.

Capital expenditures for our information systems were Ps.69.7 million    in 2003, Ps.70.0 million in 2004 and Ps. 74.0 million in 2005.

**Restaurants**

At December 31, 2005, we had 62 Restaurantes California located in    18 cities in Mexico, 33 of which were located in the Mexico City metropolitan    area. The average seating capacity is 223 seats per restaurant. Restaurantes California focuses on middle- to upper-income customers and tourists.

From 2003 to 2005, we opened 11 Restaurantes California. We intend    to open two new Restaurantes California and remodel two additional restaurants    during 2006. Our goal is to increase the number of Restaurantes California throughout Mexico.

Restaurantes California are family-style restaurants serving a wide    variety of Mexican and continental cuisines for breakfast, lunch and dinner. These    restaurants emphasize high quality, homemade-style food with fast service at    low prices, with an average lunch costing Ps.70.00 (approximately U.S.$6.50).

Meals at Restaurantes California are prepared fresh when ordered. To    differentiate ourselves from our competitors, each Restaurante California also    has a buffet and salad bar. We emphasize sales of buffet-style food, and in    some stores "super buffets," which generally have higher gross margins. The    buffet sales in relation to total restaurant sales were 56.7% in 2003, 56.9% in    2004 and 57.0% in 2005. Restaurantes California is competitive on the basis of    their high-quality food and service, cleanliness, attractive architecture and    decorations, hand-painted dishes, colorful menus and innovative promotions    (like free buffets for children accompanied by adults and the "Birthdays Free"    campaign).

Restaurantes California have traditionally been located in    commercial areas near Comercial Mexicana stores, but are increasingly being    operated on a stand-alone basis. In choosing the sites for Restaurantes California, our real estate professionals consider criteria similar to those used in    selecting store sites. Suppliers deliver all products used in the operation of    Restaurantes California directly to the restaurants. Restaurantes California generally does not use media advertising. At December 31, 2005, Restaurantes California had 3,207 employees.

**Suppliers**

We purchase the products frequently carried or used by our stores    and restaurants from more than 2,500 suppliers. No single supplier or group of    related suppliers accounts for more than 3.9% of the total products purchased    by us. We believe that the sources and availability of materials for our    retail store and restaurant operations are adequate and will continue to be so    for the foreseeable future.

Certain of our suppliers prepare items for sale under our private    label brand names. We expect that the source and availability of private label    products will be adequate in the foreseeable future.

We have not experienced any difficulty in obtaining the types or    quantities of the merchandise we require on a timely basis and believe that, if    any of our current sources of supply were to become unavailable, alternative    sources could be obtained without any material disruption to our business.

We maintain a centralized purchasing department that specializes in    perishables, groceries, clothing and other merchandise through four principal    groups. One group within the purchasing department is responsible for the    stores in our Comercial Mexicana, Mega, Bodega and Sumesa formats. A second    group is responsible for purchasing the products required by Restaurantes California. We also have two separate groups of buyers responsible for determining and    purchasing the items carried in the Costco membership warehouses. One Costco    de Mexico Group joint venture purchasing team is located in Mexico and is responsible for purchasing domestic products. The other Costco de Mexico Group joint    venture purchasing team is located in San Diego, California, operating with the    support of Costco and is responsible for purchasing products manufactured    outside Mexico. The separate groups of buyers allow each group to focus on the    needs of the target customers for the stores or restaurants serviced by that    group of buyers. These purchasing groups coordinate with one another, sharing    information on suppliers and the terms and conditions on products offered by    suppliers. The buyers determine which products will be stocked in our stores    and restaurants and are responsible for maintaining our relationships with our    suppliers and negotiating the prices of all goods stocked in our stores and the    products required by our restaurants. The centralized purchasing department    orders approximately 80% of the goods in our stores and has secured    arrangements with suppliers for the remaining 20% of goods.

We believe that communication through our information systems have    allowed us to negotiate more effectively with suppliers and that we conduct    business with our suppliers on terms which are not less favorable than those    generally available in the retail industry. Domestic suppliers are paid in    Pesos on terms that vary with the product being purchased. Foreign suppliers    are paid in foreign currencies, primarily U.S. Dollars.

In both 2003 and 2004 approximately 17.0% and 20.0% in 2005 of our    sales from stores consisted of products imported from outside of Mexico. In addition, we sell certain imported products, which we acquire from    multinational corporations, distributors and wholesalers in Mexico, at prices denominated in Pesos.

**Competition**

The retail industry in Mexico is highly competitive and is    characterized by high inventory turnover and small profit margins as a percentage    of sales. Earnings primarily depend upon the maintenance of high per-store    sales volumes, efficient product purchasing and distribution and cost-effective    store operations. Advertising and promotional expenses that are necessary to    maintain our competitive position in our major markets affect margins at our    stores. Competition occurs principally on the basis of price and, to a lesser    extent, location, selection of merchandise, quality of merchandise (in    particular perishables), service, store conditions and promotions. The    principal basis of our competition with our competitors has largely been based    on offering the low prices, as customers shop where the lowest price is    offered. We compete with numerous local companies, regional and national supermarket    and self-service store chains, including Walmex, Soriana, Chedraui (which acquired    29 Carrefour stores) and Gigante, as well as small family-owned neighborhood    stores and street markets, in each region in which we do business. In    addition, certain major U.S. and international retailers have established joint    ventures with Mexican companies or have acquired the majority of shares to    control businesses which compete with our stores (for example, Wal-Mart    controls Walmex). Walmex currently has the highest market share in Mexico based on net sales. The Costco membership warehouses compete with Sam’s Club, a    self-service warehouse owned by Walmex, and our hypermarkets and other stores    face competition from Soriana, Chedraui and Gigante and other U.S. and international retailers. Additional U.S. and international retailers may enter the market    in Mexico in the future either through joint ventures or directly. In    addition, certain of our stores, which are located in the same shopping areas,    compete with each other. We believe that our principal competitive factors for    our stores are location, price, cleanliness, promotion, customer service and    quality of merchandise. See "Key Information-Risk Factors-Risk Factors Related    to Our Business-We Participate in a Very Competitive Market and Increased    Competition May Adversely Affect Our Business."

In 2005, we were one of the largest retail companies in Mexico as measured by net sales. By the same measure, Walmex is the largest retail company    in Mexico. We have a significant presence in the Mexico City metropolitan area    and the Central Region, where approximately 72.0% of the selling area of our    stores was located as of December 31, 2005.

The restaurant business in Mexico is also highly competitive.    Restaurantes California compete with numerous regional and national fast-food    restaurant chains, local restaurants and prepared food establishments and    street markets. In addition, certain U.S. fast-food restaurant chains,    including McDonalds, Burger King, Kentucky Fried Chicken, Dominos Pizza and    Pizza Hut, have opened restaurants in Mexico. We believe that Restaurantes    California compete on the basis of high-quality food, fast service,    cleanliness, attractive architecture and decoration and innovative promotion.

**Government Regulation**

Aspects of the retail restaurant business, including our    Restaurantes California operations, are subject to regulation directly or    indirectly by various Mexican federal, state and local governmental agencies.    The most significant of these agencies are the *Secretaria de Economia*,    or the Ministry of Economy, and the *Secretaria de Salud*, or Ministry of    Health, of Mexico.

The Ministry of Economy regulates the prices at which we can sell    some medicines. The Ministry of Economy also verifies that all imported    products have a label in Spanish specifying the products origin and ingredients    and the company importing the product. Although there are no price controls    currently in effect in Mexico, in the past the Mexican government has enacted    price controls that cover products that we sell. There is no assurance that    price controls may not be imposed by the Mexican government in the future.

The Ministry of Health establishes minimum standards for cleanliness    of our stores and restaurants. We believe that we are in compliance in all    material respects with the regulations of the Ministry of Economy and that our    operations meet or exceed all requirements imposed by the Ministry of Health.

Our expansion plan depends upon obtaining the licenses, permits and    zoning approvals necessary to build on and develop the sites for our stores and    restaurants. We also maintain licenses, such as licenses to sell liquor, which    are granted by governmental agencies and which we consider important to our    business.

Our compliance with Mexican federal, state and local provisions that    regulate the discharge of materials into the environment has not had and is not    expected to have a material effect upon our capital expenditures, earnings or    competitive position.

**Trademarks**

We own and use various trademarks in our business, the most    important being "Comercial Mexicana," "Sumesa," "Mega Comercial Mexicana," "Restaurantes California," and the pelican symbol identified with our    stores. In addition, the Costco de Mexico Group joint venture has a license    from Costco to use in Mexico the "Costco" service mark. We actively protect    our intellectual property rights.

### Organizational    Structure

Following is a    list of our significant subsidiaries, all of which are incorporated in Mexico:
|                                                      | **Activity as of December 31,      2005**          | **Percentage Ownershipas of December 31, 2005(1)** |
|-----------------------------------------------------------|----------------------------------------------------|----------------------------------------------------|
| Subsidiary holding companies:                             |                                               |                                               |
| Tiendas      Comercial Mexicana, S.A. de C.V...           | Operates      a chain of 142 stores                | 100%                                               |
| Tiendas Sumesa, S.A. de C.V......................         | Operates      a chain of 21 stores.                | 100%                                               |
| Restaurantes California, S.A. de C.V............          | Operates      a chain of 62 restaurants.           | 100%                                               |
| Costco de Mexico, S.A. de C.V..................           | Operates      a chain of 28 membership warehouses. | 50%                                                |
| Real estate subsidiaries................................. | Operate      as a real estate group.               | 100%                                               |
| Distribution companies.................................   | Operate      our distribution facilities.          | 100%                                               |
| Subsidiary service companies.......................       | Operate      as a services group.                  | 100%                                               |

________

(1) Percentage ownership directly by CCM    or by CCM and other subsidiaries of CCM.

In accordance with Mexican GAAP, supplementary applied the International Accounting Standard No. 31 "Interests in Joint Ventures" to account for our investment in Costco de Mexico Group Joint Venture under the proportional consolidation method.

 

### Property, Plant and Equipment

Our properties primarily consist of different store formats,    restaurants and distribution centers, most of which are located in the Mexico City metropolitan area. In addition, as of December 31, 2005, we had approximately 7.0 million    square feet in land reserve. Our principal executive offices are located in    the Mexico City metropolitan area.

We opened a new distribution center in the Mexico City metropolitan    area in August 2003. The distribution center has a storage capacity of 538,195 square feet. The distribution center allows us to negotiate better prices with suppliers,    who can place their products in one centralized location rather than in several    different locations.

We also currently operate a 377,000 square feet distribution center in the Mexico City metropolitan area for perishable items,    which we plan to replace when we open a new distribution center. The site for    this new distribution center has been acquired and we expect construction to    start in 2006.

The Costco de Mexico Group joint venture operates a 538,000 square feet distribution center in the Mexico City metropolitan area.

We own, develop and lease real estate to support our operations and    expansion plans. We continuously study potential new locations and make    decisions regarding new stores and restaurant locations based on, among other    things, the location’s population, income demographics, traffic, public    transportation, access to streets, zoning and other services and facilities.    The Costco de Mexico Group joint venture uses similar criteria to select suitable    real estate for its operations.

At December 31, 2005, we owned approximately 78.7% of the land on    which our stores are located, and we own the land on which 43 of the 62    Restaurantes California are located. Substantially all of the remaining land    on which our stores and restaurants are located is leased from independent    third parties. Leases have a 15 year term on average, with one or more options    to extend or renew. Approximately 85% of our stores and restaurants that lease    land (representing 27% of our total stores and restaurants) have leases which    will expire between 2006 and 2010. The lease agreements for the stores and    restaurants generally provide for rent payments calculated as a percentage of    monthly net sales, ranging from 1.5% to 3.25% for stores and from 5% to 9% for    restaurants, with a minimum guaranteed rental.

The following table sets forth our owned and rented retail space by    total selling area, selling area as percentage of total area and number of our    stores at December 31, 2005.
|                                                                                                     | **At December 31, 2005**             |
|----------------------------------------------------------------------------------------------------------|--------------------------------------|
|                                                                                                     | **TotalSelling Area(in sq. ft.)(1)** | **Percentage Total Selling Area** | **Numberof Stores** |
| Owned properties...............................................................................          | 11,384,000                           | 78.7% | 136 |
| Leased properties...............................................................................         | 3,087,999                            | 21.3    | 55 |
| Total................................................................................................... | 14,471,999                           | 100.0% | 191 |

______________

(1) Assuming the five stores acquired from Auchan in 2003 are    leased properties. Had these five stores been treated as owned, the total    selling area for owned properties would have been 12,140,664 sq.ft. (83.9% of    the total selling area) and the total selling area for leased properties would    have been 2,331,335 sq.ft. (16.1% of the total selling area).

The following table sets forth our owned and leased retail space by    store format, number of stores and total area at December 31, 2005.
|                                                                                               | **At December 31, 2005** |
|----------------------------------------------------------------------------------------------------|--------------------------|
| **Store Format**                                                                                   | **Owned**                | **Leased** | **Total** | **Total Selling Area** |
| Comercial Mexicana.....................................................................            | 40                       | 21 | 61 | 4,092,678 |
| Bodega...........................................................................................  | 25                       | 11 | 36 | 2,130,783 |
| Mega(1)..........................................................................................  | 37                       | 8 | 45 | 4,783,520 |
| Sumesa...........................................................................................  | 7                        | 14 | 21 | 211,780 |
| Costco............................................................................................ | 27                       | 1 | 28 | 3,253,238 |

______________

(1) Considering the five stores acquired from Auchan in 2003 are    leased properties. 

Our real estate subsidiaries have also engaged in the development of    shopping centers in which Comercial Mexicana stores have participated as anchor    tenants, with the remaining space being leased to third parties. Currently we    have over 2,093 commercial tenants, with approximately 1,750,300 square feet under lease, from which we receive income.

We have a land reserve of unimproved land for future development of    approximately 7.0 million square feet in the Mexico City metropolitan area    and in the Central Region, and other cities in Mexico, which management expects    will be sufficient for substantially all of our expansion plans for 2006 and    2007 whether or not economic conditions in Mexico continue to improve. Because    it is increasingly difficult to locate larger plots of land suitable for store    sites within Mexico City, we are increasingly considering acquiring land    outside of Mexico City, primarily in the suburbs of Mexico City and in the    Central Region.

**Insurance**

We maintain all risk and first loss insurance policies (including    insurance for losses resulting from hurricanes and earthquakes) and business    interruption insurance with an insurance value up to Ps.32.4 billion    (calculated on the basis of the maximum foreseeable loss) with a maximum per    claim of Ps.1.8 billion (calculated on the basis of the maximum foreseeable    loss) per location, and a limit up to Ps.8.1 billion per event. The fixed    assets at each of our locations are covered on a replacement cost of market    value basis. We also maintain a transit insurance policy that protects against    loss for shipment up to Ps.88.5 million per shipment. We maintain    comprehensive liability insurance policies with an insured limit of up to    Ps.300.0 million per event per location.

## Item    5. Operating and Financial Review and Prospects

*You should read the following discussion together with our audited    year-end financial statements and the accompanying notes appearing elsewhere in    this annual report.*

*This annual report contains forward-looking statements that reflect    our plans, estimates and beliefs. Our actual results could differ materially    from those discussed in the forward-looking statements. Factors that could    cause or contribute to these differences include, but are not limited to, those    discussed below and elsewhere in this annual report, particularly in "Key    Information-Risk Factors." In addition to the other information in this annual    report, investors should consider carefully the following discussion and the    information set forth under "Key Information-Risk Factors" before evaluating us    and our business. See "Key Information-Forward-Looking Statements."*

*Our financial statements have been prepared in accordance with    Mexican GAAP, which differs in significant respects from U.S. GAAP. Note 17 to our 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 net income and other items for the years ended December 31, 2003,    2004 and 2005 and stockholders’ equity as of December 31, 2004 and 2005. Any    reconciliation to U.S. GAAP may reveal significant differences between our    stockholders’ equity, net income and other items as reported under Mexican GAAP    and U.S. GAAP. See "Key Information-Risk Factors-Risk Factors Related to    Mexico-Differences Between Mexican GAAP and U.S. GAAP May Have an Impact on the    Presentation of Our Financial Information."*

**Overview**

Our operations are conducted entirely in Mexico. Consequently, our    historical financial results have been, and our financial results are expected    to continue to be, materially affected by the general level of economic    activity and growth of per capita disposable income in Mexico. This is particularly the case in the Mexico City metropolitan area and in the Central    Region, where we derived approximately 72.0% of our net sales for the year    ended December 31, 2005.

Historically, the results of Mexican retailers have been closely    correlated with changes in Mexican GDP. Over the last five years, Mexican GDP    has increased at an average annual rate of 3.0%, while Mexico has experienced low inflation rates and a stable macroeconomic environment. This growth and    stability has resulted in an expansion in domestic consumption, which has    benefited retail businesses. In recent years, however, as competition has    increased, results of operations for retailers like us have also increasingly    been affected by competition. Competitive pressures may decrease our sales, as    consumers migrate to our competitor’s stores, and reduce our margins, as we    reduce prices to maintain market share. See "Key Information-Risk Factors-Risk    Factors Related to Our Business-We Participate in a Very Competitive Market and    Increased Competition May Adversely Affect Our Business."

We maintain our financial records in Pesos. The Mexican Institute of Public Accountants has issued Bulletin B-10, "Recognition of the Effects of    Inflation on Financial Information," and Bulletin B-12, "Statement of Changes    in Financial Position." These bulletins outline the inflation accounting method    that is mandatory for all companies reporting under Mexican GAAP. Under    Bulletin B-10, all financial information is presented in constant Pesos (having    the same purchasing power for each period indicated taking into account    inflation) as of the date of the most recent balance sheet. The presentation    of financial information in constant Pesos is intended to recognize certain    effects of inflation on the financial statements and to permit comparisons    between comparable periods in comparable monetary units. The result of this    adjustment is that growth rates between periods are stated in "real" terms,    eliminating the general effects of inflation. Except where otherwise    indicated, financial data for all periods in the financial statements and    throughout this annual report have been restated in constant Pesos with    purchasing power as of December 31, 2005. See Note 2 to our financial    statements.

Under Mexican GAAP, inventories are stated at cost using the retail    method, which, because of our rapid inventory turnover, approximates    replacement cost. The cost of sales is restated using methods that recognize    the replacement cost of merchandise at the time of sale. Bulletin B-10    requires us to restate non-monetary assets at current replacement cost, to    restate non-monetary liabilities using the NCPI and to restate the components    of stockholders’ equity using the NCPI.

In accordance with Bulletin B-10, we are required to report, as a    gain or loss on our net monetary position, the effects of inflation on our    monetary assets and liabilities. This net amount reflects the gain or loss    arising from holding net monetary liabilities or assets in an inflationary    period because over time a monetary liability can be settled for units of less    purchasing power whereas a monetary asset decreases in value in real terms.    Our operations generate monetary assets (primarily in the form of cash and    temporary investments and general accounts and notes receivables) while our    trade and accounts payable and borrowings constitute monetary liabilities.

Under Bulletin A-8, "Supplementary Application of International    Accounting Standards," Mexican companies are required to refer to International    Accounting Standards, or IASs, for guidance in determining accounting    requirements when an accounting principle has not been formally promulgated in Mexico. No accounting principle has been formally promulgated in Mexico regarding the accounting and reporting for interests in joint ventures. Accordingly, we    follow the provisions of IAS 31, "Financial Reporting for Interests in Joint    Ventures," which requires that companies report joint ventures using the    "proportionate consolidation," or pro rata method. As a result, we consolidate    on a pro rata basis 50% (equivalent to our interest in the joint venture) of    the assets, liabilities, income and expenses of the Costco de Mexico Group    joint venture. For U.S. GAAP purposes, this investment would be treated as an equity investment, however CCM has adopted to avail itself the SEC accommodation to omit reconciling differences related to  the classification or display and instead provides summarized footnote disclosure of the amounts proportionally consolidated. See Note 17 to our financial statements. Unless otherwise    indicated, the discussion and financial data below reflects only 50% of those    operations.

In February 2003, we acquired Auchan’s operations in Mexico, consisting of five hypermarket stores located in the Central Region. These five    stores have an aggregate selling area of approximately 495,139 square feet. We currently operate these stores under the Mega format. The purchase price    for the acquisition of the corporations consists of six installment payments.    In 2003 we paid U.S.$15.0 million, in 2004 we paid U.S.$20.0 million,    in 2005 we paid U.S.$25 million and in 2006 we paid U.S.$20.0 million.    We are required to make additional payments of U.S.$20.0 million in each    of 2007 and 2008. The stock of the Mexican corporations that hold the fixed    assets of these stores are presently held in an escrow. The stock will not be    released from this escrow, and we will not acquire title to the stock, until    the purchase price is paid in full to the sellers. If we do not pay the    purchase price in full when due, we will not obtain title to the stock and will    have no rights to be repaid the amounts we previously paid to Auchan. In    addition, there are certain restrictive covenants that limit the operations of    the business until the purchase price is paid to the seller. See "Key    Information-Risk Factors-Risk Factors Related to Our Business-Our Acquisition    of the Mexican Operations of Auchan Is Dependent on Payment of the Purchase    Price Due and Failure to Pay Will Result in Forfeiture of Auchan Properties and    All Amounts Paid."

As used herein, the term "same store sales" reflects the sales of    our stores operating throughout the same months of both financial periods    compared. If a store did not operate for a full month of either of the    financial periods being compared, we exclude its sales for such month from both    financial periods. For example, if a new store was opened on July 1, 2004 and    operated throughout the last six months of 2004, (1) our "same store sales"    data would include the sales of that store for the last six months of 2004 and    the last six months of 2005 and (2) we would account for the sales of the new    store during the first six months of 2005 as sales from a newly opened store.    Our calculations of same store sales data may differ from same store sales    calculations of other retailers.

In computing sales per retail square foot for a period, we divide    total store sales for the full period by the aggregate retail square footage at    the end of such period. Accordingly, stores that are opened for less than the    full period have the effect of decreasing store sales per retail square foot, and    stores that are closed prior to the end of the full period have the opposite    effect. Similarly, in computing average annual sales per store, we divide    total store sales for the full period by the number of stores at the end of the    period, and in computing sales per operating employee, we divide total stores    sales for the full period by the number of operating employees at the end of    the period.

As used herein, the term "operating employees" includes all    employees at our stores and distribution centers, other than administrative    employees and employees of our restaurants.

As used herein, the terms "retail square footage" or "selling space"    mean the square footage of space in our stores from the cash registers    (including accompanying displays) to the back of our stores (excluding any    warehouse space).

**Effects of Devaluation and Inflation**

The following    table sets forth, for the periods indicated:
> 
- the percentage      that the Mexican Peso devalued or appreciated against the U.S. Dollar;

- the Mexican      inflation rate;

- the U.S. inflation rate;

- the percentage      that Mexican GDP changed as compared to the prior period; and

- the percentage      change in the Mexican retail sector as compared to the prior period.

|                                                                                                                        | **Year ended December 31,** |
|-----------------------------------------------------------------------------------------------------------------------------|-----------------------------|
|                                                                                                                        | **2003**                    | **2004** | **2005** |
| Devaluation (appreciation) of the Mexican Peso as compared to the      U.S. Dollar (1) ...                                  | 8.0 %                       | (0.7)% | (4.7)% |
| Mexican inflation rate (2) ...........................................................................................      | 4.0                         | 5.2 | 3.3 |
| U.S. inflation rate ....................................................................................................... | 1.9                         | 3.3 | 3.1 |
| Increase in Mexican GDP (3) .....................................................................................           | 1.3                         | 4.4 | 3.0 |
| Increase in the Mexican retail sector (4) .....................................................................             | 1.1                         | 3.5 | 8.6 |

______________

(1) Based    on changes in the Interbank Rates, as reported by Banamex, at the end of each    period, which were as follows: Ps.10.395 per U.S. Dollar as of December    31,2002, Ps.11.232 per U.S. Dollar as of December 31, 2003, Ps.11.151 per U.S.    Dollar as of December 31, 2004 and Ps.10.627 per U.S. Dollar as of December 31,    2005

(2) Based    on changes in the NCPI from the previous period, as reported by the Mexican    Central Bank, which were as follows:, 102.9 in 2002, 106.9 in 2003, 112.5 in 2004 and 116.39 in 2005.

(3) As    reported by the Instituto Nacional de Estadistica, Geografia e Informática, or    INEGI, and, in the case of GDP information for 2002, 2003, 2004 and 2005, as    estimated by INEGI.

(4) As    reported by the Mexican National Association of Self-service and Department    Stores, or ANTAD.

The general condition of the Mexican economy, the devaluation of the    Peso as compared to the U.S. Dollar, inflation and high interest rates have    adversely affected, and may in the future adversely affect, our financial    conditions and results of operations. Inflation also affects consumer demand,    our ability to raise prices, supplier prices, employment rates, competitive    factors and consumer purchasing power. In addition to the extent inflation    exceeds our price increases, our prices and revenues will be adversely affected    in "real" terms. See "Key Information-Risk Factors-Risk Factors Related to Mexico."

**Seasonality**

Our retail business reflects seasonal patterns of consumer spending and    our total net sales and operating results vary from quarter to quarter. We    have historically incurred a higher percentage of our overall net sales in the    third quarter in connection with the "Julio Regalado" promotion and in the    fourth quarter in connection with the Christmas holiday season. Any    significant reduction in the third or fourth quarter revenue could adversely    affect our business, financial condition and results of operations.

**Critical Accounting Policies**

We prepare our consolidated financial statements in conformity with    Mexican GAAP, which requires management to make certain estimates and    subjective judgments or decisions. We base our estimates, judgments and    decisions on historical experience, current trends and other factors that management    believes to be important at the time the consolidated financial statements are    prepared. On a regular basis, management reviews our accounting policies and    how they are applied and disclosed in our consolidated financial statements.    We continually evaluate the information used to make these estimates as our    business and the economic environment change.

While we believe that the historical experience, current trends and    other factors considered support the preparation of our consolidated financial    statements in conformity with Mexican GAAP, actual results could differ from    our estimates, and such differences could be material.

We believe that the following accounting policies include a higher    degree of judgment and/or complexity and, thus, are considered to be critical    accounting policies. Our management has discussed the development and selection    of our critical accounting policies with the audit committee of our board of    directors and the audit committee has reviewed our disclosures relating to    them.

**Inventories**

Inventories are valued under the retail inventory method, or RIM.    Under RIM, the valuation of inventories at cost and the resulting gross margins    are calculated by applying a calculated cost-to retail ratio to the retail    value of inventories. RIM is an averaging method that is widely used in the    retail industry due to its practicality. The use of RIM results in an    inventory valuation at the lower of cost or market when markdowns deemed to be    a permanent change in value are taken separately as a reduction of the retail    value of inventories.

Inherent in the RIM calculation are certain significant management    judgments and estimates including, among others, merchandise mark-ups and    markdowns, which significantly impact the ending inventory valuation at cost as    well as resulting gross margins. To reduce the potential for variances in the    valuation of inventory, our RIM utilizes four different categories (Groceries,    General Merchandise, Clothing and Perishables) divided into several sections or    departments in which similar classes of merchandise inventories are valued    under the same standards. Historically, we have rarely experienced significant    variances in the valuation of inventory. However, future changes in    circumstances and inappropriate management’s estimations could cause our    inventory to be inappropriately valuated and as a consequence, the possible    variances would have to be charged against the cost of sales.

In addition, we estimate shrinkage inventory that may be caused by    employee theft, shoplifting, breakage, spoilage, possible errors in    recordkeeping and unrecorded markdowns as a percentage of net sales. We    periodically evaluate our provisions for shrinkage and adjust it based on    historical amounts. Shrinkage can vary significantly between stores and    merchandising departments and we may adjust the shrinkage estimates as    circumstances change.

**Revenue    recognition**

Our principle source of income is derived from sales to customers.    Revenue from product sales is recognized at the point of sale, except for    layaway transactions, which are recognized when the customer makes full payment    and takes possession of the merchandise in question. Defective merchandise    returned by customers is either returned to the supplier or is destroyed and    reimbursement is sought from the supplier, which, in most cases, accepts our    reimbursement claim.

Discounts provided to customers at the point of sale are recognized    as a reduction in sales as the products are sold. We monitor our revenue    recognition figures using a variety of tools. One of our most important    tracking tools is the daily revenue reports received by the stores, which are    reconciled with register reports and receipts. This information is gathered at    the store level, then combined and reviewed in our central accounting    department, in order to identify any possible distortion.

**Property,    equipment and leasehold improvement**

Property, equipment and leasehold improvement are stated at cost,    less accumulated depreciation, and restated in accordance with Mexican GAAP (Bulletin B-10)  by applying factors derived from    the NCPI to historical costs. Depreciation of buildings, equipment, and other    depreciable assets is primarily determined using the straight-line method.    Expenditures that substantially improve and/or increase the useful life of    facilities or equipment are capitalized. Maintenance and repair costs are    expensed as incurred. Gains and losses on retirements are included in income    as they occur.

Property, equipment and leasehold improvement are evaluated for    possible impairment on a specific asset basis or in groups of similar assets,    as applicable, whenever events or changes in circumstances indicate that the    carrying amount of an asset may not be recoverable. Recoverability of assets    to be held and used is measured by a comparison of the carrying amount of an    asset to estimate discounted future net cash flows to be generated by the asset    or group of assets. If the carrying amount of an asset or group of assets    exceeds its estimated future cash flows, an impairment loss is recognized for the    amount by which the carrying amount of the asset exceeds the fair value of the    asset. Assets to be disposed of are reported at the lower of the carrying    amount or fair value less costs to sell, and depreciation ceases.

The key factors for property, equipment and leasehold improvement    policy are the estimation of the useful lives of our various asset types, the    election to primarily utilize the straight-line method for recording    depreciation, management’s judgment regarding appropriate capitalization or expensing    of costs related to fixed assets, and management’s determination regarding    impairment of any asset or group of assets. The estimation of useful lives for    fixed assets impacts the level of annual depreciation expense recorded.    Utilization of the straight-line method for recording depreciation or any of    the other acceptable methods for depreciating assets results in the same amount    of depreciation over the life of an asset; however, the amount of annual    depreciation expense and the resulting carrying amount of net property,    equipment and leasehold improvement will vary significantly depending on the    method elected. Our management believes that the straight-line method results    in the most accurate recognition of periodic depreciation expense for all of    our assets. Our management’s evaluation of whether an expenditure related to    property, equipment and leasehold improvement substantially improves and/or    increases the useful life of an asset and is appropriately capitalized as an    addition to the asset’s cost basis or is expensed as normal maintenance and    repair expense also can significantly affect results of operations for a given    period as well as our financial position. Our management has also evaluated    any asset or group of assets for which potential impairment might exist and has    determined that there are none requiring an impairment write-down as of    December 31, 2005. This process requires management’s estimate of future cash    flows generated by each asset or group of assets. For any instance where this    evaluation process might indicate an impairment exists, the appropriate asset’s    carrying values would be written down to fair value and the amount of the    write-down would be charged against the results of continuing operations.

**Accounting for income taxes**

In the preparation of our consolidated financial statements we are    required to estimate our expected income taxes. This process involves an    estimation of our actual current tax and an assessment of temporary differences    resulting from differing treatment of items for tax and accounting purposes.    These differences result in deferred assets and liabilities, which are included    within our consolidated balance sheet. We must then assess the likelihood that    our deferred assets will be recovered from future taxable income and to the    extent we believe that recovery is not likely, we must establish a valuation    allowance. To the extent we establish a valuation allowance or increase this    allowance in a period, we must include a charge against the tax provision in    the statement of operations.

Significant management judgment is required in determining our    provision for income taxes, our deferred tax assets and liabilities and any    valuation allowance recorded against our net deferred tax asset. The valuation    allowance is based on our estimates of taxable income and the period over which    our deferred tax asset will be recoverable. In the event that actual results    differ from these estimates or we adjust these estimates in future periods we    may need to establish an additional valuation allowance which could materially    impact our financial position and results of operations.

**Financial    Instruments**

 The Company historically has used    derivatives to manage its exposure to changes in interest rates and foreign    exchange. As required by Statement C-10 of the Mexican Accounting    pronouncement, as amended, the definition of derivatives requires that    derivatives be carried at fair value on the balance sheet and Statement C-10    provides for hedge accounting when certain conditions are met. In accordance    with this standard, the Company’s derivative financial instruments are    recognized on the balance sheet at fair value. Changes in the fair value of    derivative instruments designed as "cash flow" hedge, to the extent the hedges    are highly effective, are recorded in comprehensive income, net of tax effects.    Ineffective proportions of cash flow hedges, if any, are recognized in current    period earnings. Other comprehensive income or loss is reclassified into    current period earnings when the hedge transaction affects earnings. Changes in    the fair value of derivative instruments designed as "fair value" hedges, along    with corresponding changes in the fair values of the hedged assets or    liabilities, are recorded in the current period earnings.

 Derivatives that are no designed as    hedging instruments are classified as trading assets and liabilities; the gain    or loss is recognized in the earnings in the period of change.

 The table below summarizes the    outstanding currency derivatives designed as hedges of December 31, 2005 and    December 31 2004.
|                          | **2005**        | **2004**            |
|-------------------------------|-----------------|---------------------|
|                          | **Fair Value**  | **Notional Amount** | **Due Date** | **Fair Value** | **Notional Amount** | **Due Date** |
| **Cash Flow Hedges**          |            |                |   |   |   |   |
| Exchange rate      options    | Ps 551,285      |                | 2006-2009 |   |   |   |
|       Buy      |            | 21,614,046          |   |   |   |   |
|       Sale     |            | 4,966,004           |   |   |   |   |
| Exchange rate Swaps           | 103,256         | 2,125,420           | 2015 |   |   |   |
|                          |            |                |   |   |   |   |
| **Trading      Derivatives**  |            |                |   |   |   |   |
| Interest rate swaps           | Ps  46,218 | Ps 2,125,420        | 2015 | Ps (186,925) | Ps 3,719,640 | 2005 |
| Exchange rate      options    | 464,283         |                | 2006-2010 | 229,138 | 546,342 | 2005 |
|       Buy      |            | 7,352,303           |   |   |   |   |
|       Sale     |            | 8,653,648           |   |   |   |   |
| Exchange rate swaps           | 362,402         | 5,581,353           | 2015 | - | - | - |
| Exchange rate      forwards   | -               | -                   | - | 58,183 | 367,983 | 2005 |
|                          |            |                |   |   |   |   |
| **Embedded      derivatives** | (220,882)       |                |   | - |   |   |

The notional amount of derivative financial instruments is    represented by US dollars valued at the exchange rate of $10.627 pesos per    dollar. Notional amounts (in US dollars) related to derivative financial    instruments reflect the volume of operations. However, they do not reflect    amounts at risk. Amounts at risk are generally limited to the unrealized    profit or loss from valuation to market of those instruments.

For the year-ended December 31, 2005, a $664,541 change in the fair value of cash flow hedges was recorded    within stockholders’ equity net of Ps.183, 271 of deferred tax. Cash flow    hedges are utilized to protect the Company from exchange rate risk associated    with payments for the acquisition of production materials or investment    activities during the next four years, interest and principal payments associated with a foreign    currency debt issuance that will be made during the next 10 years.

### Results of Operations

General

The following table sets forth consolidated income statement data    for the years ended December 31, 2003, 2004 and 2005 as presented in our    audited year end financial statements, expressed as a percentage of    consolidated net sales.
|                                                                                                                                  | **Year Ended December 31,** |
|---------------------------------------------------------------------------------------------------------------------------------------|-----------------------------|
|                                                                                                                                  | **2003**                    | **2004** | **2005** |
| Net sales (millions pesos as of December 31, 2005)...........................................                                         | 38,004                      | 38,842 | 40,309 |
| Cost of sales .....................................................................................................                   | (80.0)%                     | (79.8)% | (79.0)% |
|       Gross profit................................................................................................     | 20.0                        | 20.2 | 21.0 |
| Selling, general and administrative expenses:                                                                                         |                        |   |   |
|       Selling......................................................................................................... | (13.8)                      | (13.6) | (13.6) |
|       Administrative.............................................................................................      | (2.2)                       | (1.9) | (1.8) |
|       Total selling, general and administrative expenses.........................................                      | (16.0)                      | (15.5) | (15.4) |
| Operating income............................................................................................                          | 4.0                         | 4.7 | 5.6 |
| Integral result of financing:                                                                                                         |                        |   |   |
|       Interest expense........................................................................................         | (0.9)                       | (0.8) | (1.1) |
|       Gain (loss) from forward agreements.........................................................                     | -                           | 0.2 | 1.4 |
|       Interest income..........................................................................................        | 0.1                         | 0.2 | 0.2 |
|       Loss from repurchase of notes...................................................................                 | (0.1)                       | - | - |
|       Foreign exchange loss, net.........................................................................              | (0.3)                       | - | - |
|       Gain from monetary position......................................................................                | 0.7                         | 0.8 | 0.6 |
|       Total integral results of financing................................................................              | (0.5)                       | (0.4) | 1.5 |
|       Other income (expense), net....................................................................                  | 0.2                         | (0.1) | (1.3) |
| Provisions for income taxes and employee statutory profit sharing....................                                                 | (0.7)                       | (0.5) | 0.8 |
| Income before minority interest......................................................................                                 | 3.0                         | 4.6 | 4.6 |
| Minority interest.............................................................................................                        | -                           | - | - |
| Net income....................................................................................................                        | 3.0%                        | 4.6% | 4.5% |

______________

**Segment Disclosures**

Our business is operated in three segments: (1) the CM Group, which    comprises our core business and includes the Comercial Mexicana and Bodega supermarkets and Mega hypermarkets, (2) the Costco de Mexico    Group, which consists of our 50% interest in the joint venture with Costco and    (3) the Other Group, which includes our Sumesa stores and Restaurantes California. Operating decisions are made separately for the Costco de Mexico Group. Under    Mexican GAAP, segment disclosure must be made in respect of net sales,    depreciation and amortization, net income and certain balance sheet items.    Information about our segments is provided below.
| **As of and for the year endedDecember 31, 2005**                                 | **CCM Group**      | **Costco de México Group Joint Venture** | **Other Group**               | **Total**      |
|-----------------------------------------------------------------------------------|--------------------|-------------------------------------------------|-------------------------------|----------------|
| Net sales ....................................                                    | Ps      30,134,625 | Ps.      8,398,566                              | Ps      1,775,664             | Ps 40,308,855  |
| Cost of sales ...............................                                     | 23,524,254         | 7,204,808                                       | 1,101,605                     | 31,830,667     |
| Gross profit ................................                                     | 6,610,371          | 1,193,758                                       | 674,059                       | 8,478,188      |
| Selling, general and administrative expenses .................................... | 4,777,562          | 839,354                                         | 583,120                       | 6,200,036      |
| Operating income........................                                          | 1,832,810          | 354,405                                         | 90,937                        | 2,278,152      |
| Integral result of financing ...........                                          | 633,939            | (12,124)                                        | (1,134)                       | 620,681        |
| Other income .............................                                        | (561,191)          | 19,140                                          | 22,599                        | (519,452)      |
| Income taxes (1) .......................                                          | 197,182            | 120,431                                         | 14,893                        | 332,506        |
| Net income ...............................                                        | 1,550,128          | 226,957                                         | 54,580                        | 1,831,665      |
| Property, equipment and leasehold and owned buildings improvement.                | Ps. 17,744,510     | Ps. 3,246,472                                   | Ps.  736,118   | Ps. 21,727,100 |
| Liabilities ...................................                                   | 5,967,931          | 845,483                                         | 180,035                       | 6,993,449      |
| Capital expenditures ..................                                           | 2,057,049          | 515,863                                         | 110,757                       | 2,683,669      |
| **As of and for the year endedDecember 31, 2004**                       | **CCM Group**       | **Costco de México Group Joint Venture** | **Other Group**               | **Total**           |
|-------------------------------------------------------------------------|---------------------|-------------------------------------------------|-------------------------------|---------------------|
| Net sales ......................................                        | Ps.      29,423,734 | Ps.      7,818,627                              | Ps.      1,599,770            | Ps.      38,842,131 |
| Cost of sales ................................                          | 23,234,988          | 6,771,323                                       | 974,323                       | 30,980,634          |
| Gross profit ..................................                         | 6,188,747           | 1,047,304                                       | 625,446                       | 7,861,497           |
| Selling, general and administrative expenses                            | 4,741,171           | 746,554                                         | 545,321                       | 6,033,046           |
| Operating income.........................                               | 1,447,576           | 300,750                                         | 80,124                        | 1,828,451           |
| Integral result of financing .............                              | 154,712             | (23,729)                                        | 50,935                        | 181,918             |
| Other income ...............................                            | (17,749)            | 11,620                                          | 25,873                        | 19,744              |
| Income taxes (1)...........................                             | 172,685             | 23,219                                          | 11,831                        | 207,735             |
| Net income ..................................                           | 1,435,440           | 293,505                                         | 45,898                        | 1,774,843           |
| Property, equipment and leasehold and owned buildings improvements .... | Ps. 16,200,500      | Ps. 2,923,701                                   | Ps.    660,813 | Ps. 19,785,014      |
| Liabilities.....................................                        | 6,351,174           | 964,812                                         | 125,104                       | 7,441,090           |
| Capital expenditures ...................                                | 1,562,532           | 455,038                                         | 86,018                        | 2,103,588           |
| **As of and for theyear ended December 31, 2003**                  | **CM Group**        | **Costco de Mexico Group(1)** | **Other Group**   | **Total**      |
|--------------------------------------------------------------------|---------------------|-------------------------------|-------------------|----------------|
| Net sales.......................................................   | Ps.      29,361,761 | Ps. 7,183,743                 | Ps 1,458,703      | Ps. 38,004,207 |
| Cost of sales..................................................    | 23,236,291          | 6,278,866                     | 880,549           | 30,395,706     |
| Gross profit...................................................    | 6,125,470           | 904,877                       | 578,154           | 7,608,501      |
| Selling, general and administrative expenses ..                    | 4,896,772           | 676,539                       | 507,589           | 6,080,900      |
| Operating income..........................................         | 1,228,698           | 228,338                       | 70,565            | 1,527,601      |
| Integral results of financing.............................         | 247,641             | (40,087)                      | (4,818)           | 202,736        |
| Income taxes(2)............................................        | 209,521             | 33,876                        | 18,098            | 261,495        |
| Net income...................................................      | 830,871             | 243,908                       | 47,447            | 1,122,226      |
| Property, equipment and leasehold improvements                     | Ps. 15,221,790      | Ps. 2,585,669                 | Ps.  616,610 | Ps. 18,424,069 |
| Liabilities....................................................... | 5,613,279           | 985,981                       | 88,989            | 6,688,249      |
| Capital expenditures......................................         | 1,255,593           | 354,183                       | 59,822            | 1,669,598      |

(1) Reflects    only 50% of the operations of the Costco de Mexico Group joint venture since we    consolidate our 50% investment in the joint venture under the proportionate    consolidation method of accounting. 

(2) Amounts    include current and deferred income tax, asset tax and employee’s profit sharing.

For an understanding of the significant factors that influenced our    performance during the past three fiscal years, the following discussion should    be read in conjunction with our audited year end consolidated financial    statements and the related notes appearing elsewhere in this annual report. We    intend for this discussion to provide you with information that will assist you    in understanding our financial statements, the changes in certain key items in    those financial statements from year to year, the primary factors that    accounted for those changes, as well as how certain accounting principles    affect our financial statements. The discussion also provides information    about the financial results of the various segments of our business so that you    may better understand how those segments and their results affect the financial    condition and results of operations of our company as a whole. 

**Comparison of fiscal years ended December    31, 2005 and December 31, 2004**

***Overview***

We had 191 stores and 62 restaurants at the end of 2005 compared to 181    stores and 58 restaurants at the end of 2004. In 2005, we opened two Comercial    Mexicanas, four Bodegas, four Megas, two Sumesas, three Costco membership    warehouses and five Restaurantes California. During 2005, we closed one    Restaurante California and five Comercial Mexicana and also converted two Comercial Mexicanas to Mega formats. In 2004, we opened four Megas, two Costco    membership warehouses, two Sumesas and two Restaurantes California. During    2004, we closed one Bodega, one Mega and three Restaurantes California. Retail    sales area increased 6.8% to 14,472,000 square feet at the end of 2005 from 13,551,320 square feet at the end of 2004, after having increased 3.9% from 13,037,452 square feet at the end of 2003.

***Net Sales***

Our consolidated net sales increased 3.8% to Ps.40,308.9 million for    2005 from Ps.38,842.1 million for 2004, primarily as a result of increases in    net sales from the opening of new stores and restaurants in our various    segments and also as a result of the closed stores that participated with sales    during the year. Consolidated same store sales increased 0.5% for 2005 as    compared to 2004. Of our consolidated net sales for 2005, 74.8% were    attributable to the operations of the CM Group, 20.8% were attributable to the    operations of the Costco de Mexico Group and 4.4% were attributable to the    operations of the Other Group.

*CM Group*

Net sales for the CM Group increased 2.4% to Ps.30,134.6 million in    2005 from Ps.29,423.7 million in 2004. This increase was primarily due to Ps.750.5    million in sales derived from two Comercial Mexicanas, four Bodegas and four    Megas that opened in 2005 and Ps.213.4 million in additional sales from a full year    of operations for one Bodega and one Mega that opened in 2004. This increase    was offset by the closure of five Comercial Mexicanas in 2005 an additional    decrease of Ps.242.8 million in sales in 2004 without contributing in 2005 and as    of Ps.151.0 million in other income in 2005 as compared to Ps. 127.1 million in    2004. In 2004, sales decreased for seven stores that were remodeled during the year    while they were in the process of remodeling, however sales for these stores    increased by an average of 12.9% in 2005. Same store sales increased 0.2% to    Ps.28,617.6 million for 2005 from Ps.28,572.8 million for 2004 as a result of    an increase in the average customer ticket and the number of customers.

Net sales per retail square foot for the CM Group decreased 2.1% to    Ps.2,729.3 per retail square foot in 2005 from Ps.2,787.0 per retail square    foot in 2004 primarily as a result of the opening of stores in 2005 which had    the effect of adding new floor space without contributing to a full year of    sales. Net sales per operating employee decreased 5.9% to Ps.1,355.9 thousand    in 2005 from Ps.1,441.4 thousand per operating employee in 2004 primarily as a    result of an increase in employees in 2005 that did not contribute to a full    year of sales.

*Costco de Mexico Group*

Net sales for the Costco de Mexico Group increased 7.4% to Ps.8,398.6    million in 2005 from Ps.7,818.6 million in 2004. This increase was primarily    due to Ps.194.5 million in sales derived from three new Costco membership    warehouses opened in 2005, and Ps. 337.7 for two units opened during 2004, Ps.45.2    million increase in same store sales and an increase of Ps.4.2 million in    revenue from membership fees. Same store sales increased 0.59% for 2005 as    compared to 2004.

