Our First Century 1909

2009 Annual Report Our First Century 2009 Annual Report Vitro 2009 It all began 100 years ago…

On December 6, 1909, a group of visionary businessmen created Vidriera Monterrey, laying the groundwork for the glass industry to become a reality in Mexico. This seed has grown today to become one of the leading glass manufacturing companies in the world. Vitro’s importance in the industry is no coincidence. Over the last century, the Company has faced innumerable challenges but has also had the foresight to capitalize on many important opportunities. In 2009 Vitro celebrated its First Century. Today we can proudly say that the Company’s corporate philosophy, ideology and the strong foundation of beliefs and values inherited from its founders and predecessors, combined with its employees commitment and dedication throughout their years, Vitro will not only succeed but will maintain and strengthen the confidence of customers, suppliers and community in the future ahead. Vitro is preparing to celebrate many more centuries as one of the world’s largest suppliers.

1 At Vitro, our Mission, Vision and Values are the foundations that give meaning to everything we do within the Company; they represent the key elements that encompasses the image projected to the world.

8 1 7 6

United States of America Bolivia 1 One of the leading processors and distributors of architectural glass; automotive 5 Producer and distributor of glass containers for the soft drink, beer, food, wine replacement glass, distribution and installation, and an important supplier of and liquor, and pharmaceutical industries. custom-made value-add glass containers.

Portugal Mexico 6 An important player in the processing and distribution of flat glass products for 2 Largest producer, distributor and seller of glass containers and flat glass. the Portuguese construction industry.

Spain Costa Rica, Guatemala and Panama 7 One of the leading processors of flat glass products for the construction industry 3 Leading glass container producer and commercial seller in Central America and and other industrial markets. the Caribbean through Comegua, our joint venture in the region.

France Colombia 8 Processing and distribution of glass products for the French and Central 4 Producer of laminated and tempered glass products for the construction and European construction markets. automotive industries.

Companies Glass Containers Flat Glass Vitro Envases Norteamérica Viméxico Productos de Valor Agregado en Cristal Compañía Vidriera Cristales Inastillables de México Vitro Cristalglass (Spain) Fabricación de Máquinas Distribuidor Vidriero Lan Vitro Chaves - Industria de Vidro: Industria del Álcali Vidrio Plano de México Chaves Family (Portugal) - 40% Servicios Integrales de Acabados Vidrio y Cristal del Noroeste Vitro America (USA) Vidriera Guadalajara Vitro Automotriz Super Sky (USA) Vidriera Los Reyes Cristales Automotrices + Posselt Family - 49% Vidriera Monterrey Vitrocar Vidriera Querétaro Vitro Colombia Vidriera Toluca Vitro Flex Vidrio Lux (Bolivia) Vitro Flotado Cubiertas Vitro Packaging de México Vitro Vidrio y Cristal Vitro Packaging (USA) Grupo Sordo Noriega: Ruiz Álvarez Family - 45%

2 Our Company

Founded in 1909, Vitro, S.A.B. de C.V. (BMV: VITROA), Mission is the leading glass manufacturer in Mexico, and one Vitro is a customer-committed company dedicated to of the largest in the world, backed by more than 100 providing value-added products and services in profitable years of experience in the industry. and growing markets. Headquartered in Monterrey, Mexico, the Company has subsidiaries in 10 countries throughout Europe Vision and the Americas, through which it offers high quality To become a leading Company in the glass industry in products and reliable services that address the needs terms of profitability, efficiency, quality, and service. of two distinct businesses: containers and flat glass. Vitro’s manufacturing facilities produce, process, Values At Vitro we maintain a strict adherence to the following distribute and sell a wide range of glass products that Values, to move on the path to profitability. form an important part of millions of people’s everyday Customer Orientation: Our customer as origin and lives. The Company also provides excellent solutions final destination of our efforts. to a variety of industries, including: food, beverage, wines & spirits, cosmetics, and pharmaceutical, as Quality: Constantly meet and exceed customer’s well as the automotive and construction industries. expectations. In addition Vitro is a supplier of raw materials, machinery and industrial equipment. Creativity and Innovation: Continuously search for new ideas to develop and improve our value-added products As part of its culture of corporate responsibility, and services. the Company continues to create new initiatives to improve the well-being of its employees, support Integrity: Meet and exceed expected ethic behavior. the communities in which it conducts business, preserve the environment, and manage its business Teamwork: Foster a friendly environment among with the highest ethical standards and in complete colleagues. transparency.

Contents 4 Financial Highlights 19 Corporate Governance 6 Chairman´s Letter 20 Operating and Financial Analysis 8 CEO´s Letter 28 Management´s Financial Responsibility 10 Glass Containers 29 Independent Auditors´ Report 12 Flat Glass 30 Consolidated Financial Statements 14 Sustainable Development 65 Shareholder Information 18 Board of Directors

3 Financial highlights Vitro, S.A.B de C.V. and Subsidiaries (In millions of pesos, except where indicated otherwise; dollar figures are in millions of US nominal dollars).