Net sales per square foot for the Costco de Mexico Group (based on    100% of Costco de Mexico Group’s net sales) decreased 6.5% to Ps.5,163.2 per    square foot in 2005 from Ps.5,520.0 in 2004 primarily as a result of Costco    membership warehouses opening at the end of 2005 which had the effect of adding    floor space without contributing to a full year of sales. Net sales per operating    employee (based on 100% of the Costco de Mexico Group’s net sales and all of    its operating employees) decreased 9.5% to Ps.2,000.1 thousand per operating    employee in 2005 from Ps.2,210.2 thousand in 2004 primarily because the    increase in net sales was higher than the increase in the number of employees.

*Other Group*

Net sales for the Other Group increased 11.0% to Ps.1,775.7 million in    2005 from Ps.1,599.8 million in 2004. Of this increase, Ps.25.5 million were generated    by the opening of two Sumesas and five Restaurantes California during the    year. Same store sales for the Sumesa format increased 4.9% for 2005 as    compared to 2004.

***Cost of Sales***

Our consolidated cost of sales increased 2.7% to Ps.31,830.7 million    in 2005 from Ps.30,980.6 million in 2004, while our cost of sales as a    percentage of net sales decreased to 79.0% in 2005 from 79.8% in 2004. This    decrease primarily reflected the efficiency of the Distribution Center and its ability to better negotiate with suppliers, as well as the effect of not    participating in the government voucher program . Of our consolidated cost of    sales for 2005, 73.9% were attributable to the operations of the CM Group,    22.6% were attributable to the operations of the Costco de Mexico Group and    3.5% were attributable to the operations of the Other Group.

*CM Group*

 Cost    of sales for the CM Group increased 1.7% to Ps. 23,524.2 million in 2005 from    Ps. 23,235.0 million in 2004. The cost of sales as a percentage of net sales    decreased from 79.0% in 2004 to 78.1% in 2005, primarily as a result of the    increase in sales and the efficiency of the Distribution Center which reduced    distribution costs and our decision not to participate in the Government of    Mexico City voucher program. The increase in the same store sales also was due    to the Company pricing policy and the improvement in cost of merchandise    negotiations with suppliers.

*Costco de    Mexico Group*

 Cost    of sales for the Costco Group increased 6.4% to Ps. 7,204.8 million in 2005    from Ps.6,771.3 million in 2004. Cost of sales as a percentage of net sales    decreased from 86.1% in 2004 to 85.8% in 2005, primarily as a result of the    increase in sales and efficiencies caused by our reduction in shrinkage.

*Other Group*

 Cost    of sales for the Other Group increased 13.1% to Ps. 1,101.6 million in 2005    from Ps. 974.6 in 2004. The cost of sales as a percentage of net sales    increased from 60.1% in 2004 to 62.0% in 2005, primarily as a result of the    sales of Sumesa in the total of the Other Group. Sumesa increased its sales 14.8%    while its cost of sales was 79.8% in 2005. Restaurantes California increased    its sales 5.0% while its cost of sales was 31.9% for the year 2005.

***Gross Profit***

As a result of the factors discussed above, our gross profit    increased 7.8% to Ps.8,478.2 million in 2005 from Ps.7,861.5 million in 2004.    Our gross profit as a percentage of net sales increased to 21.0% in 2005 from 20.2%    in 2004. Of our gross profit for 2005, 78.0% was attributable to the    operations of the CM Group, 14.0% was attributable to the operations of the    Costco de Mexico Group and 8.0% was attributable to the operations of the Other    Group.

*CM Group*

Gross profit for the CM Group increased 6.8% to Ps.6,610.4 million    in 2005 from Ps.6,188.7 million in 2004. Gross profit as a percentage of net    sales for the CM Group increased to 21.9% in 2005 from 21.0% in 2004.

*Costco de    Mexico Group*

Gross profit for the Costco de Mexico Group increased 14.0% to Ps.1,193.7    million in 2005 from Ps.1,047.3 million in 2004 primarily as a result of a    greater increase in net sales relative to cost of sales. Gross profit as a    percentage of net sales for the Costco de Mexico Group increased to 14.2% in    2005 from 13.4% in 2004.

*Other Group*

Gross profit for the Other Group increased 7.8% to Ps.674.0 million    in 2005 from Ps.625.4 million in 2004. Gross profit as a percentage of net    sales for the Other Group was 38.0% in 2005 as compared to 39.1% in 2004.

***Selling,    General and Administrative Expenses***

Our consolidated selling, general and administrative expenses increased    2.8% to Ps.6,200.0 million in 2005 from Ps.6,033.0 million in 2004, primarily    as a result of an increase in utility expenses and bank fees offset in part by    a reduction in salaries and marketing expenses due to improve negotiations and    less expensive media. Of our operating expenses for 2005, 77.1% was    attributable to the operations of the CM Group, 13.5% was attributable to the    operations of the Costco de Mexico Group and 9.4% was attributable to the    operations of the Other Group.

*CM Group*

Selling, general and administrative expenses for the CM Group increased 0.8% to Ps.4,777.6 million in 2005 from Ps.4,741.2 million in 2004, primarily    as a result of increased expenses in the CM Group due to an increase in utility    expenses and bank fees offset in part by a reduction in salaries and marketing    expenses.

*Costco de    Mexico Group*

Selling, general and administrative expenses for the Costco de    Mexico Group increased 12.4% to Ps.839.4 million in 2005 from Ps.746.5 million    in 2004, primarily as a result of new personnel at the three Costco membership    warehouses opened in 2005.

*Other Group*

Selling, general and administrative expenses for the Other Group    increased 6.9% to Ps.583.1 million in 2005 from Ps.545.3 million in 2004, while    selling, general and administrative expenses as percentage of net sales of the    Other Group decreased to 32.8% in 2005 from 34.1% in 2004. The decrease in the    margin reflects that the fixed expenses remained constant while net sales    increased in the year.

***Operating    Income***

As a result of the factors described above, our consolidated    operating income increased 24.6% to Ps.2,278.1 million in 2005 from Ps1,828.4    million in 2004. On a consolidated basis, our operating income as a percentage    of net sales increased to 5.6% in 2005 from 4.7% in 2004.

*CM Group*

Operating income for the CM Group increased 26.6% to Ps.1,832.8    million in 2005 from Ps.1,447.6 million in 2004. Operating income for the CM Group as a percentage of net sales increased to 6.1% in 2005 from 4.9% in 2004.

*Costco de    Mexico Group*

Operating income for the Costco de Mexico Group increased 17.8% to    Ps.354.4 million in 2005 from Ps.300.7 million in 2004. Operating income for    the Costco de Mexico Group as a percentage of net sales increased to 4.2% in    2005 from 3.8% in 2004.

*Other Group*

Operating income for the Other Group increased 13.5% to Ps.90.9    million in 2005 from Ps.80.1 million in 2004. Operating income for the Other    Group as a percentage of net sales increased to 5.1% in 2005 from 5.0% in 2004.

***Integral    Result of Financing***

Integral results of financing cost decreased to a loss of Ps.620.7    million in 2005 from a gain of Ps.181.9 million in 2004, primarily as a result    of :

Interest expense increased by 44.0% to Ps.432 million in 2005 as    compared to Ps.300 million in 2004. This was the result of the promotion of    "Months without interest" that increased 88% from last year, interests and    commissions that increased 17% from 2004. On June 1, 2005, we issued a private    placement of U.S.$200 million aggregate principal amount of 6.625% Senior Notes    due 2015 to restructure our indebtedness. 

As can be seen, the Company’s income for the period shows a    Ps.220,882 credit for valuation of implicit derivatives operations which have    been segregated from service agreements and/or goods set in foreign currency    that represent an exchange risk during their term. The valuation has been    carried out as a forward for each of the established monthly and/or semi-annually    obligations.

Interest income decreased 18.9% to Ps.64 million in 2005 as compared    to Ps.79 million in 2004.

Foreign exchange loss decreased to Ps.86.8 million in 2005 from a    gain of Ps.7.0 million in 2004 primarily as a result of a 4.7% revaluation of    the Peso in 2005 compared to the 0.7% revaluation of the Peso in 2004.

The gain from monetary position decreased from Ps.236.4 million in    2005 to Ps.319.3 million in 2004 as a result of lower inflation, which was 3.3%    in 2005 compared to 5.2% in 2004.

Other    income was Ps.561.2 million in 2005 and Ps. 17.7 million in 2004. Other income    as a percentage of net sales for the CM Group was 1.9% in 2005 and 0.06% in    2004.

***Income Taxes    and Employee Profit Sharing***

The statutory rate of Mexican corporate income tax was 30% in 2005    and 33% in 2004. The income tax rate will be 29% in 2006 and 28% in 2007.

Our effective tax rate was 15% in 2005 and 8% in 2004. The increase    in the effective tax rate was mainly due to a change in the statutory income    tax rate. Tax loss carryforwards primarily arose from the timing difference    between the tax and accounting treatment of inventory. See note 9 to the    financial statements.

***Net Income***

As a result of the foregoing, consolidated net income increased 3.2%    from Ps.1,831.6 million in 2005 to Ps.1,774.8 million in 2004. Net income as a    percentage of net sales was 4.5% for 2005 as compared to 4.6% for 2004.

**Comparison of fiscal years ended December    31, 2004 and December 31, 2003**

***Overview***

We had 181 stores and 58 restaurants at the end of 2004 and 175    stores and 59 restaurants at the end of 2003. In 2004, we opened four Megas,    two Costco membership warehouses, two Sumesas and two Restaurantes California. During 2004, we closed one Bodega, one Mega and three Restaurantes California. In 2003, we opened six Megas, two new Costco membership warehouses and four    Restaurantes California. During 2003, we closed one Comercial Mexicana and two Bodegas. Retail sales area increased 3.9% to 13,551,320 square feet at the end of 2004 from 13,037,452 square feet at the end of 2003, after having increased 7.8% from 12,097,806 square feet at the end of 2002.

***Net Sales***

Our consolidated net sales increased 2.2% to Ps.38,842.1 million    for 2004 from Ps.38,004.2 million for 2003, primarily due to an increase    in net sales in the Costco de Mexico Group. Consolidated same store sales decreased    0.1% in 2004 as compared to 2003. Of our consolidated net sales for 2004,    75.8% were attributable to the operations of the CM Group, 20.1% were    attributable to the operations of the Costco de Mexico Group and 4.1% were    attributable to the operations of the Other Group.

*CM Group*

Net sales for the CM Group increased 0.2% to Ps.29,423.7 million    in 2004 from Ps.29,361.7 million in 2003. This increase reflected Ps.492.7 million    in additional sales from a full year of operations for six Megas that opened in    2003 and Ps.277.9 million in sales derived from the four Megas that opened in    2004. This increase was offset by the closure of one Mega and one Bodega in    2004 which contributed an additional Ps.469.0 million in sales in 2003 as    compared to 2004, a decrease of Ps.208.0 million in same store sales, a    decrease of Ps.24.0 million in the sales of six Comercial Mexicanas and    one Mega that were being remodeled during 2004, and a decrease of Ps.7.6 million    in other income in 2004 as compared to 2003. Same store sales decreased 0.7%    for 2004 compared to 2003 primarily as a result of the adverse impact on    customer traffic resulting from a public works project on a major highway in    front of our highest revenue producing Mega.

Net sales per retail square foot for the CM Group decreased 1.8% to    Ps.2,794.4 per retail square foot in 2004 from Ps.2,844.6 per retail square    foot in 2003 as a result of the opening of stores in 2004 which had the effect    of adding new floor space without contributing to a full year of sales. Net    sales per operating employee increased 4.4% to Ps.1,445.2 thousand in 2004 from    Ps.1,384.0 thousand per operating employee in 2003 primarily as a result of a    reduction in employees at the store level due to improvements in our    distribution process, which was partially offset by new personnel hired in    conjunction with the opening of new stores.

Net sales for the CM Group also include other income which consists    of rental income from commercial properties leased to third parties in shopping    centers where one of our stores is an anchor tenant. Other income was Ps.59.8 million    in 2004 and Ps.67.5 million in 2003. Other income as a percentage of net    sales for the CM Group was 0.2% in both years.

*Costco de Mexico Group*

Net sales for the Costco de Mexico Group increased 8.8% to Ps.7,818.7 million    in 2004 from Ps.7,183.8 million in 2003. This increase was primarily due    to Ps.356.2 million in additional sales from a full year of operations for    the two Costco membership warehouses that opened in 2003, Ps.172.9 million    in sales derived from two new Costco membership warehouses opened in 2004, a Ps.96.1 million increase in same store sales and an increase of Ps.9.7 million in    revenue from membership fees. Same store sales increased 1.4% in 2004 compared    to 2003 as a result of the maturing of stores opened during the pervious year.

Net sales per retail square foot for the Costco de Mexico Group    (based on 100% of Costco de Mexico Group’s net sales) decreased 1.9% to Ps.5,519.9    per retail square foot in 2004 from Ps.5,628.9 in 2003, primarily as a result    of Costco membership warehouses opening at the end of 2004, which had the    effect of adding floor space without contributing to a full year of sales. Net    sales per operating employee (based on 100% of the Costco de Mexico Group’s net    sales and all of its operating employees) increased 0.6% to Ps.2,210.2 thousand    per operating employee in 2004 from Ps.2,196.8 thousand in 2003 primarily due    to the increase in net sales which exceeded the increase in employees. 

*Other Group*

Net sales for the Other Group increased 9.7% to Ps1,599.8 million    in 2004 from Ps.1,458.6 million in 2003. Of this increase, Ps.56.8 million    was generated by the two Sumesas and two Restaurantes California opened in    2004. Same store sales for the Sumesa format increased 7.0% for 2004 as    compared to 2003.

***Cost of Sales***

Our cost of sales are primarily composed of cost of goods sold and    costs associated with our distribution centers. Our consolidated cost of sales    increased 2.0% to Ps.30,980.6 million in 2004 from Ps.30,395.7 million    in 2003, while our consolidated cost of sales as a percentage of net sales    decreased to 79.7% in 2004 from 80.0% in 2003. The increase in consolidated    cost of sales primarily reflected increased costs in the Costco de Mexico Group    attributable to the increase in the Costco de Mexico Group’s net sales in    2004. Of our consolidated cost of sales for 2004, 75.0% was attributable to    the operations of the CM Group, 21.9% was attributable to the operations of the    Costco de Mexico Group and 3.1% was attributable to the operations of the Other    Group.

*CM Group*

Cost of sales for the CM Group decreased slightly to Ps.23,235.0 million    in 2004 as compared to Ps.23,236.3 million in 2003, reflecting increased    efficiency in our supply chain through our new distribution center, improved    price negotiations with suppliers, and reductions in inventory shrinkage.

*Costco de Mexico Group*

Cost of sales for the Costco de Mexico Group increased 7.8% to Ps.6,771.4 million    in 2004 from Ps.6,278.9 million in 2003, primarily as a result of the    increase in net sales which was offset in part by more favorable pricing terms    negotiated with suppliers.

*Other Group*

Cost of sales for the Other Group increased 10.6% to Ps.974.3 million    in 2004 from Ps.880.5 million in 2003.

***Gross Profit***

As a result of the factors discussed above, our gross profit    increased 3.3% to Ps.7,861.4 million in 2004 from Ps.7,608.5 million    in 2003. Our gross profit as a percentage of net sales increased to 20.3% in    2004 from 20.0% in 2003. Of our gross profit for 2004, 78.7% was attributable    to the operations of the CM Group, 13.3% was attributable to the operations of    the Costco de Mexico Group and 8.0% was attributable to the operations of the    Other Group.

*CM**Group*

Gross profit for the CM Group increased 1.0% to Ps.6,188.7 million    in 2004 from Ps.6,125.4 million in 2003, primarily as a result of a    greater increase in net sales relative to cost of sales. Gross profit for the CM Group as percentage of net sales for the CM Group increased to 21.0% in 2004 from 20.9% in    2003.

*Costco de Mexico Group*

Gross profit for the Costco de Mexico Group increased 15.7% to Ps. 1,047.3 million    in 2004 from Ps.904.9 million in 2003, primarily as a result of a greater    increase in net sales relative to cost of sales. Gross profit for the Costco    de Mexico Group as percentage of net sales for the Costco de Mexico Group    increased to 13.4% in 2004 from 12.6% in 2003.

*Other Group*

Gross profit for the Other Group increased 8.2% to Ps.625.5 million    in 2004 from Ps.578.1 million in 2003.

***Selling,    General and Administrative Expenses***

Our selling, general and administrative expenses are composed of    selling expenses, administrative expenses and depreciation and amortization.    Our consolidated selling, general and administrative expenses decreased 0.8% to    Ps.6,033.1 million in 2004 from Ps.6,080.9 million in 2003, primarily    as a result of decreases in selling, general and administrative expenses in the    CM Group offset in part by increases in these expenses in the Costco de Mexico    Group. Of our selling, general and administrative expenses for 2004, 78.6% was    attributable to the operations of the CM Group, 12.4% was attributable to the    operations of the Costco de Mexico Group and 9.0% was attributable to the    operations of the Other Group.

*CM Group*

Selling, general and administrative expenses for the CM Group decreased 3.2% to Ps.4,741.1 million in 2004 from Ps.4,896.7 million in 2003,    reflecting our continued efforts to reduce expenses through improved cost    controls. In particular, we reduced our marketing expenses by using fewer    newspaper inserts and more fliers and by better targeting our television    advertising. We also reduced our labor costs as we centralized supply    operations in our distribution centers, thereby reducing the total number of    employees required in the supply process.

*Costco de Mexico Group*

Selling, general and administrative expenses for the Costco de    Mexico Group increased 10.4% to Ps.746.6 million in 2004 from Ps.676.5 million    in 2003 primarily as a result of new personnel at the two Costco membership    warehouses opened in 2004.

*Other Group*

Selling, general and administrative expenses for the Other Group    increased 7.4% to Ps.545.3 million in 2004 from Ps.507.6 million in    2003.

***Operating    Income***

As a result of the factors described above, our consolidated    operating income increased 19.7% to Ps.1,828.5 million in 2004 from Ps.1,527.6 million    in 2003. On a consolidated basis, our operating income as a percentage of net    sales increased to 4.7% in 2004 from 4.0% in 2003.

*CM Group*

Operating income for the CM Group increased 17.8% to Ps.1,447.6 million    in 2004 from Ps.1,228.7 million in 2003. Operating income for the CM Group as a percentage of net sales for the CM Group increased to 4.9% in 2004 from 4.2% in    2003.

*Costco de Mexico Group*

Operating income for the Costco de Mexico Group increased to Ps.300.8 million    in 2004 from Ps.228.4 million in 2003. Operating income for the Costco de    Mexico Group as a percentage of net sales for the Costco de Mexico Group    increased to 3.8% in 2004 from 3.2% in 2003.

*Other Group*

Operating income for the Other Group increased to Ps.80.1 million in    2004 from Ps.70.6 million in 2003. Operating income for the Other Group as a    percentage of net sales for the Other Group increased to 5.0% in 2004 from 4.8%    in 2003.

***Integral Result of Financing***

Our integral result of financing primarily includes:
> 
- interest      paid on borrowed funds, interest paid in connection with credit card      promotions, and bank fees in connection with cash management, as well as gains      or losses on derivative agreements;

- interest      earned on cash and temporary investments;

- foreign      exchange gains or losses associated with liabilities denominated in foreign      currencies; and

- losses      resulting from holding monetary assets exposed to inflation, net of gains      resulting from having monetary liabilities exposed to inflation.

The computation of monetary gains or losses is made on a monthly    basis using the average balance of such assets and liabilities and applying the    NCPI.

Integral results of financing improved to contribute Ps.181.9    million to income in 2004 as compared to an expense of Ps.202.7 million in    2003, reflecting improvements in all components of this line item.

Interest expense decreased by 47.7% to Ps.209.1 million in 2004 as    compared to Ps.400.0 million in 2003. In both periods, interest expense    included interest on the U.S.$100 million principal amount of our senior    secured notes due 2010, Ps.631.4 million (equivalent to U.S.$54.8 million)    principal amount of our UDI-denominated Notes due 2010 and Ps.413.3 million of    borrowings under our credit facility. Interest expense also included a Ps.492.9    thousand loss from derivative agreements in 2003 and a Ps.90.8 million gain    from derivative agreements in 2004. See "-Liquidity and Capital Resources."    Interest expense decreased primarily as a result of the lack of short term debt    in 2004 as compared to 2003 when we had outstanding short term debt for most of    the period consisting of bank loans and lines of credit. The weighted average    effective interest rate on our debt was 6.7% for 2004 and 2003 (in each case    excluding additional amounts currently payable in respect of certain Mexican    withholding taxes).

Interest income includes our income from interest-bearing temporary    investments. Interest income increased 69.7% to Ps.78.7 million in 2004 as    compared to Ps.46.4 million in 2003, primarily as a result of more cash    available for investment and higher interest rates we earned on our investments    in 2004 as compared to 2003.

Foreign exchange loss decreased to Ps.7.0 million in 2004 from Ps.108.4    million in 2003 primarily as a result of the 8.0% devaluation of the Peso in    2003 compared to the 0.7% appreciation of the Peso in 2004.

The gain from monetary position increased from Ps.259.3 million in    2003 to Ps.319.3 million in 2004 primarily as a result of higher inflation,    which was 5.2% in 2004 compared to 4.0% in 2003.

***Income Taxes    and Employee Profit Sharing***

The statutory rate of Mexican corporate income tax was 33.0% in 2004    and 34.0% in 2003. The Mexican corporate income tax rate is scheduled to    decrease to 30.0% in 2005 and 29.0% in 2006.

Our effective tax rate was 8% in 2004 and 16% in 2003. The decrease    in the effective tax rate was mainly due to changes to the Mexican Tax Law    approved on November 13, 2004, whereby the income tax rate decreased from 34%    in 2003, 33.0% in 2004, to 30% in 2005, and will decreased to 29% and 28%, in    2006 and 2007, respectively. The effect of these tax rate reductions resulted    in a decrease in the deferred income tax liability by Ps.213,225.0 in 2004.

On January 1, 2005, the Mexican Tax Law was amended to require us to    expense the cost of our inventory at the time we sell it rather than at the    time we purchase it. The liability for deferred income tax we built up by    reason of the timing difference between the time we expensed our inventory    costs for tax purposes (at the time of purchase) and the time we expense it for    accounting purposes (at the time of sale to customers) will offset the effect    of the actual income tax we pay for accounting purposes. For tax purposes, a    transitional rule has been adopted that permits us to deduct inventory at the    time of sale even though prior to 2005 we had deducted the same inventory at    the time it was purchased. We will be required to recognize as taxable income    the benefit we receive from the transition rule over the next six to seven    years. See note 15 to the financial statements.

***Net Income***

As a result of the foregoing, consolidated net income increased 58.2%    from Ps.1,122.2 million in 2003 to Ps.1,774.8 million in 2004. Net income as a    percentage of net sales was 4.6% for 2004 as compared to 3.0% for 2003.

**Liquidity and    Capital Resources**

***Liquidity.*** Our principal sources of    liquidity have historically been provided by cash generated from operations and    short-term working capital borrowings. In addition, to fund our growth, we    have raised funds in the debt and equity capital markets, including the    following financings:
> 
-         a public offering of equity securities in Mexico in April 1991 for net proceeds of approximately Ps.82.9 million;

-         an issuance in the Eurobond market in April 1993      for net proceeds of approximately U.S.$127.4 million;

-         a global offering in Mexico, the United States      and elsewhere outside of Mexico in the third quarter of 1996 with the listing      of 2.6 million global depositary shares representing 52.0 million BC Units on      the New York Stock Exchange and 21.5 million BC Units on the Mexican Stock      Exchange and net proceeds of approximately U.S.$67.8 million which was used to      repay part of our then outstanding bank indebtedness;

-         a private offering in the United States of      Series B Notes in April 1998 for net proceeds of approximately U.S.$127.6      million;

-         an offering in December 2000 of 8.00%      UDI-denominated Notes due 2010; and

-         a private placement in the United States in June 2003 of U.S.$100.0 million of senior unsecured notes due 2010; and.

-         on June 1, 2005, we issued a placement of      U.S.$200 million aggregate principal amount of 6.625% Senior Notes due 2015.

From time to time, we may incur additional indebtedness to finance    our operations and growth. We will determine the type of currency, the    maturity and the specific characteristics of any future borrowings based on    available terms including interest and exchange rates, as well as general    economic conditions. Also, from time to time we enter into derivative    contracts designed to hedge against currency and interest rate fluctuations.    See "-Quantitative and Qualitative Disclosure About Market Risk."

Our management of trade payables and inventory is also an important    source of our liquidity. The excess of the average length of days for payment    of trade payables over the average number of days of inventory, was 11.8 days    for 2003, 10.2 days for 2004 and 6.4 days for 2005, 9.6 days for the first    quarter of 2005 and 10.8 days for the first quarter of 2006.

At December 31, 2005, we had an aggregate of over Ps.5,204 million    of credit available through uncommitted lines of credit with seven Mexican and    foreign banking institutions under which we may borrow in Pesos or, at our    option, in U.S. dollars (converted to Pesos at the exchange rate in effect at    the time of the borrowing). Since none of these facilities is committed,    borrowings thereunder are subject to the lender’s direction and may be    terminated at any time. The terms and conditions of these lines of credit are    determined at the time when they are utilized. We intend to renew our bank    lines of credit on a annual basis. The bank credit lines do not contain any    financial covenants.

In June 2003, we also have registered with the Mexican National    Banking and Securities Commission a short-term debenture program in the amount    of Ps.1,000.0 million, the proceeds of which are expected to be used for    working capital requirements. At December 31, 2005, there were no outstanding    debentures under this program.

Resources provided by operating activities were Ps.3,026.4 million    in 2005 compared to Ps.2,312.3 million in 2004. Inventories decreased 10.9%    to Ps.5,047 million at December 31, 2005 from Ps.5,661 million at December 31,    2004, due in part to the increase in sales in the last month of the year. The average number of days    inventory was 57.6 days for 2005 as compared to 53.4 days for 2004. The    average length of days payable for our trade payable was 63.6 days for 2005 and    63.6 days for 2004. This change reflects reduced payment terms with suppliers    which we negotiated in return for better pricing terms.

***Indebtedness*.** In December 2000, we issued 8.00% UDI-denominated Notes due 2010.    The UDI-denominated Notes have certain covenants that limit the ability of CCM    and its subsidiaries to:
> 
-         incur additional indebtedness;

-         create liens;

-         merge or sell assets; and

-         pay dividends.

These covenants are subject to certain exceptions and    qualifications. 

In June 2003, we issued U.S.$100.0 million    of Senior Unsecured Notes due 2010 consisting of: (1) U.S.$98.0 million    aggregate principal amount of Series A notes at a fixed interest rate of 6.10%    payable semi-annually with annual amortization in equal amounts from the third    year, and (2) U.S.$2.0 million aggregate principal amount of Series B notes at    a fixed interest rate of 6.70% payable semi-annually with principal due at maturity.    The Senior Unsecured Notes were guaranteed by Tiendas Comercial Mexicana and certain of our other subsidiaries. 

In September 2003, we entered into an    agreement with Banamex for a credit facility of up to Ps.400.0 million to fund    our working capital requirements. Loans outstanding under the credit facility    bear interest at TIIE plus 65 basis points, payable monthly. The principal    amount of the loans outstanding under the credit facility is payable in five    equal payments made semi-annually beginning September 9, 2006. The credit    agreement requires that we maintain a consolidated leverage ratio, an interest    coverage ratio and a minimum net worth ratio. The credit agreement also    contains covenants that, among other things, restrict our ability to incur    debt, engage in mergers, sell assets, incur liens, pay dividends or other    restricted payments, provide guarantees and enter into affiliated    transactions. These covenants are subject to specified exceptions. As of    December 31, 2005, we had Ps.318 million of outstanding borrowings under the    credit facility. 

On    June 1, 2005, we issued a Bond of U.S.$200 million aggregate principal amount    of 6.625% Senior Notes due 2015. We used or are using the net proceeds from    this offering to fund:
> 
-        our tender for any or all of our Ps.631.5      million or approximately U.S.$54.8 million as of December 31, 2004 (Ps.90.8      million or approximately U.S.$8.5 million as of December, 2005), aggregate      principal amount of 8.00% UDI-denominated Notes due 2010. At the expiration of      the tender offer period, we had received tenders from the holders of      approximately Ps.523.2 million or approximately U.S.$46.9 million as of      December 31, 2004 in aggregate principal amount of the outstanding 8.00% UDI-denominated Notes due      2010, representing approximately 85.6% of the outstanding principal amount of      the UDI-denominated Notes;

-        the redemption of our U.S.$100.0 million      aggregate principal amount of Senior Unsecured Notes due 2010, including a      "make-whole" payment equal to approximately U.S.$5.2 million assuming those      notes had been redeemed on May 24, 2005. On June 2, 2005, we delivered an      irrevocable notice of redemption to the holders of these Senior Unsecured Notes      due 2010. As specified in the notice delivered to each holder, we prepaid all      of the U.S.$100 million aggregate principal amount of outstanding Senior      Unsecured Notes due 2010 on July 2005. The final payment for these notes will      include a make-whole payment equal to approximately U.S.$5.2 million assuming      these notes had been redeemed on May 24, 2005; and

-        the prepayment of Ps.413.3 million, or      approximately U.S. $35.8 million as of March 31, 2005, of outstanding      borrowings under our bank credit facility.

At December 31, 2005, our total outstanding indebtedness of    Ps.2,216.3 million consisted of:
> 
-         U.S.$200 million aggregate principal amount of      6.625% Senior Notes due 2015 

-         Direct bank loan of U.S.$30 million due on      January 20, 2006, to a fixed rate of interest of the 4.97% payable      semi-annually.

-         Debenture bonds of 24.9 million Investment Units      (UDIs) (Ps. 90.8 million as of December) maturing in 2010 at a fixed interest      rate of 8.0% payable semi-annually.

From time to time, we may incur additional indebtedness to finance    our operations and growth. We will determine the type of currency, the    maturity and the specific characteristics of any future borrowings based on    available terms including interest and exchange rates, as well as general    economic conditions. Also, from time to time we enter into derivative    contracts designed to hedge against currency and interest rate fluctuations.    See "-Quantitative and Qualitative Disclosure About Market Risk."

***Cash Policy*.** Consistent with other retailers, we    seek to maintain a lower average number of days of inventory as compared to    average length of days for our trade payable.

Credit card payments represented 30.0% of    net sales in 2005 and 29.0% of net sales in 2004; voucher payments decreased to    14.6% of net sales in 2005 from17.4% of net sales in 2004 and cash payments    represented approximately 55.4% of net sales in 2005 and 53.6% of net sales in    2004.

We hold our cash and cash equivalent    assets in both Pesos and U.S. Dollars. We manage all cash, including that from    our subsidiaries (other than the Costco de Mexico Group joint venture) at the    holding company level. By doing so, we distribute cash to our subsidiaries in    order that they are able to meet their commitments with suppliers and others.

In each year, substantially all of our    available cash flows are dedicated to capital expenditures with the exception    of dividends paid to stockholders. We paid aggregate dividends of Ps.128.9    million in 2003, Ps.129.4 million in 2004, Ps.138.0 million in 2005 and    Ps.149.9 million in 2006. Total cash flow from our operation was Ps. 1,171.6 in 2003 Ps. 2,312.3 in 2004 and Ps.3,026.4 in 2005.

Based on current operating results, we    believe that cash flow from operations and other sources of liquidity,    including borrowings under our short term debenture program and credit    facility, will be adequate to meet anticipated requirements for working    capital, capital expenditures, interest payments and scheduled principal    payments for the foreseeable future.

**Sensitivity**.The Company historically has    exposure to changes in interest rates and foreign exchange. The exchange rate at the end of the fiscal year ended 2005 was Ps. 10.627 per dollar    and the Cetes interest rate was 8.15%.

If    the exchange rate and the interest rate fluctuated  plus or minus 10%,    the effects in our Income Statement would have been:

 
|                                  | **(Million pesos as of December 31, 2005)** |
|---------------------------------------|---------------------------------------------|
|                                  | **Plus 10%**                                | **As of 2005** | **Minus 10%** |
| Long term debt $ 200 million dollars: | Ps. 2,337.9                                 | Ps.2,125.4 | Ps.1,912.9 |
| Interest Income:                      | 70.7                                        | 64.3 | 57.9 |

Due to these effects, our net income fluctuated between Ps.1,947.1    million and Ps.1,716.3 million during 2005.

**Capital Expenditures.** The following    table sets forth our capital expenditures for each of the three years ended    December 31, 2003, 2004, 2005 and the budgeted capital expenditures for the    year ended December 31, 2006:
|                                                                                             | **Year ended December 31,(1)**                                                                                        |
|--------------------------------------------------------------------------------------------------|-----------------------------------------------------------------------------------------------------------------------|
|                                                                                             | **2003**                                                                                                              | **2004** | **2005** | **2006 (2)** |
|                                                                                             | **(Millions of constant Pesos          as of December 31, 2005,except for 2006 amounts, which are in nominal Pesos)** |
| Real estate (3).............................................................................     | Ps.    625.9                                                                                           | Ps. 1,335.8 | Ps. 1,694.1 | Ps.2,089.6 |
| Store fixtures (4).........................................................................      | 974.0                                                                                                                 | 697.8 | 915.6 | 913.5 |
| Information systems.....................................................................         | 69.7                                                                                                                  | 70.0 | 74.0 | 79.9 |
| Total........................................................................................... | Ps. 1,669.6                                                                                                           | Ps. 2,103.6 | 2,683.7 | Ps. 3,083.0 |

______________

(1) Capital expenditures included,    Ps.354.1 in 2003, Ps.445.9 in 2004 and Ps.515.9 in 2005and an estimate of Ps.500.0    in 2006 contributed by us to the Costco de Mexico Group joint venture.

(2) Represents    budgeted amounts for the year ending December 31, 2006.

(3) Not    including our acquisition of Auchan’s operations in any period.

(4) Represents    new units, store fixtures, remodeling and other equipment expenditures.

Capital expenditures including 2005 Auchan’s operations payment was    Ps.2,969.5 million in 2005 and were funded with cash from operations. Our    plans for 2006 could change depending on the economic situation in Mexico, our financial results and our ability to generate sufficient cash flow to fund such    expenditures.

We expect to open 22 units in 2006 as follows: one City Market, five    Bodegas, seven Megas, three Costco membership warehouses, two Sumesa and four    Restaurantes California. We intend to continue remodeling units.

We currently plan to finance all of the remaining 2006 capital    expenditures primarily with cash flow from operations. Although we believe    that sufficient financing will be available to us, we cannot assure you that we    will have sufficient cash flow from operations to make all of our planned    capital expenditures when scheduled or, if necessary, that we will be able to    obtain, or what the terms may be of, any bank or other financing. We are also    responsible for financing 50% of new Costco membership warehouses.

**Off-Balance Sheet Arrangements**

As of December 31, 2005, we have one off-balance sheet arrangement.    In February 2003, we acquired Auchan’s operations in Mexico, consisting of five    hypermarket stores located in the Central Region. These five stores have an    aggregate selling area of approximately 495,139 square feet. We now operate these stores under the Mega format. The purchase price for the    acquisition of the corporations consists of six installment payments. We paid    U.S.$15.0 million in 2003, U.S.$20.0 million in 2004, U.S.$25 million in 2005    and U.S.$20.0 million in 2006. We are required to make additional payments of    U.S.$20.0 million in each of 2007 and 2008. The stock of the Mexican    corporations that hold the fixed assets of these stores are presently held in    an escrow. The stock will not be released from this escrow, and we will not    acquire title to the stock, until the purchase price is paid in full to the    sellers. If we do not pay the purchase price in full when due, we will not    obtain title to the stock and will have no rights to be repaid the amounts we    previously paid to Auchan. In addition, there are certain restrictive    covenants that limit the operations of the business until the purchase price is    paid to the seller. See "Key Information-Risk Factors-Risk Factors Related to    Our Business-Our Acquisition of the Mexican Operations of Auchan is Dependent    on Payment of the Purchase Price Due and Failure to Pay Will Result in    Forfeiture of Auchan Properties and All Amounts Paid." 

***Contractual Obligations and Other    Commitments*.** The    following table presents the contractual obligations and other commitments for    which cash flows are fixed or determinable as of December 31, 2005:
|                                                         | **Total**                                                     | **Less than OneYear** | **One to ThreeYears** | **Three to FiveYears** | **More than FiveYears** |
|--------------------------------------------------------------|---------------------------------------------------------------|-----------------------|-----------------------|------------------------|-------------------------|
|                                                         | **(Millions      of constant Pesos as of December 31, 2005)** |
| Long-term debt........................................       | Ps. 2,535.1                               | Ps. 318.8             | Ps. 18.2              | Ps. 72.7               | Ps. 2,125.4             |
| Interest on long-term debt........................           | 1,440.5  (1)                                             | 149.4                 | 442.8                 | 285.1                  | 563.2                   |
| Auchan purchase obligation......................             | 637.5                                     | 212.5                 | 425.0                 | -                      | -                       |
| Operating lease obligations......................            | 1,764.6                                   | 204.6                 | 613.8                 | 409.2                  | 537.0                   |
| Total....................................................... | Ps. 6,377.7                               | Ps. 885.3             | Ps. 1,499.8           | Ps. 766.9              | Ps. 3,225.7             |

(1)     Senior Notes of U.S.$200 million due in 2015, at a fixed interest rate of 6.525%, bank loan of U.S.$30 million due in January 2006 at fixed interest rate of 4.97%.

 

**New Accounting    Pronouncements under Mexican GAAP**

Beginning June 1, 2004, the Mexican Financial Reporting Standards    Board - (CINIF, for its initials in Spanish), assumed the responsibility for    setting accounting and reporting standards in Mexico. In compliance with this    responsibility and after due exposure in 2004 and 2005, the CINIF issued    several Financial Reporting Standards - (NIFs) that will become effective on    January 1, 2006.

The main objective of the NIFs is to harmonize and converge Mexican accounting and reporting standards and    regulation practices with International Financial Reporting Standards (IFRS).

The full hierachy of NIFs, in effect beginning January 1, 2006, is      as follows:
> 
- NIFs and Interpretations of NIFs issued by the CINIF.

- Statements issued by the Accounting Principles Board of the      Mexican Institute of Public Accountants (IMCP) that have not been      modified, replaced or repealed by the new NIFs.

- In accordance with Mexican GAAP "NIF A-8", when no Mexican GAAP address a specific accounting matter, the accounting literature in IFRS supplementary become applicable.

The circulars issued by the Accounting Principles Board will    continue to have the status of recommendations and will be part of the NIFs    until such time as they are repealed or superseded by NIFs.

Following is a list of the NIFSs issued to date. Being mainly of a    general nature, they are not expected to have a significant effect on financial    reporting:
> 
NIF A-1 "Structure of Financial Reporting Standards"

NIF A-2 "Basic postulates"

NIF A-3 "User needs and objectives of financial      statements"

NIF A-4 "Qualitative features of financial statements"

NIF A-5 "Basic elements of financial statements"

NIF A-6 "Recognition and valuation"

NIF A-7 "Presentation and disclosure"

NIF A-8 "Supplementary"

NIF B-1 "Accounting changes and correction of errors"

## Item 6.  Directors, Senior Management and Employees

**Directors**

Our bylaws provide that the Board of Directors will consist of    between five and 20 directors as elected by CCM’s shareholders at the annual    shareholders’ meeting for an indefinite term. The Board currently consists of    12 directors. At the present time three are independent. The Board is    responsible for the management of our business.

Each Board member was elected on April 6, 2006 at our annual    shareholders’ meeting, and is elected for a one-year term. The names and    positions of the current members of the Board, their dates of birth, and    information on their principal business activities outside CCM are as follows:
| **Name and Date of Birth**                                    | **Principal Occupation**                                    | **Other Directorships and   Business Experience   **                                                   | **FirstElected** |
|---------------------------------------------------------------|-------------------------------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------|------------------|
| Guillermo González Nova (7/2/33)                       | Chairman of the Board                                       | Vice Chairman of the Board      and Member of the Executive Committee of CCM                                                         | 1957             |
| Jaime González          Nova (11/13/30)                | Vice Chairman of the Board                                  | Member of the Executive Committee of CCM                                                                                             | 1957             |
| Carlos          González Zabalegui (7/13/51)           | Vice Chairman of the Board and Chief Executive      Officer | Executive Vice-President, General Director of CCM,      Member of the Executive Committee of CCM, and Director of Desc, S.A. de C.V. | 1985             |
| Elena M. González Guerra de Guichard(4/7/54)           | Director                                                    | Not applicable                                                                                                                       | 1990             |
| Pablo J. González          Guerra (1/24/51)            | Director                                                    | Director of Inmobilaria Nova, S.A. de C.V., Director      of Operadora Vista Hermosa, S.A. de C.V.                                   | 1984             |
| Francisco Martínez de la Vega(12/21/56)                | Chief Financial and Administrative Officer                  | Member of the Executive Committee, Treasury Director      of CCM and Director of Prestaciones Universales S.A. de C.V.               | 1990             |
| Angel Portilla          González(9/25/43)              | General Director of Sumesa                                  | Member of the Executive Committee of CCM                                                                                             | 1990             |
| Javier Cantú          Charles (12/13/40)               | Corporate Planning and Development Director                 | Former General Director of Sorimex, Member of the      Executive Committee of CCM                                                    | 1992             |
| Santiago Garcia          García (11/26/53)             | General Director of Comercial Mexicana                      | Chief Operating Officer of Palacio de Hierro, Member      of the Executive Committee of CCM                                          | 2002             |
| Fermín Sobero          San Martín (2/18/38)     | Director                                                    | Independent Consultant                                                                                                               | 2002             |
| José Ignacio          Llano Gutiérrez (6/21/50) | Director                                                    | Partner and General Director of Logyx Almacenadora,      S.A. de C.V.                                                                | 2005             |
| Raúl J.          Alvarado Herroz(10/10/45)             | Director                                                    | Partner of AD Consulting                                                                                                             | 2005             |

Each Member of the Board has an alternate. The alternates    are: Gustavo González Fernández, Luis Felipe González Solana, Luis Felipe    González Zabalegui, Luis José Guichard González, Antonino B. González Guerra, Jaime    González Solana, Alejandro González Zabalegui, Juan Blanco Fortes, Joaquín    Solis Rivera, Humberto Melendez Martínez, Ignacio Parada Díaz and Miguel    Garatea Lerga,. Our independent directors are Fermín Sobero San Martín, Jose    Ignacio Llano Gutiérrez and Raúl Alvarado Herroz.

Carlos González Nova is the Honorary Chairman of the Board. As the    Honorary Chairman of the Board, he does not have the right to vote. José Luis    Rico Maciel is the Secretary to the Board of Directors and Rodolfo García Gómez    de Parada is the Secretary Pro Term to the Board of Directors.

Carlos González    Nova, Jaime González Nova and Guillermo González Nova are brothers. Carlos    González Zabalegui is the son of Carlos González Nova and the nephew of Jaime    González Nova and Guillermo González Nova, Elena M. González Guerra and Pablo J.    González Guerra are the niece and nephew, respectively, of Carlos González    Nova, Jaime González Nova and Guillermo González Nova.

Pursuant to the Mexican Securities Market Law, at least 25% of the    members of the Board of Directors must qualify as Independent Directors. The    Mexican Securities Market Law provides that the following persons, among    others, do not qualify as independent:
> 
- employees      or managers of the issuer;

- controlling      shareholders of the issuer; and

- important      clients, suppliers, debtors or creditors of the issuer or their employees or      officers.

Our bylaws also provide that a specific alternate director may be    appointed for each director. In the event of a tied vote, the Chairman of the    Board of Directors has a casting vote. The Board of Directors is required to    meet at least on a quarterly basis. The Chairman, the Secretary, 25% of the    Board Members or any statutory auditor may call for a Board meeting. The Board    of Directors must approve all transactions that are to be entered into between    us and any of our shareholders, our managers or other related individuals that    deviate from our ordinary course of business after the Board of Directors has    received the favorable opinion of our audit committee. Likewise, the Board of    Directors must approve any purchase or sale that represents 10% or more of our    assets, the grant by us of guarantees exceeding 30% of our assets and any other    transactions representing more than 1% of our assets, in addition to any other    shareholder approvals required by our bylaws or otherwise. Related party    transactions require the approval of our audit committee and, if requested by    our audit committee, the opinion of a third party appraiser.

In addition, our bylaws, as amended pursuant to the Mexican    Securities Market Law, provide that each holder or group of holders    representing at least 10% of a series of shares has the right to appoint one    director and its corresponding alternate director. Ten percent holders of    limited voting stock are also entitled to nominate a director and its    corresponding alternate director.

**Executive    Officers**

The names and    positions of our current executive officers, their dates of birth, and    information concerning their prior business experience are as follows:
| **Name and Date of Birth**                                    | **Current Position**                                         | **Business Experience**                                                             | **FirstAppointed** |
|---------------------------------------------------------------|--------------------------------------------------------------|-------------------------------------------------------------------------------------|--------------------|
| Carlos          González Zabalegui(7/13/51)            | Chief Executive Officer                                      | Chief Executive Officer,General Director                                            | 1978               |
| Santiago García García(11/26/53)                | General Director of Comercial Mexicana                       | Chief Operating Officer ofPalacio de Hierro,Purchasing and MarketingDirector of CCM | 2002               |
| Javier Cantú          Charles(12/13/40)                | Real Estate Developer Director                               | General Director ofComercial Mexicana;General Director of Sorimex                   | 2002               |
| Luis Felipe          González Solana(12/5/58)          | General Director of Restaurantes California                  | General Director ofRestaurantes California                                          | 1986               |
| Jaime          González Solana(2/26/57)                | General Director of the Costco de Mexico Group joint venture | General Director of theCostco de Mexico Groupjoint venture                          | 1991               |
| Joaquin Solis          Rivera(10/25/39)                       | Corporate Legal Affairs Director                             | Corporate Legal AffairsDirector                                                     | 2004               |
| Francisco Martínez          de la Vega      (12/21/56) | Chief Financial and Administrative Officer                   | Chief Financial andAdministrative Officer                                           | 1990               |
| Angel          Portilla González(9/25/43)              | General Director of Sumesa and Development Director          | Corporate Planning andDevelopment Director                                          | 1984               |
| Rodolfo García          Gómezde Parada(5/9/53)  | Corporate Lawyer, Tax Legal Matters Director                 | Corporate Tax MattersDirector of CCM                                                | 1990               |

**Audit Committee**

 Our independent    Audit Committee members are Fermín Sobero San Martín as President, Jose Ignacio    Llano Gutiérrez and Raúl Alvarado Herroz as members. The functions of the Audit    Committee are largely specified in the new Mexican Market Securities Law and    the Audit Committee charter to strengthen corporate governance and internal    control. 

**Corporate Practices Committe**

 In the    annual shareholders meeting held on April 6, 2006, three independent directors Raúl J. Alvarado Herroz as    President, and Fermín sobero San Martín and José Ignacio Llano Gutiérrez were elected as members of the Corporate Practices Committe.    This committe primary function are related to executives compensations    and related parties transactions.

**Compensation**

For the year ended December 31, 2005, the aggregate compensation we    paid to our directors and executive officers for services in all capacities was    approximately Ps.71.5 million.

We made Ps.3.6 million in contributions to our retirement plan    on behalf of our directors, alternate directors and executive officers in 2005.

**Options to    Purchase Securities from Registrant or Subsidiaries**

 We    have two Stock Appreciation Rights plans for key employees (subdirectors) of    the Company under which key employees were granted rights to purchase an amount    of BC Units at a fixed price. These rights are exercisable only on either the    holder’s date of retirement from the Company (which is normally at the age of    65) or in the event of a change of control of the Company. We purchased the    required number of BC Units granted under the terms of the plans in the stock    market and deposited them in an employee’s trust. Upon exercise, the employees    must pay us an amount based on the agreed fixed exercise price to receive the stock    certificates from the employee trust. After payment of the exercise price to the Company, the employees receive the appreciation of the BC Units in    cash. Rights to purchase a total of 7,318,895 BC Units had been granted to    employees at December 31, 2005 (32,522,666 at December 31, 2004). 

**Board Practices and    Audit Committee**

We are responsible for maintaining a system of internal accounting    controls to provide assurance that transactions are authorized, recorded and    reported properly. Our internal accounting control system is enhanced by    periodic reviews of our controls and procedures to provide reasonable    assurance, at an appropriate cost/benefit relationship, that assets are    safeguarded and our internal auditors and independent auditors. In addition,    we have hired a group of advisors, which performs a separate review of our    disclosure controls. In our opinion, our internal accounting controls provide    reasonable assurance that assets are safeguarded and that the financial records    are reliable for preparing financial statements.

In accordance with the Mexican Securities Market Law and our bylaws,    we established an audit committee consisting of the following members of our    Board: Fermín Sobero San Martín, who is the President of this Committee, and    Raul J. Alvarado Herroz and José Ignacio Llano Gutierrez who are members. Both    the Chairman and a majority of the members of the audit committee must be, and    are, independent directors.

The audit committee meets periodically with management, the internal    auditors and the independent auditors to review matters relating to our    financial reporting, the adequacy of internal accounting controls and the scope    and results of audit work. The internal auditors and independent auditors have    full and free access to the audit committee.

Our statutory auditors must be invited to attend all audit committee    meetings. Among other duties and responsibilities, the audit committee must:
> 
-            prepare an annual report regarding its      activities for submission to the Board and to our shareholders at our annual      shareholders’ meeting;

-            prepare and render statements to the Board as to      the fairness of transactions and arrangements with related parties, which must      be approved by our Board of Directors; and

-            retain independent experts to render fairness      opinions in connection with extraordinary corporate transactions and      arrangements with related parties.

We have not entered into any service contracts with our directors    that provide for benefits upon termination of employment.

**Employees and Labor Relations**

At December 31, 2005, we employed 35,837 individuals. During the    busiest retail months, part-time employees may constitute up to 10% of our workforce.    At December 31, 2005, we had 1,123 administrative and managerial employees and 34,714    operating employees.

We seek to employ store assistants who meet criteria established by    us for particular positions. However, depending upon conditions prevailing in    regional job markets, we are not able to adhere strictly to these criteria.    Although we believe that our turnover of store assistants does not exceed the    industry average, it nevertheless remains high. We are seeking to reduce    turnover by paying higher compensation and providing opportunities for    advancement within CCM.

Our store managerial staff is comprised mostly of employees with    long tenure with us who have worked their way up to a managerial position, as    well as employees with a higher education who have completed a three-month    training program that includes some practical experience in our stores. In many    cases, our store managerial staff receives further training from a leading    Mexican university under a program exclusively available to our employees.

Our senior managerial and administrative employees have semi-annual    performance assessments and receive performance-related compensation. Our    management believes that compensation must attract, retain and motivate the    best employees available and, therefore, we are willing to compensate employees    at levels which management believes are generally higher than those prevailing    in the Mexican retail industry.

We are committed to training employees. During 2005 we dedicated    approximately six days of training per employee. All new employees are    provided with training designed to ensure compliance with our policies relating    to customer service, prevention of theft and operational procedures.    Continuing on-the-job training is provided to our employees, including upon    each transfer or promotion of an employee.

Approximately 16.5% of our employees were members of one of 12 labor    unions with which we have collective labor agreements at December 31, 2005. In    addition, labor relations in some stores are governed by separate collective    bargaining agreements executed between employees of a single store and a union    selected by such employees. The economic terms of the collective bargaining    agreements are renegotiated on an annual basis and other terms are negotiated    every two years. We have not experienced any work stoppages and management    believes that we have a good relationship with our employees and unions.

The following table sets forth the number of employees    and a breakdown of employees by main category of activity and geographic    location as of the end of each year in the three-year period ended December 31,    2005:
|                                                                                                  | **At December 31,** |
|-------------------------------------------------------------------------------------------------------|---------------------|
|                                                                                                  | **2003**            | **2004** | **2005** |
| Number of Employees........................................................                           | 33,557              | 33,763 | 35,837 |
|       Category of Activity:                                                            |                |   |   |
|       Operating and Restaurant Employees............................                   | 31,746              | 31,776 | 34,714 |
| Administrative Employees...................................................                           | 1,811               | 1,987 | 1,123 |
| Geographic Location:                                                                                  |                |   |   |
|       Metropolitan................................................................     | 13,825              | 13,337 | 14,154 |
|       Central ........................................................................ | 12,315              | 12,222 | 12,973 |
|       Northwest....................................................................    | 3,187               | 3,883 | 4,121 |
|       Northeast.....................................................................   | 707                 | 641 | 681 |
|       Southwest....................................................................    | 1,409               | 1,384 | 1,469 |
|       Southeast.....................................................................   | 2,114               | 2,296 | 2,439 |

**Share Ownership of Directors and Officers**

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

## Item 7. Major    Shareholders and Related Party Transactions 

**Major Shareholders**

Our common stock consists of 3,995,921,848 B Shares and 348,078,152    C Shares. Each series of shares is evidenced by a global certificate and    held in Mexico by Indeval, S.A. de C.V. ("Indeval"), a privately owned    securities depositary that acts as a clearinghouse, depositary and custodian,    as well as a settlement, transfer and registration agent for Mexican Stock    Exchange transactions, eliminating the need for physical transfer of    securities. B Shares, without par value, provide each holder one vote per    share. C Shares, without par value, only have voting rights with respect to    certain transactions. Our shares are currently held in B Units and in BC    Units. Each B Unit consists of four B Shares and each BC Unit consists of    three B Shares and one C Share. 

Each B Unit may at any time be converted into a BC Unit by either    the Secretary of CCM or by Indeval. Our capital structure as of December 31,    2005was as follows:
| **Year ended December 31,**                                                                          | **Number of BC Units** | **Number of B Units** |
|------------------------------------------------------------------------------------------------------|------------------------|-----------------------|
| 2002................................................................................................ | 338,448,390            | 747,551,610           |
| 2003................................................................................................ | 338,448,390            | 747,551,610           |
| 2004................................................................................................ | 341,984,390            | 744,015,610           |
| 2005................................................................................................ | 348,078,152            | 737,921,848           |

The    following table sets forth certain information with respect to ownership of CCM’s capital stock as of December 31, 2005 of (i) each person who is known by CCM to own more than 5% or each executive officer or director who is known by CCM to own more than 1% of either the currently outstanding B Units (consisting of four B Shares,    without par value and with one vote per share, or B Shares, which trade    together as a single security) and BC Units (consisting of three B Shares and    one C Share, without par value and without voting rights, or C Shares, which    trade together as a single security) and (ii) all our executive officers    and directors as a group.
|                                                                                       | **B Units and BC Units Owned as of December 31, 2005** |
|--------------------------------------------------------------------------------------------|--------------------------------------------------------|
|                                                                                       | **B Units**                                            | **BC Units** |   |   |
| **Identity of      Owner**                                                                 | **Number**                                             | **Percentage of Class** | **Number** | **Percentage of Class** | **Aggregate****Percentage of Outstanding B Units and BC Units** | **Voting Power** |
| Scotiabank Trust(1) .........................                                              | 737,859,998                                            | 99.9% | 1,601,295 | 0.5% | 68.09% | 73.98% |
| All executive officers and      directors as a group (20 persons) (2) .................... | 689,272,075                                            | 92.3% | 6,072,999 | 1.8% | 63.5% | 68.9% |

_________________

(1)     For a description of this trust and its beneficiaries which    indirectly include our principal shareholder, see " - Our Principal    Shareholder."

(2)     Including most of the members of the González Family.

As of December 31, 2005, the public float for    the BC Units (including those represented by GDSs) represented approximately 31.91%    of the total outstanding capital stock of CCM.

***Our Principal Shareholder.*** At December 31, 2005, our principal shareholder, the Scotiabank    Inverlat Trust, or the Scotiabank Trust, owned 737,859,998 B Units representing    approximately 68.0% of the total outstanding capital stock or 73.9% of the    outstanding B Shares. Scotiabank Trust is able to exercise full voting rights    with respect to the B Shares that it holds (including B Shares held through B    Units representing a majority of the outstanding B Shares as well as any B    Shares held through BC Units) and may convert each B Unit into one BC Unit at    any time. Scotiabank Trust has informed us that it currently intends to    maintain its control position and, through this position, will have the power    to elect our board of directors and determine the outcome of substantially all    actions requiring shareholder approval. See "Key Information-Risk Factors-Risk    Factors Related to Our Principal Shareholders-Our Principal Shareholders Have    Substantial Influence Over Our Management and the Interests of Our Principal    Shareholders May Differ from Those of Other Shareholders."

Decisions regarding the Scotiabank Trust are    made by a Technical Committee. The members of the Technical Committee    are Carlos González Nova, Carlos González Zabalegui, Guillermo González Nova,    Jaime González Nova, Pablo José González Guerra, Elena M. González Guerra and    Antonio B. González Guerra. The Technical Committee has the    exclusive authority to make decisions regarding voting and disposition of the B    Units held by the Scotiabank Trust in accordance with the share percentage that    each member of the Committee represents. In the event a member of the    Technical Committee resigns or dies, that member’s alternate will become full    member. A new alternate will be selected by the new member, subject to    Technical Committee approval.

**Related Party Transactions**

We do not grant personal loans to our employees or shareholders.    Employees and our shareholders are permitted to borrow only against our    retirement fund or from our annual savings fund.

We currently sublease one store located in Puebla from a company    controlled by the principal shareholders and certain members of the principal    shareholders’ families. We believe that this lease, which expires in 2015, is    on terms no less favorable to us than would be obtainable in an arm’s-length    transaction.

From time to time, in the regular course of business, we deal with    Nova Distex, S.A. de C.V. (successor to Casa Distex S.A. de C.V.), or Nova.    Members of the González family own a controlling interest in Nova, a textile    manufacturer and property management company. We provide management services    to Nova and purchase textiles for resale in our stores. We believe that these    transactions are on terms no less favorable to us than would be obtainable in    an arm’s-length transaction.

We currently lease a portion of the parking lots of two of our    stores to two gasoline stations owned and operated by Gasomer, S.A. de C.V., or Gasomer. Members of the González family own a controlling interest in Gasomer.

For additional information regarding related party transactions, see    Note 5 to our financial statements.

## Item 8. Financial    Information

**Consolidated    Financial Information**
> 
See "Financial      Statements" and pages F‐1 through F‐37, which are incorporated      herein by reference.

**Legal Proceedings**
> 
See "Other      Information - Legal Proceedings."

**Dividend Policy**
> 
See "Key Information      - Dividends."

## Item 9. The Offer and Listing

**Market Information**

The    GDSs, each of which represents 20 BC Units, are listed on the NYSE, and the    NYSE symbol for the GDSs is "MCM." B Shares and the C Shares trade on the    Mexican Stock Exchange as BC Units. Each BC Unit consists of three B Shares and    one C Share. 

The following table shows the high and low sales prices in nominal    Pesos (without adjustment for inflation) for the BC Units and the B Units on    the Mexican Stock Exchange for the period from January 1, 2000 to July 14,    2005.
|                                                        | **Nominal Pesos Per BC Unit(1)** | **Nominal Pesos Per B Unit(1)(2)** |
|-------------------------------------------------------------|----------------------------------|------------------------------------|
|                                                        | **High**                         | **Low**                            | **High** | **Low** |
| 2000....................................................... | 11.06                            | 7.62                               | 11.20 | 9.60 |
| 2001....................................................... | 7.50                             | 5.35                               | 16.00 | 12.00 |
| 2002....................................................... | 8.40                             | 4.80                               |   |   |
| 2003....................................................... | 11.21                            | 7.83                               |   |   |
| 2004                                                        |                             |                               |   |   |
| First Quarter...........................................    | 14.60                            | 11.21                              |   |   |
| Second Quarter......................................        | 14.50                            | 12.00                              |   |   |
| Third Quarter .......................................       | 13.19                            | 11.21                              |   |   |
| Fourth Quarter......................................        | 13.46                            | 11.68                              |   |   |
|                                                        |                             |                               |   |   |
| 2005                                                        |                             |                               |   |   |
| First Quarter...........................................    | 12.81                            | 11.06                              |   |   |
| Second Quarter......................................        | 12.99                            | 11.02                              |   |   |
| Third Quarter ........................................      | 17.19                            | 13.10                              |   |   |
| Fourth Quarter.....................................         | 17.05                            | 14.81                              |   |   |
|                                                        |                             |                               |   |   |
| 2006                                                        |                             |                               |   |   |
| January.................................................    | 16.57                            | 15.32                              |   |   |
| February...............................................     | 19.29                            | 17.16                              |   |   |
| March...................................................    | 19.12                            | 17.73                              |   |   |
| April.....................................................  | 18.95                            | 17.70                              |   |   |
| May......................................................   | 20.70                            | 17.67                              |   |   |
| June......................................................  | 19.29                            | 16.75                              |   |   |
| July (through July 14, 2006)..................              | 20.18                            | 18.49                              |   |   |

_________________

(l)       Source: Mexican Stock Exchange.

(2)     Unlisted from the BMV on Oct. 27, 2001.

The following table shows the high and low sales prices in U.S.    Dollars for the GDSs on the New York Stock Exchange for the period from January    1, 2000 to July 14, 2006.
|                                                                                                       | **U.S. Dollars per GDSs(1)** |
|------------------------------------------------------------------------------------------------------------|------------------------------|
|                                                                                                       | **High**                     | **Low** |
|                                                                                                       |                         |   |
| 2000...................................................................................................... | 20.00                        | 16.38 |
| 2001...................................................................................................... | 19.50                        | 15.31 |
| 2002.....................................................................................................  | 18.15                        | 9.90 |
| 2003.....................................................................................................  | 19.80                        | 8.50 |
|                                                                                                       |                         |   |
|                                                                                                       | **U.S. Dollars per GDSs(1)** |
|                                                                                                       | **High**                     | **Low** |
|                                                                                                       |                         |   |
| 2004                                                                                                       |                         |   |
| First Quarter............................................................................                  | 27.14                        | 19.95 |
| Second Quarter......................................................................                       | 25.50                        | 20.65 |
| Third Quarter.........................................................................                     | 22.54                        | 19.15 |
| Fourth Quarter.........................................................................                    | 23.75                        | 20.60 |
| December................................................................................                   | 22.80                        | 20.60 |
|                                                                                                       |                         |   |
| 2005                                                                                                       |                         |   |
| First Quarter...........................................................................                   | 23.29                        | 19.69 |
| Second Quarter........................................................................                     | 23.35                        | 19.79 |
| Third Quarter...........................................................................                   | 31.59                        | 24.07 |
| Fourth Quarter.........................................................................                    | 31.83                        | 28.20 |
| December.................................................................................                  | 30.98                        | 28.99 |
|                                                                                                       |                         |   |
| 2006                                                                                                       |                         |   |
| First Quarter............................................................................                  | 36.72                        | 30.25 |
| January....................................................................................                | 35.60                        | 30.25 |
| February..................................................................................                 | 36.55                        | 32.50 |
| March.......................................................................................               | 36.72                        | 33.01 |
| Second Quarter........................................................................                     | 38.00                        | 31.22 |
| April..........................................................................................            | 34.73                        | 31.90 |
| May..........................................................................................              | 38.00                        | 31.22 |
| June...........................................................................................            | 33.60                        | 34.04 |
| July (through July 14, 2006).........................................................                      | 34.03                        | 33.38 |

________________

(1) Source: New York Stock Exchange

**Trading on the Mexican Stock Exchange**

The Mexican Stock Exchange, located in Mexico City, is the only    stock exchange in Mexico. Operating continuously since 1907, the Mexican Stock    Exchange is organized as a corporation with variable capital, or *sociedad    anónima de capital variable*. Securities trading on the Mexican Stock    Exchange occur from 8:30 a.m. to 3:00 p.m., Mexico City time, each business    day. Since January 1999, all trading on the Mexican Stock Exchange has been    effected electronically. The Mexican Stock Exchange operates a system of    automatic suspension of trading in shares of a particular issuer as a means of    controlling excessive price volatility, but under current trading regulations    this system does not apply to the BC Units because they are traded in the form    of GDSs on a stock exchange outside Mexico, the New York Stock Exchange.

Settlement is effected two business days after a share transaction    on the Mexican Stock Exchange. Deferred settlement, even by mutual agreement,    is not permitted without the approval of the CNBV. Most securities traded on    the Mexican Stock Exchange, including the CPOs, are on deposit with Indeval.

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

**Market Regulation and    Registration Standards**

In    1946, the *Comisión Nacional de Valores*, or the National Securities    Commission, commonly known as the CNV, was established to regulate stock market    activity. In 1995, the CNV and the *Comisión Nacional Bancaria*, or the    National Banking Commission, were merged to form the CNBV. The Mexican    securities market law, which took effect in 1975, introduced important    structural changes to the Mexican financial system, including the organization    of brokerage firms as corporations. The Mexican securities market law sets    standards for the registration of brokerage firms in the intermediaries’    section of the registry. Registration of brokerage firms, which is a    prerequisite to becoming a member of the Mexican Stock Exchange, is granted by    the Ministry of Finance upon the recommendation of the CNBV. In addition to    setting standards for brokerage firms, the Mexican securities market law    empowers the CNBV to regulate the public offering and trading of securities and    to impose sanctions for the illegal use of insider information. The CNBV    regulates the Mexican securities market, the Mexican Stock Exchange and    brokerage firms through a board of governors composed of thirteen members, five    of which are appointed by the Ministry of Finance.

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

In 1993, the CNBV established an intermediate    securities market, which was also operated by the Mexican Stock Exchange, in    order to permit less-liquid issues and issuers with lower capitalization to    participate in a public securities market. In essence, the general rules    divided the securities section of the registry into two subsections, subsection    A and subsection B. In addition to trading regularly in the auction process,    registration of securities in subsection A enabled those securities to be    eligible for transactions for which only securities classified as high    liquidity issues by the Mexican Stock Exchange were eligible.

To be registered and maintain registration in    subsection A of the registry, an issuer was usually required to meet more    stringent qualitative and quantitative requirements than for subsection B. The    CNBV adopted regulations that became effective on January 1, 2001 that    eliminate subsection B and impose additional requirements to those currently    applicable to subsection A. Accordingly, as of January 1, 2001, in order to be registered in subsection A, an issuer must or must have, among other things:

-         at least three years of operating history, or if    an issuer is a holding company, it must present three years of operating    history for its principal subsidiaries; if the issuer is a newly created entity    as a result of a merger or spin-off, the three year requirement must be    evidenced through any of the entities involved in such merger or spin-off, as    the case may be;
> 
-         shareholders’ equity of at least 20 million *unidades      de inversión*, or UDIs, which are inflation indexed currency units,      equivalent to Ps. 58.2 million as of December 31, 2000;

-         profits for the last three years of operation      taken as a whole;

-         conduct a public offering of at least 15% of the      issuer’s paid-in capital stock or, if the offering exceeds 160,000,000 UDIs, it      represents at least 7% of the issuer’s paid-in capital stock;

-         offer at least 10,000,000 shares at a price per      share of at least one UDI; and

-         conduct a public offering with the potential to      reach at least 200 stockholders.

To maintain its registration, an issuer      must have:
> 
-         stockholders’ equity of at least 15 million      UDIs;

-         at least 36 trades in its securities every six      months through the Mexican Stock Exchange;

-         an average price of its securities greater than      Ps.1.00 during any six-month period; 

-         at least 100 stockholders;

-         a public float of at least 8,000,000 shares; and

-         a public float of at least 12% of the issuer’s      paid-in capital stock or at least 5% of the issuer’s paid-in capital stock if      the initial public offering exceeded 160,000,000 UDIs.

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

On December 30, 2005, new Mexican    Securities Market Law (Ley de Mercado de Valores). The compliance date for this    new law is June 28, 2006 for all filers registered in the Mexican Stock    Exchange (Bolsa Mexicana de Valores) was issued. -The Securities Market Law, was amended    to increase the protection given to minority shareholders and to bring    corporate governance procedures of Mexican issuers up to international    standards. Such amendments were implemented through governmental regulations.    Accordingly, we amended our bylaws at our annual shareholders’ meeting held on    April 06, 2006, to reflect some of these amendments. For a description of these    amendments, see "Other Information - Mexican Securities Market Law."

There are several requirements that have to be    met by Mexican issuers in order to continue listed in the Mexican Stock    Exchange and registered in the RNVI. Both the Mexican Stock Exchange and the    CNBV will review issuers annually to verify the compliance with the foregoing    requirements. Some of these requirements may be further reviewed by the CNBV    on a quarterly basis. The Mexican Stock Exchange must inform the CNBV of the    results of its review. If an issuer fails to comply with any of the foregoing    requirements, the Mexican Stock Exchange will request that the issuer propose a    plan to cure the violation. If the issuer fails to propose such plan, or if    its plan is not acceptable to the Mexican Stock Exchange, trading of its shares    on the Mexican Stock Exchange will be temporarily suspended until the situation    is corrected. In addition, if the issuer fails to propose the plan or ceases    to follow such plan once proposed, the CNBV might suspend or cancel the    registration of the shares. In such event, the issuer must evidence the    mechanisms to protect the rights of public investors and market in general. In    the event the CNBV determines to cancel the registration of our shares, our    controlling Shareholder is obligated to conduct a tender offer at a price equal    to the higher of (i) the average closing price of the last thirty trading days    of our stock or (ii) the book value of such shares, in accordance with our    latest quarterly reports filed with the CNBV before such tender offer is to be    conducted.

Issuers of listed securities are required to    file unaudited quarterly financial statements and audited annual financial    statements as well as various periodic reports with the CNBV and the Mexican    Stock Exchange. Recently, the internal regulations of the Mexican Stock    Exchange were amended to implement the EMISNET, an automated system for the    electronic transfer of the information required to be filed with the Mexican    Stock Exchange and the CNBV. Issuers of listed securities must prepare and    disclose their financial information by a Mexican Stock Exchange-approved    system known as the Sistema de Información Financiera Computarizada, or    Computerized Financial Information System, commonly known as the SIFIC.    Immediately upon its receipt, the Mexican Stock Exchange makes that information    available to the public.

The *Circular Única* of the CNBV and the    internal regulations of the Mexican Stock Exchange require issuers of listed    securities to file through the EMISNET information on the occurrence of    material events affecting the relevant issuer. Material events include, but    are not limited to:
> 
-         the entering into or termination of joint      venture agreements or agreements with key suppliers;

-         the creation of new lines of businesses or      services;

-         significant deviations in expected or projected      operating performance;

-         the restructuring or payment of significant      indebtedness;

-         material litigation or labor conflicts;

-         changes in dividend policy;

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

-         changes in the directors; and

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

If the Mexican Stock    Exchange deems it necessary, it may request additional information regarding    material events affecting the issuer.

The CNBV and the    Mexican Stock Exchange may suspend the dealing in securities of an issuer as a    result of the disclosure of material events if:
> 
-         the information filed by the issuer requires      further clarifications; or

-         the Mexican Stock Exchange determines that the      public should be aware of that information before a trade may take place.

In these cases, trading may resume if the    Mexican Stock Exchange determines that:
> 
-         the additional information provided by the      issuer is sufficient and not misleading; or 

-         the public has had the opportunity to access      that information.

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

Pursuant to the Securities Market Law, as    amended, the CNBV must be notified by the shareholder of a company listed on    the Mexican Stock Exchange before any such shareholder effects one or more    simultaneous or successive transactions outside the Mexican Stock Exchange that    result in a transfer of 10% or more of that company’s capital stock. The    holders of the shares being transferred must also inform the CNBV of the    results of such transactions within three days of the completion, or otherwise,    the non-completion, of the transaction. The CNBV will notify the Mexican Stock    Exchange of these transactions, without disclosing the names of the parties    involved. Under the amendments to the Securities Market Law, the CNBV may    determine the cases in which the purchaser thereof shall complete such    transactions through a tender offer, as well as the minimum and maximum    percentages of stock of an issuer that that may be purchased through the tender    offer.

Also, the Law states that a shareholder holding    10% or more of the capital stock of a company listed in the registry, is    required to notify the CNBV of any ownership changes in shares of such company    that results in a transfer of shares representing a beneficial ownership    interest of 10% or more, within ten business days following the transfer transaction.    The amendments to the Securities Market Law expressly permit Mexican issuers to    include in their bylaws anti-takeover defenses.

## Item 10. Other    Information 

**Mexican Securities Market Law**
The Mexican Congress published on December 30, 2005    approved amendments to the Mexican Securities Market Law, which became    effective on June 28, 2006, and have been implemented by governmental    regulations. We amended our bylaws at our annual shareholders’ meeting, which    was held on April 06, 2006, to reflect some of these amendments, including :
> 
-         Creating three new entities to be      registered in the Mexican Stock Exchange:"Sociedad Anónima Bursátil" (Current      filers in the Securities market); "Sociedad Anónima Promotora de Inversión      Bursátil" (Transition to Company that want to access the securities market);"Sociedad      Anónima Promotora de Inversión" 

-         Adding that the term "Bursátil" should be added to the      Corporate Name.

-         Establishing a Board of Directors of between 5 and 21      members, 25% of whom must be independent. The independence rules has been      strengthened.

-         Excluding the figure of commissioner and  transfering his functions to the external auditor, the Audit Committee and the      Corporate Practice Committee.

-         Specifying the functions of the Audit Committee to strengthen the corporate governance and internal control. 

-         Creating  a Corporate Practices Committe, which      is mandatory. This committee’s primary functions are related to executives      compensations and related parties transactions.

-         Specifying responsibilities and duties of directors and      management.

-         Providing a additional minority rights: 10% - name advisors, call      Shareholder’s assembly and defer voting; 5% - civil actions against directors      and management; and 20% - legal opposition to resolutions of the assembly.

For a further description of amendments we made    to our bylaws in accordance with the Mexican Securities Market Law, see    "Directors, Senior Management and Employees-Board Practices."

In addition, the Mexican Securities Market Law    now permits issuers to include anti-takeover defenses in their bylaws, provided    that their bylaws also include specified minority rights and protections, among    other things, and we have included such provisions in our bylaws. See    "-Bylaws-Other Provisions-Appraisal Rights." The Mexican Securities Market Law    does not permit issuers to implement mechanisms where common shares and limited    or non-voting shares are jointly traded or offered to public investors, unless    the limited or non-voting shares are convertible into common shares within a    term of up to five years, or when as a result of the nationality of a given    holder, the shares or the securities representing the shares limit the right to    vote in order to comply with applicable foreign investment regulations. In    addition, the aggregate amount of shares with limited or non-voting rights may    not exceed 25% of the total shares held by public investors. As a result of    applicable grandfathering provisions, our existing share structure will not be    affected by this aspect of the Mexican Securities Market Law. 

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

On December 30, 2005, a new Mexican Securities Market Law was enacted and published in the Official Gazette. The new    Securities Market Law will be effective on the date that is 180 days following    its publication (late June 2006) and in some cases will allow an additional    period of 180 days (late December 2006) for issuers to incorporate in their    by-laws the new corporate governance and other requirements derived from the    new law. The new Mexican Securities Market Law changed the Mexican securities    laws in various material respects. In particular the new law (i) clarifies the    rules for tender offers, dividing them in voluntary and mandatory, (ii)    clarifies standards for disclosure of holdings applicable to shareholders of    public companies, (iii) expands and strengthens the role of the board of    directors of public companies, (iv) determines with precision the standards    applicable to the board of directors and the duties of the board, each    director, its secretary, the general director and executive officers    (introducing concepts as the duty of care, duty of loyalty and safe harbors),    (v) replaces the statutory auditor (comisario) and its duties with the audit    committee, the corporate practices committee and the external auditors, (vi)    clearly defines the role of the general director and executive officers and    their responsibilities, (vii) improves rights of minorities, and (vii) improves    the definition of applicable sanctions for violations to the Mexican Securities    Market Law, including the payment of punitive damages and criminal penalties.

The new Mexican Securities Market Law does not    substantially modify the reporting obligations of issuers of equity securities    listed in the Mexican Stock Exchange. The new Mexican Securities Market Law    reinforces insider trading restrictions and specifically includes, within such    restrictions, trading in options and derivatives the underlying security of    which is issued by such entity. Among other changes, the new Mexican    Securities Market Law provides for a course of action available to anyone who    traded (as a counterparty) with someone in possession of privileged information    to seek the appropriate indemnification.

Pursuant to both the current and the new Mexican    Securities Market Law: 
> 
-                    members of a listed issuer’s board of directors,

-                    shareholders controlling 10% or more of a listed      issuer’s outstanding share capital,

-                    advisors,

-                    groups controlling 25% or more of a listed      issuer’s outstanding share capital and

-                    other insiders must inform the CNBV    of any transactions undertaken with securities of a listed issuer.

In addition, under    both the current and the new Mexican Securities Market Law insiders must    abstain from purchasing or selling securities of the issuer within 90 days from    the last sale or purchase, respectively.

The new Mexican Securities Market Law has, in some respects,    modified the rules governing tender offers conducted in Mexico. Under the new law, tender offers may be voluntary or mandatory. All tender offers must be    open for at least 20 business days and purchases thereunder are required to be    made pro-rata to all tendering shareholders. Any intended purchase resulting    in a 30% or greater holding requires the tender to be made for the greater of    10% of the company’s capital stock or the share capital intended to be    acquired; if the purchase is aimed at obtaining control, the tender must be    made for 100% of the outstanding shares. In calculating the intended purchase    amount, convertible securities, warrants and derivatives the underlying    security of which are such shares must be considered. The new law also permits    the payment of certain amounts to controlling shareholders over and above the    offering price if these amounts are fully disclosed, approved by the board of    directors and paid in connection with non-compete or similar obligations. The    new law also introduces exceptions to the mandatory tender offer requirements    and specifically provides for the consequences, to a purchaser, of not    complying with these tender offer rules (lack of voting rights, possible    annulment of purchases, etc.) and other rights available to prior shareholders    of the issuer.

The new Mexican Securities Market Law ratifies that public companies    may insert provisions in their by-laws pursuant to which the acquisition of    control of the company, by the company’s shareholders or third parties, may be    prevented, if such provisions (i) are approved by shareholders without the    negative vote of shareholders representing 5% or more of the outstanding    shares, (ii) do not exclude any shareholder or group of shareholders, and    (iii) do not restrict, in an absolute manner, the change of control.
**Bylaws **
Below is a brief summary of some significant provisions    of our bylaws and Mexican law. This description does not purport to be    complete, and is qualified by reference in its entirety to our bylaws, which    have been filed as an exhibit to this annual report and Mexican law. For a    description of the provisions of our bylaws relating to our Board of Directors,    Executive Committee and statutory auditors, see "Directors, Senior Management    and Employees."

**Purpose**

Article 2 of our bylaws defines our purpose as    the promotion, organization, management and participation in the capital stock    of all types of commercial companies, partnerships, associations or industrial,    trading, services or any other type of company, both domestic and foreign, as well    as participation in the administration thereof, as well as other purposes    related thereto.

**Duration**

The Bylaws provide that the duration of CCM is    99 years, which term expires on January 28, 2043.

**Organization, Registration and Transfer**

We were incorporated under Public Deed    Number 30,200, dated September 20, 1991, granted before Notary Public Number 104    of Mexico City, D.F., and registered with the Public Registry of Commerce of    Mexico City, under Commercial Page (folio mercantil) Number 15103.

Share certificates in registered form, which may,    evidence our shares or may not have dividend coupons attached. We maintain a    stock registry, and in accordance with Mexican law only those holders listed in    the stock registry are recognized as our shareholders. We will register B    Shares and C Shares in our stock registry only as a part of BC Units or B    Units, as the case may be. Shareholders may hold their BC Units or B Units in    the form of physical certificates or through book-entries with institutions    that have accounts with Indeval. Indeval is the holder of record in respect of    such BC Units or B Units held in book-entry form. Brokers, banks and other    entities approved by the CNBV may maintain accounts at Indeval.

**Voting Rights and Shareholders’ Meetings**

*Board of Directors.*The    management of our business is vested in our Board of Directors. Article 19 of    our bylaws, amended pursuant to the June 2001 amendments to the Mexican    Securities Market Law, currently provides for a Board of Directors of a minimum    of five and no more than twenty members, at least 25% of which must be    "independent directors" under Mexican law, and the same number of alternate    directors. The Board currently consists of 12 members. Under Mexican law, as    recently amended, a shareholder or group of shareholders owning 10% or more of    the capital stock of a company has the right to elect one regular and the    corresponding alternate director.

*Holders of B Shares*.    Holders of B Shares have the right to vote on all matters subject to shareholder    approval at any general shareholders’ meeting and have the right, voting as a    class, to appoint the Board of Directors and the corresponding alternate    directors.

*Holders of C Shares*. The holders of C Shares will generally not be entitled to vote,    or to attend or address meetings of shareholders at which they are not entitled    to vote. However, under Mexican law, classes of shareholders (including    holders of non-voting stock such as the C Shares) are entitled to vote as a    class in a special meeting governed by the same rules that apply to    extraordinary general meetings, as described below, on any action that would    prejudice the rights of holders of shares of other series, and a holder of    shares of such series would be entitled to judicial relief against any such    action taken without such a vote. The determination whether an action requires    a class vote on these grounds would initially be made by the Board. In certain    cases, the Board, the statutory auditors or a Mexican court could call a    special meeting. A negative determination would be subject to judicial    challenge by an affected shareholder and a court would ultimately determine the    necessity for a class vote. There are no other procedures for determining    whether a particular proposed shareholder action requires a class vote, and    Mexican law does not provide extensive guidance on the criteria to be applied    in making such a determination.

*Holders of GDSs*.    Holders of GDSs are entitled to instruct the depositary how to vote the shares    comprising the BC Units represented by their respective GDSs, subject to the    terms of the Deposit Agreement.

*Holders of GDRs*.    Holders of GDRs or general depository receipts will be entitled to instruct the    depositary as to the exercise of the voting rights pertaining to the B Shares    and the limited voting rights pertaining to the C Shares forming the BC Units    represented by their GDRs.

*Other Rights of Shareholders*. General shareholders’ meetings may be ordinary general meetings    or extraordinary general meetings. Extraordinary general meetings are those    called to consider certain matters specified in the Mexican Companies Law and    the Bylaws including, principally, amendments of the Bylaws, liquidation,    dissolution, merger and transformation from one form of company to another and    increases and reductions of the fixed portion of the capital stock. General    meetings called to consider all other matters are ordinary meetings. An    ordinary general meeting of the holders of B Shares must be held at least once    each year within the first four months following the end of the preceding    fiscal year to consider the approval of the financial statements of CCM and    certain of its subsidiaries for the preceding fiscal year, to elect directors    for holders of B Shares and statutory auditors, to determine the compensation    of all directors or statutory auditors, and to determine the allocation of the    profits or losses of the preceding year.

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

The quorum for an extraordinary general meeting    is at least 75%**and a majority of all of the outstanding shares that are    entitled to vote on first and successive calls, respectively, and action may be    taken by a vote of 50% plus one of the outstanding shares that are entitled to    vote.

Under Mexican law, holders of 33% of our    outstanding shares may have any shareholder action suspended pending final    judicial resolution by filing a complaint with a Mexican court of competent    jurisdiction within 15 days after the close of the meeting at which such action    was taken, by showing that the challenged action violates Mexican law or the    Bylaws. Relief under these provisions is only available to holders (i) who    were entitled to vote on the challenged shareholder action and (ii) whose    shares were not represented when the action was taken or, if represented, voted    against it.

Shareholders’ meetings may be called by the    Board, our statutory auditors or a Mexican court. The Board or the statutory    auditors may be required to call a meeting of the shareholders at the written    request of the holders of 33% of the B Shares or, in the case of a meeting at    which holders of C Shares would be entitled to vote, at the written request of    the holders of 33% of the outstanding C Shares. In the event that a meeting is    not called within 15 days following the date of such request, a Mexican court    may require such meeting to be called. Notices of meetings and agendas    therefor must be published in the *Diario Oficial de la Federación*or a    newspaper of general circulation in Mexico City at least 15 days prior to the    date set for the meeting. Meetings may be held without such publication,    provided that 100% of the shares entitled to vote are represented. To attend a    meeting, shareholders must deposit their shares prior to such meeting as    indicated in the notice. If entitled to attend the meeting, a shareholder may    be represented by an attorney-in-fact.

**Dividends and Distributions**

At the annual ordinary general meeting of    holders of B Shares, the Board submits our financial statements for the    previous fiscal year together with a report thereon by the Board and the report    of the statutory auditor, to the holders of B Shares for approval. The holders    of B Shares, once they have approved the financial statements, determine the    allocation of our net profits for the preceding year. They are required by law    to allocate at least 5% of such net profits to a legal reserve, which is not    thereafter available for distribution except as a stock dividend, until the    amount of the legal reserve equals 20% of historical capital stock (before    effect of any restatement). See Note 11 to our Annual Financial Statements.    Thereafter, the shareholders may determine and allocate a certain percentage of    net profits to any general or special reserve, including a reserve for    open-market purchases of our shares. The remainder of net profits is available    for distribution in the form of dividends to the shareholders, subject to the    terms of certain restrictive covenants contained in certain of our    indebtedness. See "Key Information-Dividends.

Holders of the B Shares and C Shares and,    accordingly, holders of BC Units and B Units, will have equal rights, on a per    share basis, to dividends and other distributions, including any distributions    upon our liquidation.

**Capital Variations**

The fixed portion of our capital stock may only    be increased or decreased by resolution of an extraordinary general meeting of    shareholders, subject to the exception that we may decrease our fixed capital    stock under certain circumstances without such a resolution if we, in    accordance with the Securities Market Law, repurchase our shares, whereas the    variable portion of our capital stock may be increased or decreased by    resolution of an ordinary or extraordinary general meeting of shareholders    (except in connection with repurchases of shares where no shareholders meeting    is required). Increases and decreases in our capital stock must be recorded in    our book of capital variations. Any increase or decrease in our capital stock    is subject to the limitations that the variable portion of the capital stock    may not exceed the equivalent of 10 times the fixed portion of the capital    stock and that the C Shares may not at any time represent more than 25% of our    capital stock.

**Pre-emptive Rights**

Except in certain circumstances involving a    public offering and requiring prior CNBV approval or in connection with the    placement of our shares which were previously repurchased, in the event of a    capital increase, a holder of existing shares of a given series has a    preferential right to subscribe for a sufficient number of shares of the same    series to maintain the holder’s existing proportionate holdings of shares of    that series. For example, subject to certain exceptions, if we issued B Shares    and C Shares in the form of BC Units and B Shares in the form of B Units in the    future, pursuant to and subject to applicable Mexican law, each holder of BC    Units and B Units would be entitled to subscribe for a sufficient number of BC    Units and/or B Units, as the case may be, to maintain such holder’s    then-existing proportionate holdings of B Shares and C Shares, and the    Principal Shareholders would be entitled to subscribe for a sufficient number    of B Units and BC Units to maintain their proportionate holdings of B Shares    and C Shares with respect thereto. Pre-emptive rights must be exercised during    a term fixed by the shareholders at the meeting declaring such capital    increase, which term may not end before at least 15 days following the publication    of notice of the capital increase in the official gazette of the corporate    domicile. Under Mexican law, pre-emptive rights cannot be waived in advance    and cannot be represented by an instrument that is negotiable separately from    the corresponding share. Holders of GDSs may be restricted in their ability to    participate in the exercise of such pre-emptive rights.

**Other Provisions**

*Redemption.*The    B Shares and the C Shares are subject to redemption in connection with either    (i) a reduction of share capital or (ii) a redemption with retained earnings,    which, in either case, must be approved by our shareholders at an extraordinary    general shareholders’ meeting. The shares subject to any such redemption would    be selected by us by lot or in the case of redemption with retained earnings,    by purchasing shares on the Mexican Stock Exchange, in accordance with the    Mexican Companies Law, provided that in no case can shares be redeemed in such    a way that the number of currently outstanding C Shares represents more than    25%**of our capital stock.

*Fixed and Variable Capital.*We are permitted to issue shares constituting fixed capital and    shares constituting variable capital. The fixed minimum part without right to    withdrawal of our capital amounts to the sum of Ps.1,000,000,000.00 and it is    represented by 1,000,000,000 shares. 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 a vote of 50% plus one of the B Shares at    an ordinary general meeting of shareholders. Under Mexican law and the Bylaws,    if we issued variable capital shares, any holder of such shares would be    entitled to redeem them at the holder’s option at any time at a redemption    price equal to the lower of (i) 95% of the average market value of such shares    on the Mexican Stock Exchange for 30 trading days on which the shares were    quoted preceding the date on which the exercise of the option is effective and    (ii) the book value of such shares at the end of the fiscal year in which the    exercise of the option is effective. If the option is exercised during the    first three-quarters of a fiscal year, it is effective at the end of that    fiscal year, but if it is exercised during the fourth quarter, it is effective    at the end of the next succeeding fiscal year. The redemption price would be    payable following the annual ordinary general meeting of holders of B Shares at    which the relevant annual financial statements were approved.

*Forfeiture of Shares.*As required by Mexican law, the Bylaws provide that non-Mexican    holders of B Shares, C Shares, BC Units and B Units formally agree with the    Foreign Affairs Ministry (i) to be considered as Mexicans with respect to the B    Shares, the C Shares, the BC Units and the B Units that they acquire or hold as    well as the property, rights, concessions, participation or interests owned by    us or to the rights and obligations derived from any agreements the Company has    with the Mexican government and (ii) not to invoke the protection of their own    governments. Failure to comply may result in a penalty of forfeiture of such a    shareholder’s capital interests in favor of Mexico. In the opinion of    Santamarina y Steta, S.C., our Mexican counsel, under this provision a    non-Mexican shareholder (including non-Mexican holders of GDSs) is deemed to    have agreed not to invoke the protection of his own government by asking such    government to interpose a diplomatic claim against the Mexican government with    respect to the shareholder’s rights as a shareholder, but is not deemed to have    waived any other rights it may have, including any rights under the United    States securities laws, with respect to its investment in us. If the    shareholder should invoke governmental protection in violation of this    agreement, its shares could be forfeited to the Mexican government.

*Exclusive Jurisdiction.*The Bylaws provide that legal actions relating to our relationship    and the shareholders may be brought only in courts in the Federal District of    Mexico City.

*Purchase by CCM of its**Shares*. We generally may not repurchase our shares, subject    to certain exceptions. First, we may repurchase shares for cancellation with    distributable earnings pursuant to a decision of an extraordinary general    meeting of shareholders. Second, pursuant to judicial adjudication, we may    acquire the shares of a shareholder in satisfaction of a debt owned by such    shareholder to us, we must sell any shares so acquired within three months,    otherwise our capital stock will be reduced and such shares canceled. Third,    in accordance with the Securities Market Law and our Bylaws, we may repurchase    our shares representing our capital on the Mexican Stock Exchange at any time    at the then-prevailing market price. The Board of Directors must approve any    such repurchase. Our capital stock would be reduced automatically in an amount    equal to the theoretical value of each repurchased share (determined by    dividing the outstanding capital stock of CCM by the number of shares    outstanding immediately prior to such repurchase); in the event that the    purchase price of such shares exceeded the theoretical value, the difference    would be paid for with amounts allocated from net earnings to a special reserve    created for the repurchase of shares. We would hold repurchased shares as    treasury stock, pending future placements thereof which could be effected on    the Mexican Stock Exchange. Our capital stock would be automatically increased    upon the resale of shares in an amount equal to their theoretical value; any    excess amount would be allocated to the special reserve referred to above. The    economic and voting rights corresponding to such repurchased shares may not be    exercised during the period in which such shares are owned by us and such    shares would not be deemed to be outstanding for purposes of calculating any    quorum or vote at any shareholder’s meeting during such period. In no event    may such repurchase result in a percentage of C Shares in excess of that    permitted by the Bylaws or applicable law.

*Obligation of Majority Shareholders.*In accordance with the Mexican Securities Market Law, persons deemed    to control us, including the Principal Shareholders, will be required to make a    public offer to repurchase any shares held by minority shareholders (at the    higher of the average market price during the 30 preceding days or at book    value) in the event that either us or the CNBV cancels the registration of such    shares with the National Register of Intermediaries and Securities, or RNVI.

*Conflict of interest.*Any shareholder that has a direct interest with respect to a certain    transaction shall abstain from voting with respect to such transaction at the    relevant shareholders’ meeting. A shareholder that votes on a business    transaction in which its interest conflicts with that of CCM may be liable for    damages, but only if the transaction would not have been approved without our    vote.

*Appraisal rights.*Whenever the shareholders approve a change of corporate purposes,    change of nationality of the corporation or transformation from one form of    company to another, any shareholder entitled to vote on such change that has    voted against it may withdraw from us and receive the amount calculated as    specified under Mexican law attributable to its shares, provided that it exercises    its right within 15 days following the adjournment of the meeting at which the    change was approved. Because the C Shares may not vote on these matters, such    appraisal rights are not available to such holders of C Shares, including C    Shares underlying the BC Units.

*Actions against Directors.*Action for civil liabilities against the directors may be initiated    by resolution of an ordinary shareholders’ meeting. In the event the ordinary    shareholders’ meeting decides to bring such action, the directors against whom    such action is to be brought will immediately cease to be directors.    Additionally, shareholders representing not less than 15%****of the    outstanding shares may directly exercise such action against the directors,    provided that (i) such shareholders shall not have voted in favor of not    exercising such action at the relevant shareholders’ meeting, and (ii) the    claim covers all the damages alleged to have been caused to us and not only the    portion corresponding to such shareholders. Any recovery of damages with    respect to such action will be for the benefit of us and not for the    shareholders bringing this action.

**Material Contracts**

In June 1991, we entered into a joint venture with Costco. The    joint venture is governed by a board of directors consisting of six members,    three of whom are appointed by us (including the chairman of the board of the    joint venture) and three of whom are appointed by Costco. The Costco de Mexico    Group joint venture is managed, on a day-to-day basis, by officers appointed by    Costco and approved by us pursuant to certain management agreements between us,    Costco and the Costco de Mexico Group joint venture. The management agreements    may be terminated by either Costco or the Costco de Mexico Group joint venture    at any time, and any termination initiated by the joint venture must be    approved by a majority (at least four directors consisting of two    representatives of each of CCM and Costco) of its board of directors. The    affirmative vote of a majority of the entire board of directors of the joint    venture is required to approve certain significant decisions regarding the    joint venture, including certain revisions to the joint venture business plan,    obligations or acquisitions of real estate or certain other fixed assets not    otherwise provided for in the business plan, the removal of any of the    management personnel appointed by Costco and certain transfers of ownership    interests in the joint venture. In addition, a unanimous vote of both members    of a two-person executive committee consisting of the chief executive officers    of Costco and us is required to approve certain obligations not otherwise    provided for in the business plan and other significant decisions regarding the    joint venture which are not specifically reserved for the board of directors.