December 31, (1) (2) US $ % Ps. % 2009 2008 change (3) 2009 2008 change (3) Income Statement Consolidated net sales $ 1,770 $ 2,627 (32.6) Ps. 23,991 Ps. 29,013 (17.3)

Domestic 825 1,157 (28.7) 11,152 12,831 (13.0) Export 484 600 (19.3) 6,568 6,547 0.3 Foreign Subsidiaries 461 870 (47.0) 6,271 9,635 (34.9)

Operating income (EBIT) 98 160 (38.7) 1,329 1,710 (22.3)

Net loss (47) (458) (754) (5,682)

Net loss of majority interest (49) (460) (787) (5,706) Net loss of majority interest earnings per common share (4) (0.17) (1.34) (2.17) (16.57) EBITDA (5) 237 329 (27.8) 3,217 3,605 (10.8)

Balance Sheet Total assets 2,500 2,586 (3.3) 32,652 35,774 (8.7)

Total liabilities 2,348 2,361 (0.5) 30,668 32,666 (6.1)

Stockholders’ equity 152 225 (32.4) 1,984 3,108 (36.2)

Stockholders’ equity of majority interest 40 123 (67.5) 520 1,704 (69.5)

Financial Indicators Debt / EBITDA (times) 6.5 4.9 6.2 6.1 Interest Coverage (times) 1.3 2.1 1.3 2.1 (EBITDA / total net financial expense)

EBIT Margin (%) 5.5 6.1 5.5 5.9

EBITDA Margin (%) 13.4 12.5 13.4 12.4

Personnel 16,807 19,385 (13.3) 16,807 19,385 (13.3)

Capital expenditures (6) 48 176 (72.7) 638 1,909 (66.6)

(1) Dollar figures reported herein are in nominal dollars resulting from dividing each month’s nominal pesos by that month’s ending exchange rate. (2) Financial data is presented in nominal pesos. (3) Change from 2008 to 2009. (4) Based on the weighted average shares outstanding. (5) EBITDA = earning before interest, taxes, depreciation and amortization, and provision for employee retirement obligations. (6) Represents the capital expeditures carried out during the year, for which differs of the investments presented in the cash flow.

Starting December 2008 Comegua is consolidated under the method of equity. Due to changes in Mexican FRS, regarding to consolidation of entities, specifically to consolidation of entities or single-purpose transaccions, our accounts receivables securization trusts were included in the Consoli- dated Financial Statements of Vitro and Subsidiaries. The effects of these changes in accounting principles increased debt of fiscal years 2008 and 2009.

4 Consolidated Net Sales

26,567 27,876 28,591 29,103 23,991 2,212 2,401 2,560 2,627 1,770

2005 2006 2007 2008 2009 2005 2006 2007 2008 2009 In millions of pesos (1) In millions of US nominal dollars

EBIT

153 180 242 160 98 1,839 2,117 2,704 1,710 1,329

2005 2006 2007 2008 2009 2005 2006 2007 2008 2009 In millions of pesos (1) In millions of US nominal dollars

EBITDA

336 371 391 329 237 4,041 4,331 4,379 3,605 3,217

2005 2006 2007 2008 2009 2005 2006 2007 2008 2009 In millions of pesos (1) In millions of US nominal dollars

(1) Financial data for year 2009 and 2008 is presented in nominal pesos, while for previous periods it is expressed in constant pesos as of December 31, 2007.

5 Chairman’s Letter

Dear Shareholders: 2009 was a challenging and very important year for our Company. Since then, we have maintained ongoing negotiations with the major- Vitro commemorated its First Century of operations on December 6, ity of our creditors attempting to reach a mutually satisfactory agree- 2009. This tremendous milestone occurred in the backdrop of a financial ment. Throughout this process, we have reached agreements with crisis that impacted almost everyone across the globe. Our financial posi- several of them, exchanged restructuring proposals and expect to tion and liquidity was particularly affected since the third quarter 2008. conclude this process in the near future. While this was not the ideal scenario for celebrating an anniversary, it was The effects of the global recession significantly impacted the auto- an incentive for us to renew our commitment and work diligently to main- motive and construction industries - the two important markets served tain our position as one of the leading glass manufacturers in the world. by our Flat Glass business unit, as well as contractions in other markets The financial crisis which began in late 2008, worsened in 2009, and served by the Glass Containers business unit. This in turn negatively af- fully impacted the global economy affecting, in different degrees our fected our top line and, ultimately, our financial results. key geographic markets: US, Spain, France, Portugal, Colombia, Panama During 2009 our net consolidated sales reached US$1,770 million, and Mexico. a 32.6 percent decrease compared with the prior year, while EBITDA In light of this broad and acute industry contraction, a disproportion- fell 27.8 percent to US$92 million. These figures include the results of ate increase in unemployment rates, reduced consumer purchasing power, Empresas Comegua, S.A. our Central American investment which was lack of liquidity at all levels, sharp devaluation of the Mexican Peso versus consolidated until November 2008. the US Dollar, combined with an unsafe environment in Mexico, our num- Management’s efforts to maintain production facilities operations ber one priority became the ”business as usual” operation of our facilities. and enhance liquidity have proven successful. We exceeded our cost In these circumstances we were forced to make difficult decisions reduction goals for the year. By the end of the third quarter of 2009, during the first quarter of 2009 to safeguard the Company’s operations we achieved annualized savings of close to US$122 million, above our and liquidity. US$80 to US$120 million annualized savings target range. The majority As announced, we decided not to comply with certain financial obli- of these benefits will be maintained going forward, and the rest will be gations, which led certain creditors to demand payment. incurred as required by growth in our businesses. We began negotiations with our creditors at the end of 2008, with In order to streamline operations and re-calibrate our business to the objective of achieving an organized debt restructuring that would customers’ reduced demand, we divested certain assets, downsized our allow us to maintain operations as usual and continue to address our workforce, adjusted our installed capacity and implemented processes customers’ needs. focused on increasing operating efficiencies.