The funding requirements of the joint venture are    shared by Costco and us, as determined from time to time by the parties. We and Costco each contributed Ps.354.1    million in 2003, Ps.445.9 million in 2004 and Ps.159.4 million in 2005 to the    Costco de Mexico Group joint venture. In 2006, we and    Costco each agreed to contribute U.S.$15.0 million to the Costco de Mexico    Group joint venture. In the event that either party defaults on its    obligations to provide its portion of the funding for the joint venture, the    other party, at its option, may, among other things, exercise its right to buy    out the defaulting party’s interest at fair market value. The joint venture    agreement contains limitations on competition in the membership warehouse    format by Costco and us. The joint venture has a duration of 99 years, ending    2090. However, the joint venture agreement may be terminated and the joint    venture dissolved, (i) by mutual agreement of Costco and us, or (ii) upon a    sale by either party of its entire interest in the joint venture by written    agreement. We or Costco may purchase the other party’s interest in the joint    venture at a price determined by reference to the fair market value of that    interest in the event that the other party (i) fails to provide its portion of    the financing to the joint venture, (ii) fails to provide or maintain a    guarantee as required by the joint venture agreement, (iii) transfers its    interest to an unaffiliated third party without the consent of the majority of    the board of directors of the joint venture, (iv) is unable to resolve with the    other party within a prescribed period a deadlock of the board of directors,    (v) is in default of its obligations under the joint venture agreement, or (vi)    is insolvent or bankrupt. 

See "Operating and Financial Review and Prospectus-Liquidity and    Capital Resources-Indebtedness" for a brief discussion of certain terms of our    significant debt agreements.
**Enforceability of Civil    Liabilities**
All of our directors, executive officers and    controlling persons reside outside of the United States, substantially all of    the assets of our directors, executive officers and controlling persons are    located outside the United States, all of our assets are located outside of the    United States and some of the experts named in this annual report also reside    outside of the United States. As a result, it may not be possible for you to    effect service of process within the United States upon these persons or to    enforce against them or us in U.S. courts judgments predicated upon the civil    liability provisions of the federal securities laws of the United States. We have been advised by our Mexican counsel, Mijares, Angoitia, Cortes y Fuentes,    S.C., that there is doubt as to the enforceability, in original actions in    Mexican courts, of liabilities predicated solely on U.S. federal securities    laws and as to the enforceability in Mexican courts of judgments of U.S. courts    obtained in actions predicated upon the civil liability provisions of U.S. federal    securities laws. 
**Legal Proceedings**
We are involved in certain legal proceedings incidental to the    normal conduct of our business, which management does not believe will, in the    aggregate, be material to our consolidated financial condition.

We are also involved in several legal proceedings regarding various    tax matters, which we do not believe will, individually or in the aggregate, be    material to our consolidated financial condition.

Over the past year and a half, we were notified at various times by    the *Secretaría de Hacienda y Crédito Público*, or the Mexican tax    authority, of federal tax assessments in an aggregate amount of approximately    Ps.371.8 million including penalties and surcharges relating to the 1997 to    2005 tax years. The assessments relate to asset tax claims. We believe that    these claimed assessments are without merit, and we are vigorously defending    against them before the appropriate judicial authority, although no assurances    can be given as to the outcome of these disputes.

The Costco de Mexico group joint venture has also been notified of    tax assessments in an aggregate amount of approximately Ps.117.5 million (Ps.58.7    million for our 50% share) including penalties and surcharges relating to the 1997, 1998,    1999, 2000, 2001, 2002 and 2003 tax years. The assessments relate principally    to import tax claims. We believe that these claimed assessments are without    merit, and we are vigorously defending against them before the appropriate    judicial authority, although no assurances can be given as to the outcome of    these disputes.
**New York Stock Exchange CorporateGovernance Standards**
As a foreign private issuer with shares listed    on the NYSE, we are subject to different corporate governance requirements than    a U.S. company under the NYSE listing standards. With certain exceptions,    foreign private issuers are permitted to follow home country practice    standards. Pursuant to Rule 303A.11 of the NYSE listed company manual, we are    required to provide a summary of the significant ways in which our corporate    governance practices differ from those required for U.S. companies under the    NYSE listing standards. 

We are a Mexican corporation with shares, in the    form of BC Units, listed on the *Bolsa Mexicana de Valores*, or Mexican    Stock Exchange. Our corporate governance practices are governed by our bylaws,    the Mexican Securities Market Law, and the regulations issued by the CNBV and    the Mexican Stock Exchange. Although compliance is not mandatory, we also    substantially comply with the Mexican Code of Best Corporate Practices (*Código    de Mejores Prácticas Corporativas*), which was created in January 1999 by a    group of Mexican business leaders and was endorsed by the Mexican Banking and    Securities Commission. See "-Bylaws" for a more detailed description of our    corporate governance practices. 

The table below    sets forth a description of the significant differences between corporate    governance practices required for U.S. companies under the NYSE listing    standards and the Mexican corporate governance standards that govern our    practices. 
| **NYSE      Standard**                                                                                                                                    | **Our      Corporate Governance Practice**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Majority      of board of directors must be independent.                                                                                                  | We are          required to have a board of directors of between 5 and 21 members, 25% of          whom must be independent under the Mexican Securities Market Law.

The definition          of independence according the Mexican Securities Market differs in certain          respects from the definition applicable to U.S. issuers under the NYSE      standard.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| Non-management      directors must meet at executive sessions without management.                                                                         | Executive          sessions within non-management or independent directors are not recommended      by the Mexican Code of Best Corporate Practices.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| Nominating/Corporate      Governance Committee composed entirely of independent directors required.                                                       | We are          not required to have a nominating/corporate governance committee, and is not      recommended by the Mexican Code of Best Corporate Practices.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| Compensation      Committee composed entirely of independent directors required.                                                                          | In the          annual shareholders meeting held on April 7, 2005 it has been voted for the          creation of this committee composed in its majority by independent directors.

Pursuant          the new Mexican Market Securities Law issued on December 30, 2005 and in the annual shareholders meeting held on April 6, 2006  three independent directors were elected to the committee and the committee renamed as the Corporate      Practices Committee.                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| Audit          Committee satisfying the independence requirements of rule 10A-3 under the      Exchange Act and the NYSE independence standards required. | We have a          three member audit committee. The members are independent under applicable          Mexican Standards. The chairman of the audit committee has been elected an          "audit financial expert".

The Audit          Committee has a written charter as required by Rule 10A-3.

We also have      an internal audit department.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| Corporate Governance Guidelines must be adopted and      Code of Conduct and Ethics required.                                                             | We have adopted a code of ethics applicable to all our employees,          which is available at www.comerci.com. We are required by          item 16B of Form 20-F to disclose any waivers granted to our CEO, CFO and any      other persons performing similar functions.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| Officer’s      Certifications                                                                                                                       | We are          required to disclose every year our degree of compliance with Mexican Code of          Best Corporate Practices. The truthfulness of such disclosure must be          certified by the Chairman of the Board of Directors, however there is no such          concept as a violation since compliance with the Mexican Code of Best          Corporate Practices is not mandatory.

Furthermore,          other than the certification described above and the certifications required          by Section 302 and Section 906 under the Sarbanes-Oxley Act of 2002, no CEO          is required to notify any non-compliance of which it may be aware of.

Pursuant Rule          303A.12 of the Listed Company Manual of the NYSE, we will submit within 30          days of the day that we file our annual report on form 20-F an Annual      Written Affirmation signed by an authorized officer. |
**Exchange Controls and Restrictions    on Foreign Investment**
**Exchange Rates and    Controls**

The Mexican economy has suffered balance of    payments deficits and shortages in foreign exchange reserves. While the    Mexican Government does not currently restrict the ability of Mexican or    foreign persons or entities to convert Pesos to U.S. Dollars, no assurance can    be given that the Mexican Government will not institute a restrictive exchange    control policy in the future (as has been the case in the past). Any such    restrictive exchange policy could have a material adverse effect on our    business and financial condition. See "Key Information-Risk Factors-Risk    Factors Related to Mexico-Currency Fluctuations or the Devaluation and    Depreciation of the Peso Could Limit Our Ability to Convert Pesos into U.S.    Dollars or into Other Currencies, Which Could Adversely Affect Our Business,    Financial Condition or Results of Operations."

Except for the period from September through    December 1982, during the Mexican liquidity crisis, Banco de Mexico    consistently has made foreign currencies available to Mexican private sector    entities (such as the Company) to meet their foreign currencies obligations.    Nevertheless, in the event of renewed shortages of foreign currencies there can    be no assurance that Banco de Mexico would continue to make foreign currencies    available to private sector companies or that foreign currencies needed by us    to service foreign currency obligations could be purchased in the open market    without substantial additional cost.

Fluctuations in the exchange rate between the    Peso and the U.S. dollar will affect the U.S. dollar equivalent of the Peso    price of the securities on the Mexican Stock Exchange, including the BC Units    and, as a result, will likely affect the market price of the GDSs. Such    fluctuations also would affect the conversion by the depositary into U.S.    dollars of any cash dividends paid in Pesos on the B Shares and the C Shares    comprising the BC Units.

**Foreign Investment Legislation**

Ownership by non-Mexicans of shares of Mexican    enterprises is regulated by the 1993 *Ley de Inversión Extranjera*, or the    Foreign Investment Law, and the 1998 *Reglamento de la Ley de Inversión    Extranjera,* or the Foreign Investment Regulations. The *Comisión    Nacional de Inversiones Extranjeras,* or National Foreign Investment    Commission, administers the Foreign Investment Law and Regulations. To comply    with the restrictions on percentages of capital stock that may be owned by    non-Mexicans, Mexican companies typically limit the ownership of particular    classes of their capital stock to Mexicans. 

The Foreign Investment Law reserves certain    economic activities exclusively for the Mexican State, certain other activities    exclusively for Mexican individuals or Mexican corporations and limits the    participation of non-Mexican investors to certain percentages in regard to    enterprises engaged in activities specified therein. Foreign investors may    freely participate in up to 100% of the capital stock of Mexican companies or    entities except for those existing companies (i) engaged in reserved    activities as referred to above and (ii) with assets exceeding the amount    to be established annually by the Foreign Investment Commission (which has been    set at Ps.85 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. The Principal Shareholders have advised us that they intend    to maintain the Control Position directly in the form of B Units. Pursuant to    the Foreign Investment Law, unless appropriate authorization is obtained, the    Control Position may be transferred only to Mexican nationals.

Mexican and non-Mexican nationals are entitled    to hold, and to exercise the rights of a holder of, the BC Units, the B Units,    the B Shares and the C Shares. The C Shares may not represent more than 25% of    our capital stock.
**Taxation**
**United States Taxes**

*General.*The following is a summary of the anticipated material U.S. federal    income tax consequences of the purchase, ownership and disposition of GDSs , B    Units, BC Units and the B Shares and C Shares underlying the Units (referred to    herein as the "Underlying Shares"), except as otherwise noted, by U.S. Holders,    as defined below. This discussion does not address all aspects of U.S. federal income taxation that may be relevant to a particular beneficial owner of B    Units, BC Units, GDSs or Underlying Shares based on the beneficial owner’s    particular circumstances. For example, with respect to U.S. Holders, the    following discussion does not address the U.S. federal income tax consequences    to a U.S. Holder:
> 
-         that owns, directly, indirectly or through      attribution, 2% or more of the total voting power or value of our shares      (including through ownership of B Units, BC Units or GDSs);

-         that is a dealer in securities, insurance      company, financial institution, tax-exempt organization, U.S. expatriate,      broker-dealer or trader in securities; or

-         whose functional currency is not the U.S.      dollar.

Also, this discussion does not consider:
> 
-         the tax consequences for the shareholders,      partners or beneficiaries of a U.S. holder; or

-         special tax rules that may apply to a U.S.      holder that holds B Units, BC Units, GDSs or Underlying Shares as part of a      "straddle," "hedge," "conversion transaction," "synthetic security" or other integrated      investment.

In addition, the following discussion does not    address any aspect of state, local or non-U.S. tax laws, other than Mexican tax    laws (see "Mexican Taxes" below). Further, this discussion generally applies    only to U.S. Holders that hold the B Units, BC Units, GDSs or Underlying Shares    as capital assets within the meaning of Section 1221 of the Internal Revenue    Code. This summary does not constitute, and should not be considered as legal    or tax advice to holders.

The discussion set forth below is based on the    U.S. federal income tax laws as in force on the date of this annual report,    including:
> 
-         the Internal Revenue Code of 1986, as amended,      applicable Treasury Regulations and judicial and administrative      interpretations; and 

-         the convention between the Government of the      United States of America and the Government of the United Mexican States for      the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with      Respect to Taxes on Income, including the applicable protocols, which we refer      to as the tax treaty; 

-         and is subject to changes to those laws and the      tax treaty subsequent to the date of this annual report, which changes could be      made on a retroactive basis; and 

-         is also based in part on the representations of      the Citibank, N.A. as depositary and on the assumption that each obligation in      the deposit agreement relating to the B Units, BC Units and GDSs and any      related agreement will be performed in accordance with its terms. 

Beneficial    owners of B Units, BC Units, GDSs and Underlying Shares should consult their    own tax advisors as to the particular United States, Mexican or other tax    consequences of the ownership and disposition of B Units, BC Units, GDSs and    Underlying Shares which may be applicable to them.

As used in this section, the term "U.S. Holder"    means a beneficial owner of B Units, BC Units, GDSs or Underlying Shares that    is, for U.S. federal income tax purposes:
> 
-         a citizen or individual resident of the United States;

-         a corporation (or entity classified as a      corporation for these purposes) created or organized in or under the laws of      the United States or of any State thereof or the District of Columbia;

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

-         a trust, if either (x) it is subject to the      primary supervision of a court within the United States and one or more      "United States persons" has the authority to control all substantial      decisions of the trust or (y) it has a valid election in effect under      applicable U.S. Treasury regulations to be treated as a "United States      person".

If a partnership    (or an entity or arrangement classified as a partnership for U.S. federal    income tax purposes) holds B Units, BC Units, GDSs or Underlying Shares, the    U.S. federal income tax treatment of a partner in the partnership generally    will depend on the status of the partner and the activities of the partnership,    and partnerships holding B Units, BC Units, GDSs or Underlying Shares should    consult their own tax advisors regarding the U.S. federal income tax    consequences of purchasing, owning and disposing of B Units, BC Units, GDSs or    Underlying Shares.

An individual may be treated as a resident of the United States in    any calendar year for U.S. federal income tax purposes by being present in the    United States on at least 31 days in that calendar year and for an aggregate of    at least 183 days during a three-year period ending at the close of that year.    For purposes of this calculation, all of the days present in the current year,    one-third of the days present in the immediately preceding year and one-sixth    of the days present in the second preceding year would be counted. Residents    are taxed for U.S. federal income purposes as if they were U.S. citizens.

The application    of the tax treaty to U.S. Holders is conditioned upon, among other things, the    assumptions that the U.S. Holder:
> 
-         is not a resident of Mexico for purposes of the      tax treaty;

-         is an individual who has a substantial presence      in the United States;

-         is entitled to the benefits of the tax treaty      under the limitation on benefits provision contained in Article 17 of the tax      treaty; and

-         does not have a fixed place of business or a      permanent establishment in Mexico with which its ownership of B Units, BC      Units, GDSs or Underlying Shares is effectively connected.

*Ownership of B Units, BC Units and Shares.*In general, for the U.S. federal income tax purposes, U.S. Holders of GDSs will be treated as the beneficial owners of    BC Units (and the Underlying Shares comprising such BC Units) represented by    those GDSs.

*Taxation of Dividends and Stock    Distributions*. Any distribution paid by us,    including the amount of any Mexican taxes withheld, will be included in the    gross income of a U.S. Holder as a dividend, treated as ordinary income, to the    extent that the distribution is paid out of our current or accumulated earnings    and profits, as determined under U.S. federal income tax principles. U.S.    Holders will not be entitled to claim a dividends received deduction for    dividends received from us. A U.S. Holder who is an individual may be eligible    for reduced rates of taxation on such dividends. Such dividends paid in Pesos    will be includible in the income of a U.S. Holder in a U.S. dollar amount    calculated by reference to the exchange rate in effect on the day the pesos are    received by the U.S. Holder or the depositary on behalf of the U.S. Holder,    regardless of whether the payment is in fact converted into U.S. dollars. U.S.    Holders should consult their own tax advisor regarding the treatment of any    foreign currency gain or loss on any Pesos received by the U.S. Holder or the    depositary on behalf of the U.S. Holder which are not converted into U.S.    dollars on the day the Pesos are received. 

A U.S. Holder may, subject to certain    limitations, be eligible to claim as a credit or deduction, for purposes of    computing such holder’s United States federal income tax liability, any Mexican    withholding tax paid in respect of dividends paid by the Company. Such    dividends will generally constitute foreign-source income and will generally be    classified as foreign source "passive income" or, in the case of some    U.S. Holders, foreign source "financial services income" for taxable    years beginning on or before December 31, 2006 and foreign source "general    category income" for taxable years beginning after December 31, 2006, for    purposes of determining the United States foreign tax credit limitation. In    addition, foreign tax credits generally will not be allowed for Mexican    withholding taxes imposed with respect to certain short-term or hedged    positions in stock. The calculation of United States foreign tax credits and,    in the case of a U.S. Holder that elects to deduct foreign taxes, the    availability of deductions, involves the application of complex rules that    depend on a U.S. Holder’s particular circumstances. U.S. Holders should consult    their own tax advisors regarding the availability of foreign tax credits and    deductions for such Mexican withholding tax.

Distributions of additional shares of the    Company to U.S. Holders with respect to the Underlying Shares (and accompanying    distributions with respect to B Units, BC Units and GDSs) that are made as part    of a pro rata distribution to all shareholders of the Company generally will    not be subject to United States federal income tax.

A beneficial owner of B Units, BC Units, GDSs or    Underlying Shares that, for U.S. federal income tax purposes, is neither a U.S.    Holder nor a partnership (nor an entity or arrangement classified as a    partnership for U.S. federal income tax purposes), referred to herein as a    non-U.S. Holder, will not be subject to United States federal income or    withholding tax on dividends paid with respect to the Underlying Shares (or    with respect to B Units, BC Units or GDSs), unless such income is effectively    connected with the conduct by the non-U.S. Holder of a trade or business in the    United States.

*Taxation of Capital Gains*. Gain or loss recognized by a U.S. Holder on the sale or other    taxable disposition of B Units, BC Units, GDSs or Underlying Shares will be    subject to United States federal income taxation as capital gain or loss in an    amount equal to the difference (if any) between such U.S. Holder’s tax basis in    the B Units, BC Units, GDSs or Underlying Shares and the amount realized on the    sale or other taxable disposition. Such capital gain or loss will be long-term    capital gain or loss if the B Units, BC Units, GDSs or Underlying Shares have    been held for more than one year at the time of the disposition. The deductibility    of capital losses is subject to limitations. Capital gains recognized on a sale    or other taxable disposition of B Units, BC Units, GDSs or Underlying Shares by    a U.S. Holder generally will be treated as United States source income, unless    such gains are subject to Mexican taxation under the tax treaty, in which case,    a U.S. Holder generally will be permitted to elect to treat such gains as    foreign source income for U.S. foreign tax credit purposes. Capital losses    recognized on the sale or taxable disposition of B Units, BC Units, GDSs or    Underlying Shares by a U.S. Holder generally will be allocated to reduce income    from U.S. sources for U.S. foreign tax credit purposes. U.S. Holders should    consult their tax advisors concerning the U.S. foreign tax credit implications    of a disposition of B Units, BC Units, GDSs or Underlying Shares. Deposits and    withdrawals of BC Units for GDSs by U.S. Holders will not be subject to United States federal income tax.

A non-U.S. Holder of B Units, BC Units, GDSs or    Underlying Shares will not be subject to United States federal income or    withholding tax on gain realized on the sale or other taxable disposition of B    Units, BC Units, GDSs or Underlying Shares, unless:
> 
-         such gain is effectively connected with the      conduct by the holder of a trade or business in the United States, or 

-         in the case of gain realized by an individual      holder, the holder is present in the United States for 183 days or more in the      taxable year of the sale or other taxable disposition and certain other conditions      are met.

*Backup    Withholding and Information Reporting*. A U.S.    Holder may be subject to U.S. information reporting and U.S. backup withholding    for dividends paid on the B Units, BC Units, GDSs or Underlying Shares, or    proceeds from the sale or other disposition of B Units, BC Units, GDSs or    Underlying Shares unless the U.S. Holder:
> 
-         is a corporation or comes within an exempt      category; or 

-         provides a taxpayer identification number,      certifies as to no loss of exemption from backup withholding tax and otherwise      complies with the applicable requirements of the backup withholding rules.

The amount of any backup withholding will be    allowed as a credit against the U.S. Holder’s U.S. federal income tax liability    and may entitle such holder to a refund provided that certain required    information is furnished to the U.S. Internal Revenue Service.

A non-U.S. Holder may be required to comply with    certification and identification procedures in order to establish its exemption    from backup withholding.

**Mexican Taxes**

*General.*The following is a general summary of the anticipated material    Mexican tax consequences of the purchase, ownership and disposition of Units    and GDSs to a person who is not a resident of Mexico for Mexican tax purposes    as defined below.

An income tax treaty between the United States and Mexico is in effect (the "Tax Treaty"). Except as indicated below under    "-Taxation of Capital Gains," the Tax Treaty will not have any material effect    on the Mexican tax consequences described herein.

This summary is based upon the tax laws of Mexico as in effect on the date of this Annual Report, which are subject to change.    Holders should consult their own tax advisors as to the particular United    States, Mexican or other tax consequences of the purchase, ownership and    disposition of Units or GDSs which may be applicable to them and as to their    entitlement to the benefits afforded by the Tax Treaty or other income tax    treaty to which Mexico is a party.

*Taxation of Dividends.*Dividends, either in cash or in any other form, paid with respect to    the shares underlying the BC Units, including those BC Units represented by    GDSs, will not be subject to Mexican withholding tax.

When dividends are paid from our    "previously taxed net earnings account," or "cuenta de utilidad    fiscal neta," we will not be required to pay any Mexican corporate income    tax on the dividends. If dividends are not paid from our "previously taxed    net earnings account" we will be required to pay a 30% Mexican corporate    income tax on the dividends multiplied by 1.4286.

*Taxation of Capital Gains.*The sale or other disposition of GDSs    will not be subject to Mexican tax. Deposits and withdrawals of Units for GDSs    will not give rise to Mexican tax or transfer duties.

The sale or other disposition of Units will not    be subject to any Mexican tax if the sale is carried out through the Mexican    Stock Exchange or other recognized securities market, as determined by Mexican    tax authorities under general rules. Sales or other dispositions of Units made    in other circumstances would be subject to Mexican income tax. Under    the Tax Treaty, gains on the disposition of Units by less than 25% U.S.    Holders eligible for benefits under the Tax Treaty will not be subject to    Mexican tax, unless (i) 50% or more of the fair market value of the    Company’s assets consist of "immovable property" (as defined in the treaty)    situated in Mexico, or (ii) such gains are attributable to a permanent    establishment or fixed base of such U.S. Holder in Mexico. Because of    uncertainty regarding the interpretation of the relevant provision of the Tax    Treaty there can be no assurance that 50% or more of the fair market value of    CCM’s assets do not or will not consist of "immovable property" situated in Mexico. Gains of a non-U.S. Holder eligible for benefits under a treaty to which Mexico is a party may be exempt (in whole or in part) from Mexican tax under such treaty.    Holders should consult with their tax advisors as to their entitlement to    benefits afforded by an applicable income tax treaty.

*Other Mexican Taxes*. There are no Mexican inheritance or succession taxes applicable    to the ownership, transfer or disposition of Units or GDSs. There are no    Mexican stamp, issuer, registration or similar taxes or duties payable by    holders of Units or GDSs.
**Documents on Display**
For further information about us and our    securities, we refer you to the filings we have made with the U.S. Securities    and Exchange Commission, or the SEC.

CCM is subject to the informational requirements of the U.S.    Securities Exchange Act of 1934, as amended, and in accordance therewith files    reports and other information with the SEC. Reports and other information    filed by CCM with the SEC can be inspected and copied at the public reference    facilities maintained by the SEC at its public reference room at 100 F Street, N.E., Washington, D.C. 20549. You may obtain information on the operation of    the Public Reference Room by calling the SEC at 1-800-SEC-0330. Such materials    can also be inspected at the offices of the New York Stock Exchange, Inc., 20 Broad Street, New York, New York 10005. Any filings we make electronically will be    available to the public over the internet at the SEC’s website at www.sec.gov.

As an issuer of securities listed on the Mexican Stock Exchange, we    are required to file unaudited quarterly financial statements and audited    annual financial statements as well as various periodic reports with the CNBV    and the Mexican Stock Exchange. Recently, the internal regulations of the    Mexican Stock Exchange were amended to implement the EMISNET. Issuers of    listed securities must prepare and disclose their financial information by a    Mexican Stock Exchange-approved system known as the *Sistema de Información    Financiera Computarizada*, or Computerized Financial Information System,    commonly known as the SIFIC. Immediately upon its receipt, the Mexican Stock    Exchange makes that information available to the public. In addition, as a    Mexican listed company, we must file through the EMISNET, an automated system    for the electronic transfer of the information required to be filed with the    Mexican Stock Exchange and the CNBV, information regarding the occurrence of    material events specified in Mexican Securities regulations.

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

We are exposed to market risk from changes in interest rates and    currency exchange rates. Interest rate risk exists with respect to our cash    flows related to our floating rate financial assets and liabilities and with    respect to the fair value of our fixed-rate financial assets and liabilities.    Foreign exchange rate risk exists with respect to our financial assets and    liabilities denominated in currencies other than Mexican Pesos.

At December 31, 2005, we had approximately Ps.963.6 million in financial    assets denominated in currencies other than Mexican Pesos, principally    consisting of short-term investments and marketable securities, and    approximately Ps.3,172.6 million in financial liabilities denominated in    currencies other than Mexican Pesos consisting of debt and trade payables.

The Company historically has used derivatives to manage its exposure    to changes in interest rates and foreign exchange. Statement C-10, as amended, which defines derivatives, requires that derivatives be    carried at fair value on the balance sheet and provides for hedge accounting    when certain conditions are met. In accordance with this standard, the    Company’s derivative financial instruments are recognized on the balance sheet    at fair value. Changes in the fair value of derivative instruments designed as    "cash flow" hedge, to the extent the hedges are highly effective, are recorded    in comprehensive income, net of tax effects. Ineffective proportions of cash    flow hedges, if any, are recognized in current period earnings. Other    comprehensive income or loss is reclassified into current period earnings when    the hedge transaction affects earnings. Changes in the fair value of derivative    instruments designed as "fair value" hedges, along with corresponding changes    in the fair values of the hedges assets or liabilities, are recorded in the    current period earnings.

The notional amount of derivative financial instruments is    represented by US dollars valued at the exchange rate of $10.627 pesos per    dollar. Notional amounts (in US dollars) related to derivative financial    instruments reflect the volume of operations. However, they do not reflect    amounts at risk. Amounts at risk are generally limited to the unrealized    profit or loss from valuation to market those instruments.

For the year-ended December 31, 2005, a $664,541 change in the fair value of cash flow hedges was recorded    within stockholders’ equity net of Ps.183, 271 of deferred tax. Cash flow    hedges are utilized to protect the Company from exchange rate risk associated    with payments for the acquisition of production materials or investment    activities during the next four years, and payments associated with a foreign    currency debt issuance that will be made during the next 10 years.

The potential increase in our net financial liabilities and    corresponding foreign exchange loss that would have resulted from a    hypothetical, immediate 10% depreciation of all of our operating currencies    against the Mexican Peso would have been approximately Ps.212.5 million. Any such    depreciation would have also resulted in additional nominal interest expense of    approximately Ps.24.0 million per year, reflecting an increased cost of foreign    currency indebtedness.

See Note 8 to our financial statements for a discussion of the fair value    of our financial instruments.

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

> 
Not applicable.

# PART II

## Item 13. Defaults, Dividend    Arrearages and Delinquencies

> 
Not applicable. 

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

> 
Not applicable. 

# PART III

## 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 and    Administrative Officer, of the effectiveness of the design and operation of our    disclosure controls and procedures as of December 31, 2005. Based on this    evaluation, our Chief Executive Officer and Chief Financial and Administrative    Officer concluded that our disclosure controls and procedures are effective to    ensure that information required to be disclosed in our periodic filings under    the Exchange Act is recorded, processed, summarized and reported within the    time periods specified in the SEC’s rules and forms.

There have been no significant changes in our internal    controls over financial reporting identified in connection with the evaluation    above during the period covered by this annual report that has materially    affected, or is reasonably likely to materially affect, our internal controls    over financial reporting. 

## Item 16A. Audit    Committee Financial Expert

Our Board of Directors elected Mr. Fermin Sobero    San Martin as an "audit committee financial expert".

## Item 16B. Code    of Ethics

We have adopted a written Code of Ethics that    applies for all our employees, including our principal executive officers,    principal financial officer, principal accounting officer, and persons performing    similar functions.

This Code of Ethics is accessible on our website    at http://www.comerci.com

## Item 16C. Principal Accountant Fees and    Services

PricewaterhouseCoopers served as our auditors    for the years ended December 31, 2004 and 2005. The following table sets forth    the fees paid for professional audit services and other services rendered by    PricewaterhouseCoopers to the Company in 2004 and 2005.

**Fees Paid to PricewaterhouseCoopers**
|                                                                       | **2005**                                                     | **2004**   |
|----------------------------------------------------------------------------|--------------------------------------------------------------|------------|
|                                                                       | **Thousands of constant Pesos as of      December 31, 2005** |
| Audit      Fees(1)......................................................   | 7,565                                                        | 5,729      |
| Audit-related      Fees(2).........................................        |                                                         |       |
| Tax      Fees(3).......................................................... | 4,175                                                        | 4,621      |
| All      Other Fees.....................................................   | 6,810                                                        |       |
| Total..................................................................... | **18,550**                                                   | **10,350** |
|                                                                            |                                                              |            |

________________

(1) Audit fees include services performed by the independent accountant to comply with generally accepted accounting standards in Mexico and the United States. Audit fees also include fees for services provided by the independent accountants in connection with statutory and regulatory filings or engagements, comfort letters, statutory audits, attest services, consents and assistance with and review of documents filed with the SEC.

(2) Audit-related fees include employee benefit plan audits, accounting consultations and audits in connection with internal control reviews, attest services that are not required by statute or regulation and consultation concerning financial accounting and reporting standards.

(3) Tax fees include fees for tax compliance and tax advice.  Tax compliance generally involves preparation of original and amended tax returns and claims for refund. Tax advice encompasses assistance with tax audits and appeals, employee benefit plans and requests for rulings or technical advice from taxing authorities.

**    Audit Committee Pre-Approval Policies and Procedures**

The general    authority to pre-approve the engagement of our independent auditors to render    non-audit services is under the purview of our Audit Committee. Accordingly,    the Audit Committee has established pre-approval procedures to control the    provision of all audit and non-audit services by our independent auditors (the    "Pre-Approval Policy"). Under the Pre-Approval Policy, the engagement of our    independent auditors to provide audit and non-audit services must be pre-approved    by the Audit Committee, either in the form of a special approval or through the    inclusion of the services in question in a list adopted by the Audit Committee    of pre-approved services. The Pre-Approval Policy is detailed as to the    particular services to be provided. Additionally, the Pre-Approval Policy    affirms that the Audit Committee’s responsibilities under the Exchange Act are    not delegated to management.

## Item 16D. Exceptions From the    Listing Standards for Audit Committees

> 
None.

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

> 
None.

# PART IV

## Item 17. Financial Statements 

> 
See pages F-1 through F-33, which are      incorporated herein by reference.

## Item 18. Financial Statements

> 
We have responded to Item 17 in lieu of Item 18.

## Item    19. Exhibits

> 
 (a) List      of Financial Statements

| Report of Independent Register Public Accounting Firm                                                                           | F-2 |
|---------------------------------------------------------------------------------------------------------------------------------|-----|
| Consolidated      Balance Sheets as of December 31, 2004 and 2005                                                               | F-3 |
| Consolidated          Statements of Income for the Years Ended December 31, 2003,2004 and 2005.                                 | F-4 |
| Consolidated          Statements of Changes in Stockholders’ Equity for the Years ended December 31, 2003, 2004 and 2005. | F-5 |
| Consolidated          Statements of Changes in Financial Position for the Years ended December 31, 2003, 2004 and 2005.         | F-6 |
| Notes to          Consolidated Financial Statements for the Years Ended December 31, 2003,2004 and 2005.                        | F-7 |

All other schedules    relating to us are omitted because they are not required or because the    required information is contained in our Financial Statements or Notes thereto.
> 
(b)      List of Exhibits

1.1      English      translation of the Amended and Restated Bylaws (*Estatutos Sociales*) of      the Registrant.

4.1      Form of      Indemnity Agreement between the Registrant and its directors and its executive      officers.[1]

4.2      Restated      Corporate Joint Venture Agreement dated February 15, 1995, between the Price      Company and Price Venture Mexico and CCM.[1]

4.3      Form of      Share Purchase Agreement between us and certain employees.[1]

7.1      Calculation of ratio of earnings to fixed      charges.

8.1      List of      significant subsidiaries of Registrant.

12.1      CEO      Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated      July 16, 2005.

12.2      CFO      Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated      July 16, 2005.

13.1      CEO      Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, dated      July 16, 2005.

13.2      CFO Certification pursuant to Section 906 of the      Sarbanes-Oxley Act of 2002, dated July 16, 2005.

----

[1] Incorporated      herein by reference to Exhibits 10.2, 10.3 and 10.5 of the Registrant’s Annual      Report on Form 20-F for the fiscal year ended December 31, 1996.

 

 

**SIGNATURES**

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

 
> 
 Date: July        16, 2006

**CONTROLADORA COMERCIAL MEXICANA, S.A. de C.V.**

 

 

 

By:                        _______________________        
> 
Carlos            González Zabalegui            Chief Executive Officer     

 

 

 

By:                             _______________________    
> 
Francisco Martínez de la Vega                                                     Chief Financial and Administrative Officer

 

#### INDEX TO    CONSOLIDATED FINANCIAL STATEMENTS OFCONTROLADORA COMERCIAL MEXICANA, S.A. DE C.V. AND SUBSIDIARIES

|                                                                                                                       | Page |
|----------------------------------------------------------------------------------------------------------------------------|------|
| Report of Independent Registered Public      Accounting Firm                                                               | F-2  |
| Consolidated Balance Sheets as of      December 31, 2004 and 2005                                                          | F-3  |
| Consolidated Statements of Income for      the Years Ended December 31, 2003, 2004 and 2005                                | F-4  |
| Consolidated Statements of Changes in      Stockholders’ Equity for the Years Ended December 31, 2003, 2004 and 2005 | F-5  |
| Consolidated Statements of Changes in      Financial Position for the Years Ended December 31, 2003, 2004 and 2005         | F-6  |
| Notes to Consolidated Financial      Statements for the Years Ended December 31, 2003, 2004 and 2005                       | F-7  |

 

 

**REPORT    OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**

To the Stockholders ofControladora Comercial Mexicana, S.A. de C.V.

We have audited    the accompanying consolidated balance sheets of Controladora Comercial    Mexicana, S.A. de C.V. and its subsidiaries as of December 31, 2005 and    2004, 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, 2005. 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 the standards of the Public Company Accounting    Oversight Board (United States) and auditing standards generally accepted in Mexico. Those standards require that we plan and perform the audit to obtain reasonable    assurance about whether the financial statements are free of material    misstatement. An audit includes examining, on a test basis, evidence supporting    the amounts and disclosures in the financial statements. An audit also includes    assessing the accounting principles used and significant estimates made by    management, as well as evaluating the overall financial statement presentation.    We believe that our audits provide a reasonable basis for our opinion.

In our opinion,    the consolidated financial statements referred to above present fairly, in all    material respects, the financial position of Controladora Comercial Mexicana,    S.A. de C.V. and its subsidiaries as of December 31, 2005 and 2004, and the    results of their operations, their changes in stockholders’ equity and their    changes in financial position for each of the three years ended in the period    December 31, 2005, in conformity with accounting principles generally accepted    in Mexico.

Accounting    principles generally accepted in Mexico vary in certain significant respects    from accounting principles generally accepted in the United States of America.    Information relating to the nature and effect of such differences is presented    in Note 17 to the consolidated financial statements.

PricewaterhouseCoopers, S.C.

Fernando J. Morales Gutiérrez

México, D.F.,    July 16, 2006

 

 

**CONTROLADORA COMERCIAL MEXICANA, S.A. DE C.V. AND SUBSIDIARIES    CONSOLIDATED BALANCE SHEETS****At December 31, 2005 and 2004**  (In thousands of Mexican pesos of constant purchasing power as of December 31, 2005)

 
| **ASSETS**                                                                            | **2005**                        | **2004**                        |
|---------------------------------------------------------------------------------------|---------------------------------|---------------------------------|
| Current assets:                                                                       |                            |                            |
|     Cash                                                                    | Ps.      670,718 | Ps.      602,950 |
|     Temporary      investments                                              | 950,515                         | 688,228                         |
|     Trade accounts      receivable                                          | 197,697                         | 494,796                         |
|     Other accounts      and notes receivable (Note 4)                       | 1,611,186                       | 2,371,582                       |
|     Related      parties, net (Note 5)                                      | 8,659                           | 21,079                          |
|     Inventories                                                             | 5,046,913                       | 5,661,543                       |
|     Prepaid      expenses and other assets                                  | 111,771                         | 68,753                          |
|         Total current      assets                                 | 8,597,459                       | 9,908,931                       |
| Property,      equipment and leasehold and owned buildings improvements, net (Note 6) | 20,573,703                      | 18,918,063                      |
| Investment      advance payments (Note 12)                                            | 687,270                         | 401,420                         |
| Other assets                                                                          | 466,127                         | 465,531                         |
|             Total assets                                | Ps. 30,324,559                  | Ps. 29,693,945                  |
| **LIABILITIES      AND STOCKHOLDERS’ EQUITY**                                   |                            |                            |
| Current      liabilities:                                                             |                            |                            |
|     Trade payables                                                          | Ps.   6,993,449       | Ps.   7,441,090       |
|     Taxes payable                                                           | -                               | 51,573                          |
|     Short term debt (Note 7)                                                | 318,813                         | -                               |
|     Derivative      financial instruments (Note 8)                          | 509,701                         | 100,396                         |
|     Related      parties, net (Note 5)                                      | 16,184                          | -                               |
|     Deferred      revenue and negative goodwill (Notes 4 and 12)            | -                               | 689,918                         |
|     Other accrued      liabilities                                          | 1,216,657                       | 1,154,759                       |
|         Total current      liabilities                            | 9,054,804                       | 9,437,736                       |
| Long-term      liabilities:                                                           |                            |                            |
|     Long-term debt      (Note 7)                                            | 2,216,267                       | 2,197,115                       |
|     Labor      obligations (Note 10)                                        | 229,683                         | 130,468                         |
|     Derivative      financial instruments (Note 8)                          | 796,861                         | -                               |
|     Deferred income      taxes (Note 15)                                    | 1,273,374                       | 2,254,039                       |
|         Total      liabilities                                    | 13,570,989                      | 14,019,358                      |
| Stockholders’      equity (Note 11):                                            |                            |                            |
|     Contributed      capital:                                               |                            |                            |
|           Capital stock                                      | 1,737,600                       | 1,737,600                       |
|         Restatement                                               | 6,132,150                       | 6,132,150                       |
|             Total capital      stock                    | 7,869,750                       | 7,869,750                       |
|         Paid      in-capital, net                                 | 1,065,384                       | 1,057,806                       |
|             Total      contributed capital              | 8,935,134                       | 8,927,556                       |
| Earned capital:                                                                       |                            |                            |
|     Legal reserve                                                           | 788,132                         | 700,397                         |
|     Retained      earnings                                                  | 8,739,775                       | 7,189,131                       |
|     Reserve for      repurchase of units                                    | 1,194,963                       | 1,194,963                       |
|     Financial      instruments                                              | (471,270)                       | -                               |
|     Result from      holding non-monetary assets                            | (4,370,575)                     | (4,212,248)                     |
|     Net income for      the year                                            | 1,831,665                       | 1,774,843                       |
|         Total earned      capital                                 | 7,712,690                       | 6,647,086                       |
|         Total majority      stockholders’ equity            | 16,647,824                      | 15,574,642                      |
|     Minority      interest                                                  | 105,746                         | 99,945                          |
|         Total stockholders’ equity                          | 16,753,570                      | 15,674,587                      |
|         Total liabilities      and stockholders’ equity     | Ps. 30,324,559                  | Ps. 29,693,945                  |

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

 

**CONTROLADORA COMERCIAL MEXICANA, S.A. DE C.V. AND SUBSIDIARIES    CONSOLIDATED STATEMENTS OF INCOME****For the years ended December 31, 2005, 2004 and 2003**  (In thousands of Mexican pesos of constant purchasing power as of December 31, 2005, except for unit amounts)

 
|                                                                                               | **2005**                                    | **2004**                                    | **2003**                                    |
|----------------------------------------------------------------------------------------------------|---------------------------------------------|---------------------------------------------|---------------------------------------------|
| Net sales                                                                                          | Ps. 40,308,855                              | Ps. 38,842,131                              | Ps. 38,004,207                              |
| Cost of sales                                                                                      | 31,830,667                                  | 30,980,634                                  | 30,395,706                                  |
|     Gross profit                                                                         | 8,478,188                                   | 7,861,497                                   | 7,608,501                                   |
| Selling, general and administrative      expenses:                                                 |                                        |                                        |                                        |
|     Selling                                                                              | 5,325,326                                   | 5,296,215                                   | 5,248,254                                   |
|     Administrative                                                                       | 874,710                                     | 736,831                                     | 832,646                                     |
|         Total operating expenses                                               | 6,200,036                                   | 6,033,046                                   | 6,080,900                                   |
|     Operating income                                                                     | 2,278,152                                   | 1,828,451                                   | 1,527,601                                   |
| Integral result of financing:                                                                      |                                        |                                        |                                        |
|     Interest expense                                                                     | (432,417)                                   | (299,945)                                   | (355,550)                                   |
|     (Loss) gain from      forward agreements                                             | (575,728)                                   | 90,820                                      | (493)                                       |
|     Interest income                                                                      | 64,300                                      | 78,711                                      | 46,365                                      |
|     Loss from repurchase of notes                                                        | -                                           | -                                           | (43,910)                                    |
|     Foreign-exchange gain(loss) net                                                      | 86,797                                      | (7,005)                                     | (108,410)                                   |
|     Gain from monetary position                                                          | 236,367                                     | 319,337                                     | 259,262                                     |
|         Total integral result of financing                                     | (620,681)                                   | 181,918                                     | (202,736)                                   |
|     Income after integral result of      financing                                       | 1,657,471                                   | 2,010,369                                   | 1,324,865                                   |
| Other income (expense), net                                                                        | 519,452                                     | (19,744)                                    | 67,660                                      |
|     Income before provisions for income taxes and employee statutory      profit sharing | 2,176,923                                   | 1,990,625                                   | 1,392,525                                   |
| Provisions for income taxes and employee statutory profit sharing (Note 15)                        | 332,506                                     | 207,735                                     | 261,495                                     |
|     Income before minority interest                                                      | 1,844,417                                   | 1,782,890                                   | 1,131,030                                   |
| Interest of minority stockholders in the results of subsidiaries                                   | (12,752)                                    | (8,047)                                     | (8,804)                                     |
|     Net income for the year                                                              | Ps.  1,831,665                         | Ps.  1,774,843                         | Ps.  1,122,226                         |
| Average number of units                                                                            | 1,086,000                                   | 1,086,000                                   | 1,079,765                                   |
| Net income per units:                                                                              |                                        |                                        |                                        |
|     Before minority interest                                                             | Ps.           1.70 | Ps.           1.63 | Ps.           1.04 |
|     Minority interest                                                                    | 0.01                                        | -                                           | -                                           |
|     After minority interest                                                              | Ps.           1.69 | Ps.           1.63 | Ps.           1.04 |

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

 

 

**CONTROLADORA COMERCIAL MEXICANA, S.A. DE C.V. AND SUBSIDIARIES  CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY    For the years ended December 31, 2005, 2004 and 2003**    (In thousands of Mexican pesos of constant purchasing power as of December 31, 2005, except for unit amounts)
|                                                                                                                                                   | **Capitalstock** | **Paid-incapital, net** | **Legalreserve** | **Retainedearnings** | **Reserve          forrepurchasesof units** | **Units Repurchased For stock      purchase plan** | **Derivatives Instruments** | **Result          fromholdingnon-monetaryassets** | **Net          incomefor the year** | **Majority  stockholders’ equity** | **Minorityinterest** | **Total          stock-          holders’equity** |
|--------------------------------------------------------------------------------------------------------------------------------------------------------|------------------|-------------------------|------------------|----------------------|---------------------------------------------|----------------------------------------------------|-----------------------------|---------------------------------------------------|-------------------------------------|------------------------------------------|----------------------|---------------------------------------------------------|
|                                                                                                                                                   | **Ps.**          | **Ps.**                 | **Ps.**          | **Ps.**              | **Ps.**                                     | **Ps.**                                            | **Ps.**                     | **Ps.**                                           | **Ps.**                             | **Ps.**                                  | **Ps.**              | **Ps.**                                                 |
| Balance as of December 31, 2002                                                                                                                        | 7,869,750        | 1,047,154               | 601,320          | 5,532,819            | 1,179,917                                   | ( 38,913)                                          | -                           | (3,795,449)                                       | 891,447                             | 13,288,045                               | 95,962               | 13,384,007                                              |
|     Resolutions of the General Ordinary                                         Stockholders’ Meeting held on April 3, 2003: |             |                    |             |                 |                                        |                                               |                        |                                              |                                |                                     |                 |                                                    |
|         Transfer to      retained earnings                                                                                         | -                | -                       | -                | 847,531              | -                                           | -                                                  | -                           | -                                                 | (847,531)                           | -                                        | -                    | -                                                       |
|         Increase legal      reserve                                                                                                | -                | -                       | 43,916           | -                    | -                                           | -                                                  | -                           | -                                                 | (43,916)                            | -                                        | -                    | -                                                       |
|         Dividends paid (Ps.0.107 per unit)                                                                                         | -                | -                       | -                | (128,893)            | -                                           | -                                                  | -                           | -                                                 | -                                   | (128,893)                                | -                    | (128,893)                                               |
| Reissuance of units for treasury stock                                                                                                                 | -                | -                       | -                | -                    | -                                           | 38,913                                             | -                           | -                                                 | -                                   | 38,913                                   | -                    | 38,913                                                  |
| Reissuance of units for treasury stock net                                                                                                             | -                | 10,652                  | -                | -                    | 15,046                                      | -                                                  | -                           | -                                                 | -                                   | 25,698                                   | -                    | 25,698                                                  |
| Increase in      minority interest                                                                                                                     | -                | -                       | -                | -                    | -                                           | -                                                  | -                           | -                                                 | -                                   | -                                        | 4,653                | 4,653                                                   |
| Comprehensive      income (Note 2 .p.)                                                                                                                 | -                | -                       | -                | -                    | -                                           | -                                                  | -                           | (204,699)                                         | 1,122,226                           | 917,527                                  | -                    | 917,527                                                 |
| Balance as of      December 31, 2003                                                                                                                   | 7,869,750        | 1,057,806               | 645,236          | 6,251,457            | 1,194,963                                   | -                                                  | -                           | (4,000,148)                                       | 1,122,226                           | 14,141,290                               | 100,615              | 14,241,905                                              |
| Resolutions of      the General Ordinary    Stockholders’ Meeting held on    March 31,      2004:                            |             |                    |             |                 |                                        |                                               |                        |                                              |                                |                                     |                 |                                                    |
|         Transfer to      retained earnings                                                                                         | -                | -                       | -                | 1,067,065            | -                                           | -                                                  | -                           | -                                                 | (1,067,065)                         | -                                        | -                    | -                                                       |
|         Increase legal      reserve                                                                                                | -                | -                       | 55,161           | -                    | -                                           | -                                                  | -                           | -                                                 | (55,161)                            | -                                        | -                    | -                                                       |
|         Dividends paid      (Ps.0.1115 per unit)                                                                                   | -                | -                       | -                | (129,391)            | -                                           | -                                                  | -                           | -                                                 | -                                   | (129,391)                                | -                    | (129,391)                                               |
| Decrease in minority interest                                                                                                                          | -                | -                       | -                | -                    | -                                           | -                                                  | -                           | -                                                 | -                                   | -                                        | (670)                | (670)                                                   |
| Comprehensive      income (Note 2 .p.)                                                                                                                 | -                | -                       | -                | -                    | -                                           | -                                                  | -                           | (212,100)                                         | 1,774 ,843                          | 1,562,743                                | -                    | 1,562,743                                               |
| Balance as of      December 31, 2004                                                                                                                   | 7,869,750        | 1,057,806               | 700,397          | 7,189,131            | 1,194,963                                   | -                                                  |                        | (4,212,248)                                       | 1,774,843                           | 15,574,642                               | 99,945               | 15,674,587                                              |
|     Resolutions of the General Ordinary	                                     Stockholders’ Meeting held on April 7, 2005:    |             |                    |             |                 |                                        |                                               |                        |                                              |                                |                                     |                 |                                                    |
|         Transfer to      retained earnings                                                                                         | -                | -                       | -                | 1,687,108            | -                                           | -                                                  | -                           | -                                                 | (1,687,108)                         | -                                        | -                    | -                                                       |
|         Increase legal      reserve                                                                                                | -                | -                       | 87,735           | -                    | -                                           | -                                                  | -                           | -                                                 | (87,735)                            | -                                        | -                    | -                                                       |
|         Dividends paid      (Ps.0.123 per unit)                                                                                    | -                | -                       | -                | (136,464)            | -                                           | -                                                  | -                           | -                                                 | -                                   | (136,464)                                | -                    | (136,464)                                               |
| Reissuance of units. Net                                                                                                                               | -                | 7,578                   | -                | -                    | -                                           | -                                                  | -                           | -                                                 | -                                   | 7,578                                    | -                    | 7,578                                                   |
| Increase in      minority interest                                                                                                                     | -                | -                       | -                | -                    | -                                           | -                                                  | -                           | -                                                 | -                                   | -                                        | 5,801                | 5,801                                                   |
| Comprehensive      income (Note 2 .p.)                                                                                                                 | -                | -                       | -                | -                    | -                                           | -                                                  | (471,270)                   | (158,327)                                         | 1,831 ,665                          | 1,202,068                                | -                    | 1,202,068                                               |
| Balance as of      December 31, 2005                                                                                                                   | 7,869,750        | 1,065,384               | 788,132          | 8,739,775            | 1,194,963                                   | -                                                  | (471,270)                   | (4,370,575)                                       | 1,831 ,665                          | 16,647,824                               | 105,746              | 16,753,570                                              |

The    accompanying notes are integral part of these financial statements.

 

 

**CONTROLADORA COMERCIAL MEXICANA, S.A. DE C.V. AND SUBSIDIARIES    CONSOLIDATED STATEMENTS OF CHANGES IN FINANCIAL POSITION    For the years ended December 31, 2005, 2004 and 2003**    (In thousands of Mexican pesos of constant purchasing power as of December 31, 2005)
|                                                                                                         | **2005**             | **2004**             | **2003**             |
|--------------------------------------------------------------------------------------------------------------|----------------------|----------------------|----------------------|
| Operating activities:                                                                                        |                 |                 |                 |
| Net income                                                                                                   | Ps.   1,831,665 | Ps.   1,774,843 | Ps.   1,122,226 |
| Items applied to income not requiring the use of funds:                                                      |                 |                 |                 |
| Depreciation and amortization                                                                                | 710,951              | 701,284              | 735,357              |
| Derivative financial instruments                                                                             | 551,625              | 39,741               | 60,655               |
| Provision for deferred taxes                                                                                 | 115,586              | 144,309              | 151,798              |
| Labor obligations                                                                                            | 40,675               | 21,374               | 20,662               |
| Minority interest                                                                                            | 12,752               | 8,047                | 8,804                |
|                                                                                                         | 3,263,254            | 2,689,598            | 2,099,502            |
| Decrease (increase) in:                                                                                      |                 |                 |                 |
|     Accounts receivable                                                                            | 1,086,099            | 616,087              | (569,983)            |
|     Inventories                                                                                    | 446,968              | (1,361,792)          | (307,080)            |
|     Prepaid and other expenses                                                                     | (10,003)             | (34,439)             | (72,045)             |
| Increase (decrease) in:                                                                                      |                 |                 |                 |
|     Trade payables                                                                                 | (447,641)            | 752,839              | 303,499              |
|     Taxes payable                                                                                  | (51,573)             | (19,593)             | (146,032)            |
|     Other accrued liabilities                                                                      | (1,260,691)          | (330,400)            | (75,657)             |
| Resources provided by operating          activities                                                          | 3,026,413            | 2,312,300            | 1,232,204            |
| Financing activities:                                                                                        |                 |                 |                 |
|     Increase (decrease) in short-term debt                                                         | 318,813              | -                    | (178,444)            |
|     Increase (decrease) in long-term debt                                                          | 19,152               | (88,496)             | 306,578              |
|     Paid in capital                                                                                | 7,578                | -                    | 10,652               |
|     Minority interest                                                                              | (6,951)              | (8,717)              | (4,151)              |
|     Dividends paid                                                                                 | (136,464)            | (129,391)            | (128,893)            |
|     Reissuance of units for treasury stock, net                                                    | -                    | -                    | 15,046               |
|     Units reissued for stock purchase Plan                                                         | -                    | -                    | 38,913               |
| Resources provided by (used in)          financing activities                                                | 202,128              | (226,604)            | 59,701               |
| Investing activities:                                                                                        |                 |                 |                 |
|     Increase in investment advance payments and other assets                                       | (285,850)            | (216,770)            | (58,640)             |
|     Acquisitions of property and equipment          and leasehold and owned buildings improvements | (2,683,669)          | (2,103,588)          | (1,669,599)          |
|     Disposition of property and equipment                                                          | 314,900              | 418,338              | 329,331              |
|     (Amortization of goodwill) goodwill from the acquisition of one          company subsidiary    | (243,867)            | (217,876)            | 461,742              |
| Resources used in investing activities                                                                       | (2,898,486)          | (2,119,896)          | (937,166)            |
| Net increase (decrease) in cash and temporary investments                                                    | 330,055              | (34,200)             | 354,739              |
| Cash and temporary investments at beginning          of year                                                 | 1,291,178            | 1,325,378            | 970,639              |
| Cash and temporary investments at end          of year                                                       | Ps.   1,621,233 | Ps.   1,291,178 | Ps.   1,325,378 |

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

 

 

**CONTROLADORA COMERCIAL MEXICANA, S.A. DE C.V. AND SUBSIDIARIES    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**    (In thousands of Mexican pesos of constant purchasing power  as of December 31, 2005 except for unit amounts)

 

 

**1. ORGANIZATION    AND BACKGROUND:**

Controladora Comercial Mexicana, S.A. de C.V. ("CCM") was founded as    a partnership on January 28, 1944, as Antonino González e Hijo sociedad in    simple silent partnership. On July 1, 1957, it was incorporated under the name    of Comercial Mexicana, S.A.; on March 5, 1982, it became a limited liability    Company with variable capital (Sociedad Anónima de Capital Variable). On    December 9, 1988, the Company changed its name to Controladora Comercial    Mexicana, S.A. de C.V. (jointly with its consolidating subsidiaries, the    "Company"). and modified its corporate by-laws, effective January 1, 1989, to    enable it to engage in the business of leasing personal property and real    estate, and invest in companies engaged in the purchase, sale and distribution    of groceries and general merchandise in Mexico.

 

**2. SUMMARY    OF SIGNIFICANT ACCOUNTING POLICIES:**

The following is a summary of the principal accounting policies    followed by the Company, which are in accordance with generally accepted in Mexico ("Mexican GAAP"):

a) Revenue    recognition

Revenue from product sales is recognized at the point of sale,    except for layaway transactions, which are recognized when the customer makes    full payment and takes possession of the merchandise in question; revenues from    membership fees are recognized when collected; revenues from the Government of    Mexico City voucher program are recorded when customers purchase merchandise    using the vouchers; lease revenues are recognized when collected. Revenues are    recognized net of discounts.

b) Consolidation 

The Company’s owns 100% of all subsidiary companies except for    Costco de México, which is a 50% joint venture.
| **Subsidiary**                           | **Operations**                                                       |
|------------------------------------------|----------------------------------------------------------------------|
| Tiendas Comercial Mexicana, S.A. de C.V. | Operates      a chain of 142 stores (137 in 2004)                    |
| Tiendas Sumesa, S.A. de C.V.             | Operates      a chain of 21 stores (19 in 2004)                      |
| Restaurantes California, S.A. de C.V.    | Operates      a chain of 62 restaurants (58 in 2004)                 |
| Costco de México, S.A. de C.V.    | Operates      a chain of 28 membership warehouse stores (25 in 2004) |
| Subsidiary real estate companies         | Group of      real estate companies                                  |
| Subsidiary service companies             | Group of      services companies                                     |

The Company consolidates the accounts of all majority-owned    subsidiaries. The investment in subsidiary companies and all transactions and    balances between them have been eliminated as part of the consolidation of the    financial statements.

The Company’s investment in the Costco de México Group joint venture    with Costco Wholesale Corporation meets the joint control criteria discussed in    International Accounting Standard No. 31. Accordingly, the Company reports its    investment by means proportionate consolidation method.

c) Temporary    investments

Temporary investments are recorded at market value at the balance    sheet date. Unrealized gains and losses are included in interest income.

d) Inventories    and cost of sales

Inventories and cost of sales are initially recorded by the retail    method, which is equivalent to replacement cost. Due to the high inventory    turnover; amounts so determined do not exceed market value.

The Company determines and accrues a general valuation reserve for    shrinking and physical inventory losses based on management’s analysis and    experience. When applicable, the Company writes down its obsolete or    unmarketable inventory equal to the difference between the cost of inventory    and the estimated market value based upon assumptions about future demand and    market conditions.

e) Advertising    cost

Advertising consists primarily of print, radio and television    advertisements. Advertising costs are expensed as incurred. For the years-ended    December 31, 2005, 2004 and 2003, advertising expense was Ps.389,769,    Ps.368,898 and Ps.415,397, respectively.

f) Vendor    discounts

The Company receives discounts from many of the vendors from which    the Company buys products for resale in its stores. These vendor discounts are    provided to increase the sell-through of the related products. The Company    receives discounts for a variety of merchandising activities: placement of the    vendor’s products in the Company’s advertising; placement of the vendor’s    products in prominent locations in the Company’s stores; and to compensate for    temporary price reductions offered to customers on products held for sale at    retail stores. The Company also receives vendor discounts for purchasing    activities, such as volume commitment rebates.

g) Property,    equipment and leasehold and owned buildings improvements

The Company restates property, equipment and leasehold and owned    buildings improvements on the basis of changes in the National Consumer Price    Index ("NCPI"), in compliance with Statement B-10 and the amendments thereto.

Depreciation and amortization are calculated using the straight-line    method based on the expected useful lives of the assets (See Note 6).    Depreciation and amortization rates are applied to the inflation restated value    of the assets.

h) Long-lived    assets

As from January 1, 2004, the Company applies the provisions of    Statement C-15 "Impairment in the Value of Long-Lived Assets and their    Disposal", issued by the Mexican Institute of Public Accountants ("MIPA"),    which establishes, among other things, the general criteria for the    identification and when applicable, the recording of impairment losses or the    decrease in the value of tangible and intangible long-lived assets including    goodwill. The adoption of this statement had no effect on the Company’s    financial position or on the net income at December 31, 2005 and 2004.

The Company evaluates potential impairment losses on long-lived    assets by assessing whether the unamortized carrying amount can be recovered    over the remaining life of the assets through undiscounted future expected cash    flows generated by the assets, with no interest charges. If the sum of the    expected future undiscounted cash flow is less than the carrying amount of the    assets, a loss is recorded for the difference between the fair value and    carrying value of the assets. Starting in 2004, long-lived assets are reviewed    for impairment at the end of each year and whenever events or changes in    circumstances indicate that the carrying amount may not be recoverable.    Long-lived assets for which management has committed to a disposal plan are    recorded at the lower of the unamortized carrying amount or fair value less    disposal cost.

i) Segment    reporting

In March 2003, the MIPA issued Statement B-5 "Segment Financial    Information", which is effective for fiscal years beginning January 1, 2003.    That Statement establishes standards for reporting information on operating    segments. (See Note 16).

j) Pre-opening    costs

Costs associated with the opening of new stores are expensed in the    same fiscal year in which such stores begin operations.

k) Stock    appreciation rights plan

The Company granted stock appreciation    rights to the executives of the Company, by means of which the executives    acquire a number of shares which are transferred to them upon occurrence of    certain conditions (refer to Note 13 for description of the plans). The Company    purchased the required number of Shares granted under the terms of the Plan and    deposited them into a trust. The shares deposited in the trust are recorded on    the balance sheet within Other Assets.

l) Deferred    Income tax

Income tax is recorded by the comprehensive asset-and-liability    method, which consists of recognizing deferred tax on all temporary differences    between the book and tax values of assets and liabilities. (See Note 15).

m) Pension    plans, seniority premiums and indemnities

Under the Mexican Federal Labor Law, the Company’s Mexican employees    are entitled to seniority premiums after 15 years of service or upon dismissal,    disability or death. Under Statement D-3, "Labor Obligations", the actuarially    determined projected benefit obligation is computed using estimates of salaries    that would be in effect at the time of payment. Employees not yet eligible for    seniority premiums are also included in the determination of the obligation,    with necessary adjustments based on the likelihood of these employees reaching    the required seniority. The cost of past service is amortized over the average    period for employees to reach retirement age. The cost of the retirement plans    (pensions and seniority premiums), both formal and informal, is recognized as    an expense in the years in which the services are rendered, based on studies    made by independent actuaries using the projected unit credit method. (See Note    10).

According to the Mexican Federal Labor Law, other compensation,    based on length of service, to which employees may be entitled in the event of    dismissal or death, is charged to income in the year in which it becomes    payable.

On January 1, 2005, the Company adopted the amendments to Statement    D-3, Labor Obligations, which contain rules for the valuation, presentation and    recognition of remuneration obligations upon termination of employment for    reasons other than restructuring. Those effects are determined using actuarial    studies carried out using the projected unit credit method. Net cost for the    period for this type of remuneration was Ps. 17,487, which was applied against    income for the year. Initial adoption of said amendments did not have a    significant effect on the accompanying financial statements.

n) Foreign    currency transactions

Transactions in foreign currencies are recorded at the exchange    rates prevailing on the dates they are entered into and/or settled. Assets and    liabilities denominated in such currencies are stated at the Mexican peso    equivalents resulting from applying the rates in effect on the balance sheet    dates. Exchange differences arising from fluctuations in the exchange rates    between the transaction and settlement dates, or the balance sheet date, are    charged or credited to income. (See Note 14).

o) Financial    instruments

As of January 1, 2005 the Company adopted bulletin C-10 "Derivative    Financial Instruments and Coverage Operations", which establishes the valuation    and disclosure criteria applicable to all derivative financial instruments. The    statement also requires that the effectiveness of cash-flow hedges and of the    net investment in subsidiaries located abroad be evaluated and that the    effective portion of the gains or losses on hedging instruments be recorded in    comprehensive income.

The adoption of this new pronouncement    resulted on a charge to the statement of income and to the comprehensive income    of Ps. 652,021 and Ps. 654,541, respectively.

Financial instruments are valued at their fair value at the end of    December 2005, accordingly to Bulletin C-10.

p) Comprehensive    income

Statement B-4, "Comprehensive Income", requires that the various    components of stockholders’ equity resulting from non-owner transactions be    shown in the statement of changes in stockholders’ equity under comprehensive    income.

Comprehensive income represents the net income plus the gain or loss    from holding non-monetary assets, mark-to-market adjustments on financial    instruments, the net effect of tax and items required by specific accounting    standards to be reflected in stockholders’ equity, but which do not constitute    capital contributions, reductions or distributions. Comprehensive income is    restated on the basis of NCPI factors.

q) Use of    estimates

Preparation of the financial statements in conformity with Mexican    GAAP requires the Company’s management to make estimates that affect the    reported amounts of assets and liabilities, the disclosure of contingent assets    and liabilities at the dates of the financial statements, and the reported    amounts of revenues and expenses during the reporting periods. Actual results    could differ from estimates.

r) Earnings per    unit

Earnings per unit are computed by dividing the net income by the    weighted average number of units outstanding each year.

s) Goodwill

Goodwill    represents the excess of the cost of shares over the book value of a purchased    subsidiary. Such goodwill is stated at restated value, determined by applying    NCPI factors to the original value and deducting the respective accumulated    amortization. Prior to January 1, 2005, goodwill and negative goodwill was    amortized by applying the straight-line method to restated balances. As from    January 1, 2005, the Company adopted Statement B-7 "The Acquisition of a    Business", which rules that goodwill is not amortized and its value is    subject to annual impairment tests. According to B-7, negative goodwill is    allocated as a pro-rate reduction to eligible acquired assets and if all    eligible assets are reduced to zero and an amount of negative goodwill still    remains, the remaining amount is recognized as an extraordinary gain.

In 2005, the Company acquired all the shares of a new subsidiary,    for which it paid Ps. 214,594. At the acquisition date, the book value of the    assets acquired and liabilities assumed exceeded the price paid by Ps.649,263.    As required by Statement B-7, the excess price (negative goodwill) was shown    under Other Income. At year end, the Company reviewed the carrying value of the    acquired assets that were established at acquisition date.

t) New    accounting standards

Beginning June 1, 2004, the Mexican Financial Reporting Standards    Board - (CINIF, for its initials in Spanish), assumed the responsibility for    setting accounting and reporting standards in Mexico. In compliance with this    responsibility and after due exposure in 2004 and 2005, the CINIF issued    several Financial Reporting Standards - (NIFs) that will become effective on    January 1, 2006.

The main objective of the NIFs is to achieve the maximum possible    harmonization and convergence of Mexican accounting and reporting standards    with the regulations of International Financial Reporting Standards (IFRS).

The full hierarchy of NIFs, in effect beginning January 1, 2006, is    as follows:

- NIFs and Interpretations of NIFs issued by the CINIF.

- Statements issued by the Accounting Principles Board of the    Mexican

 Institute of Public Accountants (IMCP) that have not been modified    replaced or repealed by the new NIFs.

- IFRS, which are applicable when no Mexican NIF exists. 

The circulars issued by the Accounting Principles Board will    continue to have the status of recommendations and will be part of the NIFs    until such time as they are repealed or superseded by NIFs.

Following is a list of the NIFs issued to date. Being mainly of a    general nature, they are not expected to have a significant effect on financial    reporting:

NIF A-1 "Structure of Financial Reporting Standards"

NIF A-2 "Basic postulates"

NIF A-3 "User needs and objectives of financial statements"

NIF A-4 "Qualitative features of financial statements"

NIF A-5 "Basic elements of financial statements"

NIF A-6 "Recognition and valuation"

NIF A-7 "Presentation and disclosure"

NIF A-8 "Supplementary"

NIF B-1 "Accounting changes and correction of errors"

 

**3. EFFECTS    OF INFLATION ON THE FINANCIAL STATEMENTS:**

The consolidated financial statements of the Company have been    prepared in accordance with Statement B-10, "Recognition of the Effects of    Inflation on the Financial Information," as amended, issued by the MIPA. The    financial statements have been presented in pesos of constant purchasing power    as of December 31, 2005 so that they are comparable to financial information as    of that date, as follows:

The balance sheets have been restated at constant pesos as of    December 31, 2005 using the NCPI as of that date.

The statements of income have been restated at constant pesos as of    December 31, 2005 using the NCPI for the month in which the transactions were    carried out.

The NCPI used to restate prior year’s financial statements are as    follows:
|   | **Inflation for the period** | **Cumulative inflation at December 31,2005** |
|--------|------------------------------|----------------------------------------------|
| 2003   | 3.97%                        | 13.00 %                                      |
| 2004   | 5.19%                        | 8.70 %                                       |
| 2005   | 3.33%                        | 3.33 %                                       |

The following items are the result of recognition of the effects of    inflation on the financial information.

**Capital stock    and earned capital**

Capital stock, capital reserves and retained earnings represent the    value of these items, stated in purchasing power as of the most recent balance    sheet date, and are determined by applying factors derived from the NCPI to the    historical amounts.

**Paid in-capital**

Unit premiums represent the difference between the payment for the    units subscribed and the nominal value of those units, which is restated by    applying NCPI factors.

**Deficit in the    restatement of capital**

The deficit in the restatement of capital is composed mainly of the    initial cumulative effects of inflation and of the loss from holding    non-monetary assets such as property, equipment, leasehold and owned buildings    improvements and inventories, is restated in Mexican pesos of purchasing power    as of the most recent balance sheet date.

In 2005 and 2004, the deficit in the restatement of capital is due    to inventories being valued at replacement cost instead of being restated for    the change in general price level. 

**Gain on monetary    position**

The gain on monetary position represents the inflation gain,    measured in terms of the NCPI, on net monthly monetary assets and liabilities    for the year, expressed in pesos of purchasing power as of the most recent    balance sheet date.

 

**4. OTHER    ACCOUNTS AND NOTES RECEIVABLE:**

At December 31, other accounts and notes receivable consist of the    following:
|                                                    | **2005**                                                 | **2004**                      |
|---------------------------------------------------------|----------------------------------------------------------|-------------------------------|
| Mexico City government (1)                              | Ps.                 - | Ps.    966,763 |
| Lease receivables                                       | 5,444                                                    | 14,140                        |
| Receivables from employees                              | 73,832                                                   | 24,474                        |
| Value-added tax and income tax          receivables     | 1,070,994                                                | 1,010,566                     |
| Trade accounts pertaining to credit          card sales | 287,130                                                  | 258,291                       |
| Others                                                  | 173,786                                                  | 97,348                        |
|                                                    | Ps. 1,611,186                                            | Ps. 2,371,582                 |

(1) During    2005, the Company did not participate in the GDF voucher program. In the fourth    quarter of 2004, the Company participated in a public bidding process and was    awarded a voucher contract by the Government of Mexico City. This contract    accounted for approximately Ps.1,601,657 and benefited approximately 310,000    program participants. Pursuant to this contract, the Company offered all    program participants a 35.68% discount on all merchandise. During 2004, the    Company recorded an account receivable and deferred revenue of approximately    Ps.1,030,227. Revenue is recorded when customers purchase merchandise using the    vouchers. As of December 31, 2004, the recorded revenue from this program was    Ps.583, 830.

 

**5. RELATED    PARTIES:**

In the regular course of business, the Company provides management    services to and purchases clothes for resale in Company stores from Nova    Distex, S.A. de C.V. (successor to Casa Distex S.A. de C.V.), or Nova a textile    manufacturer and property management Company.  These transactions are on    terms no less favorable than would be obtainable in an arm’s-length    transaction.

At December 31, accounts receivable and payable consist of the    following:
|                           | **2005**                                        | **2004**                                               |
|--------------------------------|-------------------------------------------------|--------------------------------------------------------|
| Accounts receivable:           |                                            |                                                   |
| Nova Distex, S. A. de C.V.     | Ps.             - | Ps.   12,148                                      |
| Gasomer, S.A. de C.V.          | 6,195                                           | 5,836                                                  |
| Costco de Mexico, S.A. de C.V. | 2,464                                           | 2,747                                                  |
| Other                          | -                                               | 348                                                    |
|                           | Ps.    8,659                          | Ps.  21,079                                       |
| Accounts payable:              |                                            |                                                   |
| Nova Distex, S. A. de C.V.     | Ps.  16,184                                | Ps.                    - |
|                           | Ps.  16,184                           | Ps.           -          |

 

The following table summarizes the amounts recorded in the Company’s    accounts, which relate to transactions with related parties.
|                                                         | **2005**   | **2004**   | **2003**   |
|--------------------------------------------------------------|------------|------------|------------|
| Purchases                                                    | Ps. 77,769 | Ps. 77,075 | Ps. 62,420 |
| Purchase of Almacenes de      Querétaro, S.A. de C.V. | -          | -          | 38,044     |
| Lease expenses                                               | -          | 11,566     | 6,160      |
| Sale of 100% ownership Servicios Mills, S.A. de      C.V.    | -          | -          | 57,609     |
| Other lease      revenues                                    | 12,560     | 19,191     | 23,391     |
| Sales of inventory                                           | -          | -          | 15,607     |

 

**6. PROPERTY,    EQUIPMENT AND LEASEHOLD AND OWNED BUILDINGS IMPROVEMENTS:**

Property, equipment and leasehold and owned buildings improvements    consist of the following at December 31:
|                                                                        | **2005**                        | **2004**                        | **AverageDepreciationRate** |
|-----------------------------------------------------------------------------|---------------------------------|---------------------------------|-----------------------------|
| Buildings                                                                   | Ps.    9,104,088 | Ps.    8,075,909 | 2 %                         |
| Store fixtures                                                              | 4,645,428                       | 4,376,613                       | 10 %                        |
| Electronic equipment                                                        | 1,132,499                       | 1,069,578                       | 25 %                        |
| Office fixtures                                                             | 85,829                          | 103,331                         | 10 %                        |
| Leasehold and owned buildings          improvements                         | 2,918,632                       | 2,656,664                       | 5 %                         |
|                                                                        | 17,886,476                      | 16,282,095                      |                        |
| Less: accumulated depreciation and          amortization                    | 7,297,037                       | 6,708,654                       |                        |
|                                                                        | 10,589,439                      | 9,573,441                       |                        |
| Land                                                                        | 9,590,417                       | 9,197,304                       |                        |
| Construction in progress and advances          for purchase of fixed assets | 393,847                         | 147,318                         |                        |
|                                                                        | Ps.  20,573,703            | Ps.  18,918,063            |                        |

Depreciation expense amounted to Ps.710,951, Ps. 701,284 and    Ps.735,357, for the years ended December 31, 2005, 2004 and 2003, respectively.

Construction in progress and advances for purchase of fixed assets,    relates to a subsidiary’s plans to open new stores during the first half of    2006.

 

**7. DEBT:**

Total debt as of December 31 consists of the following obligations:
|                                                                                                                                                                                                                                                                                                                                                                                                                        | **2005**           | **2004**                                                      |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------------|---------------------------------------------------------------|
| Senior          notes of US$200 million due in 2015, at a fixed interest rate of 6.625%          payable semi-annually (1)                                                                                                                                                                                                                                                                                                  | Ps. 2,125,420      | Ps.                 - |
| Bank          loan of US$30 million due in January 2006, at a fixed interest rate of 4.97%          payable at maturity date                                                                                                                                                                                                                                                                                                | 318,813            | -                                                             |
| Debenture          bonds of 24.9 (172.9 in 2004) million investment units (UDIS), maturing in          2010, at a fixed interest rate of 8.00% payable semi-annually (2)                                                                                                                                                                                                                                                    | 90,847             | 631,520                                                       |
| Private placement of US$100 million due 2010 divided in          two series. (i) U.S.$98 million Series A notes at a fixed interest rate of          6.10% payable semi-annually, and annual amortization in equal amounts          beginning in the third year. (ii) U.S.$2 million Series B notes at a fixed          rate of 6.70%, payable semi-annually, with amortization on the due date (3).          (See Note 8). | -                  | 1,152,264                                                     |
| Direct bank loan in Mexican pesos, payable semi-annually          from September 2006 to September 2008, at a local interest rate (9.61% at          the end 2004) plus 65 basis points, payable monthly                                                                                                                                                                                                                    | -                  | 413,331                                                       |
|                                                                                                                                                                                                                                                                                                                                                                                                                        | 2,535,080          | 2,197,115                                                     |
| Less:                                                                                                                                                                                                                                                                                                                                                                                                                       |               |                                                          |
| Debt short term                                                                                                                                                                                                                                                                                                                                                                                                             | 318,813            | -                                                             |
| Total long-term debt                                                                                                                                                                                                                                                                                                                                                                                                        | Ps. 2,216,267 | Ps. 2,197,115                                            |

(1)      On May 25, 2005, CCM issued an offering of    US$200 million of senior notes, due in 2015 at a fixed interest rate of 6.625%    payable semi-annually. These notes are subject to certain covenants that    including: (1) limitations on liens; (ii) limitations on sales and leasebacks;    (iii) limitations on subsidiary indebtedness; (iv) limitations on mergers,    consolidations and similar transactions. 

(2)     During December 2000, CCM entered into a program    that provides for the issuance of up to Ps.1.5 billion of debentures. As part    of this program, CCM issued 1,729,000 debentures with a face value of 100    Investment Units (UDI’s) each, equivalent to 172.9 million Investment Units    (UDI’s) over a ten-year term, subject to fixed interest rate of 8.00%, plus the    increase in the NCPI issued by Banco de Mexico for the value of each UDI.    Interest accrued on the debentures will be paid semi-annually on June 8 and    December 8 of each year. The program contains certain financial covenants,    including: (i) limitations on the acquisition of additional debt; (ii)    limitations on encumbrances; (iii) limitations on mergers, spin-offs or the    sale of assets; (iv) limitations on the payment of dividends; and (v) the    debentures must be pari passu with other indebtedness. On June 2005, the    Company repurchased approximately 85.6% of this debenture bonds. 

(3)     On June 9, 2003, CCM issued in a private    placement, Senior Unsecured Notes of U.S.$100 million, due 2010, divided into    two series: (i) U.S.$98 million Series A notes at a fixed interest rate of    6.10%, payable semi-annually, and annual amortization in equal amounts as from    the third year. and (ii) U.S.$2 million of Series B notes at a fixed rate of    6.70%, payable semi-annually, with amortization on the due date. These notes    are neither listed for trading on any stock exchange nor approved for quotation    through any quotation system. These notes are subject to certain covenants    that, among other things, limit the ability of the Company and its Subsidiaries    (as defined) as follows: (i) the Company may not make certain restricted    payments; (ii) the Company will ensure that at all times Tiendas Comercial    Mexicana, S.A. de C.V. is a Subsidiary Guarantor, all Wholly-Owned Subsidiaries    that are Material Subsidiaries are Subsidiary Guarantors and the Company and    all of the Subsidiary Guarantors account for not less than 80% of Consolidated    Assets, excluding the consolidated assets of Costco de Mexico, S.A. de C.V.;    (iii) there are restrictions on consolidating or merging with any other    corporation or conveying, transferring or leasing substantially all of its    assets in a single transaction or series of transactions; (iv) no liens may by    placed upon or with respect to any property or assets of the Company or any    Subsidiary; (v) the Company may not engage in any material line of business    that is materially different; (vi) no Subsidiary may create, assume, incur,    guarantee or otherwise become liable in respect of any Indebtedness. On June    2005, the Company repurchased this private placement en 2005, incurring into a    loss for repurchase of notes of Ps 126,991. As of December 31, 2005, CCM was in compliance with all debt convenants. 

On June 2, 2003, CCM was authorized by Mexican National Bank    Commission to launch a local short-term debenture program in pesos, as follows:
| **Type of bonds:**    | Short term local debenture program                                        |
|-----------------------|---------------------------------------------------------------------------|
|                  |                                                                      |
| **Amount:**           | Ps. 1,000,000                                                             |
|                  |                                                                      |
| **Settlement:**       | Up to 360 days from the date of issuance                                  |
|                  |                                                                      |
| **Interests payment** | Interest is payable in advance upon issuance or payable at      maturity. |

At December 31, 2005 and 2004, the Company had an aggregate of over    Ps.5, 204 million and Ps.7, 360 million of available credit, respectively,    through unused uncommitted lines of credit with eight banking institutions    through which the Company may borrow in pesos or in U.S. dollars (converted to    pesos at the exchange rate in effect at the time of the borrowing). The terms    and conditions of such lines of credit will be determined at the time they are    utilized. The Company renews its bank lines of credit on a yearly basis. The    bank credit lines contain no financial covenants.

In 2005, 2004 and 2003, CCM paid Ps.116,514, Ps.154, 761and Ps.162,    878, respectively, of interest on debt.

The Company has, from time to time, entered into interest rate and    currency swap agreements designed to modify the interest characteristics of    outstanding debt or limit exposure to increasing interest rates and to manage    currency risk, in accordance with its interest rate and currency risk    management policy. For interest rate swaps, the differential to be paid or    received as interest rates change is accrued in the balance sheet and    recognized as gain or loss from forward agreements in the income statement.

 

**8. FINANCIAL INSTRUMENTS:**

In the normal course of business, the Company enters into derivative    transactions to manage interest rate risk and foreign currency risk. Most    expiration dates and the amounts of derivative financial instruments match the    dates of the assets and liabilities they are intended to cover.

As required by Statement C-10, the    Company records its derivative financial instruments at fair value using    valuations obtained from the parties with which the operations were entered.

The Company applies either cash flow or fair value hedge accounting    when cost beneficial for those derivatives qualified and designated as hedges.    To qualify for hedge accounting, details of the hedging relationship must be    formally documented at the inception of the arrangement, including the risk    management objective, hedging strategy, hedged item, specific risks that are to    be hedged, the derivative instrument and how effectiveness is being assessed.    The derivative must be highly effective in offsetting either changes in fair    value or cash flows, as appropriate, for the risk being hedged. Effectiveness    is assessed at the inception of the relationship. If specified criteria for the    assumption of effectiveness are not met at hedge inception, effectiveness is    assessed quarterly on a retrospective and prospective basis. Ineffectiveness is    also measured quarterly, with the results recognized in earnings. 

Derivatives that are not designated as hedging instruments are    classified as trading assets and liabilities; the gain or loss is recognized in    earnings in the period of change.

Certain embedded derivatives within contracts are required to be    separated from their host contract and recognized at fair value, generally    based on market prices (with gains and losses taken to income), if the economic    characteristics and risks of the embedded derivative are not closely related to    that of the host contract.

The following table provides information about the    Company’s derivatives by instrument:
|                          | **2005**                 | **2004**            |
|-------------------------------|--------------------------|---------------------|
|                          | **Fair Value**           | **Notional Amount** | **Due Date** | **Fair Value** | **Notional Amount** | **Due Date** |
| **Cash Flow      Hedges**     |                     |                |   |   |   |   |
| Exchange      rate options    | Ps.   551,285       |                | 2006 - 2009 |   |   |   |
|     Buy             |                     | Ps. 21,614,046      |   |   |   |   |
|     Sale            |                     | 4,966,004           |   |   |   |   |
| Exchange      rate Swaps      | 103,256                  | 2,125,420           | 2015 |   |   |   |
|                          |                     |                |   |   |   |   |
| **Trading      Derivatives**  |                     |                |   |   |   |   |
| Interest      rate swaps      | Ps.     46,218 | Ps.  2,125,420 | 2015 | Ps. (186,925) | Ps. 3,719,640 | 2005 |
| Exchange rate options         | 464,283                  |                | 2006 - 2010 | 229,138 | 546,342 | 2005 |
|     Buy             |                     | 7,352,303           |   |   |   |   |
|     Sale            |                     | 8,653,648           |   |   |   |   |
| Exchange      rate swaps      | 362,402                  | 5,581,353           | 2015 |   |   |   |
| Exchange      rate forwards   |                     |                |   | 58,183 | 367,983 | 2005 |
|                          |                     |                |   |   |   |   |
| **Embedded      derivatives** | Ps. (220,882)            |                |   |   |   |   |

The notional amount of derivative financial instruments is    represented by US dollars valued at the exchange rate of $10.627 pesos per    dollar. Notional amounts (in US dollars) related to derivative financial    instruments reflect the volume of operations. However, they do not reflect    amounts at risk. Amounts at risk are generally limited to the unrealized    profit from valuation to market of those instruments.

For the years-ended December 31, 2005, a Ps.654,541 change in the fair value of cash flow hedges was recorded    within stockholders’ equity net of Ps.183, 271 of deferred tax. Cash flow    hedges are utilized to protect the Company from exchange rate risk associated    with forecasted payments for the acquisition of imported merchandise and    materials for the new stores during the next four years, interest and principal payments    associated with an outstanding foreign currency debt issuance that will be made    during the next 10 years.

For the years    ended December 31, 2005 and 2004, the Company recognized a (loss) and gain of    Ps.(575,728) and Ps.90,820, respectively due to its operations with Financial    Instruments.

 

**9. LEASES:**

The Company leases certain retail locations, warehouses and    distribution space under operating leases. Some leases require that the fixed    portion of the rent be negotiated annually. Certain leases also provide for    contingent rentals based on the sales revenue of the individual stores or    restaurants. As leases expire, they can be expected to be renewed or replaced    in the normal course of business.

Total rent expense for operating leases for each of the three years    ended December 31 is as follows:
|                  | **2005**    | **2004**    | **2003**    |
|-----------------------|-------------|-------------|-------------|
| Base lease            | Ps. 204,608 | Ps. 241,753 | Ps. 228,499 |
| Contingent lease      | 84,276      | 85,549      | 85,017      |
| Total leasing expense | Ps. 288,884 | Ps. 327,302 | Ps. 313,516 |

 

Minimum lease commitments under non-cancelable operating leases at    December 31, 2005 are as follows:
|                | **Amount**               |
|---------------------|--------------------------|
| 2006                | Ps.    204,608 |
| 2007                | 204,608                  |
| 2008                | 204,608                  |
| 2009                | 204,608                  |
| 2010 and thereafter | 946,138                  |
|                | Ps. 1,764,570            |

 

**10. RETIREMENT    COMPENSATION:**

Retirement    Trust

An irrevocable retirement trust fund was set up in 2003. Two of the    Company’s subsidiaries contributed cash equivalent to 1% and 1.5% of their    employees’ salaries. Employees of these subsidiaries are entitled to the    accumulated amounts upon retirement. The Company canceled the retirement plan    outstanding at December 31, 2002, and the accumulated employees’ fund will be    distributed as beneficiaries reach retirement age.

Seniority    Premium and Allowance Plan

The Company has established a retirement plan at two of its    subsidiaries, to which employees do not contribute. Benefits under this plan    are mainly based upon employee’s length of service and remuneration at    retirement. This plan’s obligations and costs, as well as seniority premium to    which employees are entitled after 15 years of service, are recorded on the    basis of actuarial studies made by independent experts.

The net cost for the period was Ps.40,675, Ps.21,374 and Ps.20,662    in 2005, 2004 and 2003, respectively.

The Company also has established plans for compensation of employees    in the event of dismissal, which are based on actuarial studies prepared by    independent experts. The respective liability at December 31, 2005 was Ps.73,620.    Additionally, the Company established a post-retirement benefit plan for one of    its subsidiaries, the liability for which was Ps.33,609.

The amounts of projected benefits for labor obligations at December    31, 2005 and 2004 (See Note 2.m.) are as follows:
|                                                                                      | **2005**    | **2004**    |
|-------------------------------------------------------------------------------------------|-------------|-------------|
| Accumulated benefit obligation                                                            | Ps. 183,509 | Ps. 139,954 |
| Additional projected benefits                                                             | 73,515      | 26,989      |
|     Projected benefit obligation                                                | 257,024     | 166,943     |
| Less:                                                                                     |        |        |
|     Plan assets                                                                 | (50,160)    | (37,967)    |
| Projected benefit obligation in excess of plan assets                                     | 206,864     | 128,976     |
| Net transition assets, changes in assumption and adjustments based          on experience | 22,819      | 1,492       |
| Accrued liabilities                                                                       | Ps. 229,683 | Ps. 130,468 |

 

Actuarial data    under this assumption are as follows:
|                      | **2005** | **2006** |
|---------------------------|----------|----------|
| Interest rate             | 4.5      | 3.5      |
| Increase in salaries      | 1.0      | 1.0      |
| Return of assets expected | 4.5      | 4.5      |

The cost of prior services and of modifications to the plans,    variations in assumptions and adjustments for experience are being amortized    over the average remaining labor life of the employees who are expected to    receive the plan benefits.

 

**11. STOCKHOLDERS’    EQUITY:**

The authorized capital stock is comprised of 1,086,000,000 B and BC    related units with no stated value. At December 31, 2005 there are 737,921,848    and 348,078,152 subscribed and paid in B and BC units, respectively    (744,015,610 and 341,984,390 in 2004).

Each stockholder owns either one BC unit consisting of three B    shares and one C share, or one B unit consisting of four B shares, both of    which trade on the Mexican Stock Exchange.

The nominal capital stock, with a stated value of Ps.1,737,600,    consists of Ps.298,258 of cash contributions, Ps.909, 632 of capitalized    profits and Ps.529,710 of capitalized effects of inflation.

At the General Ordinary Stockholders’ Meeting held on March 31, 1992, a resolution was passed approving the creation of a reserve for the temporary repurchase of CCM    units. Subsequently, at the General Ordinary Stockholders’ Meeting held on    April 11, 2002, it was agreed to increase that reserve to Ps.1,000,000. The    reserve fluctuates as CCM purchases and sales its own units in the stock    market. There were no repurchases by CCM of its units at the end of 2005 and    2004. 

The profit for the period is subject to the legal provision    requiring at least 5% of the profit for each period to be set aside to increase    the legal reserve until it reaches an amount equivalent to 20% of the capital    stock.

Dividends are not subject to income tax if paid from the Net Tax    Profit Account. Any dividends paid in excess of that account are subject to a    tax equivalent to 40.84% or 38.91% depending on whether paid in 2006 or 2007,    respectively. The tax is payable by the Company and may be credited against its    income tax in the same year or the following two years. Dividends paid from    previously taxed profits are not subject to tax withholding or additional tax    payment.

At December 31, 2005, cumulative earnings that have been subject to    income tax and can be distributed by CCM free of Mexican withholding tax were    approximately Ps.438,973 (Ps.432,577 in 2004).

In the event of a capital reduction, any excess of stockholders’    equity over capital contributions, the latter restated in accordance with the    provisions of the Income Tax Law, is accorded the same tax treatment as    dividends.

 

**12. COMMITMENTS    AND CONTINGENCIES:**

a. Commitments

On February 11, 2003, CCM signed a Master Contract with Soficole,    N.V., Auchan, S.A., Flooragest, B.V. and Societe Domaine de Bonne Nouvelle,    S.A.R.L. (the "Sellers") to purchase the shares of Controladora Auchan Mexicana,    S.A. de C.V. (CAM) and Auchan, S.A. de C.V. (Amex). Under the terms of the    respective contract, CCM has exclusive governance over CAM operations, but does    not receive the shares of CAM until such time as the purchase price is    completely paid over to the sellers.

On March 1st, 2003, CCM executed the purchase of Amex shares and    took over the operation of five retail stores located in the central Mexico, which were converted into Megas stores.

CAM owns the five store buildings and additional    land. According to the contracts, CCM will make six payments, without interest,    in respect of the CAM shares beginning in February 2003, which under the    purchase contract will be kept in trust until the last payment is made. Under    the terms of the contract, CCM has the right and obligation to a) conduct the    business in a diligent and efficient manner, b) maintain the accounting systems    and keep the accounting records, c) operate, maintain and monitor all the real    estate properties, d) manage all legal matters required to operate the    business, e) provide quarterly and annual consolidated financial statements to    the sellers, and f) vote at the annual shareholder’ meeting. Also, in managing    CAM operations and assets, CCM is not allowed to a) contract additional debt    that limits CAM’s payment capacity, b) acquire or lease properties for CAM in    an amount that exceeds U.S$250,000 without the Seller’s consent, c) use CAM’s    real estate assets as collateral, d) merge the CAM real estate companies, or e)    substantially modify CAM’s real estate properties without the Seller’s consent.    In the event CCM fails to cover the payments, share ownership and partial    payments made will be lost.

The payment schedule is as follows:
|              | **(thousands)** |
|-------------------|-----------------|
| February 28, 2003 | U.S.$15,000     |
| February 28, 2004 | 20,000          |
| February 28, 2005 | 25,000          |
| February 28, 2006 | 20,000          |
| February 28, 2007 | 20,000          |
| February 28, 2008 | 20,000          |

On December 19, 2003, a purchase price adjustment for the Amex and CAM shares was concluded and the original price was reduced by U.S.$1.8 million. In    January 2004, CCM received the payment for that amount.

On December 31, 2005, CCM recorded the Ps.687,270 (U.S.$58.2    million) payments of the CAM shares under investment advance payments.

On February 28, 2006, CCM made the third payment of Ps.230,000    (U.S.$20 million).

b. Contingencies

Certain    companies of the group are involved in a number of lawsuits and claims arising    from the regular course of its operations. These matters are not expected to    have a significant effect on the Company’s financial position or on the results    of future operations.

Likewise, the    Company is involved in a number of legal procedures involving taxes, which are    neither singly nor in the aggregate expected to significantly affect the    consolidated financial statements, except as mentioned in the following    paragraph.

The tax    authorities have assessed approximately $430,500 of tax payable by CCM and a    subsidiary. Appeals have been filed, and the Company considers that there is    every likelihood of obtaining favourable resolutions. 

 

**13.        ****STOCK APPRECIATION PLAN**

In    2004, the Company granted Stock Appreciation Rights to the sub-directors of the    Company, by means of which the executives bought a number of shares of the    Company at a contractually agreed price of $7.4 pesos per share. The transfer    of the shares will not be effective until the executive retires (which is at    the age of 65) or in the event of a change of control of the Company. Upon    occurrence of one of those events, the executives receive the stock certificates    and must pay the Company an amount based on the agreed share price. The    executives must use the proceeds from the sale of the shares to pay off their    outstanding debt with the Company and retain the excess of the share market    price over the exercise price. The stock appreciation rights were made    available to the sub-directors who acquired a number of 7,318,895. The transfer    of the shares to the sub-directors will not be effective until the executive    retires (which is at the age of 65) or in the event of a change of control of    the Company.