6 We successfully refinanced the majority of our short term lines of Nevertheless, we are very confident that the decisions taken by the credit to finance working capital and, during the last quarter of the Board of Directors are appropriate and will lead us back to our original year, closed transactions to increase our cash position to US$217 mil- growth path. lion. This enables us to meet our 2010 cash requirements, and to be We have reached our first one hundred year milestone, the result of prepared for any future scenario as we continue our debt restructuring the hard work, commitment, and enthusiasm of the men and women process. who have been a part of this great company. In honor of their dedica- The current complex financial position has not been a barrier to re- tion, those of us who form part of Vitro today are grateful for the trust sponsibly and transparently manage your Company, complying with the you bestow upon us and reiterate our commitment to being “The Glass highest standards and guidelines of corporate governance. I am pleased Company” for many more centuries to come. to report that Vitro received an award for Best Business Ethics Practices from the Mexican Philanthropic Center, A.C. (Cemefi) as well as from the Alliance for Social Responsibility in Mexico (AliaRSE) for our practice of “Corporate Institutionalization and Transparency.” Since the onset of the restructuring process, we have kept our customers, suppliers, personnel and financial audiences well informed about its progress, while making it very clear that our top priority is to Sincerely, safeguard our operations, in order to continue servicing our customers in the timeliest manner possible. Regarding conversations with our creditors, our position as a company has always been to maintain an open dialogue in order to reach a mutually satisfactory agreement. We expect to reach a consensual agreement with the majority of our creditors in the coming months and Adrián Sada González to finalize the restructuring process. Chairman of the Board of Directors We don’t foresee a short term recovery in our key markets. Al- Vitro, S.A.B. de C.V. though they have begun to show slight signs of improvement, we expect the recovery process will require time. September, 2010

7 CEO’s Letter

Dear Fellow Shareholders: At Vitro we are aware that the global economic environment remains In order to improve liquidity, we concluded a US$75 million transaction uncertain, and complete recovery of our markets to levels before 2008’s with Fintech Advisory Limited in 2009, creating a trust to which Vitro and financial crisis is still a long way ahead. selected subsidiaries transferred several real estate assets. Vitro also suc- Although we see signs of recovery in certain market segments, we cessfully refinanced its accounts receivable program for three Viméxico, are nonetheless aware that the financial crisis drove the world into a S.A. de C.V. subsidiaries and refinanced the trade receivable securi- deep recession and believe it will take at least a few years to see a sig- tization of our Glass Containers business unit. nificant recovery. These and other initiatives will allow us to continue servicing our cus- At the beginning of 2009 we expected a challenging year; not only tomers´ needs in a timely manner while maintaining operations as usual. for our Company, but also for the markets we serve. And indeed this The current state of our businesses is a direct reflection of today’s year was a difficult period for all as a result of the economic crisis and global economic conditions. The majority of the market segments ser- restrictions in capital flows. viced by our Glass Containers business unit were negatively impacted; Despite the difficult environment, 2009 was a year of pride and en- the only exceptions were fragrances, cosmetics and pharmaceuticals. couragement for those of us who are part of this great Company, as Vitro Glass Containers’ consolidated net sales for 2009 reached US$919 mil- celebrated its First Century of existence. This historic event strengthened lion, a 34.8 percent decline compared with 2008. These figures include our spirits and reinforced our Company’s importance to shareholders, the results of Empresas Comegua, S.A., our investment in Central Amer- customers, suppliers, employees, the countries where we operate and ica, which was consolidated until November 2008. other constituencies. We have proved that we are a company that is Flat Glass was also negatively impacted. Sales continued to reflect truly committed to the hard work, determination and loyalty passed on the contraction in two of the most drastically affected sectors of the by our predecessors. We have the passion and skills to face all kinds of NAFTA economy: automotive and construction, and the poor conditions challenges, as we have demonstrated it over the past 100 years. in Spain’s construction market, to which Vitro has significant exposure. Flat Glass consolidated net sales reached US$845 million in 2009, a 29.3 Results percent decline versus the prior year. We continued making important strategic decisions in 2009, redefining During 2009, our Company reported a 32.6 percent decline in total our Company’s structure and better aligning us with market demands; net consolidated sales, reduced to US$1,770 million. Operating income including the implementation of a challenging cost and expense reduction (EBIT) amounted to US$98 million, representing a 38.7 percent decrease program. Today, we can proudly say that these initiatives have truly been versus 2008. These figures include the results of Empresas Comegua, S.A. successful, as they generated annualized savings of around US$122 mil- which was consolidated until November 2008, since then Comegua’s re- lion versus our forecasted range of US$80 to US$120 million. sults have been reported under the equity method. At the same time, we made other important adjustments which partially compensated the negative impact the financial crisis had on our key Financial Restructuring markets; we downsized our organization and adjusted installed capacity In order to protect our liquidity and maintain operational continuity, to adapt to the current market needs. given the severe decline in industrial activity at the end of 2008- with the

8 added threat of an even greater impact from financial derivative instru- majority of our creditors, Vitro is prepared to defend the interests of ments we used mainly to hedge our natural gas prices- Vitro decided not the Company, and of our shareholders and business partners, custom- to meet certain financial obligations. ers, suppliers and employees, as well as the communities where we are Due to this decision, some of our counterparties begun legal pro- located. ceedings to which Vitro have responded in a timely manner. Proceed- For this process, Vitro has therefore assembled a very capable negotiat- ings are following their normal legal process, and Vitro will continue to ing team. This allows us to remain focused on our operations and to defend its rights vigorously whenever necessary. continue to meet the expectations of our customers, suppliers and other Vitro has maintained an open dialogue with its counterparties from members of the value chain of the Company. To all, we appreciate the the outset. Throughout the year, the Company maintained conversa- confidence bestowed upon us and reiterate our commitment to continue tions and exchanged proposals with bondholders seeking to reach a sat- offering the highest quality products and service possible. isfactory agreement for all parties; specifically an agreement in line with To our valued shareholders, on behalf of everyone at Vitro I would Vitro’s cash flow generation capacity given current market conditions. like to reaffirm that our collective efforts and dedication are focused In February and March of 2009 some of the Company’s subsidiaries, on strengthening our Company to regain satisfactory levels of value and in certain cases the Company itself, were sued by counterparties generation. involved in financial derivative operations who collectively demanded a payment of US$240 million plus interest. In June 2010, Vitro reached an agreement to settle the amount related to derivative financial instruments (“DFIs”) with Calyon, London Branch and on September 2010, the Company reached a settlement agreement with Fintech Investments Ltd. (“Fintech”), who had previously acquired all of the remaining DFIs claims from the other counterparties. As a result of these Settlements, all Sincerely, of the lawsuits related with the DFIs have been dismissed. To date, the negotiations with bondholders continue and Vitro’s efforts are focused on arriving at a consensual restructuring with the majority of its creditors. The Company remains committed to offer a package that will represent an enhanced recovery for creditors versus the historical pricing levels during the last six months of the Senior Notes. The proposed struc- Hugo A. Lara García ture has the purpose of ensuring the long-term financial sustainability Chief Executive Officer and competitiveness of Vitro, which should have a positive impact on the Vitro, S.A.B. de C.V. future value of the restructured debt. Even with our intent of reaching an acceptable agreement with the September, 2010