The Company    purchased the required number of shares granted under the terms of the Plan and    deposited them into a trust. The Company recognizes an account receivable for    the outstanding amount due from the directors and sub-directors. The account    receivable is recorded on the balance sheet within Other Assets. Dividends on    shares are credited to the account receivable balance. As of December 31, 2005    and 2004, the balance of the stock appreciation rights’ account receivable was    Ps.218,398 and Ps.238,417, respectively.

 

**14. FOREIGN    CURRENCY POSITION:**

The foreign currency position as of December 31 is as follows:
|                                     |                             |               |               | **Year-endExchange Rates (1)** |
|------------------------------------------|----------------------------------|--------------------|--------------------|--------------------------------|
|                                     | **2005**                         | **2005**           | **2004**           | **2005**                       | **2004** |
| Assets:                                  |                             |               |               |                           |   |
|     U.S. Dollars:              |                             |               |               |                           |   |
|     Investments in securities  | Ps.            963,635 | U.S.$  90,678 | U.S.$  27,487 | Ps. 10.627                | Ps. 11.151 |
| Liabilities:                             |                             |               |               |                           |   |
|     U.S. Dollars:              |                             |               |               |                           |   |
|     Debt and other liabilities | Ps.3,172,606                     | U.S.$298,542       | U.S.$171,457       | Ps. 10.627                | Ps. 11.151 |

 

As of December 31, 2005 and 2004, the Company had foreign    non-monetary assets, or whose replacement cost is determined in foreign    currency, as detailed below:
|               | **2005**           | **2005**           | **2004**     |
|--------------------|--------------------|--------------------|--------------|
| Computer equipment | Ps.   808,842 | U.S.$  76,112 | U.S.$ 72,449 |
| Inventories        | 411,392            | 38,712             | 18,091       |
| Total              | Ps.1,220,234       | U.S.$114,824       | U.S.$ 90,540 |

 

Other transactions carried out in U.S. dollars, for the years ended    December 31 are summarized below:
|                                                 | **2005**      | **2004**     | **2003**     |
|------------------------------------------------------|---------------|--------------|--------------|
| Net export and import of goods and          services | Ps. 2,608,727 | U.S.$245,481 | U.S.$255,128 |
| Technical advisory services                          | 25,696        | 2,418        | 2,281        |
| Interest payments                                    | 108,108       | 10,173       | 6,172        |
| Total                                                | Ps. 2,742,531 | U.S.$258,072 | U.S.$263,581 |

As of March 24, 2006, date of issuance of the independent auditors’    report, the exchange rate was Ps.10.87 per U.S. dollar as published by    brokerage houses.

 

**15. INCOME    TAX:**

At December 31, 2005, 2004 and 2003, income tax and employees’    profit sharing provisions are summarized as follows:
|                                                                          | **2005**    | **2004**          | **2003**          |
|-------------------------------------------------------------------------------|-------------|-------------------|-------------------|
| Income tax due                                                                | Ps. 204,247 | Ps.   22,956 | Ps.   75,456 |
| Deferred income tax                                                           | 188,224     | 249,164           | 241,030           |
| Assets tax                                                                    | 9,598       | 35,753            | 28,738            |
| Employees’ statutory profit sharing                                     | 3,075       | 4,717             | 5,503             |
| Gain on monetary position from the      initial effect of deferred income tax | (72,638)    | (104,855)         | (89,232)          |
| Total                                                                         | Ps. 332,506 | Ps. 207,735       | Ps. 261,495       |

For Mexican GAAP purposes, the financial statement carrying amounts    utilized in the determination of the deferred tax assets and liabilities    include the inflation adjustment described in Note 3, and their respective tax    bases also include the effects of inflation based on tax regulations.

In 1989, the Company received authorization from the Mexican    Treasury Department to consolidate its tax result with those of its controlled    companies.

As of December 31, 2005, the Company had consolidated tax losses of    approximately Ps.3,554,528, which will reduce consolidated taxable income in    future years up to 2014. In addition, the Company has operating loss    carryforwards, which have been generated by subsidiary companies prior to their    inclusion in the consolidated income tax calculation. Accordingly, the    individual subsidiary companies must generate taxable income for the group to    utilize such losses.

Tax loss carryforwards will expire as follows:
| ** Years ended December 31,** |                                  |
|------------------------------------|---------------------------------------|
| 2006                               | Ps.         7,265 |
| 2007                               | 26,268                                |
| 2008                               | 168,855                               |
| 2009 and thereafter                | 3,352,140                             |
|                               | Ps. 3,554,528                         |

The Company elected the "fraction V Art.3" transitory option of the    Mexican income tax law modifications bill. Based on the fraction V Art. 3    provisions, the Company can defer the accrued inventories to reduce the cost of    sales. The 2005 income tax includes inventories accrued at December 2004.

Asset tax paid may be utilized as a credit against future income tax    during the years for which the Company’s income tax exceeds asset tax. Asset tax    is available as a carryforward for up to ten years and is subject to    restatement based on the NCPI when utilized. As of December 31, 2005, assets    tax of Ps.271,153 (Ps.591,822 in 2004) is available as a tax loss carryforward,    and expires from 2006 to 2015. 

At December 31, the main temporary differences on    which deferred income tax is recognized are summarized as shown below:
|                        | **2005**                 | **2004**      |
|-----------------------------|--------------------------|---------------|
| Inventories                 | Ps.    920,416 | Ps. 1,688,490 |
| Fixed assets                | 1,804,241                | 1,727,811     |
| Tax loss carryforwards      | (995,268)                | (503,396)     |
| Other net items             | (184,862)                | (67,044)      |
| Assets tax carryforwards    | (271,153)                | (591,822)     |
| Deferred income tax payable | Ps. 1,273,374            | Ps. 2,254,039 |

As a result of the changes to the Income Tax Law approved on    November 13, 2004, the income tax rate will be 29% and 28% in 2006 and 2007,    respectively. The effect of the tax rate reduction is a decrease in the    deferred income tax liability by Ps.212,127 in 2005 (Ps.213,225 in 2004),    increasing the net income by the same amount.

Below is a reconciliation of the statutory income tax rate of the    actual current income tax rate for the year ended December 31:
|                                                               | **2005** | **2004** | **2003** |
|--------------------------------------------------------------------|----------|----------|----------|
| Income tax computed at statutory tax      rate                     | 30%      | 33%      | 34%      |
| Depreciation and amortization                                      | (1%)     | (13%)    | 3%       |
| Inventories                                                        | 1%       | (2%)     | (2%)     |
| Inflationary interest adjustment and      net monetary gain (B-10) | 3%       | ( 2%)    | (4%)     |
| Goodwill from the acquisition of one      company subsidiary       | (9%)     | -        | -        |
| Tax loss carryforwards in stock share      sales                   | (5%)     | -        | -        |
| Others                                                             | (4%)     | (6%)     | 11%      |
| Tax loss carryforwards                                             | -        | (2%)     | (26%)    |
| Provision for current and deferred      taxes                      | 15%      | 8%       | 16%      |

 

**16. SEGMENT    INFORMATION:**

The Company’s reportable business segments are disclosed in    compliance with Statement B-5, "Financial Information by Segment".

The Company is mainly engaged in the operation of supermarkets and    mass merchandising stores in Mexico.

The Company operates in three segments: (1) the CCM Group, which    includes the Comercial Mexicana and Bodega supermarkets and Mega hypermarkets,    and comprises the Company’s core business, (2) the Costco de Mexico Group,    which operates Costco de Mexico, its joint venture with Costco Wholesale    Corporation, and (3) the Other Group, which includes its Sumesa stores and    Restaurantes California.

Information under Mexican GAAP on the Company’s reportable segments    is provided below:
| **As of and for the year ended December 31, 2005**                         | **CCM Group**       | **Costco de Mexico                                      Group Joint Venture** | **Other Group**           | **Total**      |
|----------------------------------------------------------------------------|---------------------|-------------------------------------------------------------------------------|---------------------------|----------------|
| Net sales                                                                  | Ps.      30,134,625 | Ps. 8,398,566                                                                 | Ps. 1,775,664             | Ps. 40,308,855 |
| Cost of sales                                                              | 23,524,254          | 7,204,808                                                                     | 1,101,605                 | 31,830,667     |
| Gross profit                                                               | 6,610,371           | 1,193,758                                                                     | 674,059                   | 8,478,188      |
| Selling, general and administrative expenses                               | 4,777,562           | 839,354                                                                       | 583,120                   | 6,200,036      |
| Operating income                                                           | 1,832,810           | 354,405                                                                       | 90,937                    | 2,278,152      |
| Integral result of financing                                               | 633,939             | (12,124)                                                                      | (1,134)                   | 620,681        |
| Income taxes (1)                                                           | 197,182             | 120,431                                                                       | 14,893                    | 332,506        |
| Net income                                                                 | 1,550,128           | 226,957                                                                       | 54,580                    | 1,831,665      |
| Property, equipment and          leasehold and owned buildings improvement | Ps. 17,744,510      | Ps. 3,246,472                                                                 | Ps.     736,118 | Ps. 21,727,100 |
| Liabilities                                                                | 5,967,931           | 845,483                                                                       | 180,035                   | 6,993,449      |
| Capital expenditures                                                       | 2,057,049           | 515,863                                                                       | 110,757                   | 2,683,669      |
| **As of and for the year ended December 31, 2004**                          | **CCM Group**           | **Costco de Mexico       Group Joint Venture** | **Other Group**               | **Total**               |
|-----------------------------------------------------------------------------|-------------------------|------------------------------------------------|-------------------------------|-------------------------|
| Net sales                                                                   | Ps.          29,423,734 | Ps.          7,818,627                         | Ps. 1,599,770                 | Ps.          38,842,131 |
| Cost of sales                                                               | 23,234,988              | 6,771,323                                      | 974,323                       | 30,980,634              |
| Gross profit                                                                | 6,188,747               | 1,047,304                                      | 625,446                       | 7,861,497               |
| Selling, general and administrative expenses.                               | 4,741,171               | 746,554                                        | 545,321                       | 6,033,046               |
| Operating income                                                            | 1,447,577               | 300,750                                        | 80,124                        | 1,828,451               |
| Integral result of financing                                                | 154,712                 | (23,729)                                       | 50,935                        | 181,918                 |
| Income taxes (1)                                                            | 172,685                 | 23,219                                         | 11,831                        | 207,735                 |
| Net income                                                                  | 1,435,440               | 293,505                                        | 45,898                        | 1,774,843               |
| Property, equipment and          leasehold and owned buildings improvements | Ps. 16,200,500          | Ps. 2,923,701                                  | Ps.    660,813 | Ps. 19,785,014          |
| Liabilities                                                                 | 6,351,174               | 964,812                                        | 125,104                       | 7,441,090               |
| Capital expenditures                                                        | 1,562,532               | 455,038                                        | 86,018                        | 2,103,588               |
| **As of and for the year ended December 31, 2003**                          | **CCM Group**           | **Costco de Mexico                                      Group Joint Venture** | **Other Group**               | **Total**               |
|-----------------------------------------------------------------------------|-------------------------|-------------------------------------------------------------------------------|-------------------------------|-------------------------|
| Net sales                                                                   | Ps.          29,361,762 | Ps.          7,183,745                                                        | Ps.          1,458,700        | Ps.          38,004,207 |
| Cost of sales                                                               | 23,236,291              | 6,278,868                                                                     | 880,547                       | 30,395,706              |
| Gross profit                                                                | 6,125,471               | 904,877                                                                       | 578,153                       | 7,608,501               |
| Selling, general and administrative expenses.                               | 4,896,773               | 676,539                                                                       | 507,588                       | 6,080,900               |
| Operating income                                                            | 1,228,698               | 228,338                                                                       | 70,565                        | 1,527,601               |
| Integral result of financing                                                | 247,641                 | (40,087)                                                                      | (4,818)                       | 202,736                 |
| Income taxes (1)                                                            | 209,521                 | 33,876                                                                        | 18,098                        | 261,495                 |
| Net income                                                                  | 830,872                 | 243,908                                                                       | 47,446                        | 1,122,226               |
| Property, equipment and          leasehold and owned buildings improvements | Ps. 15,221,791          | Ps. 2,585,669                                                                 | Ps.    616,610 | Ps. 18,424,070          |
| Liabilities                                                                 | 5,613,281               | 985,981                                                                       | 88,989                        | 6,688,251               |
| Capital expenditures                                                        | 1,255,594               | 354,183                                                                       | 59,822                        | 1,669,599               |

(1)    Amounts include current and deferred income tax, asset tax and employee’ profit    sharing

 

**17.          DIFFERENCES BETWEEN      MEXICAN GAAP AND****U.S.****GAAP:**

The Company’s consolidated financial statements are prepared in      accordance with Mexican GAAP, which differ in certain significant aspects from    U.S. GAAP.

The reconciliation      to U.S. GAAP does not include the reversal of the adjustments to the financial      statement for the effects of inflation required under Statement B-10. The      application of Statement B-10 represents a comprehensive measure of the effects      of price level changes in the inflationary Mexican economy and, as such, is      considered a more meaningful presentation than historical cost-based financial      reporting for both Mexican and U.S. accounting purposes. The application of      Statement B-10 to the U.S. GAAP adjustments follows the methodology discussed      in Note 3.  The principal differences, other than inflation accounting, between      Mexican GAAP and U.S. GAAP are presented below together with an explanation,      where appropriate, of the adjustments that affect the determination of the      consolidated results of operations (net of effects of minority interest), for      each of the three years in the period ended December 31, 2005, 2004 and 2003      and stockholders’ equity at December 31, 2005 and 2004.

 

Reconciliation    of Net Income

Net income is reconciled as follows:

 
|                                                                                            |   | **Year ended December 31,** |
|-------------------------------------------------------------------------------------------------|--------|-----------------------------|
|                                                                                            |   | **2005**                    | **2004** | **2003** |
| Net income reported under Mexican GAAP.........................................                 |   | Ps.      1,831,665          | Ps.      1,774,843 | Ps.      1,122,226 |
| U.S. GAAP adjustments:                                                                          |   |                        |   |   |
| Deferred income taxes.........................................................................  | a.     |   183,543              | (6,584) | (62,309) |
| Deferred employee profit sharing..........................................................      | a.     | 7,648                       | (7,648) | 2,500 |
| Compensation from stock appreciation      plan..........................................        | c.     | (52,099)                    | 36,337 | 5,613 |
| Adjustments on minority interest...........................................................     | e.     | -                           | (3,819) | 592 |
| U.S. GAAP on Costco de Mexico.......................................................            | f.     | (3,751)                     | (5,174) | (3,595) |
| Effect of      inflation accounting on U.S. GAAP Adjustments.....................               | d.     | (2,106)                     | 2,337 | 14,665 |
| Reversal of the negative goodwill      accretion...........................................     | g.     | (243,867)                   | (217,876) | (153,914) |
| Consolidation of the CAM results for      the year......................................        | g.     | 32,845                      | 24,912 | 18,544 |
| Financing cost from the CAM long term debt.......................................               | g.     | 16,003                      | 5,352 | (86,685) |
| Reversal of other income from-Mijolife      acquisition                                         | a.     | (689,051)                   | - | - |
| Embedded derivatives........................................................................... | h.     | (167,842)                   | - | - |
| Derivative financial instruments .........................................................      | k.     | (541,913)                   | - | - |
| Total U.S. GAAP adjustments.............................................................        |   | (1,460,590)                 | (172,163) | (264,589) |
| Net income under U.S. GAAP.............................................................         |   | Ps. 371,075                 | Ps.      1,602,680 | Ps. 857,637 |
| Weighted average units outstanding      (thousands).....................................        |   | 1,086,000                   | 1,086,000 | 1,079,765 |
| Outstanding units under stock purchase      plan..........................................      |   | 7,319                       | 32,523 | 34,705 |
| Diluted      weighted average units outstanding (thousands)                                     |   | 1,093,319                   | 1,118,523 | 1,114,470 |
| Basic income per unit under U.S. GAAP...............................................            |   | Ps. 0.34                    | Ps. 1.48 | Ps. 0.79 |
| Diluted net income per unit under U.S. GAAP.......................................              |   | Ps. 0.34                    | Ps. 1.43 | Ps. 0.77 |

Comprehensive    Income

Statement    of Financial Accounting Standards ("SFAS") No. 130, "Reporting Comprehensive    Income" establishes rules for the reporting of comprehensive income and its    components. Comprehensive income includes net income and loss from holding    non-monetary assets. The following table summarizes the components of    comprehensive income under U.S. GAAP for the years ended December 31, 2005,    2004 and 2003.
|                                                                  |   | **December,**            |
|-----------------------------------------------------------------------|--------|--------------------------|
|                                                                  |   | **2005**                 | **2004** | **2003** |
| Net income........................................................... |   | Ps.   371,075  | Ps.  1,602,680 | Ps.      857,637 |
| Derivative financial instruments...............................       |   | (81,093)                 | - | - |
| Loss from holding non-monetary assets..................               | a.     | (167,660)                | (227,550) | Ps.       (204,699) |
| Comprehensive income.........................................         |   | Ps.    122,322 | Ps.  1,375,130 | Ps.    652,938 |

Components of    accumulated other comprehensive income at December 31:
|                                                                            | **2005**                                    | **2004**                                                                      |
|---------------------------------------------------------------------------------|---------------------------------------------|-------------------------------------------------------------------------------|
| Derivative financial instruments............................................... | Ps.            (81,093) | Ps.                       - |
| Results from holding non-monetary      assets...............................    | Ps.  (4,395,358)                       | Ps. (4,227,698)                                                               |
|                                                                            | Ps.       (4,476,451)                  | Ps. (4,227,698)                                                          |

Reconciliation    of Stockholders’ Equity

Stockholder’s equity is reconciled as    follows:
|                                                                                       |   | **December 31,**    |
|--------------------------------------------------------------------------------------------|--------|---------------------|
|                                                                                       |   | **2005**            | **2004** |
| Stockholders’ equity under Mexican GAAP...................................           |   | Ps.      16,753,570 | Ps.      15,674,587 |
| U.S. GAAP adjustments:                                                                     |   |                |   |
| Minority interest net of impact of U.S. GAAP adjustments ..............                    | e.     | (105,746)           | (99,945) |
| Deferred income taxes....................................................................  | a.     | 2,400               | (20,074) |
| Deferred employee profit sharing.....................................................      | a.     | -                   | (7,648) |
| US. GAAP effect on Costco de Mexico                                                        | f.     | (50,773)            | (47,022) |
| Accrued liability under stock      appreciation plan.................................      | c.     | (51,361)            | - |
| Receivable under stock appreciation      plan.........................................     | c.     | (58,985)            | (238,417) |
| Net book value of CAM acquired assets.........................................             | g.     | 699,113             | 666,268 |
| Reversal of negative goodwill...........................................................   | g.     | -                   | 243,867 |
| Long term liabilities payables to CAM shareholders.........................                | g.     | (602,215)           | (904,068) |
| Reversal of the CAM investment.....................................................        | g.     | (687,270)           | (401,420) |
| Reverse of other income from -Mijolife      Acquisition.........................           | a.     |   (689,051)    | - |
| Embedded derivatives...................................................................... | h.     | (170,686)           | - |
| Total U.S. GAAP adjustments.......................................................         |   | (1,714,574)         | (808,459) |
| Stockholders’ equity under U.S. GAAP.........................................        |   | Ps.      15,038,996 | Ps.      14,866,128 |

Analysis of    changes in Stockholders’ Equity under U.S. GAAP
|                                                                              |   | **2005**             | **2004**            |
|-----------------------------------------------------------------------------------|--------|----------------------|---------------------|
| Stockholders’ equity at beginning of      year.........................     |   | Ps. 14,866,128  | Ps. 13,592,726 |
| Net income.....................................................................   |   | 371,075              | 1,602,680           |
| Dividends paid................................................................    |   | (136,464)            | (129,391)           |
| Reissuance of      Units......................................................... |   | 7,578                | -                   |
| Other comprehensive      income...........................................        |   | (248,753)            | (227,550)           |
| Change in receivable under stock      appreciation plan.........                  | c.     | 179,432              | 27,663              |
| Stockholders’ equity at end of year................................         |   | Ps. 15,038,996  | Ps. 14,866,128 |

a. Deferred    Income Taxes and Employee Profit Sharing

Effective January 1, 2000, the Company follows the provisions of the    revised Statement D-4, "Accounting Treatment of Income Tax, Asset Tax, and    Employee Profit Sharing", for Mexican GAAP purposes. Accounting for income    taxes in accordance with this statement is similar to accounting for income tax    in accordance with U.S. GAAP SFAS 109 "Accounting for Income Taxes" ("SFAS 109").

At December 31, the primary components of net deferred tax liability    under U.S. GAAP consist of the following: 
|                                                                      | **2005**                                                  | **2004**                                                    |
|---------------------------------------------------------------------------|-----------------------------------------------------------|-------------------------------------------------------------|
|                                                                      | **SFAS No.109Applied to the Company MexicanGAAPBalances** | **SFAS No. 109Applied toU.S. GAAPAdjustments**              |   | **SFAS No. 109Total** | **SFAS No. 109Total** |
| Deferred current income tax:                                              |                                                      |                                                        |   |   |   |
| Accruals..............................................................    | Ps.           38,142        | Ps.               - |   | Ps.             38,142 | Ps.         46,238 |
| Inventories..........................................................     |        (154,851)                           | -                                                           |   |        (154,851) |  (1,688,490) |
| Deferred      revenue................................................     | -                                                         | 5,916                                                       | (2) | 5,916 | 6,324 |
| Accrued vacations..............................................           | 9,483                                                     | -                                                           |   | 9,483 | 9,985 |
| Tax loss carryforwards.......................................             | 995,268                                                   | 67,255                                                      | (2) | 1,062,523 | 577,367 |
| Prepaid expenses...............................................           | (8,490)                                                   | -                                                           |   | (8,490) | (6,324) |
| Layaway sales....................................................         | 10,421                                                    | -                                                           |   | 10,421 | 3,527 |
| Total current.......................................................      | 889,973                                                   | 73,171                                                      |   | 963,144 | (1,051,373) |
|      Noncurrent:                                                |                                                      |                                                        |   |   |   |
| Inventories .........................................................     | (765,565)                                                 | -                                                           |   | (765,565) | - |
| Fixed      assets........................................................ | (1,804,261)                                               | (32,929)                                                    | (2) | (1,837,190) | (1,753,363) |
| Equity investments..............................................          | -                                                         | (43,759)                                                    | (1) | (43,759) | (84,183) |
| Deferred      revenue................................................     | -                                                         | 5,916                                                       | (2) | 5,916 | 9,300 |
| Prepaid expenses...............................................           | (74,510)                                                  | -                                                           |   | (74,510) | (10,837) |
| Seniority premiums.............................................           | 26,566                                                    | -                                                           |   | 26,566 | 24,455 |
| Derivative instruments..........................................          | 183,271                                                   | -                                                           |   | 183,271 | - |
| Asset tax credit carryforwards...........................                 | 529,577                                                   | -                                                           |   | 529,577 | 591,822 |
| Total non current................................................         | (1,904,922)                                               | (70,772)                                                    |   | (1,975,694) | (1,222,807) |
|   Less - Valuation      allowance on asset tax                       | (258,424)                                                 | -                                                           |   | (258,424) |   |
| Net deferred income tax liabilities........................               | Ps. (1,273,374)                                           | Ps.        2,400                             |   | Ps. (1,270,974) | Ps. (2,274,180) |

(1)           Difference between inside and outside basic in    Costco investment.

(2)           Deferred tax arising from the consolidation of CAM’S financial statements. See note 17g.

For the year ended December 31, 2005 and 2004, the difference in net    deferred tax liabilities between Mexican and US GAAP was as follows:
|                                                                                                | **Mexican GAAP**                        | **U.S.          GAAP**      | **Difference**      |
|-----------------------------------------------------------------------------------------------------|-----------------------------------------|-----------------------------|---------------------|
| Deferred tax liability:                                                                             |                                    |                        |                |
| At December 31, 2004.......................................................................         | Ps.   (2,254,039)                  | Ps.   (2,274,113)      | Ps.   (20,074) |
| At December 31, 2005.......................................................................         | (1,273,374)                             | (1,270,974)                 | 2,400               |
| Net change......................................................................................... | Ps.         980,665 | Ps.     1,003,139 | Ps.   (22,474) |

 
|                                                                                                | **Mexican GAAP**            | **U.S.      GAAP**          | **Difference**                 |
|-----------------------------------------------------------------------------------------------------|-----------------------------|-----------------------------|--------------------------------|
| Deferred tax liability:                                                                             |                        |                        |                           |
| At December 31, 2003.......................................................................         | Ps.   (2,125,179)      | Ps.   (2,123,219)      | Ps.       1,960 |
| At December 31, 2004.......................................................................         | (2,254,039)                 | (2,274,113)                 | (20,074)                       |
| Net change......................................................................................... | Ps.     (128,860) | Ps.     (150,894) | Ps.   (22,034)            |

The net change in the deferred tax to income statement during the    year ended December 31, 2005 and 2004 was allocated to the following    components:
|                                                                                | **MexicanGAAP 2005** | **U.S.      GAAP 2005**  | **Difference** |
|-------------------------------------------------------------------------------------|----------------------|--------------------------|----------------|
| Deferred tax expense:...........................................................    | Ps. (188,224)        | Ps.    (4,681) | Ps. (183,543)  |
| Monetary gain ..................................................................... | 72,638               | 72,638                   | -              |
|                                                                                | Ps. (115,586)        | Ps.  (67,957)       | Ps. (183,543)  |
|                                                          | **MexicanGAAP 2004** | **U.S.          GAAP 2004** | **Difference**    |
|---------------------------------------------------------------|----------------------|-----------------------------|-------------------|
| Deferred tax expense:.....................................    | Ps. (249,164)        | Ps. (255,748)               | Ps.  (6,584) |
| Monetary gain ............................................... | 104,855              | 104,855                     | -                 |
|                                                          | Ps. (144,309)        | Ps. (150,893)               | Ps. (6,584)       |

The effect of the    U.S. GAAP deferred tax related adjustment on the comprehensive income is as    follows:
|                                                               | **MexicanGAAP 2005** | **U.S.      GAAP 2005** | **Difference**           |   |
|--------------------------------------------------------------------|----------------------|-------------------------|--------------------------|--------|
| Result from holding non-monetary      assets: ......               | Ps. (158,327)        | Ps. (167,660)           | Ps.    (9,333) | (1)    |
| Derivative financial instruments ....................              | 183,271              | 31,535                  | (151,736)                | (2)    |
| Total ............................................................ |                 |                    | Ps. (161,069)            |   |
|                                                  | **MexicanGAAP 2004** | **U.S.          GAAP 2004** | **Difference** |   |
|-------------------------------------------------------|----------------------|-----------------------------|----------------|--------|
| Result from holding non-monetary      assets:........ | Ps. (212,100)        | Ps. (227,550)               | Ps. (15,450)   | (1)    |

(1) Reversal of    the deferred tax amount recorded under Mexican GAAP as part of the proportional    consolidation of Costco de Mexico.

(2) Deferred tax effect from US GAAP reconciliation item related to derivative financial instruments. See note 17 k.

Mijolife    acquisition

Under Mexican GAAP, the Company adopted Statement Bulletin B-7    "Business Acquisitions" effective January 1, 2005. Under the scope of    Bulletin B-7, purchase accounting rules should be applied to the acquisition of    companies with future tax benefits. Under Mexican GAAP, the Company recognised    Ps. 649,263 in Other income and Ps. 39,788 as a reduction to Deferred income    taxes as a result of the acquisition of Mijolife, which has as its    sole asset, an incomer tax loss carryforward.

Under US GAAP, the Company applies EITF 98-11. In 2005, the Company recognised a tax asset of Ps. 903,645, and a deferred credit of Ps. 689,051    for US GAAP purposes. The deferred credit will be    amortized to income tax expense in proportion to the    realization of the tax benefits that gave rise to the deferred credit. The GAAP reconciliation of the shareholder’s equity includes the    recognition of the deferred credit balance for US GAAP.

  Through December 31, 2004 the Company applied EITF 98-11,    "Accounting for Acquired Temporary Differences in Certain Purchase    Transactions That Are Not Recorded as Business Combinations", for both    Mexican and US GAAP purposes.

Deferred    employee profit sharing

Under Mexican law, employees’ profit sharing is computed at 10% of    the individual income of each of the Company’s subsidiaries. The calculation is    based on taxable income adjusted to exclude the effects of inflation and asset    restatement. While the employee profit sharing provision is calculated in a    manner similar to income tax, it is classified as an operating expense under    U.S. GAAP.

The components of net deferred employee profit sharing under U.S.    GAAP consist of the following:
|                                                                                               | **December 31,**                              |
|----------------------------------------------------------------------------------------------------|-----------------------------------------------|
|                                                                                               | **2005**                                      | **2004** |
| Deferred employee profit sharing:                                                        |                                          |   |
|     Short-term:                                       |                                          |   |
| Inventories................................................................................        | Ps. (7,525)                                   | Ps. (15,871) |
| Accrued vacations.....................................................................             | 3,161                                         | 3,303 |
|     Total short-term.................................................................... | Ps. (4,364)                                   | Ps. (12,568) |
|                                                                                               |                                          |   |
| Fixed      assets...............................................................................   | (3,662)                                       | (3,138) |
| Seniority premiums....................................................................             | 11,586                                        | 8,058 |
|     Total long-term..................................................................... | 7,924                                         | 4,920 |
| Total deferred employee profit sharing      before reserve................                         | 3,560                                         | (7,648) |
| Valuation Allowance.................................................................               | (3,560)                                       | - |
|     Total deferred employee profit sharing....................................           | Ps.           - | Ps. (7,648) |

The distribution of the net change in deferred employee profit    sharing under U.S. GAAP for the years ended December 31, 2005, 2004 and 2003 is    provided below:
|                                                                   | **2005**  | **2004**    | **2003**  |
|------------------------------------------------------------------------|-----------|-------------|-----------|
| Deferred profit sharing income      (expense) ........................ | Ps. 3,560 | Ps. (7,648) | Ps. 2,500 |

b. Seniority    Premiums, Pension Plan and Labour Obligations

Liabilities and cost related to pension plans and seniority premiums    are recorded under Mexican GAAP and under US GAAP according to Statement of    Financial Accounting Standards No. 87. "Employers’ Accounting for Pensions", as    amended by Statement of Financial Accounting Standards No. 132, "Employees    Disclosures about Pensions and Other Postretirement Benefits". US GAAP requires    more extensive disclosure, mainly in relation to the components of net cost for    the year, assumptions involved in the calculations of the cost of the period and    projected liability. The cost of the period is analyzed as follows:
|                                                              | **December 31,**                                     |
|-------------------------------------------------------------------|------------------------------------------------------|
|                                                              | **2005**                                             | **2004** | **2003** |
| Service cost ...................................................  | Ps.     16,980                             | Ps.     13,364 | Ps.     14,042 |
| Interest cost ................................................... | 22,339                                               | 5,726 | 5,243 |
| Actual return on plan assets ............................         | (2,075)                                              | (1,531) | (1,787) |
| Net amortization and deferral ..........................          | 3,431                                                | 3,815 | 3,164 |
| Settlement loss ...............................................   | -                                                    | - | - |
| Net cost under U.S. GAAP ...........................              | 40,675                                               | 21,374 | 20,662 |
| Net cost under Mexican GAAP ....................                  | (40,675)                                             | (21,374) | (20,662) |
| Difference to be recognized under U.S.      GAAP                  | Ps.             - | Ps.             - | Ps.             - |

Assumptions used in the calculation of net cost as of December 31,    are:
|                                                                 | **December 31,** |
|----------------------------------------------------------------------|------------------|
|                                                                 | **2005**         | **2004** | **2003** |
| Weighted average discount rates..................................    | 4.5 %            | 3.5 % | 3.5 % |
| Rates of increase in compensation      levels....................... | 1.0 %            | 1.0 % | 1.0 % |
| Expected long-term return on assets.............................     | 4.5 %            | 4.5 % | 4.5 % |

The seniority premium and pension plan liabilities as of December    31, 2005 and 2004 are as follows:
|                                                                                                                                                                            | **2005**                                                    | **2004**                                                    |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-------------------------------------------------------------|-------------------------------------------------------------|
| Actuarial present value benefit      obligations:                                                                                                                               |                                                        |                                                        |
| Vested benefit obligations..............................................................................................................................................        | Ps.       (29,283)                           | Ps.       (54,774)                           |
| Non-vested benefit obligations.......................................................................................................................................           | (154,226)                                                   | (85,180)                                                    |
| Accumulated benefit obligations.....................................................................................................................................            | (183,509)                                                   | (139,954)                                                   |
| Fair value of plan assets.................................................................................................................................................      | 50,160                                                      | 37,967                                                      |
| Accumulated benefit obligations in excess of plan assets.................................................................................................                       | Ps.   (133,349)                                        | Ps.   (101,987)                                        |
| Projected benefit obligations..........................................................................................................................................         | Ps.   (257,024)                                        | Ps.   (166,943)                                        |
| Plan assets.................................................................................................................................................................... | 50,160                                                      | 37,967                                                      |
| Unfunded projected benefit obligations..........................................................................................................................                | (206,864)                                                   | (128,976)                                                   |
| Unfunded projected benefit obligation to be recognized in future      years:                                                                                                    |                                                        |                                                        |
| Unrecognized net gain.....................................................................................................................................................      | (22,819)                                                    | (1,492)                                                     |
| Unfounded projected benefit obligations to be recognized in the      consolidated balance sheet under U.S. GAAP .................                                               | (229,683)                                                   | (130,468)                                                   |
| Accrued cost recognized in the consolidated balance sheet under      Mexican GAAP ............................................................                                  | 229,683                                                     | 130,468                                                     |
| Additional liability under U.S. GAAP................................................................................................................................            | Ps.               - | Ps.               - |

The assets of the seniority premium and pension plan trust are    invested in equity securities and corporate and government bonds.

The actual investment return of the seniority premium trusts based    on fair market values is Ps. 3,603 and Ps. 2,894 as of December 31, 2005    and 2004, respectively.

Changes in the plan’s funded status and plan assets during the year    ended December 31, 2005 and 2004 were as follows:
|                                                                              | **December 31,**   |
|-----------------------------------------------------------------------------------|--------------------|
|                                                                              | **2005**           | **2004** |
| Change in benefit obligation:                                                     |               |   |
| Benefit obligation at beginning of year..............................             | Ps.   166,943 | Ps. 164,056 |
| Service cost ...................................................................  | 9,473              | 13,364 |
| Interest cost.................................................................... | 10,760             | 5,726 |
| Actuarial gain .................................................................  | (4,668)            | (1,423) |
| Benefits paid...................................................................  | (29,962)           | (14,780) |
| Termination indemnity and post      retirement benefit plan                       | 104,478            | - |
| Benefit obligation at end of year......................................           | Ps. 257,024        | Ps. 166,943 |
| Change in plan assets:                                                            |               |   |
| Fair value of plan assets at beginning      of year...................            | Ps.   37,967  | Ps.   34,005 |
| Actual return on plan assets...........................................           | 3,603              | 2,894 |
| Company’s contribution................................................      | 11,967             | 8,224 |
| Benefits paid.................................................................    | (2,129)            | (7,156) |
| Withdraw of plan assets................................................           | (1,248)            | - |
| Fair value of plan assets at end of      year..........................           | Ps.  50,160   | Ps.  37,967 |

c. Stock    Appreciation Plan

As of December 31, 2005, the Company had a stock appreciation plan    for key employees as described in Note 13. The Company purchased the required    number of shares granted under the terms of the plan in the stock market and    deposited them in a trust. Under Mexican GAAP, an account receivable was    recorded for the purchased units within other assets. Under U.S. GAAP, this    purchase would have been reflected as a reduction in stockholder’s equity as    treasury stock. 

Under Mexican GAAP no compensation expense is recorded when the    shares are purchased and deposited into the trust or when they are sold to the    employee. Under US GAAP, according to FIN 28, "Accounting for Stock    Appreciation Rights and Other Variable Stock Option or Award Plans,"    compensation expense is recorded at the end of each period as the amount by    which the quoted market value of the shares of the Company’s stock covered by a    grant exceeds the option price or value specified under the plan and should be    accrued as a charge to expense over the periods the employees perform the    related services. The compensation expense under U.S. GAAP amounted to   $ 50,623 in 2005. In 2004 and 2003, the Company reversed the liabilities recognized in connection with    ancient stock plans cancelled in 2004.

The following table summarizes the activity in treasury stock, under    U.S. GAAP, for the three years ended on December 31, 2005. 
|                                                                                                                    | **Units**    | **Ps. (Thousands)**              |
|-------------------------------------------------------------------------------------------------------------------------|--------------|----------------------------------|
| Balance at January 1, 2003...................................................................................           | 51,194,120   | Ps.       394,279 |
|                                                                                                                    |         |                             |
| Purchases.............................................................................................................. | -            | -                                |
| Sale of shares      under the Plan..................................................................................    | (16,489,156) | (128,198)                        |
| Balance at December 31, 2003..............................................................................              | 34,704,964   | 266,081                          |
|                                                                                                                    |         |                             |
| Purchases.............................................................................................................. | -            | -                                |
| Sale of shares      under the Plan..................................................................................    | (2,182,298)  | (27,663)                         |
| Balance at December 31, 2004..............................................................................              | 32,522,666   | 238,418                          |
|                                                                                                                    |         |                             |
| Purchases.............................................................................................................. | -            | -                                |
| Sale of shares      under the Plan..................................................................................    | (25,203,772) |        (179,433)            |
| Balance at December 31, 2005..............................................................................              | 7,318,894    | Ps.       58,985  |

 

d. Effects of    Inflation on U.S. GAAP Adjustments

This item represents the inflation adjustment calculated under    Statement B-10 applied to the changes in monetary assets and liabilities    generated by the application of U.S. GAAP to the Company’s financial statements.

Effect of inflation accounting on U.S. GAAP adjustments for the    years ended December 31,
|                                                                                              | **2005**                           | **2004**         | **2003**                          |
|---------------------------------------------------------------------------------------------------|------------------------------------|------------------|-----------------------------------|
| Adjustment relating to:                                                                           |                               |             |                              |
| Receivable under stock appreciation plan and accrued liability      under stock appreciation plan | Ps.        738 | Ps.   2,337 | Ps.       805 |
| Embedded derivatives under Auchan      acquisition                                                | (2,844)                            | -                | -                                 |
| Inflation effect of CAM acquisition                                                               | -                                  | -                | 13,860                            |
|                                                                                              | Ps.       (2,106)             | Ps.   2,337 | Ps. 14,665                        |

e. Minority    Interest

Under Mexican GAAP, the minority interest in consolidated    subsidiaries is presented as a separate component within the stockholders’    equity section in the consolidated balance sheet. For U.S. GAAP purposes, the    minority interest is not included in stockholders’ equity. When applicable, the    effect of the U.S.GAAP adjustments on the equity and net income were quantified    and included in the equity and net income GAAP reconciliations.

f. U.S. GAAP effect on Costco de Mexico

For Mexican GAAP, the CCM accounts for its 50% joint venture in    Costco de Mexico by the proportional consolidation method. For U.S. GAAP    purposes, this investment would be treated as an equity investment; however CCM    has adopted to avail itself the SEC accommodation to omit reconciling    differences related to the classification or display and instead provides    summarized footnote disclosure of the amounts proportionally consolidated.

The proportionally    consolidated amounts included in CCM the consolidated balance sheet under    Mexican GAAP are as follow:   
| **ASSETS**                                                                                                                                                          | **2005**                         | **2004**                         |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------------------------------|----------------------------------|
| Current assets:                                                                                                                                                     |                             |                             |
|     Cash...................................................................................................................................               | Ps.       242,140 | Ps.       202,030 |
|     Temporary      investments........................................................................................................                    | 209,285                          | 201,279                          |
|     Trade accounts      receivable...................................................................................................                     | 20,935                           | 16,452                           |
|     Other accounts      and notes receivable ...................................................................................                          | 367,900                          | 257,564                          |
|     Inventories..........................................................................................................................                 | 1,010,818                        | 884,517                          |
|     Prepaid      expenses and other assets.......................................................................................                         | 2,101                            | 2,362                            |
|         Total current      assets..........................................................................................................     | 1,853,179                        | 1,564,204                        |
| Property,      equipment and leasehold and owned buildings improvements, net .............................                                                          | 3,239,093                        | 2,917,110                        |
| Other assets............................................................................................................................                            | 7,379                            | 6,591                            |
|         Total assets.....................................................................................................................       | Ps. 5,099,650                    | Ps. 4,487,905                    |
| **LIABILITIES**                                                                                                                                                     |                             |                             |
| Current      liabilities:                                                                                                                                           |                             |                             |
|     Trade payables....................................................................................................................                    | Ps.    845,483         | Ps.    964,812         |
|     Taxes payable.....................................................................................................................                    | 186,274                          | 28,723                           |
|     Related      parties, net .............................................................................................................               | 1,335                            | 2,422                            |
|     Deferred      revenue and negative goodwill ..............................................................................                            | -                                | 689,918                          |
|     Other accrued      liabilities........................................................................................................                | 361,502                          | (560,524)                        |
|         Total current      liabilities......................................................................................................    | 1,394,593                        | 1,125,351                        |
| Long-term      liabilities:                                                                                                                                         |                             |                             |
|     Labor      obligations ...............................................................................................................                | 9,981                            | 4,416                            |
|     Deferred income      taxes .......................................................................................................                    | 224,103                          | 261,457                          |
|         Total      liabilities................................................................................................................. | 1,628,677                        | 1,391,224                        |
|                                                                                                                                                                |                             |                             |
| **NET CCM INVESTMENT IN COSTCO DE MEXICO**                                                                                                                          | Ps. 3,470,974                    | Ps. 3,096,682                    |

The    proportionally consolidated amounts included in CCM consolidated statement of    income under Mexican GAAP, for the three years ended December 31, 2005 are as    follow:
|                                                                                                                                              | **2005**                 | **2004**                 | **2003**                      |
|---------------------------------------------------------------------------------------------------------------------------------------------------|--------------------------|--------------------------|-------------------------------|
| Net sales..............................................................................................................................           | Ps.      8,398,566       | Ps.      7,818,627       | Ps.      7,183,745            |
| Cost of sales........................................................................................................................             | 7,204,808                | 6,771,323                | 6,278,868                     |
|     Gross profit.....................................................................................................................   | 1,193,758                | 1,047,304                | 904,877                       |
| Selling, general and administrative      expenses:                                                                                                |                     |                     |                          |
|     Selling............................................................................................................................ | 685,796                  | 600,351                  | 544,117                       |
|     Administrative................................................................................................................      | 153,558                  | 146,203                  | 132,422                       |
|         Total operating expenses............................................................................................  | 839,354                  | 746,554                  | 676,539                       |
|     Operating income...........................................................................................................         | 354,405                  | 300,750                  | 228,338                       |
| Integral result of financing:                                                                                                                     |                     |                     |                          |
|     Interest expense.............................................................................................................       | (10,342)                 | (12,520)                 | (10,402)                      |
|     Interest income..............................................................................................................       | 12,083                   | 11,298                   | 16,482                        |
|     Foreign-exchange gain(loss) net.....................................................................................                | (5,721)                  | 8,703                    | 24,574                        |
|     Gain from monetary position..........................................................................................               | 16,104                   | 16,248                   | 9,433                         |
|         Total integral result of financing..................................................................................  | 12,124                   | 23,729                   | 40,087                        |
|     Income after integral result of      financing..........................................................................            | 366,529                  | 324,479                  | 268,425                       |
| Other income (expense), net.............................................................................................                          | 19,141                   | 7,755                    | (9,362)                       |
|     Income before provisions for income taxes and employee statutory      profit sharing ..........                                     | 347,388                  | 316,724                  | 277,787                       |
| Provisions for income taxes and employee statutory profit sharing .....................................                                           | 120,431                  | 23,219                   | 33,879                        |
|     Income before minority interest.....................................................................................                | 226,957                  | 293,505                  | 243,908                       |
|     Net income for the year................................................................................................             | Ps.    226,957 | Ps.    293,505 | Ps.    243,908 |

The principal differences, other than inflation accounting, between    Mexican GAAP and U.S. GAAP applicable to the proportionally consolidated    amounts are presented below: 

On    Costco’s net income:
|                                                                            |   | **Year ended December 31,** |
|---------------------------------------------------------------------------------|--------|-----------------------------|
|                                                                            |   | **2005**                    | **2004** | **2003** |
|    Membership fees                                                         | a.     | Ps.       (3,599)      | Ps.       (3,332) | Ps.       (5,097) |
|    Capitalized pre-operating cost, net.................................... | b.     | (739)                       | (1,382) | 597 |
|    Deferred tax impact on the U.S. GAAP      adjustments..........         |   | 587                         | (460) | 905 |
| Total U.S. GAAP effect on Costco de      Mexico ...................             |   | Ps.       (3,751)      | Ps.       (5,174) | Ps.       (3,595) |

On    Costco’s stockholder’s equity:
|                                                                   |   | **December 31,**        |
|------------------------------------------------------------------------|--------|-------------------------|
|                                                                   |   | **2005**                | **2004** |
|        Membership fees                                  | a.     | Ps.       (65,601) | Ps.       (62,002) |
|        Capitalized pre-operating cost, net              | b.     | (5,910)                 | (5,171) |
|        Deferred tax impact on the U.S. GAAP adjustments |   | 20,738                  | 20,151 |
| Total U.S.      GAAP effect on Costco de Mexico                        |   | Ps.       (50,773) | Ps.       (47,022) |

a ) Under Mexican GAAP, membership payments are generally recognized    as income the period in which payments are received. Under U.S. GAAP,    membership fees are recognized to income when   earned on an accrual basis.

b) Under Mexican GAAP, pre-operating expenses are capitalized during the construction process until    facilities are completed and operations begin. Under U.S. GAAP, such costs are    expensed as incurred.

g. Consolidation    of Auchan Operations.

As noted in Note 12, in February 2003, Controladora Comercial    Mexicana (CCM) signed three contracts with Controladora Auchan Mexicana    shareholders, Controladora Auchan Mexicana (CAM) and Auchan (AMEX), for the    acquisition of 100% of the CAM and AMEX shares.

As provided in Mexican GAAP, each of the acquisitions was treated    separately. The AMEX acquisition was accounted for in 2004 and resulted in the    recognition of Ps. 595,799 of negative goodwill, which is being applied to    income over three years on a straight-line basis. The payments related to the    acquisition of CAM are being recorded as a permanent investment and the    acquisition will be recorded in 2008, once all the payments have been made.

Under U.S. GAAP, both transactions are treated as an integrated    transaction and accounted for as a business combination, in accordance with    SFAS 141 "Business Combination", since February 2003, the effective date of    acquisition.   The acquired assets and results of operations represented 2.9%    and 1.0%, in 2003, of the total CCM consolidated assets and results of    operations.

Under U.S. GAAP, the purchase price of Ps. 1,217,572 was determined    as to the net present value of U.S.$120,000,000 to be paid to the seller,    adjusted by the purchasing adjustment price. The Ps. 944,220 negative goodwill    arising from the acquisition was allocated as a pro rata reduction of the fair    value of the assets acquired. Also, the long-term liability was determined at    the net present value of future payments.