9 Glass Containers This Vitro business unit supplies glass containers to the following industries: beverage, beer, food, wine and liquor, cosmetics and pharmaceuticals, as well as a broad range of design and marketing services. It is the main manufacturer in Mexico and Central America, the most important exporter into the US, and one of the leading glass manufacturers in the world. Also supply raw materials, machinery and industrial equipment to different industries.

10 Business Outlook Industria del Álcali Results for 2009 were affected by the prolonged and deep market Industria del Álcali, a Vitro company that manufactures, markets and contraction. distributes soda ash, sodium bicarbonate, sodium chloride and calcium Glass Containers production declined from early in the year, not chloride, basic ingredients for the glass, soaps and detergents, chemicals, only in the beer sector, but in all sectors Glass Containers serves, with pharmaceutical, food, oil, and water treatment industries, registered the exception of fragrances and pharmaceutical. This scenario required positive results by operating its four plants at 99.5 percent capacity. dramatic capacity adjustments in order to meet the lower demand lev- The greatest challenge the company faced in 2009 was the broad els, aggressive cost and expense reduction programs were simultaneously based market contraction, which impacted Álcali’s top line as well as put in place. those of the industries it serves. The major drop in oil prices brought We also adjusted our workforce and capacity utilization to accom- down prices in ocean shipping and represented another challenge; in- modate these demand changes. Vitro’s customers remained supportive creased shipping at cheaper prices brought competitive products into during these difficult times, and throughout 2009 we implemented a Mexico from China. series of measures directed towards strengthening these valuable long We addressed this challenge through increased productivity and term business relationships. strict adherence to the cost and expense reduction plan. We also rein- We were able to manage the market’s recessionary impact through forced alliances with customers by demonstrating that our high-quality creativity and innovation, encouraging new product development, pro- products and services have been and will always be available to them at ducing high-value-added glass containers and exploring the market for competitive prices, regardless of economic environment. new niche opportunities. In order to increase productivity and operating efficiencies, we in- The Mexican Containers and Packaging Association (“AMEE”) once vested in a replacement drier at Álcali’s soda ash plant in 2009, which again awarded recognition to 45 Vitro glass containers, specially de- allowed us to improve operations and gain important cost savings in signed for several of our high-profile customers. At the same ceremony, energy consumption, also benefiting the environment. a first-ever Sustainable Container Award was given to Vitro, for comply- 2009 was good year for Industria del Álcali; it reported a 14.6 in- ing with specific criteria, including: performance, cost, use of renewable crease in sales compared with the prior year. resources, use of new technology and, among others, for being a clean We are optimistic; the recovery of our end markets, combined with industry. our important alliances with customers and suppliers, should ensure we Likewise, Vitro excelled among companies from 32 countries, when meet or exceed our goals in the near future. for the third consecutive year, three of its glass containers received the annual “World Star Award” from the World Packaging Organisation. Strategic Perspectives for the Business Consolidated net sales for Glass Containers were US$919 million, a While the markets we serve recover, we will continue focusing on de- 34.8 percent year over year decline. Glass Containers reported EBITDA veloping and improving our products and services in order to offer of US$223 million, equivalent to a decrease of 11.5 percent compared optimum solutions for our customers’ needs. We will strengthen our to 2008. efforts to maintain a competitive cost structure and to be prepared to Sales for Vitro Packaging, our US subsidiary, decreased by 9.8 per- address any demand increases, once the economic environment begins cent compared to 2008, largely due to the decline in demand for glass to normalize. containers from the beverage and wine markets. We will continue to seek out new business opportunities by taking advantage of our team’s experience and talent, while nurturing solid, Fabricación de Máquinas well-established relationships with our current portfolio of customers. Fabricación de Máquinas (“Fama”) a Vitro subsidiary specializing in the development of machinery, molds and equipment for the glass industry, reported a 48.9 percent decrease in sales caused by the downsizing of the installed capacity in our manufacturing facilities as well as a significant decline in demand for the equipment and machinery that we supply to external customers and other industries. Fama continues to integrate new technologies into its processes in order to improve its products, an example is Fama’s recent strategic alliance with Boscato Dalla Fontana, one of the world’s largest glass industry equipment manufacturers.

11 Flat Glass Flat Glass is Vitro’s business unit dedicated to glass manufacturing, processing, commercialization, distribution and installation for the construction and automotive industries, in the later for both original equipment and replacement glass. The quality of Vitro’s products and services has transcended borders, and the Company operates facilities in Mexico, Portugal, Spain, France, Colombia and the US through which it serves the North American, Central and South American and European markets.