The reconciliation of the stockholders’ equity includes the    following reconciling items: a) the consolidation of CAM’s consolidated results    of operations, post acquisition and consolidated financial position, b) the    recognition of the long-term liability arising from the transaction, c) in 2004    the reversal of the unamortized balance of the negative goodwill recognized    under Mexican GAAP, and d) the reversal of the amount recorded as permanent    investment on CAM shares under Mexican GAAP.

The reconciliation of the net income includes the following    reconciliation items: a) the reversal of the negative goodwill amortization    recorded under Mexican GAAP, b) the recognition of the financing cost (which    includes interest and foreign exchange gains or losses), net of monetary gain,    related to the recognized long-term liability, c) the consolidation of CAM results    from the acquisition date through December 31, 2003 and for the years ended    December 31, 2004 and 2005, before deferred tax effect.

h. Embedded    derivatives

Under Mexican    GAAP, at December 31, 2005 the Company recognized an embedded derivative of    Ps.170,686 due to the payment commitments in US Dollars derived from the    acquisition of Controladora Auchan Mexicana (CAM) as described in the note 17 g. Under US GAAP, CAM is consolidated and a long-term liability is    recognized for the future payments in US Dollars. The reconciliation of    shareholder’s equity includes the reversal of the embedded derivative    recognized under Mexican GAAP. The reconciliation of net income includes the    reversal of the gain of the embedded derivative net of the related inflation    effect.

i. Basic Income    Per Unit and Diluted Net Income Per Unit

In accordance with SFAS No. 128, "Earnings per Share" U.S. GAAP    requires disclosures of basic earnings per share by using the weighted average    number of units outstanding. Diluted net income per unit differs from basic net    income per unit, since the weighted average number of units is adjusted to    include potential number of additional units that would have been outstanding    under the stock appreciation plan.

j. Cash Flow    Information

Under Mexican GAAP, the Company presents statements of changes in    financial position. The changes in the financial statement balances included in    this statement constitute the generation and application of resources stated in    pesos of constant purchasing power as of December 31, 2005.

The changes in the financial statement balances included herein    constitute cash flow activities stated in Mexican pesos in purchasing power as    of December 31, 2005 (including monetary and foreign exchange gains and losses,    which are considered cash gains and losses in the constant Mexican peso    financial statements). Under Mexican GAAP, the effect of restatement of prior    year’s balance sheet balances to Mexican pesos of constant purchasing power are    reflected in the stated change of the asset or liability in the statements of    changes in financial position and the gain from monetary position is presented    as a component of operating activities. Included within financing activities in    the statements of changes in financial position for notes payable and long-term    debt securities are the effects of restating the prior year notes payable and    debt securities balances to constant Mexican pesos.

The statement of cash flow presented below is in accordance with    SFAS No. 95, "Statement of Cash Flows" ("SFAS 95") and includes the effect of the U.S. GAAP difference for the years ended December 31, 2005, 2004    and 2003.

|                                                                                                                                                                                                            | **2005**           | **2004**      | **2003**           |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------------|---------------|--------------------|
| Net income........................................................................................................................................................................                              | Ps.   371,075 | Ps. 1,602,680 | Ps.   857,636 |
| Operating      activities:                                                                                                                                                                                      |               |          |               |
| Adjustments to reconcile net income to resources      provided by (used for) operating activities:                                                                                                              |               |          |               |
|         Gain (loss) on      derivative financial instruments..............................................................................................................                  |               |          |               |
|         Depreciation      and amortization....................................................................................................................................              | 710,951            | 790,740       | 735,366            |
|         Seniority      premiums....................................................................................................................................................         | 40,675             | 21,373        | 16,378             |
|         Minority      interest........................................................................................................................................................      | 12,752             | 8,048         | 4,652              |
|         Deferred income      taxes..............................................................................................................................................            | (67,957)           | 150,893       | (214,100)          |
|         Deferred      employee profit sharing..............................................................................................................................                 | (7,648)            | 7,648         | 2,499              |
|         Monetary gain.........................................................................................................................................................              | (295,331)          | (308,991)     | (206,419)          |
|         Unrealized      exchange gains.........................................................................................................................................             | 89,999             | 24,274        | 23,739             |
|         Financial      instruments.................................................................................................................................................         | 1,264,224          | 56,589        | -                  |
|         Write off of      fixed assets............................................................................................................................................          | 314,900            | 418,338       | 329,226            |
|         Effects US       GAAP   of Auchan acquisitions..............................................................................................................              | (48,848)           | (30,264)      | 68,138             |
|         (Benefit)      compensation expense of stock purchase plan.............................................................................................                             | 51,361             | (38,674)      | 6,418              |
|                                                                                                                                                                                                            | 2,436,153          | 2,702,654     | 1,623,533          |
|     Changes in      operating assets and liabilities:                                                                                                                                                 |               |          |               |
|         (Increase)      decrease in:                                                                                                                                                        |               |          |               |
|             Trade accounts      receivable...................................................................................................................................     | 780,628            | 503,090       | (233,653)          |
|             Inventories.......................................................................................................................................................... | 446,968            | (1,361,792)   | (307,014)          |
|             Other accounts      and notes receivable...................................................................................................................           | (27,088)           | (50,427)      | (83,481)           |
|         Increase      (decrease) in:                                                                                                                                                        |               |          |               |
|             Trade payables..................................................................................................................................................      | (207,838)          | 968,552       | 509,206            |
|             Taxes payable...................................................................................................................................................      | (49,911)           | (17,298)      | (184,121)          |
|             Other accrued      liabilities......................................................................................................................................  | (330,026)          | (405,047)     | 401,880            |
|                                                                                                                                                                                                            | 612,733            | (362,922)     | (269,779)          |
| Net cash      provided by operating activities........................................................................................................................                                          | 3,048,886          | 2,339,732     | 1,893,312          |
| Financing      activities:                                                                                                                                                                                      |               |          |               |
|     Bank loans..................................................................................................................................................................                      | 2,444,233          | 409,724)      | 284,721            |
|     Repayment of      bank loans............................................................................................................................................                          | (2,106,268)        | (448,778)     | (117,791)          |
|     Payment of long term debt  related to the Auchan acquisition.......................................................................................                                               | (285,851)          | (170,686)     | -                  |
|     Units reissued for stock purchase plan..........................................................................................................................                                  | -                  | -             | 38,905             |
|     Paid in capital..............................................................................................................................................................                     | 7,578              | -             | 10,643             |
|     Reissuance of units for treasury stock ..........................................................................................................................                                 | -                  | -             | 15,045             |
|     Dividends paid............................................................................................................................................................                        | (136,464)          | (129,391)     | (136,175)          |
| Net cash       provided by (used in) financing activities...........................................................................................................                                       | (76,772)           | (339,131)     | 95,348             |
| Investing      activities:                                                                                                                                                                                      |               |          |               |
|     Acquisition of          property and equipment, additions to real estate, leasehold and owned      buildings improvements and other assets                                                        | (2,683,667)        | (2,103,588)   | (1,669,344)        |
| Net cash used      in investing activities...................................................................................................................................                                   | (2,683,667)        | (2,103,588)   | (1,823,254)        |
| Net (decrease)      increase in cash and temporary investments...............................................................................................                                                   | 288,447            | (102,987)     | 319,316            |
| Effects of      inflation on cash at beginning of the year.............................................................................................................                                         | 41,608             | 68,787        | 35,413             |
| Cash and      temporary investments at beginning of the year....................................................................................................                                                | 1,291,178          | 1,325,378     | 970,649            |
| Cash and      temporary investments at end of the year.............................................................................................................                                             | Ps. 1,621,233      | Ps. 1,291,178 | Ps. 1,325,378      |

Net resources    provided by operating activities reflect cash payments for interest and income    taxes as follows:
|                                                                                       | **December 31,**  |
|--------------------------------------------------------------------------------------------|-------------------|
|                                                                                       | **2005**          | **2004** | **2003** |
| Interest ................................................................................. | Ps . 116,514 | Ps. 154,761 | Ps. 162,878 |
| Income taxes .........................................................................     | 134,084           | 72,218 | 137,070 |

k. Derivative    Financial Instruments 

Effective January 1, 2001, for U.S. GAAP purposes, CCM adopted    Statement of Financial Accounting Standards No. 133, "Accounting for Derivative    Instruments and Hedging Activities" ("SFAS No. 133"), as amended by SFAS No. 137 and SFAS No. 138 and as interpreted by the Derivative    Implementation Group (DIG). SFAS No. 133 establishes accounting and reporting    standards for derivative instruments, including certain derivative instruments    embedded in other contracts (collectively referred to as derivatives) and for    hedging activities. SFAS No. 133 requires that an entity recognize all    derivatives as either assets or liabilities in the consolidated balance sheet    and measure those instruments at fair value. SFAS No. 133 prescribes    requirements for designation and documentation of hedging relationships and    ongoing assessments of effectiveness in order to qualify for hedge accounting.

If a derivative instrument qualifies as a fair value hedge under the    applicable guidance and is documented as such, the change in the fair value of    the derivative and the change in the fair value of the hedged item that is due    to the hedged risk(s) is recorded in earnings based on the income    classification of the item being hedged. These hedges also adjust the book    values of the derivatives and hedged item. If a derivative instrument qualifies    as a cash flow hedge under the applicable guidance and is documented as such,    the effective portion of the gain or loss on the hedging instrument is reported    in stockholders’ equity (as a component of accumulated other comprehensive    income) and is reclassified into earnings in the period during which the    transaction being hedged affects earnings. Gains or losses reclassified from    stockholders’ equity to earnings are classified in accordance with the earnings    treatment of the hedged transaction. The ineffective portion of the change of a    hedging derivative’s fair value, where that derivative is used in a cash flow    hedge, is recorded in current earnings. Classification in the statement of    operations of the ineffective portion of the hedging instrument’s gain or loss    is based on the income statement classification of the transaction being    hedged. If a derivative instrument does not qualify as a cash flow hedge under    the applicable guidance, the change in the fair value of the derivative is    immediately recognized in the statements of operations.

Through December 31, 2004 CCM management did not document its    derivative instruments as hedges; therefore, the changes in the fair value of    CCM derivative instruments were recorded in the income statement.

As more fully disclosed in note 2o, effective January    1, 2005, the Company adopted the provisions of Bulletin C-10, which is a more    comprehensive accounting standard on the recognition of derivative financial    instruments, included embedded derivatives and hedge documentation and    effectiveness testing therein. Contracts need to be evaluated for embedded derivatives, with such derivatives needing to be bifurcated from the host contract under certain conditions. The provisions of the Bulletin C-10 are   somewhat consistent with those provisions under SFAS 133.

Beginning in 2005, hedge effectiveness is assessed    consistently with the method and risk management strategy documented for each    hedging relationship.  As of December 31, 2005, for both, Mexican and US    GAAP, the Company assesses the effectiveness of each qualifying hedging relationship    retrospectively and prospectively to ensure that hedge accounting was    appropriate for the prior period and continues to be appropriate for future    periods.  The Company considers hedge accounting to be appropriate if the    assessment of hedge effectiveness indicates that the change in fair value of    the designated hedging instrument is highly effective at offsetting the change    in fair value due to the hedged risk of the hedged item or transaction.

The Company also evaluates, for both, Mexican GAAP and    US GAAP, contracts for "embedded" derivatives, and considers whether any    embedded derivatives have to be bifurcated, or separated, from the host    contracts in accordance with both GAAP requirements.  Embedded derivatives    may have terms that are not clearly and closely related to the terms of the    host contract in which they are included.  If embedded derivatives exist    and are not clearly and closely related to the host contract, they are    accounted for separately from the host contract as derivatives, with changes in    their fair value recorded in current earnings, to the extent that the hybrid    instrument is not already accounted at fair value.

When hedge accounting is discontinued due to the    Company’s determination that the derivative no longer qualifies as an effective    fair value hedge, the Company will continue to carry the derivative on the    balance sheet at its fair value.  The related hedged asset or liability    will cease to be adjusted for changes in fair value that are due to the    previously hedged risk.  When the Company discontinues hedge accounting in    a cash flow hedge because it is no longer probable that the forecasted    transaction will occur in the originally expected period, the gain or loss on    the derivative remains in accumulated other comprehensive income and is    reclassified into earnings when the forecasted transaction affects    earnings.  However, if it is probable that a forecasted transaction will    not occur by the end of the originally specified time period of time    thereafter, the gains and losses that were accumulated in other comprehensive    income will be recognized in current earnings.  If a derivative instrument    ceases to meet the criteria for hedge accounting, any subsequent gains and    losses are recognized in current earnings.

The difference between derivative accounting under Mexican GAAP and U.S. GAAP applicable to the Company financial statements through December 31, 2005 relates to the following.

Under US GAAP, if a written option is designated as hedging a recognized asset or liability or an unrecognized firm commitment, the combination of the hedged item and the written option must provide at least as much potential for gains as a result of a favorable change in the fair value of the combined instruments as exposure to losses from an unfavorable change in their combined fair value, as a precedent to applying hedge accounting.  No such requirement exists under Mexican GAAP.  Therefore hedging instruments that are net written options accounted for as cash flow hedges under Mexican GAAP do not qualify cash flow hedges under US GAAP.

 

l. Disclosure About Fair Value of Financial    Instruments

The following methods and assumptions are used to estimate the fair    value of financial instruments:

Receivables, Temporary Investments and Short Term Borrowings: The    carrying amounts approximate fair value because of the short maturity of those    instruments. Values for temporary investments and financial instruments are    obtained from quoted market values.

As of December 31, the estimated fair values of   CCM’s debt are as    follows:
|                                                                                                                                  | **2004**                           |
|---------------------------------------------------------------------------------------------------------------------------------------|------------------------------------|
|                                                                                                                                  | **Fair Value**                     | **NotionalAmount** |
| Private      placement...................................                      | Ps.       1,122,684 | Ps.       1,152,264 |
|                                                                                     | **2005**                           |
|------------------------------------------------------------------------------------------|------------------------------------|
|                                                                                     | **Fair Value**                     | **NotionalAmount** |
| Senior      notes............................................        | Ps.       2,171,414 | Ps.       2,125,420 |
|                                   | **2005**                  | **2004**                 |
|----------------------------------------|---------------------------|--------------------------|
|                                   | **Fair Value**            | **CarryingAmount**       | **Fair Value** | **CarryingAmount** |
| Debenturebonds........................ | Ps.     104,808 | Ps.     90,847 | Ps.     743,975 | Ps.     631,520 |

l. Lease    Revenue

The Company leases retail space in its stores to outside parties    under non-cancelable operating leases. All the lease contracts are renewable    annually. 

Total rentals included in income for the years ended December 31,    2005, 2004 and 2003 were Ps.242,258,   Ps. 201,379 and Ps. 171,392 respectively.

m. Condensed    Financial Information

The condensed balance sheet and income statement presented below    reflect the Costco de Mexico Group joint venture and other investments as an    equity investment and include the effects of all U.S. GAAP adjustments.
|                                                                                                                                                       | **December      31,**                  |
|------------------------------------------------------------------------------------------------------------------------------------------------------------|----------------------------------------|
|                                                                                                                                                       | **2005**                               | **2004** |
| **ASSETS**                                                                                                                                                 |                                   |   |
| Current assets:                                                                                                                                            |                                   |   |
|     Cash and temporary investments.........................................................................                                      | Ps.           1,624,529 | Ps.           1,296,375 |
|     Inventories..........................................................................................................                        | 5,046,913                              | 5,661,543 |
|     Other current assets............................................................................................                             | 3,036,939                              | 3,431,472 |
|                                                                                                                                                       | 9,708,381                              | 10,389,390 |
| Non-current assets...................................................................................................                                      | 22,344,335                             | 20,875,261 |
|             Total assets..................................................................................................   | Ps.  32,052,716                   | Ps.       31,264,651 |
|                                                                                                                                                       |                                   |   |
| **LIABILITIES AND STOCKHOLDERS’ EQUITY**                                                                                                             |                                   |   |
|                                                                                                                                                       |                                   |   |
| Current liabilities........................................................................................................                                | Ps.     9,650,795            | Ps.       11,238,695 |
| Long-term liabilities....................................................................................................                                  | 7,257,179                              | 5,059,883 |
|         Total liabilities....................................................................................................          | 16,907,974                             | 16,298,578 |
| Minority interest........................................................................................................                                  | 105,746                                | 99,945 |
| Stockholders’ equity.................................................................................................                                | 15,038,996                             | 14,866,128 |
|             Total liabilities and stockholders’      equity........................................................... | Ps.   32,052,716             | Ps.       31,264,651 |
|                                                                                                                       | **Year       ended December 31,** |
|----------------------------------------------------------------------------------------------------------------------------|----------------------------------------|
|                                                                                                                       | **2005**                               | **2004** | **2003** |
| Net sales.........................................................................................................         | Ps.   40,388,825                  | Ps.        38,919,706 | Ps.        38,086,826 |
| Operating income............................................................................................               | 2,283,370                              | 1,878,954 | 1,535,309 |
| Comprehensive financing results.......................................................................                     | (1,155,127)                            | 195,692 | (282,747) |
| Other expenses...............................................................................................              | (547,899)                              | (238,416) | (65,830) |
| Income before taxes........................................................................................                | 580,344                                | 1,836,231 | 1,186,732 |
|     Income tax.................................................................................................. | (196,517)                              | (221,685) | (320,884) |
| Minority interest...............................................................................................           | (12,752)                               | (11,866) | (8,211) |
|     Net income.................................................................................................. | Ps.       371,075  | Ps.             1,602,680 | Ps.              857,637 |

n. New accounting pronouncements 

In November 2004,    the FASB issued Statement of Financial Accounting Standards (SFAS) No. 151,    "Inventory Costs-an Amendment of ARB No. 43" ("SFAS No.    151"), which is the result of its efforts to converge U.S. accounting    standards for inventories with International Accounting Standards. SFAS No. 151    requires idle facility expenses, freight, handling costs, and wasted material    (spoilage) costs to be recognized as current-period charges. It also requires    that allocation of fixed production overhead to the costs of conversion be    based on the normal capacity of the production facilities. SFAS No. 151 will be    effective for inventory costs incurred during fiscal years beginning after June    15, 2005. The impact of SFAS No. 151 is not    expected to have a material effect on the Company’s consolidated financial    statements.

In December 2004,    the FASB published FASB Statement No. 123 (Revised 2004) "Share-Based    Payments" ("SFAS No. 123(R)").SFAS No. 123(R) addresses the    accounting for share-based payments to employees, including grants of employee    stock options. Under the new standard, companies will no longer be able to    account for share-based compensation transactions using the intrinsic value    method in accordance with APB Opinion No. 25, "Accounting for Stock Issued    to Employees." Instead, companies will be required to account for such    transactions using a fair-value method and recognize the expense in their    consolidated earnings statements.   SFAS 123(R) is effective for public entities    as of the beginning of the first interim or annual reporting period that begins    after June 15, 2005, however early application is possible. The Company has    elected a prospective transition approach adoption under which FAS 123(R) would    apply to new awards granted after FAS 123 (R)’s adoption date.

In June 2005, the    FASB published SFAS No. 154, "Accounting Changes and Error Corrections a    replacement of APB Opinion No. 20 and FASB Statement No. 3" ("SFAS    No. 154"), which changes the requirements for the accounting for and    reporting of a change in accounting principle and redefines restatement as the    revising of previously issued financial statements to reflect the correction of    an error. SFAS No. 154 requires retrospective application to prior periods’    financial statements of changes in accounting principle, unless it is    impracticable to determine the period-specific effects of the cumulative effect    of the change. This Statement also carries forward without change the guidance    contained in Opinion 20 for reporting the correction of an error in previously    issued financial statements and a change in accounting estimate. This Statement    does not change the transition provisions of any existing accounting    pronouncement. SFAS No. 154 will be effective for accounting changes and    corrections of errors made in fiscal years beginning after December 15, 2005.    The Company is evaluating the impact that this statement may have on its    financial position or results of operations. 

On February 16, 2006, the FASB    issued SFAS No. 155, "Accounting for Certain Hybrid Instruments" (SFAS 155),    which permits, but does not require, fair value accounting for any hybrid    financial instrument that contains an embedded derivative that would otherwise    require bifurcation in accordance with SFAS 133. The statement also subjects    beneficial interests issued by securitization vehicles to the requirements of    SFAS 133. The statement is effective as of January 1, 2007, with earlier    adoption permitted. The adoption of SFAS No. 155 will not have a material    impact on the Company’s results of operations and financial condition.

 

**Exhibit 1.1**

 

**B Y - L A W S**

 

CHAPTER I.

CORPORATE NAME, CORPORATE PURPOSE,    CORPORATE EXISTENCE, CORPORATE DOMICILE AND NATIONALITY

FIRST.- CORPORATE NAME - The company is    called: "CONTROLADORA COMERCIAL MEXICANA". This name shall be followed by the words SOCIEDAD ANONIMA DE CAPITAL VARIABLE or the initials "S.A. DE C.V.".

SECOND.- CORPORATE PURPOSE.- The company    has as purpose the performance of any kind of acts of commerce and especially    the following:

a).- To promote, organize and manage all    kind of industrial, mercantile or civil companies.

b).- To acquire shares, interest or    participations in other mercantile or civil companies, either being part of    their incorporation or acquiring shares or participations in those companies    already incorporated, as well as to dispose of or transfer such shares or    participations.

c).- To receive from other Mexican or    foreign companies and furnish the companies of which it is a shareholder or    partner or to other companies, advisory and technical consulting services regarding    industrial, administrative, accounting, mercantile or financial matters.

d).- To obtain, acquire, use or dispose of    any kind of patents, trademarks, trade names or rights thereon either in Mexico    or abroad.

e).- To obtain all kind of loans or credits    and to lend to mercantile or civil companies with which the company has a    business relationship.

f).- To grant any kind of guarantees and    avals, of obligations or credit instruments of companies where the company has    any interest or participation, as well as obligations or credit instruments of    other companies or persons with which the company has a business relationship.

g).- To issue and draw all kind of credit    instruments, to accept them, including any obligations with or without real    mortgage or collateral.

h).- To acquire in ownership or in lease    any kind of real estate or personal property as well as real rights thereon    that may be necessary or convenient for its corporate purpose or for the    operations of the mercantile or civil companies in which the company has any    interest or participation.

i).- In general, to carry out and execute    all related, accessory or accidental acts, agreements and operations that may    be necessary or convenient to attain the abovementioned purposes.

THIRD.- DOMICILE - The corporate domicile    of the company shall be Mexico City, Federal District; however, it may    establish agencies or branches anywhere in the Mexican Republic or abroad and    submit to contractual domiciles in the agreements it may execute.- The    shareholders shall be submitted, as regards their relationship with the    company, to the jurisdiction of the Courts and authorities of the domicile of    the company, expressly waiving the jurisdiction of their respective personal    domiciles.

FOURTH.- NATIONALITY.- The company has    Mexican nationality, any foreigner who at the time of incorporation or at any    ulterior time, acquires any shares of the company, shall be considered, by that    very fact, as Mexican regarding such shares, rights, concessions, participation    or interest held by the company itself or else the rights and obligations    derived from the agreements of the company with Mexican authorities and it    shall be understood that he agrees not to invoke the protection of his    government under the penalty, in the event of not honoring his agreement, of    forfeiting such shares to the Mexican nation.

FIFTH.- CORPORATE EXISTENCE.- The corporate    existence of the company shall be ninety-nine years as from January 28, 1944,    date of its incorporation.

CHAPTER II.

CAPITAL STOCK AND SHARES.

SIXTH.- CAPITAL STOCK AND SHARES. - The    capital stock of the company is variable, its shares shall be represented by    nominative certificates without expression of any par value.- The minimum fixed    capital stock without withdrawal right, fully subscribed and paid is the amount    of $200,000,000.00 (TWO HUNDRED BILLION PESOS 00/100 MEXICAN CURRENCY); it is    represented by 200,000,000 ordinary nominative shares without any par value, to    be identified as class "I" - The variable portion of the capital    stock may not exceed ten times the amount of the fixed capital stock without    withdrawal right and the shares on which it is divided shall be represented by    certificates to be identified as class "II". The Shareholders Meeting    resolving on the issuance of shares may establish Series and, within each    Series, different subseries and determine special characteristics restricting    the circulation or transmission regime of the shares forming such Series and    subseries or condition the rights granted according to the law or these by-laws    to their holders, including the issuance of shares without voting right, to    which the provisions of article 198 of the General Law of Mercantile Companies    shall not be applicable and the issuance of shares with other limitations to    their corporate rights when so authorized by the National Securities Commission    under the terms of section III of article 14 Bis of the Securities Market Law.    The shares of the capital stock shall be divided into two series, identified by    letters A and B. Series "A" or Mexican shall at all times be formed    by the number of shares necessary to have a percentage of at least 51%.    (fifty-one percent) of the Mexican capital stock and Series "B", of    free subscription which shall be formed by the number of shares representing    not more than 49% (forty-nine percent) of the capital stock. 

All ordinary shares within their respective    Series or subseries shall grant their holders the same rights and obligations.    Those shares earmarked for or subscribed by Mexican individuals or corporations    in no event shall have lesser rights than those granted to shares that may be    acquired by foreigners and for the allocation of profits, in no event Series    "B" shares shall have any preference regarding Series "A"    shares. Series "A" shares may not be acquired by the individuals or    corporations or by the economic units referred to in article 2 of the Law to    Promote Mexican Investment and Regulate Foreign Investment; any acquisition of    Series "A" shares contravening the provisions of this clause shall be    null and shall have no legal effect and shall cause the penalties established    in articles 28 and 31 of said Law. The provisions contained in this paragraph    and the penalties provided for in articles 28 and 31 of the abovementioned Law must    be transcribed on the provisional or definitive share certificates covering    Series "B" shares. Series "B" or free subscription shares    may be acquired by any persons, companies or entities included in article 2 of    the Law to Promote Mexican Investment and Regulate Foreign Investment. Series    "B" shares owned by foreign shareholders, in addition to their    registration in the Registry Book of Shares of the company, must be registered    in the National Registry of Foreign Investments according to the provisions contained    in article 23 of the Law to Promote Mexican Investment and Regulate Foreign    Investment. The company shall not pay any dividends to those Series    "B" shares held by foreigners who are not registered in the National    Registry of Foreign Investments. The company or companies where this company    holds the majority of their shares or corporate participations must not    directly or indirectly invest in shares of this company nor in shares of any    other company which is a majority shareholder of said company or which if it is    not, they have knowledge that it is a shareholder, in any percentage, of the    holding company itself, except in the event that such companies acquire shares    of this company to comply with sale options or plans granted or designed or    which may be granted or designed in favor of workers of such companies,    provided the number of such acquired shares does not exceed 25% of the total    amount of shares outstanding. 

The company may temporarily acquire the    shares representing its capital stock, prior resolution of the Board of    Directors, through a stock exchange without applying the prohibition provided    for in article 134 of the General Law of Mercantile Companies, without    decreasing the capital stock, under the terms of section I of article 14 Bis of    the Securities Market Law. To carry out the temporary acquisition of its    shares, the company must comply with the requirements determined by the    Securities Market Law or, if applicable, the National Securities Commission. 

SEVENTH.- REDEMPTION OF SHARES.- By    resolution of the General Extraordinary Shareholders Meeting, the company may    redeem its own shares with distributable profits, for which purpose, in    addition to conforming to the provisions of article 146 of the General Law of    Mercantile Companies, the following rules shall be observed: 

a).- When shares are redeemed to all    shareholders, the redemption shall be made in such a manner that after such    redemption they have the same percentages of shares they had before and, if    this is not possible, the percentage of shares more similar to the one    previously held. 

b).- When the redemption of shares is made    by purchase in a stock exchange, the Shareholders Meeting, after taking the    respective resolutions or, if applicable, the Board of Directors by delegation    of the Meeting shall publish a notice in the official gazette of the domicile    of the company and in at least a newspaper having a wide circulation within the    domicile of the company expressing the system followed to withdraw the shares,    if any, the number of shares to be withdrawn, the person appointed as    purchasing intermediary and if applicable, the entity where the amount of the    reimbursement shall be deposited, which shall be, as from the date of    publication of the notice, available to the respective shareholders without    accruing any interest. 

c).- The share certificates shall be    annulled but if the Shareholders Meeting so resolves, preferential shares may    be issued. 

EIGHTH.- INCREASES IN THE CAPITAL STOCK.- The capital stock may be increased by resolution of the General Ordinary or    Extraordinary Shareholders Meeting, as the case may be, according to the rules    contained in this article. Increases in the fixed minimum portion of the    capital stock of the company and the limit; of the variable portion may only be    increased by resolution of the Extraordinary Shareholders Meeting and the    respective amendment to the corporate by-laws; increases in the variable    portion, within the limit provided for in clause Sixth of these by-laws, may be    made by resolution of the General Ordinary Shareholders Meeting without the    respective resolutions being registered in the Public Registry Bureau. No    increase may be decreed before all previously issued shares are fully paid.    When taking the respective resolutions, the Shareholders Meeting resolving on    the increase or any Shareholders Meeting thereafter shall fix the terms and    basis on which such increase must be carried out. Shares issued to represent    the variable portion of the capital stock and which by resolution of the    Meeting which resolved their issuance must be delivered while the subscription    is being carried out, may be offered for subscription and payment by the Board    of Directors in accordance with the authorities granted to it by the    Shareholders Meeting, in any case granting the shareholders of the company the    preference referred to in this clause. 

Increases in the capital stock may be made    by capitalization of reserves, withheld profits, premium on shares or by    payment in cash or in kind. In the increases by capitalization of reserves, all    shares shall be entitled to the proportional part corresponding to them from    the reserves. Regarding increases for payment in cash or in kind, shareholders    holding the shares existing at the time of determining the increase shall have    a preferential right to subscribe the new shares granting the same rights    issued in proportion to the shares granting the same rights at the time of the    increase, during a term not shorter than fifteen days so established by the    Meeting resolving on the Increase. This term shall be computed as from the date    of publication of the respective notice in the official gazette of the    corporate domicile or as from the date of holding the Meeting in the event that    all the shares on which the capital stock is divided had been represented    thereat. 

In the event that after the expiration of    the term during which the shareholders must exercise the preference granted by    this clause there are still some shares not yet subscribed, those shares must    be offered for subscription and payment under the conditions and terms fixed by    the Meeting which had resolved on the increase in the capital or under the    terms provided for by the Board of Directors, if any. 

NINTH.- DECREASES IN THE CAPITAL STOCK.- Decreases in the minimum fixed portion of the capital stock shall be made by    resolution of the Extraordinary Shareholders Meeting and the applicable    amendment to the corporate by-laws, complying, if any, with the provisions of    article Ninth of the General Law of Mercantile Companies. Decreases in the    variable portion of the capital stock may be carried out by resolution of the    Ordinary Shareholders Meeting without the need of filing the respective    resolutions in the Public Registry Bureau of the domicile of the company.    Decreases in the capital stock may be made to absorb losses, to reimburse    shareholders or to release them from payments not made and in the event that    the shareholders exercise the withdrawal right referred to in article two    hundred and twenty of the General Law of Mercantile Companies and the    provisions of the penultimate paragraph of this clause. In no event the capital    stock may be decreased to less than the minimum legal capital stock. 

Decreases in the capital stock to absorb    losses shall be made by the proportional reduction of the total number of    shares representing the minimum fixed portion of the capital stock as shares    representing the variable portion of the capital stock. Except in the event of    a decrease in the variable portion of the capital stock, due to the exercise of    the withdrawal right provided for in the penultimate paragraph of this clause,    the decrease of the shares subject to reduction shall be made as resolved by    the respective Meeting, through the cancellation of shares to all shareholders,    so that they represent, after the corresponding decrease in the capital stock,    the same percentages of shares and if this is not possible, the percentage of    shares which is more similar to the one they held before. Once the appointment    of the shares to be cancelled is made, notice shall be published in the    official gazette of the domicile of the company or in one of the newspapers    having a wide circulation at such domicile, expressing the system followed to    withdraw the shares, the number of shares to be withdrawn and the number of    certificates thereof which as a consequence must be cancelled or, if any,    exchanged and the credit institution where the amount of the reimbursement    shall be deposited, amount which since the date of publication shall be made    available to the respective shareholders, without accruing any interest;    provided that the first shares to be cancelled shall be the shares    corresponding to the variable portion and only if the amount of the variable    portion of the capital stock is not sufficient to fully absorb the amount of    the decrease, the shares representing the minimum fixed portion of the capital    stock without withdrawal right shall also be redeemed in the number required to    complete the decrease in capital stock so decreed. In the event of a decrease    in the fixed minimum portion without withdrawal right made by reimbursement to    the shareholders or their release from payments not made, the resolution of the    Meeting or Meetings which had resolved such decrease shall be published three    times in the official gazette of the corporate domicile with ten-day intervals. 

The decrease in the capital stock as a    consequence of the fact that a shareholder holding shares representing the    variable portion of the capital stock exercises his right to partially or    totally withdraw his contribution represented by the shares he holds, in    addition to conforming to the provisions of articles two hundred and twenty and    two hundred and twenty-one of the General Law of Mercantile Companies, shall be    made by reimbursing the shares in question the lower value between: (1) ninety    five percent of the quotation value in the stock exchange obtained from the    average of operations made during the thirty days during which the shares of    the issuing company had been quoted prior to the date on which the withdrawal    must become effective and (2) the accounting value of the shares in accordance    with the financial statements approved by the General Ordinary Shareholders    Meeting corresponding to the fiscal year on which the withdrawal must become    effective. The payment of the reimbursement shall be required from the company    as from the day following the holding of the General Ordinary Shareholders    Meeting which had approved the financial condition statement corresponding to    the fiscal year on which the withdrawal must become effective. The shareholder    which is withdrawing shall remain responsible for any obligations to third    parties according to the Law. 

TENTH.- SHARE CERTIFICATES.- Provisional    and definitive share certificates must contain the text of clause fourth of    these by-laws. Provisional or definitive share certificates which under the    provisions of paragraph three of clause sixth of these by-laws have special    characteristics and conditions which, in accordance with the law or these    by-laws, grant their holders any rights and, in any event, the provisional or    definitive share certificates must satisfy, in addition to the provisions of    articles one hundred and twenty-five of the General Law of Mercantile Companies,    the provisions of articles 28 and 31 of the Law to Promote Mexican Investment    and Regulate Foreign Investment. Share certificates may cover one or more    shares and shall have the autograph signature of the Chairman and of one of the    three Vice-Chairmen of the Board of Directors or the facsimile signature of    such directors, under the condition, in this last case to deposit the original    of the respective signatures at the Public Registry Bureau where the deed of    incorporation of the company has been filed. Definitive share certificates    shall contain or shall have adhered thereto progressively numbered coupons: the    certificates may have or not said coupons. The characteristics of the    provisional or definitive share certificates shall be determined by the Board of    Directors which may also resolve on the issuance of new certificates to    substitute those outstanding at the time the respective -resolution is taken.    Definitive share certificates must be issued within a term not exceeding one    hundred and eighty calendar days as from the date on which the issuance or    exchange has been resolved. 

ELEVENTH.- REGISTRIES.- The company shall    have a registry of shares where all subscription, payment, acquisition or    transfer of shares shall be contained indicating the names, domiciles and    nationality of the shareholders disposing of shares and of the persons on whose    favor they are transferred. The company shall only consider as holders of the    shares those persons whose names appear on the registry of shares. The company    shall also keep a registry of variations in the capital stock where all    increases or decreases of the capital stock shall be registered. 

CHAPTER III.

SHAREHOLDERS MEETINGS

TWELFTH.- CLASSES OF MEETINGS.- The General    Shareholders Meetings is the Supreme Body of the company; it may resolve on all    matters submitted to it, without prejudice of the functions reserved to the    administrative bodies of the company and its resolutions shall be obligatory    for all members even for those absent or dissident except for the provisions    contained in articles 201 and 208 of the General Law of Mercantile Companies.    General Extraordinary Meetings shall be those held to resolve regarding the    items mentioned in article 182 of the General Law of Mercantile Companies,    exception made of the increases or decreases in the variable portion of the    capital stock which, as any other matter not reserved to the Extraordinary    Meeting shall be subject to an Ordinary Meeting. Special Meetings shall be    those which are held to deal with matters that may affect the rights of a    single category of shareholders. Any kind of Meeting must be held at the    corporate domicile except for an act of God or force majeure. Ordinary    Shareholders Meetings must meet at least once a year on then date fixed by the    Board of Directors within the four months following the determination of each    fiscal year. This Meeting must deal with matters mentioned in article one    hundred and eighty-one of the General Law of Mercantile Companies and the    shareholders must be informed on the financial statements of the company or the    companies on which the company holds the majority of their shares or corporate    participations, when the amount of the investment in the shares of each of them    had exceeded twenty percent of the net worth of the holding company at the end    of the last fiscal year thereof. 

THIRTEENTH.- CALLS FOR THE MEETINGS.-    Ordinary, Extraordinary and Special Shareholders Meetings shall be called by    the Board of Directors either by their Chairman or Secretary, by an Examiner or    by the person referred to in articles one hundred and sixty-eight, one hundred    and eighty-four and one hundred and eighty-five of the General Law of    Mercantile Companies. Calls for the shareholders meetings shall be made by    publication in one the newspapers having a wide circulation at the corporate    domicile or in the Official Gazette of the Federation. Regarding Ordinary    Meetings, the first and second calls must be published at least fifteen and ten    days in advance, respectively, to the date fixed for holding the meeting. For    Extraordinary Meetings the minimum terms for publication shall be ten days for    the first call and five for the second call. In any event, the call shall state    the place, date and time for the holding of the meeting, they shall contain the    Agenda and shall be signed by the person authorized to do so. Any resolution    taken in violation of the provisions of this article shall be null, except in    the event that at the time of voting all the shares have been present. Meetings    may be held without prior call and their resolutions shall be valid if the    capital stock is fully represented at the time of voting. 

FOURTEENTH.- ADMISSION TO MEETINGS.- To be    admitted to the meetings, the shareholders must, in addition of being duly    registered as such in the Registry Book of Shares, require the Secretary of the    Board of Directors an admission card for the respective meeting. To obtain such    card, the shareholders must deposit, in advance and in the place mentioned in    the call, the outstanding share certificates they hold or the deposit evidence    thereof issued by a national credit institution legally authorized therefor.    Shareholders may be represented at the meetings by means of an attorney-in-fact    having a general or special power-of-attorney or who had been appointed by a    simple proxy. The representation of the shareholders must be evidenced at the    time of requiring the admission card. 

FIFTEENTH.- OFFICERS AT THE MEETINGS.-    Shareholders meetings shall be presided over by the Chairman of the Board of Directors;    in his absence, by one of the Vice-Chairmen of the Board of Directors and, in    the absence of both, by the shareholder appointed by the favorable vote of the    majority of the shares present at the meeting. The Secretary of the Board of    Directors or his alternate shall act as Secretary of the Meeting. In the    absence thereof, the person appointed by the Chairman shall act as such.    Likewise, the Chairman shall appoint from among the shareholders or their    representatives two tellers to count the shares present and to prepare the    attendance list. 

SIXTEENTH.- QUORUM AND VOTING AT THE    ORDINARY SHAREHOLDERS MEETINGS.- To legally convene the ordinary shareholders    meetings held due to first call, shares representing at least one half plus one    of the outstanding capital stock must be present thereat. Ordinary Shareholders    Meetings hold due to second or ulterior calls shall be valid whichever the    number of shares present. Resolutions taken at the ordinary meetings held due    to first call shall be valid if taken by the vote of the shares representing at    least, one half plus one of the outstanding capital stock. Resolutions adopted    at the Ordinary Meetings held due to second or ulterior calls shall be valid if    taken by the vote of the majority of the present shares. 

SEVENTEENTH.- QUORUM AND VOTING AT THE    EXTRAORDINARY AND SPECIAL SHAREHOLDERS MEETINGS. For the legal convention of    the Extraordinary Shareholders Meetings held due to first call, there must be    represented, at least, three fourths of the shares entitled to vote and their    resolutions shall be valid when taken by the favorable vote of shares    representing at least one half plus one of the shares entitled to. vote. To    legally convene the Extraordinary Shareholders Meetings held due to second    call, at least one half plus one of the shares entitled to vote must be present    thereat and their resolutions shall be valid when taken by the favorable vote    of shares representing at least one half plus one of the shares entitled to    vote. The same rules provided for in this article shall be applied to the    Special Meetings but regarding the special category of shares in question. 

EIGHTEENTH. REGISTRY OF MINUTES. The    minutes of the Meetings shall be registered in the respective book and shall be    signed by the Chairman and Secretary of the Meeting as well as by the Examiner,    if any. If for any reason, a Meeting cannot be legally convened, this fact    shall be evidenced in the minutes book. 

CHAPTER IV.

MANAGEMENT.

NINETEENTH.- MANAGEMENT OF THE COMPANY.-    The management of the company shall be vested in a Board of Directors formed by    the odd number of members determined by the Ordinary Shareholders Meeting and,    when so resolved by the Meeting itself, with their respective alternates. The    directors may not be shareholders. In any event, alternate directors shall    exercise their position in the absence of the respective regular directors. If    the meeting at the time of appointing them, had failed to set a special order    therefor, the alternate members shall be called in the order resolved by the    Board; the chairman of the Board may only be substituted by one of the    Vice-Chairmen and in the absence thereof, by any other Director who shall hold    the position by the voting of the Board. Minoritary shareholders representing    at least, the percentages of twenty-five percent or, if applicable, ten percent    of the shares entitled to vote shall be entitled to appoint a regular Director    and his respective alternate as provided for by article one hundred and    forty-four of the General Law of Mercantile Companies. Once the appointments by    the minoritary shareholders have been made, all other members of the Board    shall be appointed by a simple majoritary vote without computing the votes    corresponding to the minoritary shareholders who had made the mentioned    appointments. 

TWENTIETH. TERM OF THE POSITION AND    FUNCTIONS.- The Directors shall remain in office for an undefined period of    time until an Ordinary Meeting resolves to revoke their appointment, but in any    case, they must continue in office until the persons to substitute them take    office. The Directors shall fulfill the functions determined by the Board    itself. In any event, the Directors shall appoint from among them a Chairman,    three Vice-Chairmen, a Regular Secretary as well as an Assistant Secretary and    all other positions to be created for the best fulfillment of their positions.    The Chairman of the Board of Director’s shall be the legal representative and    shall comply with the resolutions of the Shareholders Meetings, of the Board of    Directors Meetings and of the Executive Committee, without the need of any    special authorization; he shall enjoy the authorities expressly conferred to    him by the Law authorities which may be extended by the Meeting; he shall have    deciding vote in the event of a tie regarding the resolutions of the Board of    Directors. Copies and evidences of the minutes of the Board of Directors    Meetings, of the Executive Committee and of the Shareholders Meeting, as well    as the entries contained in the non-accounting books and records and in general    any document of the files of the company shall be authorized by the Secretary    or the Assistant Secretary. 

TWENTY-FIRST.- GUARANTEE.- The members of    the Board of Directors and all other officers determined by the Board of    Directors shall grant the guarantee resolved by the Shareholders Meetings or by    the Board of Directors. Such guarantees may only be withdrawn until the actions    of the officer have been duly approved by the General Shareholders Meeting in    the event of members of the Board of Directors and Examiners or by the Board of    Directors in the event of other officers. 

TWENTY-SECOND.- AUTHORITIES. The Board of    Directors shall have the legal representation of the company with the following    authorities. 

1).- Manage the business and corporate    assets, with a wide power-of-attorney for acts of administration under the    terms of article two thousand five hundred and fifty-four, paragraph two, of    the Civil Code for the Federal District. 

2).- Exercise acts of ownership regarding    the real estate or personal property of the company or its real or personal    rights under the terms of paragraph three of article two thousand five hundred    and fifty-four of the Civil Code for the Federal District. 

3).- Marriage the business of the company and    the real estate and personal property thereof, with a general power-of-attorney    for lawsuits and collections, with all general and special authorities    requiring a special clause in accordance with the law, without any limitation,    under the terms of article two thousand five hundred and fifty-four of the    Civil Code for the Federal District and for all effects provided for in    articles eleven, forty-six, forty-seven, one hundred and thirty-four, section    three, five hundred and twenty-three, six hundred and ninety-two, sections    first, second and third, seven hundred and eighty-seven, eight hundred and    seventy-six, eight hundred and seventy-eight, eight hundred and eighty-three    and eight hundred and eighty-four of the Federal Labor Law; therefore, they    shall represent the company before any kind of administrative and judicial,    federal, state and municipal authorities, before any kind of boards of    conciliation and arbitration and other labor authorities and before arbiters    and arbitrators. The above powers-of-attorney include, as an enumeration but    not as a limitation, authorities to: (i) File any kind of lawsuits and    remedies, even "amparo" proceedings, and withdraw therefrom; and (ii)    Settle, submit to arbitrators, make and answer questions in court, assign assets,    challenge judges and receive payments. 

4).- File criminal claims and complaints as    well as withdraw therefrom, and assist as a civil party in the criminal    processes and grant pardons when so deemed convenient. 

5).- Draw, accept, endorse and eval, or in    any other manner subscribe credit instruments according to the provisions of    article nine of the General Law of Credit Instruments and Operations. 

6).- Appoint and remove Directors. managers    and all other officers and employees of the company, as well as to appoint the    attorneys, in-fact that may be necessary to duly take care of the corporate    matters, stating their authorities, duties and fees, granting such persons the    powers-of-attorney that may be deemed convenient: likewise, they may determine the    amount of the fees to be paid to the Directors themselves, prior to the end of    each fiscal year. 

7).- Execute agreements with the Federal    Government under the terms of sections I and IV of article twenty seven of the    Constitution, its organic law and the rulings thereof. 

8).- Open and cancel bank accounts on    behalf of the company, with authorities to appoint and authorize persons to    withdraw therefrom. 

9).- Execute individual and collective    labor agreements and intervene in the preparation of the interior labor    rulings. 

10).- Delegate their authorities to one or    several Directors in certain cases, stating their authorities to be exercised    under the terns. 

11).- Call General and Extraordinary    Shareholders Meetings, carry out their resolutions and in general, carry out    all acts and operations that may be necessary and convenient for the purposes    of the company, exception made of those expressly reserved by the law or these    by-laws to the Meeting. 

12).- Carry out the resolutions of the    meetings, delegate their functions in one or several directors, officers of the    company or attorneys-in-fact so appointed to be exercised in the business and    under the terms and conditions mentioned by the Board itself. Within the    above-mentioned provisions, the Board of Directors is exclusively authorized to    determine the sense on which the votes corresponding to the shares issued by    the controlled companies held by the company must be cast at the Ordinary and    Extraordinary Meetings of such controlled companies, appointing the delegate to    represent the company at such Meetings. 