12 Business Outlook Strategic Perspectives for the Business The global economic meltdown had a significant impact on diverse mar- Glass is a product that has a very clear future. Its virtues of trans- kets, including the construction and automotive industries, which had a parency, safety and malleability, now combined with high performance materially negative effect on our business results. in energy conservation, have substantially broadened its automotive Flat Glass net consolidated sales for 2009 contracted by 29.3 percent applications and use in construction. compared to 2008, principally due to the fact that the markets we serve The construction market in Europe, particularly the residential and entered into a recession at the end of 2008. Flat Glass reported EBITDA large building sectors, remain in a challenging situation. Neverthe- of US$6.2 million for 2009, a decline of 91.6 percent over 2008. less, we’re confident the market will recover in the medium term. In The Float Glass business unit, which serves both the construction the meantime, we have taken the necessary measures to address the and automotive industries, registered a decrease in sales caused by a effects of the industry’s contraction; one example being the consolida- severe drop in US automotive demand, a reduction of exports to the tion of Vitro’s production centers in Spain. US and the contraction in the US real estate market. Following the In Mexico, the construction industry should experience a slight financial collapse and its related impact- particularly on the construc- recovery during the next months. In the last quarter of 2009 Vitro tion industry during 2007 and 2008- Vitro America, our US subsidiary, brought on line the first production line of low emission glass in Mexi- faced one of its sharpest contractions in recent history. co, thus becoming the nation’s first supplier of this type of glass. Vitro’s subsidiaries in Spain, Portugal and France were also impac- With regards to the North American automotive industry, we also ted by the challenging global economic environment. Spain, where the anticipate a slight improvement during this year and the following greater part of Vitro’s regional facilities are located, showed a sharp years, but expect to achieve 2007 production levels until 2014. contraction in its markets caused by the bursting of the real estate It is becoming increasingly challenging to supply the Venezuelan bubble, which will continue to negatively impact the Company going market from Colombia, given the difficult business environment be- forward. tween these two countries. As an important part of Vitro’s strategic In the case of the automotive glass market, the general industry col- business plan, we will continue to make a concerted effort to find work- lapse was compounded by the weak financial situation of some of the able solutions that allow us to continue serving the large automotive large automotive original equipment manufacturing companies, who OEMs in the region. resorted to federal aid to mitigate their severe financial problems. Flat In the US, we expect that the non-residential construction sector Glass took the necessary measures to minimize the effect, adjusting will persist contracting slightly. In this scenario, we will continue to production capacity to reduced demand and, in doing so, continued focus on the competitiveness of our cost and service structure. One serving the needs of its customers at competitive costs. Management project concluded in 2009 that will have a positive impact in early made significant adjustments to Vitro’s cost structure at all facilities- in 2010 is the consolidation of three manufacturing facilities in Califor- Mexico as well as abroad- in order to adapt to the changed market nia into one single facility in the City of Industry located east of Los environment. Angeles,California. Vitro’s business segment serving the construction industry intro- The above strategies prove that, in addition to creating solutions duced pyrolytic glass to the market in 2009. This product was designed that counteract the world economic recession’s negative impact on our to satisfy the demand for glass products with thermal control; “low- markets, we are also focused on operating at production levels that emission” glass that allows a large percentage of natural light penetra- are determined by Flat Glass customers’ levels of demand, only making tion while generating significant energy savings; as well as “reflective” investments that are absolutely necessary while developing new, inno- glass, which controls excessive heat transfer by reflecting solar energy vative products. and capturing heat mass.

13 Sustainable Development 2009 was a year characterized by great challenges which ultimately led to significant advances in our sustainable development initiatives, a key element of our business strategy which assures our Company’s long term viability and the harmonious development within the many areas of our organization.

14 Socially Responsible Company are able to take advantage of the latest technologies and offer over 300 On 2010, Vitro was awarded the distinction of “Socially Responsible online courses, all of which are available through our internal network Company”, by the Mexican Philanthropic Center, A.C. (Cemefi for its training system “@utodesarróllate”. initials in Spanish). Recognizing, for the third consecutive year its commitment to the care and preservation of the environment, the develop- Plant Safety ment of its employees, the support of its community and the ethical and Year after year we place strong emphasis on workplace safety. Our pro- transparent management of the Company. gram, applicable to all of our employees, contractors and suppliers, has These distinctions were awarded to: the Flat Glass and Glass Con- allowed us to maintain an accident ratio that is well below the estab- tainers business units, as well as to Vitro Corporate Offices and Clínica lished norms and regulations, year after year. Vitro (Vitro’s Clinic). We also took an important step towards our strategy of encourag- Promoting Good Health ing social responsibility through our value chain. For the first time ever, Good health is fundamental to our employee’s well being and quality Calzado Industrial Duramax, a Vitro supplier, was awarded the distinc- of life. We have therefore designed a permanent preventive healthcare tion of being a “Socially Responsible”, Small and Medium Sized (PYME and medical services program for our workers, in line with the labor and for its initials in Spanish) Mexican Company. health laws in each country where we do business. This program enables us to detect different ailments, such as dia- betes and high blood pressure, among others, and to rely on healthier TRANSPARENCY AND BUSINESS ETHICS employees and less work days lost due to illness. Best Practices in Business Ethics Vitro’s focus on best-practice corporate governance to achieve the Education highest standards of transparency and business ethics has not been In 2009 we continued to support our employees looking to improve their overlooked. education; those who wished to finalize their basic education, and those In 2009, our “Corporate Institutionalization and Transparency” pursuing specialized courses. practice, an initiative related to the ongoing implementation of trans- One example of our commitment is Vitro’s High School (Prepa- parency–related policies and guidelines was awarded “Best Practice for Empresa) program, established in 2005 in conjunction with the Univer- Business Ethics in Mexico” by the Cemefi. sidad Regiomontana. This past year, the third generation of students, a total of 29, –graduated from this program, bringing today’s total to 94 Code of Conduct students who have received their diploma through this extracurricular Our Business Conduct and Professional Ethics Code, allows us to ensure program. that the organizations beliefs, values and the highest ethical standards are an integral part of day to day operations. With 98 percent of our Housing Ownership Program: Own your employees taking Vitro’s Professional Ethics course in 2009. own home Established in 1952, our Housing Department has worked diligently to Transparency Mailbox provide support to our Mexican employees in the mortgage loan ap- To guarantee the compliance to our Professional Code of Ethics, as well plication process so they can buy their own home, thus improving the as to the different national and international legislation that regulate quality of life for employees and their families, 1,097 new mortgages were our conduct, we have a communication tool that is available 24/7, 52 successfully obtained in 2009 alone, bringing the total to 26,167, since weeks of the year so any employee, customer, supplier or third party the program started. can document and inform any deviation from the Code in a strictly confidential manner. OUR ENVIRONMENTAL COMMITMENT Our recycling program continues to expand OUR PEOPLE One of the pillars of our commitment to sustainable development is our Training and Development glass recycling program, the most important in the industry in Mexico, We believe our Company is only as competitive as our employees’ skill- called “For a More Transparent World.” levels. We are therefore constantly striving to encourage their profes- Thanks to this initiative, during this past year we collected 152,133 sional development and to strengthen their skills and competencies. We tons of glass for recycling, representing a 16 percent increase from

15 2008. This translates into natural gas savings of 164,304 MMBTUs’, Madrid Window Renewal Plan the elimination of 9,620 tons of CO2 equivalent being released into the Vitro Cristalglass, Vitro’s European affiliate, is actively collaborating atmosphere, and freeing up 304,266 cubic meters of physical space in with the community of Madrid to promote the Windows Renewal Plan solid waste landfills. in residential buildings. This Plan substitutes single pane glass windows with double pane fortified thermal glass that yields important Energy Efficiencies energy savings. In 2009 we worked aggressively to improve the design and operation of various furnaces in order to improve efficiencies, reduce operating Lighter bottles costs, use less energy to melt glass, reduce emissions and make a sig- We continue to work towards reducing the weight of our bottles, which nificant contribution to environmental protection. represents important savings in energy and raw materials consumption while allowing for greater efficiency in our production processes. Electricity Savings Our electricity savings programs have also made progress, by Containers 100% free of heavy metals substituting high energy consumption equipment with energy In 2009 we reached an important milestone when 100 percent of the efficient equipment. production of non-returnable decorated containers was free of heavy We have also renovated the high and low air pressure compres- metals through a total migration to organic paints. This accomplishment sors responsible for approximately two thirds of our plants’ electricity contributes to the elimination of chemical reactions that could be harm- consumption. ful to people or the environment.

Clean Industry Another step forward for Naturally Vitro In 2009 our plants were once again certified as “Clean Industry” by For the third consecutive year, Vitro personnel enthusiastically participat- the Mexican government’s Federal Environmental Protection Agency for ed in the “Naturally Vitro” campaign by planting 3,500 trees. This past complying with current environmental regulations. year the Company broadened the scope of its participation by including 2,000 seedlings called “Flor Española” which are vitally important to the Authorities recognize our environmental biological cycle of the Monarch butterfly. leadership The Glass Containers business unit was recognized by the Mexican United for the preservation of wilderness Secretary for the Environment and Natural Resources as a“Leading areas Company” within the Environmental Leadership for Competitiveness Through the Wildlife Organization (OVIS for its initials in Spanish) we Initiative, a program that seeks the better use of raw materials, the confirmed our strong commitment to biodiversity, wildlife and wild plant reduced emissions and a decreased discharge of contaminants into our conservation programs by taking an active part in the 9th World Wil- streams and rivers. derness Congress which took place in Mérida, Yucatán. This important international forum was founded by The Wild Foundation in 1977. Our products contribute to sustainable architecture We strongly support sustainable development by supplying a broad OUR SOCIAL COMMITMENT range of architectural glass with thermal insulation properties, allow- Each day that passes we’re recycling more ing up to 70 percent savings in heating and cooling systems’ electric With the objective of promoting a glass recycling culture, Vitro joined energy consumption. forces with different government authorities, schools, associations, res- taurants, bars and hotels to undertake waste separation campaigns and Vitro America: a manufacturer of energy collect discarded glass. efficient products Thanks to the general response, this initiative was once again very Our US subsidiary, Vitro America, was awarded the Crystal Achievement successful; we were able to increase the number of glass recycling pro- Award for the most innovative energy efficient glass application on the grams by 12 percent compared to 2008 through 256 different projects. Azure Tower in Dallas, Texas, in a contest organized by the National In addition, the tonnage collected with the community’s help increased Glass Association. by 14 percent year over year.

16 Agreement with UANL An anniversary tour of MUVi Vitro believes education is the cornerstone for Society’s growth, and has To commemorate the 100th anniversary of Vitro, the Glass Museum signed an agreement of cooperation with the Universidad Autónoma de enriched its heritage with materials that document the Company’s Nuevo León (Autonomous University of Nuevo León) to incorporate an trajectory including one of the first bottles manufactured by Vidriera ‘application of glass in architecture’ academic program in their curricu- Monterrey, as well as the commemorative bottle for its first 100 years; lum, using criteria based on sustainability. 13,000 visitors toured the museum in 2009. This agreement also strengthens the bond between the two institu- Sustainable development is part of the reason we exist: Glass, an tions in the areas of expert interchange, professional practices and job environmentally friendly material, is 100 percent recyclable. opportunities.

Recreation and family integration We are proud to contribute to the improvement in the quality of life of our employees and the community through the Vitro Parque El Man- zano, an impressive 585 hectare green area dedicated to recreation and family use. This park a true “green lung” for the state of Nuevo León, spreads environmental awareness and is focused on the development and protection of wild life and plants; 46,492 people visited the park in 2009.