13).- Resolve on the matters referred to    the purchase or sale by the company of shares, bonds or securities and to the    participation of the company in other companies provided it is made among    controlled companies or it is not included in any of the following assumptions,    where the Board of Directors shall require the prior approval from a General    Ordinary Shareholders Meeting. 

a).- Resolve on the acquisition of shares    of another company, provided the purchase price, due to one purchase or series    of purchases, either simultaneous or successive, exceeds twenty percent of the    consolidated net worth of this holding company; prior approval from the meeting    shall not be necessary regarding the purchase of shares of other companies    whose activities coincide with the commercial activities of this company. 

b).- Resolve on the disposal of shares of a    controlled company, provided the price of the disposal, due to one or several    disposals carried out within twelve months, exceeds twenty percent of the    consolidated net worth of this company. 

c).- Exercise the withdrawal right    corresponding to the shares of any of the controlled companies with variable    capital stock, provided it represents, due to one or several operations,    simultaneous or successive, the reimbursement of shares equivalent or exceeding    twenty percent of the consolidated net worth of such company. 

d).- Exercise the withdrawal right    corresponding to the shares of any of the controlled companies with variable    capital stock whose activity coincides with the commercial or service activity    of this company, provided it implies, due to one or several acts, simultaneous    or successive, the loss of control of the company issuing the shares. 

14).- Resolve on the temporary acquisition    of the shares issued by company and their replacement among the public, under    the terms provided for in these by-laws and convert the shares representing the    variable portion of the capital stock which has been temporary acquired and not    replaced among the public within the terms provided for by the National    Securities Commission into Treasury shares. 

15).- In general, carry out all acts and    operations that may be necessary or convenient to comply with the purposes of    the company, exception made of those expressly reserved by the law or these    by-laws to the Shareholders Meeting. 

TWENTY-THIRD.- MEETINGS.- The meetings of    the Board of Directors shall be called by the Chairman or by the Secretary and    the meetings may be held at the domicile of the company or anywhere else in the    Mexican Republic or abroad. Calls for the Board of Directors meetings must be    sent by mail, telegram, telex, telefax or courier or any other means where    there is an evidence of reception at least three days in advance to the date of    the meeting. Minutes shall be drafted from each meeting containing the    resolutions taken. Such minutes must be signed by the Chairman and the    Secretary. 

TWENTY-FOURTH.- QUORUM AND VOTING.- The    Board of Directors shall be legally convened when the majority of the directors    is present and its resolutions shall be valid where taken by the favorable vote    of the majority of the attending Directors. The Chairman shall have deciding    vote in the event of a tie. 

TWENTY-FIFTH.- EXECUTIVE COMMITTEE.- The    company may also have an Executive Committee with all the authorities    established in items one to eleven and fourteen of clause Twenty Second of    these by-laws and shall be formed by the number of regular and alternate members    determined by the Ordinary Shareholders Meeting which may not exceed ten, all    of them members of the Board of Directors of the company who must necessarily    include the Chairman of the Board of Directors and the General Director, if    this last one is a member of the Board. The Secretary and the Assistant    Secretary of the Board shall act as Secretary and Assistant Secretary of the    Executive Committee. The members of the Executive Committee shall remain in    office for one year, unless, removed by the General Ordinary Shareholders    Meeting; they shall remain in office until the persons appointed to substitute    them take office; they may be reelected and shall receive the fees determined    by the General Ordinary Shareholders Meeting. The Executive Committee shall meet    when so required by the Chairman of the Committee or any three of its members,    prior notice given to the Chairman in writing five calendar days in advance.    The Examiner of the company, who shall have no vote shall be called to the    Meetings of the Executive Committee. For the meetings of the Executive    Committees to be valid, the attendance of the majority of its members shall be    required. 

CHAPTER V.

SURVEILLANCE OF THE COMPANY

TWENTY-SIXTH.- SURVEILLANCE OF THE    COMPANY.- The surveillance shall be vested in a Regular Examiner who shall have    an alternate. The Examiner and his alternate shall be appointed or reelected by    the General Ordinary Shareholders Meeting. The Regular Examiner and his    alternate do not need to be shareholders of the company; they shall remain in    office until the persona appointed to substitute them take office. The Examiner    shall have the authorities and obligations listed in article One Hundred and    Sixty-Six of the General Law of Mercantile Companies as well as all other    authorities delegated by the General Shareholders Meeting. 

CHAPTER VI.

FISCAL YEAR; FINANCIAL INFORMATION; LOSSES    AND PROFITS.

TWENTY-SEVENTH.- FISCAL YEAR.- The fiscal    years shall have twelve months starting on the first day of January to the    31st. day of December of each year. 

TWENTY-EIGHTH.- FINANCIAL INFORMATION.- Within the four months following the end of each fiscal year, the Board of    Directors shall prepare the financial information indicated in article one    hundred and seventy-two of the General Law of Mercantile Companies. 

TWENTY-NINTH.- AVAILABILITY OF    INFORMATION.- The report referred to in the above article, including the report    from the Examiner referred to in article one hundred and sixty-seven of the    General Law of Mercantile Companies must be finished and available for the    shareholders at the offices of the company during business days and hours,    together with the justifying documents, at least fifteen days before the    Meeting where they shall be discussed. Shareholders shall be entitled to have a    copy of the respective reports, when so required. 

THIRTIETH.- APPLICATION OF PROFITS AND    LOSSES.- The net profits of each fiscal year after having subtracted the    contributions and all other items to be paid according to the law shall be    allocated as follows: 

1.- Five percent to create the legal    reserve fund until it reaches at least twenty percent of the capital stock. 

2.- If the Meeting so determines, it may    establish, increase, modify or cancel the capital reserves it may deem    convenient, including the reserve for the purchase of shares issued by this    company and create contingency and reinvestment funds as well as special    reserve funds. 

3.- The remaining amount, if any, shall be    applied as determined by the Shareholders Meeting. 

CHAPTER VII.

DISSOLUTION AND LIQUIDATION.

THIRTY-FIRST.- DISSOLUTION.- The company    shall be dissolved in any of the events provided for by article two hundred and    twenty-nine of the General Law of Mercantile Companies. 

THIRTY-SECOND.- LIQUIDATION.- Once the    company is dissolved, it shall enter liquidation prod; the Extraordinary    Shareholders Meeting shall appoint one or more liquidators, as it may deem    adequate, and shall establish the terms during which they must fulfill their    positions as well as the authorities they shall have. Liquidators, if any,    shall act jointly according to the provisions of article two hundred and    twenty-nine of the General Law of Mercantile Companies. 

THIRTY-THIRD.- LIQUIDATION.- The    liquidation shall be carried out in accordance with the resolutions taken by    the Extraordinary Shareholders Meeting resolving on the dissolution of the    company. In the absence of special resolutions of the Shareholders Meeting, the    liquidation shall be carried out in accordance with the following general    rules: 

a).- Completion of the pending corporate    operations as deemed convenient.

b).- Collection of credits and payment of    debts.

c).- Sale of the assets of the company.

d).- Preparation of financial statements.

e).- Distribution of remaining assets, if    any, among the shareholders, in proportion to their shares.

THIRTY-FOURTH.- CANCELLATION OF RECORDING.-    Once the liquidation has been completed, the liquidators shall cancel the    recording of the company at that Public Registry Bureau of the corporate    domicile. 

* * * * * * * * * * * * * * * * * * * * * * 

I. Araceli Ruiz-Vivanco, Expert Translator    duly appointed by the Supreme Court of Justice in accordance with Judicial    Bulletin dated February l, 1983, hereby certify that to the best of my    knowledge the above translation from Spanish of the by-laws of    "CONTROLADORA COMERCIAL MEXICANA, S.A. DE C.V." is true and complete.    Mexico City, april 13, 1993. INDICE 

INFORMACION LEGAL Y FISCAL 

14 Price club de Mexico, S.A, Joint Venture

Price Company

Price Venture Mexico

Controlodora Comercial Mexicana, S.A. de C

Amendment to the Joint Ventures

AMENDMENT TO THE    COMPANY’S BY-LAWS As amended at the Meeting of Shareholders of the Company held    on August 6, 1996. 

CLAUSE SIXTH. CAPITAL STOCK AND SHARES. The    capital stock of the company is variable, and its shares shall be represented    by nominative stock certificates without par value, the minimum fixed part,    without right of withdrawal, reaches the total amount of $2,000’0000,000.00    (Two thousand million Pesos Mex. Cy) and it is represented by 5,000’000,000    (five thousand million) shares. The variable part of the capital stock may not    exceed by ten times the amount of the minimum fixed part without the right of    withdrawal, and the shares in which is represented shall be indemnified as    Class II shares. 

The capital stock shall have the following    share Series: 

Series "B" shares that shall    represent 100% (one hundred percent) of the total amount of ordinary stock with    full voting rights. 

Series "C" shares that shall not    represent more than 25% (twenty five percent) of the total amount of shares    issued by the company, unless that the National Banking and Securities    Commission authorizes to modify said percentage. This shares have not voting    rights and have full economic rights and shall be of free subscription. In    consequence, the Series "C" shares may be acquired by Mexican    investors and by foreign, individual or corporations. 

The stockholders’ Meeting that resolve    about a new issuance of shares may establish Series and inside each Series,    different Subseries and certain essential characteristics that will restrict    the transfer or transmission of Shares that conform said Series or Subseries;    or condition the rights that, in accordance with the law and the by-laws, those    shares will give to its holder. Within its respective Series, each share will    confer the same rights and obligations to its holder. 

In case that any foreign investor in the    present or in the future acquires Series "B" or "C" shares,    will formally be obligated with the Ministry of Foreign Affairs, to be    considered as national with respect to the shares that he acquires or that is a    holder, as well the assets, rights, concessions, participations or interest    that the company is holder, or the rights and obligations that derive of the    agreements in which the company will be part with the Mexican authorities, and    not to invoke for the same purpose the protection of their governments under    the penalty to loose in the benefit in favor of the Mexican nation, the stock    parts that she/he have acquired. 

The Series "B" shares will grant    the right to one vote in the stockholders’ meeting. 

The Series "C" shares without    voting rights will have the same economic rights than the ordinary shares,    including the participations in the profits and in the preemptive right to    subscribe the new shares of their same Series that would be issued in cash    payment, or in goods, in the respective proportion. The Series "C"    shares will not be estimated, for Quorum determination at the shareholders’    meetings, and are considered as neutral investment, that will not be estimated    in determining the percentage of foreign investment participation in the    capital stock, in the terms of the Foreign Investment Law. 

The company or companies, in which this    corporation may hold the majority of shares or corporate interests, shall not    invest direct or indirectly in shares of this corporation, nor in any other    company that is the principal shareholder of said company, or that without    being it, have the acknowledge that it is a shareholder of the Holding, in any    percentage, except in the case that such companies acquire shares just to    comply with call and put options, granted or designed, or that could be granted    or designed, in favor of the workers of those companies. 

The Company may issue non subscribed    shares, in the terms of article 81 of the Securities Market Law, which shall be    in accordance with the capital structure and Series division, referred to in    this By-laws. 

CLAUSE ELEVENTH, REGISTRY. The Company must    carry a Nominative Stock Registry Book, in accordance with article 128 and 129    of the General Corporations Act, which may be kept, by the Secretary of the    Board of Directors, a Securities Deposit Institution, a credit institution, or    by the person appointed by the Board of Directors, acting on name and behalf of    the Company, as a registry officer. 

The shares of the Company shall be    documented in "Vinculated Units" that shall necessarily contain four    shares, whether (i) four Series "B" shares, or (ii) three Series    "B" shares jointly with one Series "C" share. In this    manner, once that the shares represented by the capital stock are organized    through said certificates, the company will register in its Nominative Stock    Registry Book, only the four shares in the form of said stock certificates. 

The company shall maintain Series    "C" shares in the company’s Secretary for a non defined time in order    to proceed to the exchanges to those owning vinculated units that contain four    Series "B" shares and showing interest for the exchange for    associated units containing three Series "B" shares and one Series    "C" share. 

The company will register in said    Nominative Stock Registry Book all the transactions of subscription, payment,    acquisition or transition of shares, and of the persons in which favor are    transferred. The company shall consider as owners of the shares the persons    which names appear in said Nominative Stock Registry Book." The company    shall maintain a Variable Capital Stock Registry Book in which shall be    registered all of the capital stock increases and decreases. 

AGENDA

EXTRAORDINARY GENERAL MEETING

Proposal for partial amendment of the    company’s bylaws, for their adjustment to the changes in the Securities Market    Law published in the June 1, 2001 Official Gazette. Resolution. 

ORDINARY GENERAL MEETING

Board of Directors’ Report; presentation of    the 2001 CONTROLADORA COMERCIAL MEXICANA, S.A. DE C.V. financial statements.    Statutory Auditor’s report. Agreements reached with respect to said information    and performance of the Board of Directors. 

Determination on the application of    earnings, with the possible 

decree of dividends of $0.107 per unit    representing four shares, and determination of the amount of resources to be    set aside for the purchase of own shares during the current period.

Designation or ratification of the members    of the Board of Directors, the 

Statutory Auditor, and of the members of    the Executive and 

Audit Committees. 

Determination of Board of Directors and    Statutory Auditor compensation. 

Designation of representative to follow up    on compliance with the resolutions adopted at this Meeting, and formalization    as applicable. 

FIRST ITEM.- In addressing the first item    on the agenda, the President explained to the stockholders that the amendments    to the Securities Market Law published in the June 1, 2001 Official Gazette    require that stock issuers modify their bylaws as per article 14 Bis 3 of said    Law. A project of the bylaw articles to be modified as per said Law was    distributed to the stockholders for their consideration and resolution thereof. 

Having read and discussed the project    submitted for their consideration, and with a majority vote representing    98.252% of paid-in capital, the Stockholders agreed to:

RESOLUTION

FIRST.- Amend clauses: nine, ten, twelve to    fourteen, eighteen to twenty three, twenty five and twenty six of the bylaws,    as follows:

NINETH, paragraph five:

In the terms of article 14 Bis 3 of the    Securities Market Law, the Company can acquire own shares through the stock    market at the current market price, provided the purchase is conducted with a    charge to the company’s capital stock and, if applicable, to a reserve from    after tax earnings denominated reserve for the acquisition of own shares. For    these purposes, the General Stockholders Meeting is to indicate expressly, for    each period, the maximum amount to be allocated to the purchase of own shares,    with the only limitation that the sum of the resources allocated for said    purpose not exceed the total balance of the Company’s after tax earnings,    including retained earnings.

NINETH, paragraph nine:

The purchase and placement of shares in the    terms set forth is regulated by the general rules issued by the National    Banking and Securities Commission, in the terms of the Law.

TENTH, last paragraph:

Definitive stock certificates must be    issued within a term no longer that ninety calendar days as from the date on    which the share issuance or exchange was agreed.

TWELFTH - TYPES OF MEETINGS.- The General    Stockholders’ Meeting is an entity’s Supreme Organ empowered to resolve all    matters submitted for its consideration, without detriment to the functions    reserved for management, and its decisions are mandatory for all the partners,    present, absent or dissident, except as concerns the provisions of article 201    and 206 of the General Corporations Law, with respect to point f) of section VI    article 14 Bis 3 of the Securities Market Law. Extraordinary General Meetings    are convened to reach agreements regarding the matters mentioned in article 182    of the General Corporations Law, except as concerns variable capital stock    increases or decreases, which, like any other matter not reserved for an    Extraordinary Meeting, must be addressed at an Ordinary Meeting. Special    Meetings are convened to address matters that can affect the rights of a single    category of stockholders. All the different types of meetings must be held at    the entity’s domicile, except in the event of an act of God. An Ordinary Meeting    must be held at least once a year on the date established by the Board of    Directors within the four-month period following the end of the period, and is    convened to address the matters indicated in article 181 of the General    Corporations Law and to present to the stockholders the entity’s financial    statements, both individual and consolidated with the companies of which the    entity is a stockholder, in conformity with accounting principles, as well as    the purchase operations and placement of own shares referred to in Clause Nine.

THIRTEENTH - CONVENING A MEETING.-    Extraordinary and Special Ordinary Stockholders’ Meetings are convened by the    Board of Directors, either through the Secretary or the Chairman of the Board,    the Statutory Auditor or the persons referred to in article 178, 184 and 185 of    the Corporations Law, as well as in article 14 Bis 3 of the Securities Market    Law.- Meetings are convened through publications in a high circulation    newspaper of the entity’s location or in the Official Gazette.- For Ordinary    Meetings, the first and second notifications must be published at least five    and ten days, respectively, prior to the date of the meeting.- For    Extraordinary Meetings, the minimum terms for publishing these notifications    are ten days for the first call to meeting and five days for the second.- In    all cases, these notifications must indicate the place, date and time at which    the meeting is to be held, as well as the Agenda. Items under "General    Matters" must not include the points referred to article 181 and 182 of    the General Corporations Law and its subsribed by a person expressly authorized    for do so.- As from publication of the notification convening a stockholders’    meeting, the information and documentation related to each of the points established    in the agenda must be made available to the stockholders immediately and free    of charge.- All resolutions adopted with infractions A/in violation of the    provisions of this article are void, unless the overall shares are represented    during the vote. Meetings can be held without notification, and resolutions    adopted at said meetings are valid, provided the entire capital stock is    represented during the vote.

FOUTREENTH - ADMISSION TO MEETINGS.- For    admission to meetings, stockholders must: be registered as such in the    Shareholders’ Registration Book, and obtain from the Secretary of the Board of    Directors a card for admission to the meeting in question. To obtain said card,    the stockholders are required to deposit, in advance and at a location specified    in the notification, the certificates of shares in circulation that they hold    or the certificate of share deposit issued by a domestic credit institution    duly authorized to do so. The stockholders can be represented at the meetings    by a representative holding a general or special power of attorney or    designated through the forms prepared by the Entity in question, provided these    forms meet the following requirements: (i) clearly indicate the name of the    entity in question, and the respective agenda; (ii) provide sufficient space    for the instructions of the stockholder granting the power of attorney to    execute said power. The entity must keep on file said forms during the terms    set forth in article 173 of the General Corporations Law, to be made available    upon request to the securities market intermediaries substantiating their    status as representatives of stockholders, in order for said intermediaries to    promptly delivery said forms to the stockholders they represent. The Secretary    of the Board of Directors is required to ensure compliance with the provisions    of this clause and to submit the corresponding report at the stockholders    meeting, to be set forth in the minutes of the meeting in question. 

SIXTEENTH.-

The following paragraph was added:

Stockholders with voting rights, who hold    at least ten percent of the shares represented in the meeting, are entitled to    request deferral of the vote concerning any matter of which they do not    consider themselves to be sufficiently informed, in accordance with the terms    and conditions set forth in article 199 of the General Corporations Law.

EIGHTEENTH.- MINUTE REGISTRATION.- The    minutes of Stockholders’ Meetings must be registered in the book of minutes and    must be signed by the Secretary and the Chairman of the Board of Directors, as    well as by the Statutory Auditor, if in attendance. If for any reason, a    meeting can not be legally INSTALARSE, this fact must be set forth in the books    of minutes of stockholders’ meetings.

NINETEENTH.- COMPANY ADMINISTRATION.- The    company’s administration is the responsibility of the Board of Directors,    composed of no fewer than 5 and no more than 25 members, of which at least 25%    must be independent advisors.

An independent advisor is one selected for    his/her experience, qualifications and professional prestige, in the terms of    article 14 Bis of the Securities Market Law.

A alternate advisor is designated for every    stockholding advisor, in the understanding that independent alternate advisors    must have the same standing. The Chairman of the Board can be replaced by a    Vice Chairman, or in the absence of a Vice Chairman, the Meeting can be chaired    by another advisor elected by the board. Any party having chaired a meeting can    continue attending meetings as a voting member, if designated Honorary Chairman    by the Board of Directors.

Minority stockholders representing at least    10% of the entity’s capital stock represented by voting shares are entitled to    designate a stockholding advisor and respective alternate advisor, as per    article 144 of the General Corporations Law. Once the designations by the    minority stockholders have been concluded, the other Board Members are    designated by a majority vote, without computing the votes of the minority    stockholders involved in the aforementioned designations.

TWENTIETH.- DURATION OF POSITION AND    DUTIES.- Advisors are designated for an indefinite period until this    designation is revoked at an Ordinary Stockholders’ Meeting; however, the    advisor in question must continue to perform his/her duties as advisor until    the replacements take over the position.

The Chairman and two Vice Chairmen who    preside over the Audit Committee must be designated by the Stockholders; or    otherwise, by the Board of Directors, which can designate the positions it    considers necessary to improve the Committee’s performance.

The Chairman of the Board of Directors is    the legal representative responsible for compliance with the resolutions    adopted at Stockholders’ Meetings, Meetings of the Board of Directors and    Meetings of the Executive Committee, without the need for special    authorization; has powers granted by law, which can be extended by the    Stockholders, and a casting vote in the event of a tie in the decisions of the    Board of Directors.

The Stockholding Secretary, as well as the    Secretary Pro-term (empowered to conduct any of the functions of the Secretary,    as per the current bylaws, as alternate Secretary), designated by the    Stockholders are not required to act at Advisors, are responsible for all    non-accounting books and records, and the functions conferred in said bylaws    and the current legislation, and are required to attend all Meetings of the    Board of Directors and of the Executive Committee, as well as Stockholders’    Meetings, and the Meetings of other Committees, with a say but no vote,    receiving compensation equal to that of other attendants, and are required to    prepare the minutes to record the resolutions adopted at said meetings.

TWENTY FIRST.- 

The following one-paragraph text is added:

Stockholders representing at least 15% of    the capital stock can file a civil lawsuit against management, provided they    meet the requirements set forth in article 163 of the General Corporations Law.    This legal action can also be filed against the Statutory Auditors and members    of the Audit Committee.

TWENTY SECOND.- POWERS.- The Board of    Directors is the entity’s legal representative, with the following powers:

(points 15, 16, 17 and 18 are added to the    following text, moving current points 15 to 19 forward):

14).- To reach an agreement on the    temporary acquisition of shares issued by the entity and their replacement    among the general public, and to designate the person or persons responsible    for this acquisition and replacement, a proposition was made to incorporate new    points 15), 16) and 17) in the following text, and to move current points 15)    to 18) forward:

15).- To approve any operations that depart    from the entity’s normal business activities, and which are to be conducted by    the entity and its partners, with members of company management or with parties    with which management maintains a link or are first or second-degree relatives,    spouses; the purchase or sale of 10% or more of the company’s assets; granting    of guarantees for an amount exceeding 30% of company assets, as well as    operations other than those described above that represent more than 1% of the    company’s assets.

16).- The Board of Directors must set up an    Audit Committee, whose chairman and most members must be independent advisors.    This Audit Committee’s Meetings must be attended by the Statutory Auditor(s) as    guests, with a say but no vote.

The Audit Committee will have the following    functions: (i) to provide an opinion on transactions with the parties referred    to in point 15) above; (ii)to propose the hiring of independent specialists    when considered necessary, to obtain the opinion of said specialists on    transactions with said related parties; and (iii) to prepare an annual report    on its activities, to be submitted to the Board of Directors, and subsequently    for presentation to the stockholders at the Annual General Stockholders’    Meeting.

17).- In the terms of section VII of    article 14 Bis 3 of the Securities Market Law, the Board of Directors can    oppose an acquisition of shares considered to be hostile, by one or more third    parties, company stockholders or not, whether intending to acquire the shares    directly or indirectly through an intermediary; said acquisition is void and    can not be subscribed in the entity’s Share Registration Book. Consequently, said    shares will have no voting rights at any stockholders’ meeting, and their    holder can exercise none of the corporate rights granted by the General    Corporations Law or bylaws; unless, prior to said share acquisition, the    operation is approved with the favorable vote of more than two thirds of the    members of the Entity’s Board of Directors.

A purchase of shares is considered to be    hostile when a person or group of parties intends to acquire or acquires in one    or more operations, simultaneous or consecutive, direct or indirectly, 10% or    more of the shares that represent the entity’s capital stock, within a period    not exceeding 12 months. In light of the above, any party intending to acquire    said percentage must inform the Chairman of the Board of Directors in writing    of their intention, and set forth all the aspects related to this acquisition.    With this information, the Board of Directors can convene, in the terms of the    entity’s bylaws, an Extraordinary Meeting of the Board of Directors and report    on the intended share purchase, providing the members with all the necessary    elements for their analysis. If required, the members of the Board of Directors    will convene a new meeting, to be attended by the party or parties that intend    to acquire the shares, so that they may clarify any doubts and provide the    necessary additional information for a resolution to be adopted.

(Point 17 above, which has been approved,    is intended to protect the company from a hostile share acquisition that would    grant control over the company, in the understanding that said amendment to the    bylaws will be valid, once authorization has been obtained from the National    Banking and Securities Commission, under Article 14 Bis 3, section VII of the    Securities Market Law, which empowers the Board of Directors to make the    necessary changes in the wording of the bylaws, provided the intention is    maintained.)

18) The Board of Directors is empowered to    set up compensation plans for company officers and to make decisions with    respect to any other matter regarding evaluation, planning and finances, with    the possibility of establishing intermediary organs to assist in this regard. 

TWENTY THIRD- SESSIONS - Board of    Directors’ meetings must be held at least once every three months, and must be    called by the Chairman, the Secretary, any of the Directors representing at    least 25% of the members or any of the company’s Statutory Auditors, and may be    held anywhere in Mexico or abroad. The notifications of the Board of Directors’    meetings must be sent out by mail, telegram, Internet, telefax, messenger or    any other reliable means, at least three days in advance of the meeting.    Minutes must be taken of each meeting containing the resolutions adopted. Said    minutes must be signed by the Chairman and the Secretary.

TWENTY FIFTH - EXECUTIVE COMMITTEE- The    company may also have an Executive Committee, empowered as specified in points    one to 11 of Clause twenty two of these by-laws and will comprise the number of    proprietary members and alternates determined at an Ordinary Stockholders’    Meeting, not to exceed ten, all members of the company’s Board of Directors.    Which must necessarily include the Chairman and the Secretary of the Board of    Directors , who must hold the same positions on the Executive Committee. The    members of the Executive Committee will sit on that committee for a period of    one year, and unless they are removed from their posts by a vote taken at a    General Ordinary Stockholders’ Meeting, they must remain in their posts until    their replacements take office. They may be reelected and will receive the    remuneration determined at a General Ordinary Stockholders’ Meeting. The    Executive Committee will meet when required by the Chairman of the Committee or    any three of its members, following notification issued to the Chairman in    writing five calendar days in advance of the event. The Statutory auditor of    the Company will be requested to attend the meeting, but will not be entitled    to vote. Executive Committee meetings are only valid when a majority of its members    are in attendance.

TWENTY SIXTH - SURVEILLANCE OF THE COMPANY    - Surveillance will be assigned to one or several Proprietary Statutory    Auditors, each of which must have a deputy auditor. The Auditor(s) and his    (their) deputy(ies) will be appointed or reelected at the General Ordinary    Stockholders’ Meeting and must provide the guarantees required of the General    Ordinary Stockholders’ Meeting in the terms of Clause Twenty First of these    by-laws. Holders of voting and nonvoting shares representing at least ten per    cent of the capital stock may appoint a Statutory Auditor. The Proprietary    Auditors and the alternates need not be stockholders of the company. They must    remain in their posts until their replacements take office. The Auditors will    have the attributes and obligations specified in Article 166 of the    Corporations Law as well as those granted by the stockholders.

Aside from the Board of Directors’    meetings, Auditors must attend all meetings of intermediary consulting organs    to which the Board of Directors has delegated some faculty.

POINT TWO - At the Ordinary Annual    Stockholders’ Meeting, the Chairman of the Board of Directors stated that in    compliance with Article 172 of the Corporations Law, he would render the Board    of Directors’ report on company operations during the period ended on December    31, 2001. The Chairman of the Board stated that the report included the    Financial Statements which he also submitted to the consideration of the    stockholders, as well as the information on accounting criteria and policies    contained in the notes to the Financial Statements and the Statutory Auditor’s    report which were put at the disposal of the stockholders as from the date of    publication of the summons to this Stockholders’ Meeting. 

At the request of the Chairman, public    accountant Rogerio Casas Alatriste Hernandez, the company’s Statutory Auditor,    read his report on the company’s Financial Statements in which he states that    said statements reasonably present the financial position of the company in accordance    with generally accepted accounting principles, applied on a consistent basis,    and he therefore proposed that the information submitted by the Board of    Directors should be approved by the stockholders.

Once the stockholders have analyzed the    report of the Board of Directors and the Statutory Auditor’s report, and having    heard the explanations provided, they unanimously voted in favor of the    following:

RESOLUTIONS

SECOND- All the terms of the report    submitted to the stockholders by the Board of Directors in compliance with    Article 172 of the Corporations Law concerning company operations carried out    in the period ended on December 31, 2001 were approved, and a copy of the    report was attached to the file containing the minutes of said Stockholders’ Meeting.

THIRD- All parts of the Financial    Statements of Controladora Comercial Mexicana S.A. de C.V. at December 31, 2001, both individual and consolidated, were approved as they were submitted to    the Stockholders’ Meeting, and a copy of said Financial Statements was attached    to the file containing the minutes of this Stockholders’ Meeting.

FOURTH- The report submitted by the    company’s Statutory Auditor concerning the Financial Statements of the company    at December 31, 2001 was received and approved, and a copy of that report was    included in the file containing the Minutes of this Stockholders’ Meeting.

FIFTH- All the actions taken by the Board    of Directors in the legal performance of its functions during the period ended    on December 31, 2001 were approved and ratified.

SIXTH- It was agreed to renew for a period    of one year the "Programa de emisiones de obligaciones de Controladora Comercial Mexicana, S.A. de C.V. 2000" (the program for issuance of Controladora Comercial Mexicana S.A. de C.V. 2000 debentures) agreed at the special stockholders’ meeting    held on September 22, 2000, for which purpose, the financial statements    approved at this stockholders’ meeting will be used as a base for the issuance    of any such debentures.

POINT THREE - In dealing with the third    point in the order of the day, the Secretary read the draft containing the    application of results for the period ended on December 31, 2001. 

Having analyzed the proposal for    application of profits, the stockholders unanimously adopted the following:

RESOLUTIONS

SEVENTH - The proposal submitted by the    Controladora Comercial Mexicana S.A. de C.V. Board of Directors concerning the    application of profits shown in the individual Financial Statements of the    company at December 31, 2001 is approved, and it is agreed that 5% of the net    distributable profit should be set aside to increase the legal reserve, and    that the remainder be applied to retained earnings.

The stockholders also agreed to the payment    of a cash dividend from the company’s retained earnings amounting to $0.107    (10.7 Mexican centavos) for each of the Units in circulation on the date on    which the dividend is paid, which must be covered in a single payment upon    presentation of coupon number six of current share certificates and upon signature    of the respective receipt as from April 16, 2002, on the understanding that    each Unit represents for shares of the subscribed and paid-in capital stock of    the company, which has been decreased by the repurchasing carried out by the    company in the stock market.

That dividend must be paid with profits    arising from the after-tax earnings account referred to in Article 88 of the    current Income Tax Law.

EIGHTH- The stockholders agreed to increase    the current reserve for repurchase of company shares, with funds taken from    retained earnings, so that said reserve would total one billion pesos, to be    restated periodically on the basis of the National Consumer Price Index    published by the Banco de Mexico, which can affect the capital stock by an    amount up to and including the above-mentioned total.

POINT FOUR - The Secretary read the    proposal presented concerning the remuneration of members of the Board of    Directors and Statutory Auditors for services rendered during the period ending    on December 31, 2002. 

The stockholders considered the proposal    presented and unanimously adopted the following:

RESOLUTION

NINTH - It is agreed that for the period    ending on December 31, 2002 and unless determine otherwise at a Stockholders’    Meeting, the members of the Board of Directors and the Statutory Auditors of    the company are to be paid $13,500 (thirteen thousand five hundred pesos    00/100) for each quarterly Board of Directors’ meeting they attend, and $4,400    (four thousand four hundred pesos 00/100) for each meeting of the Audit    Committee they attend.

POINT FIVE.- As concerns the composition of    the Board of Directors, the Executive Committee and the Audit Committee and the    positions of Proprietary Auditor and Alternate, the stockholders adopted the    following: 

RESOLUTIONS

TENTH - the following persons are appointed    to the Board of Directors of Controladora Comercial Mexicana S.A. de C.V., in the following positions, on the understanding that the    persons identified with an asterisk qualify as independent.

Position Owner Alternate 

Chairman Don Guillermo González Nova Lic. Gustavo González    Fernandez 

Vice-chairman Don Jaime González Nova Lic. Luis Felipe    González Solana 

Vice-chairman Lic. Carlos González Zabalegui Lis. Jaime    González Solana 

Director Ing. Francisco Martínez de la Vega Lic. Luis Felipe González Zabalegui 

Director Lic. Angel Portilla González Lic. Alejandro    González Zabalegui 

Director Lic. Javier Cantú Charles Don Ignacio Parada Díaz 

Director Lic. Pablo González Guerra* Lic. Antonino B. González    Guerra* 

Director Sra. Elena M.González de Guichard* Sr. Luis José    Guichard González* 

Director Don Fermín Sobero San Martín* Sr. Humberto Melendez    Martínez* 

Director Ing. Santiago García García Sr. Miguel Garatea    Lerga 

Secretary Lic. José Luis Rico Maciel

Pro- Secretary Lic. Rodolfo García Gómez de Parada 

* Independent

Mr. Carlos González Nova is confirmed as    Honorary Chairman and Mr. Carlos González Zabalegui as Executive Chairman, and    it is established that said position is equivalent to the position defined in    the Corporations Law in Article 145 as General Manager reporting to the Board    of Directors, who is empowered to carry out acts of administration and    ownership, conduct lawsuits and sign credit instruments and operations with the    most ample powers available under law.

ELEVENTH - According to point 16 of clause    22 of the bylaws, the Audit Committee is comprised of the following persons:    Don Fermín Sobero San Martín as Chairman, and as members of the Board Pablo    González Guerra and Javier Cantu Charles. According to the bylaws, the    statutory auditors and secretaries, owners or alternates may attend meetings    with speaking rights but not voting rights.

TWELFTH- As specified in clause 25 of the    bylaws , the Executive Committee of the company is comprised of the following    persons:

Don Guillermo González Nova, Don Jaime González Nova, Mr.    Carlos González Zabalegui, Mr. Francisco Martinez de la Vega, Mr. Javier Cantu    Charless, Mr. Angel Portilla González, and Mr. Santiago Garcia Garcia. Also participating are Messrs. Jose Luis Rico Maciel and Mr. Rodolfo    Garcia Gomez de Parada as Secretary and ProSecretary, respectively, as well as    Don Carlos González Nova as Honorary Chairman.

The Executive Committee of the Board of    Directors must incorporate two commissions to meet periodically to provide    follow-up on information pertaining to the companies of the group, one for Comercial Mexicana, to be presided over by Don Jaime González Nova and the other for    Restaurantes California, to be presented over by Don Guillermo González Nova.

THIRTEENTH - Don Rogerio Casas Alatriste    Hernandez is confirmed as Proprietary Statutory Auditor and Mr. Manuel Garcia    Brana as Alternate Auditor.

FOURTEENTH - It is announced that the    members of the Board of Directors and the auditors have accepted the positions    and have provided the guarantee specified in the bylaws.

POINT SIX -As concerns the last point of    the order of the day, by unanimous vote, the stockholders adopted the    following: 

RESOLUTION

FIFTEENTH- The following persons have been    appointed as representatives of the shareholders: Messrs. Carlos González    Zabalegui, Jose Luis Rico Maciel and Rodolfo Garcia Gomez de Parada, any of    which on behalf of the company may:

Appear before the notary public of their    choice to notarize the minutes or the relative part of the minutes of this    stockholders’ meeting. 

When necessary, in person or through    another person to be designated for that purpose, register the notarized    minutes at the Mexico City Public Commerce Registry. 

Issue the certificates of these minutes or    of any of its parts necessary to and, in general, execute the resolutions    adopted by the stockholders at this meeting. 

It is hereby certified that during the    course of this meeting, from beginning to end, the stockholders and the    representatives of the stockholders taking part in the stockholders’ meeting    were all in attendance.

Attached to the file for these minutes are:    a) an attendance list certified by the teller and the Secretary; b) powers of    attorney of the stockholders’ representatives; c) admission cards; d) a Board    of Directors’ report; e) financial statements of the company at December 31,    2001; f) the Statutory Auditor’s report; h) copies of the summons published in    Reforma and El Economista on March 22, 2002 and in the Official Gazette on    April 1 of the same year.

With no further matters to discuss, the    resolutions contained in these minutes prepared during the course of the    meeting were read, and once the minutes were read and approved by all in    attendance, it was signed by the Chairman, the Secretary and the Statutory    Auditor.

CHAIRMAN SECRETARY 

Don Guillermo González Nova Lic. Rodolfo García Gómez de    Parada 

STATUTORY AUDITOR 

C.P. Rogerio Casas Alatriste Hernández 

 

**Exhibit 7.1**

 

RATIO OF EARNINGS TO FIXED CHARGES The    following tables set forth our consolidated ratios of earnings to fixed charges    for each year in the five-year period ended December 31, 2004 in accordance with Mexican GAAP and U.S. GAAP. 

 

Controladora Comercial Mexicana, S.A. de C.V. 

Ratio of earnings to fixed charges 

(Millions of Mexican pesos in purchasing    power as of December 31, 2004) 

Mexican GAAP:                  DECEMBER                 

     2000 2001 2002 2003 2004 

EARNINGS:

Pre-Tax income from continuing operations before    adjustment for minority interest in consolidated subsidiaries or income or loss    from equity investees 1,429,530 1,179,051 946,577 1,347,612 1,926,422 

FIXED CHARGES:

Interest expense and amortization of debt    and amortization of debt discount and premium on all indebtedness 284,004    297,211 252,322 344,083 290,271 

Estimated interest component of lease    expense (10%) 17,410 20,898 19,193 22,113 23,396 

Total Fixed Charges 301,414 318,109 271,515    366,196 313,667 

Pre-Tax income from continuing operations    before adjustment for minority interest in consolidated subsidiaries or income    or loss from equity investees plus fixed charges less preferred stock dividend    requirements of consolidated subsidiaries 1,730,944 1,497,160 1,218,092    1,713,808 2,240,089 

RATIO OF EARNINGS TO FIXED CHARGES 5.74    4.71 4.49 4.68 7.14 

 

 

US GAAP:                  DECEMBER                  

     2000 2001 2002 2003 2004 

EARNINGS:

Pre Tax Income from continuing operations    before adjustment for minority interest in consolidated subsidiaries or income    or loss from equity investees 1,429,530 1,179,051 946,577 1,347,612 1,926,422 

Adjustments for US GAAP 113,087 85,569    60,076 -256,055 -166,611 

Pre-Tax Income including US GAAP    adjustments 1,542,617 1,264,620 1,006,653 1,091,557 1,759,811 

FIXED CHARGES:

Interest expense and amortization of debt    and amortization of debt discount and premium on all indebtedness 284,004    297,211 252,322 344,083 290,271 

Estimated interest component of lease    expense (10%) 17,410 20,898 19,193 22,113 23,396 

Total Fixed Charges 301,414 318,109 271,515    366,196 313,667 

Pre-Tax income from continuing operations    before adjustment for minority interest in consolidated subsidiaries or income    or loss from equity investees plus fixed charges less preferred stock dividend    requirements of consolidated subsidiaries 1,844,031 1,582,729 1,278,168    1,457,753 2,073,478 

RATIO OF EARNINGS TO FIXED CHARGES 6.12    4.98 4.71 3.98 6.61 

 

**Exhibit    8.1**

 

Significant Subsidiaries of Controladora Comercial Mexicana S.A. de C.V., 

as of December 31, 2004 

 

Name of Significant Subsidiary Jurisdiction    of Organization or Incorporation 

Tiendas Comercial Mexicana, S.A. de C.V. Mexico 

Costco de México, S.A. de C.V. Mexico 

Arrendadora de Supermercados, S. A. de C. V. Mexico 

Real Estate Subsidiaries: 

Arrendadora el Dorado, S. A. de C. V. Mexico 

Construtiendas, S. A. de C. V. Mexico 

Controladora Inmobiliaria Comerci, S. de R. L. de C. V.    Mexico 

Edificios CM México, S. A. de C. V. Mexico 

Garments Bienes Raíces, S. A. de C. V. Mexico 

Hiper Izcalli, S. A. de C. V. Mexico 

Hiper Naucalpan, S. A. de C. V. Mexico 

Hipertiendas del Norte, S. de R. L. de C. V. Mexico 

Hipertiendas de Puebla, S. A. de C. V. Mexico 

Hiper Tlatelolco, S. A. de C. V. Mexico 

Inmobiliaria Comersa, S. A. de C. V. Mexico 

Inmobiliaria del Hueso, S. A. de C. V. Mexico 

Inmobiliaria Gleznova, S. A. de C. V. Mexico 

Inmobiliaria Los Llanos, S. A. de C. V. Mexico 

Inmobiliaria Patria, S. A. de C. V. Mexico 

Inmobiliaria Pilares, S. A. de C. V. Mexico 

Inmobiliaria Tacuba, S. A. de C. V. Mexico 

Inmobiliaria y Constructora San Luis, S. A. de C. V. Mexico 

Inmuebleaga, S. A. de C. V. Mexico 

Inmueblemar, S. A. de C. V. Mexico 

Inmueble Neza, S. A. de C. V. Mexico 

La Villa Inmobiliaria, S. A. de C. V. Mexico 

Plaza Ecatepec, S. A. de C. V. Mexico 

Plaza Fiesta Izcalli, S. A. de C. V. Mexico 

Promotora Aragón, S. C. Mexico 

Tapatiplazas Comerciales, S. A. de C. V. Mexico 

 

**Exhibit 12.1**

 

**CERTIFICATION**

 

I, Carlos González Zabalegui, certify that:

 
    I have reviewed this annual report on Form 20-F              of Controladora Comercial Mexicana, S.A. de C.V.;
Based on my knowledge, this report does not              contain any untrue statement of a material fact or omit to state a material              fact necessary to make the statements made, in light of the circumstances under              which such statements were made, not misleading with respect to the period              covered by this report;
Based on my knowledge, the financial statements,              and other financial information included in this report, fairly present in all              material respects the financial condition, results of operations and cash flows              of the company as of, and for, the periods presented in this report;
The company’s other certifying officer(s) and I                are responsible for establishing and maintaining disclosure controls and                procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the                company and have:Designed such disclosure controls and                      procedures, or caused such disclosure controls and procedures to be designed                      under our supervision, to ensure that material information relating to the                      company, including its consolidated subsidiaries, is made known to us by others                      within those entities, particularly during the period in which this report is                      being prepared;
Evaluated the effectiveness of the company’s                      disclosure controls and procedures and presented in this report our conclusions                      about the effectiveness of the disclosure controls and procedures, as of the                      end of the period covered by this report based on such evaluation; and
Disclosed in this report any change in the                      company’s internal control over financial reporting that occurred during the                      period covered by the annual report that has materially affected, or is                      reasonably likely to materially affect, the company’s internal control over financial                      reporting; and

 The company’s other certifying officer(s) and I              have disclosed, based on our most recent evaluation of internal control over              financial reporting, to the company’s auditors and the audit committee of the              company’s board of directors (or persons performing the equivalent functions):All significant deficiencies and material                    weaknesses in the design or operation of internal control over financial                    reporting which are reasonably likely to adversely affect the company’s ability                    to record, process, summarize and report financial information; and
Any fraud, whether                    or not material, that involves management or other employees who have a                    significant role in the company’s internal control over financial reporting.

 

Date: July    16, 2006

 

        /s/ Carlos González Zabalegui          Carlos González Zabalegui	   Chief Executive Officer

 

 

**Exhibit 12.2**

 

**CERTIFICATION**

 

I, Francisco Martínez de la Vega, certify    that:

 
    I have reviewed this annual report on Form 20-F          of Controladora Comercial Mexicana, S.A. de C.V.;
Based on my knowledge, this report does not          contain any untrue statement of a material fact or omit to state a material          fact necessary to make the statements made, in light of the circumstances under          which such statements were made, not misleading with respect to the period          covered by this report;
Based on my knowledge, the financial statements,          and other financial information included in this report, fairly present in all          material respects the financial condition, results of operations and cash flows          of the company as of, and for, the periods presented in this report;
The company’s other certifying officer(s) and I          are responsible for establishing and maintaining disclosure controls and          procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the          company and have:Designed such disclosure controls and                procedures, or caused such disclosure controls and procedures to be designed                under our supervision, to ensure that material information relating to the                company, including its consolidated subsidiaries, is made known to us by others                within those entities, particularly during the period in which this report is                being prepared;
Evaluated the effectiveness of the company’s                disclosure controls and procedures and presented in this report our conclusions                about the effectiveness of the disclosure controls and procedures, as of the                end of the period covered by this report based on such evaluation; and
Disclosed in this report any change in the                company’s internal control over financial reporting that occurred during the                period covered by the annual report that has materially affected, or is                reasonably likely to materially affect, the company’s internal control over                financial reporting; and

      The company’s other certifying officer(s) and I            have disclosed, based on our most recent evaluation of internal control over            financial reporting, to the company’s auditors and the audit committee of the            company’s board of directors (or persons performing the equivalent functions):

      All significant deficiencies and material                    weaknesses in the design or operation of internal control over financial                    reporting which are reasonably likely to adversely affect the company’s ability                    to record, process, summarize and report financial information; and
Any fraud, whether                    or not material, that involves management or other employees who have a                    significant role in the company’s internal control over financial reporting.

 

Date: July    16, 2006

 

       /s/ Francisco Martinez de la Vega          Francisco Martínez de la Vega     Chief Financial Officer

 

 

**Exhibit 13.1**

 

**CERTIFICATION PURSUANT TO  18 U.S.C. SECTION 1350,  AS ADOPTED PURSUANT TO  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002**

 

In connection with the Annual Report of Controladora Comercial Mexicana, S.A. de C.V. (the "Company") on Form 20-F for the period ended    December 31, 2005 as filed with the Securities and Exchange Commission on the    date hereof (the "Report"), I, Carlos González Zabalegui, Chief    Executive Officer of the Company, certify, pursuant to 18 U.S.C. 1350, as    adopted pursuant to 906 of the Sarbanes-Oxley Act of 2002, that:

(1)     The Report fully    complies with the requirements of Section 13(a) or 15(d) of the Securities    Exchange Act of 1934; and

(2)     The information    contained in the Report fairly presents, in all material respects, the financial    condition and results of operations of the Company.

 

Dated: July 16, 2006

 

       /s/ Carlos González Zabalegui       Carlos González Zabalegui          Chief Executive Officer              

 

 

**Exhibit 13.2**

 

**CERTIFICATION PURSUANT TO  18 U.S.C. SECTION 1350,  AS ADOPTED PURSUANT TO  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002**

 

In connection with the Annual Report of Controladora Comercial Mexicana, S.A. de C.V. (the "Company") on Form 20-F for the period ended    December 31, 2005 as filed with the Securities and Exchange Commission on the    date hereof (the "Report"), I, Francisco Martínez de la Vega, Chief    Financial Officer of the Company, certify, pursuant to 18 U.S.C. 1350, as    adopted pursuant to 906 of the Sarbanes-Oxley Act of 2002, that:

(3)     The Report fully    complies with the requirements of Section 13(a) or 15(d) of the Securities    Exchange Act of 1934; and

(4)     The information    contained in the Report fairly presents, in all material respects, the    financial condition and results of operations of the Company.

 

Dated:    July 16, 2006

 

       /s/ Francisco Martinez de la Vega       Francisco Martínez de la Vega          Chief Financial Officer