17 Board of Directors

ADRIÁN SADA G. 1944 RICARDO MARTÍN BRINGAS 1960 ANDRÉS A. YARTE C. 1941 Member since 1984 Member since 2007 Member since 1991 Chairman of the Board President and Member of the Board at Chairman of the Boards and Chief Executive President of the Finance and Planning Committee Organización Soriana; Member of the Boards Officer of Empresas Yarte, S.A. de C.V., and Member of the Boards of Alfa, Gruma, Cydsa, of Teléfonos de México, Aeroméxico, Grupo K-Inver, S.A. de C.V. Regio Empresas, Latin American Executive Board Financiero Banamex, Instituto Tecnológico y for the Wharton School, Consejo Mexicano de de Estudios Superiores de Monterrey (ITESM), ALEJANDRO F. SÁNCHEZ MÚJICA 1954 Hombres de Negocios (CMHN), and Grupo de Consejo Mexicano de Hombres de Negocios Secretary of the Board since 2007, non Board member Industriales de Nuevo León. (CMHN), Grupo de Empresarios de Nuevo León and Executive Vice President and General Counsel Asociación Nacional de Tiendas de Autoservicio y Member of several Mexican and foreign JULIO ESCÁMEZ F. 1934 Departamentales (ANTAD for its initials in Spanish). corporations, such as of Empresas Comegua, Member since 2006 S.A.; and of the Advisory Board of The University Member of the Boards of Consorcio Industrial de CARLOS F. MUÑOZ O. 1955 of Texas Lady Bird Johnson Wildflower Center; Manufacturas, S.A., and of Vitro, S.A.B. de C.V. Member since 2000 Secretary of the Board of Trustees of Chipinque (1974–1998); and Alternate Examiner of the Board President of Fomento Bursátil; President of Holding Ecological Park; Formerly Senior Partner at of Vitro, S.A.B. de C.V. (1999-2005). Fibsa; Member of the Board (North Zone) of Thompson & Knight (2003-2005) and currently Banco Nacional de México (Banamex); Member of Off-Counsel; Former General Counsel of Grupo ALEJANDRO GARZA L. 1926 the Board of Instituto Tecnológico y de Estudios Pulsar/Savia (1982-2003) and of one the divisions Member since 1972 Superiores de Monterrey (ITESM), Chihuahua of Grupo Kuo (1975-1981) and Legal Manager of Member of the Executive Committee of Desarrollo Campus. Indeval (1973-1975). Inmobiliario Omega; Member of the Boards of Cydsa, Instituto Tecnológico y de Estudios JAIME RICO 1957 Superiores de Monterrey (ITESM), and Centro de Member since 2008 Estudios en Economía y Educación; Member of the President and CEO of the Boards of Vitro Europa, Latin American Executive Board for the Wharton IP Vidrio y Cristal and Vitro Global; and Member of School and the Joseph H. Lauder Institute of the the Board of Vitro Cristalglass. University of Pennsylvania. FEDERICO SADA MELO 1979 TOMÁS GONZÁLEZ SADA 1943 Member since 2009 Member since 1980 International Commercial Manager at Flat Glass Chairman of the Board and Chief Executive Officer business unit; Member of the Boards of Grupo of Cydsa; Vice President of the Mexican Institute Vical, Parque Ecológico Chipinque, A.C., Pronatura for Competitiveness; Honorary Consul of Japan Noreste, A.C. and Instituto de Empresa Alumni. COMMITTEES at Monterrey, Mexico; Treasurer of the Fundación Audit Committee Martínez Sada; Member of the Board of Trustees JAIME SERRA P. 1951 Joaquín Vargas Guajardo (President) * of the Universidad Regiomontana; Member of Member since 1998 Manuel Güemez de la Vega * the Consejo Mexicano de Hombres de Negocios President of SAI Consultores, S.C.; Founder of Jaime Serra Puche * (CMHN); and Member of the Board of Directors of Aklara (Electronic auctions), Centro de Arbitraje Jonathan Davis ** Regio Empresas. de México (CAM), and the Mexico NAFTA Fund Claudio L. Del Valle Cabello (Secretary) *** (Private Capital Fund); Member of the Boards of MANUEL GÜEMEZ 1942 Chiquita Brands International, Fondo México, Corporate Practice Committee Member since 2006 Tenaris, and Grupo Modelo; former Undersecretary Manuel Güemez de la Vega (President) * President of the Corporate Practices Committee of Finance, Secretary of Trade and Industry and Alejandro Garza Lagüera * Chairman of the Boards of Regio Empresas and Secretary of Finance of the Mexican Government Carlos Muñoz Olea * Grupo PREZ; Member of the Advisory Committee (1986-1994); Member of Trustees of the Yale Ricardo Martín Bringas * of Grupo de Seguridad Integral; and Alternate University (1994-2001); Co-chair of the President’s Alejandro F. Sánchez Mújica (Secretary) *** Member of the Board of Gruma. Council on International Activities of Yale University; Member of the Trilateral Commission Finance & Planning Committee HUGO A. LARA GARCÍA 1965 and the US-Mexico Bilateral Council. Adrián Sada González (President) Member since 2009 Jaime Serra Puche * Chief Executive Officer JOAQUÍN VARGAS G. 1954 Tomás González Sada President of the Automotive Cluster in the state Member since 2000 Andrés A. Yarte Cantú of Nuevo Léon, Mexico; Member of the Board of President of the Audit Committee Hugo A. Lara García Empresas Comegua, S.A.; General Manager of Member of the Boards of Bolsa Mexicana de Jaime Rico Garza Parmalat de México (2001-2004); at Vitro he held Valores, Grupo Financiero Santander, Posadas, Federico Sada Melo several key positions such as Glass Containers Grupo Costamex, El Universal and Médica Sur; and Claudio L. Del Valle Cabello (Secretary) *** business unit’s Commercial Director (2004-2005), Member of the Patronato del Instituto Nacional de * Independent Board member Float Glass´ Vice President (2005-2006), and Nutrición. ** Finance expert, non Board member President of the Flat Glass business unit (2006-2008). *** Secretary, non Board member

18 Corporate Governance

Corporate governance is an important focus for Vitro, in order to guarantee the Company’s institutionalization through the professionalization of its management. For this reason we not only strictly adhere to the guidelines and regulations that are mandated in the Mexican Securities and Exchange Bylaws, but also seek to surpass these standards.

In addition to having well established Auditing and Business Practices Among the many different activities in place to support good corporate committees within its Board of Directors, the Company has also estab- governance, Vitro is constantly monitoring and updating its Corporate lished a special committee for Finance and Planning. Business Conduct and Code of Professional Ethics. In 2009, 98 percent Each committee member diligently fulfill his duties and obligations in of active employees studied and passed the orientation course. Vitro a timely manner. As of May 2007, the committee regulations have been has also implemented a System of Anonymous Reporting, so anyone put in writing, including clearly defined objectives, structure and composi- internal or external to Vitro can anonymously and confidentially disclose tion, functions and levels of authority for each individual committee. issues or concerns. The Company continues to establish and implement practices, poli- As of 2009, the Company implemented a new policy for Related cies and guidelines on an ongoing basis to assure that Vitro and its sub- Party Transactions to closely monitor and regulate any transaction of sidiaries are managed in a transparent manner. In September of 2009 Vitro or any of its subsidiaries with any employee, shareholder, board the Company was awarded the “Best Ethical Business Practices Award” member or any of their relatives, thus protecting the Company’s in- by the Mexican Center for Philanthropy, A.C. (Cemefi) as well as by the terests. Alliance for Social Responsibility in Mexico (AliaRSE) for “Institutionaliza- Vitro and its subsidiaries have adopted the highest standards of tion and Corporate Transparency”. corporate governance and are continuously creating and implementing These initiatives were designed to improve transparency and better policies and practices that add value to its overall strategy, management, institutionalize Vitro and its subsidiaries. To positively impact the Com- and its many different stakeholders. pany and related audiences, translating this benefit into increased economic strength.

19 Operating and Financial Analysis

ECONOMIC ENVIRONMENT

During 2009 the largest world economies continued to experience the The Mexican Peso devalued versus the US Dollar during the first four financial and economic crisis which began during the second halfof months of 2009. However, the negative tendency has since reversed 2008 and, as of the first quarter of 2010, has not shown a clear indica- itself and the Mexican Peso began its recovery vis-à-vis the US Dollar, tion that the crisis is over. Its effects were reflected in extreme unem- due to interest rate differentials between the two currencies and lower ployment rate growth, credit scarcity, as well as in reduced demand risk aversion reflected in stock markets. As of December 31, 2009 the from the automotive and construction industries, mainly in the United exchange rate was $13.06 Pesos per US$1.00 compared to $13.83 States and Spain where Vitro has a strong presence. Pesos per US$1.00 at the end of 2008 resulting in a 5.6 percent an- The havoc from this economic crisis drove Global GDP figures into nualized appreciation of the Mexican Peso. On average the Mexican negative territory in amounts of 2.2 percent contraction, a figure sharp- Peso devalued 21 percent, moving from an average exchange rate of ly contrasting with the positive growth figures observed in 2007 and $11.19 Pesos during 2008 to an average exchange rate of $13.57 Pe- 2008, based on statistics from the International Monetary Fund. sos during 2009. For 2010, it is widely expected that the Mexican Peso will strengthen throughout most of the year, due to the US policy of maintaining low interest rates. GDP Growth 2007 2008 2009 During the first nine months of 2009, as a consequence of the Mexico 3.3% 1.3% (6.5)% global economic deceleration, the price for natural gas, our main en- USA 2.1% 0.4% (2.4)% ergy source, dropped by 56 percent from the closing price of US$6.07 per MMBTU at the end of 2008. At the end of December, 2009 natu- Spain 3.6% 0.9% (3.6)% ral gas prices were US$4.40 per MMBTU; an annualized drop of 28 Global 3.3% 3.4% (2.2)% percent.

According to figures provided by Mexico’s National Institute for Sta- tistics and Geography, the economy recorded a 6.5 percent decline in Reynosa Mix GDP, the sharpest contraction on the American continent and one of

the worst worldwide. For 2010 it is expected that Mexico will resume 14

growth at a projected rate of 3.9 percent following the expected recov- 12

ery in the US economy. U 10

Despite of the US government’s stimulus initiatives to avoid a sharp- 8 er and more prolonged recession in its domestic economy and reactivate 6 US$/MMBT the more important sectors of the economy, the recovery has been slow 4

and is anticipated to continue in a similar fashion during 2010. 2 0

2007 2008 2009 Dec-07 Mar-08JJun-08 Sep-08 Dec-08 Mar-09 un-09 Sep-09 Dec-09 Mexico Consumer Inflation Index (Based on the National Consumer Price Index) 3.8% 6.5% 3.6% US Consumer Inflation Index (Based on the Consumer Price Index) 4.1% 0.1% 2.7% Difference between US/Mexico Inflation (0.3)% 6.4% 0.9% Devaluation (Revaluation) Mexican Peso 0.5% 27.3% (5.6)%

20 CONSOLIDATED OPERATING RESULTS Consolidated Net Sales In million of US nominal dollars Sales For the year ended December 31, 2009 our Net Consolidated Sales were 2,212 2,401 2,560 2,627 1,770 916 1,028 1,078 1,157 825 US$1,770 million, 32.6 percent less than Net Consolidated Sales in 2008. 708 817 881 870 461 On a comparable basis, excluding Comegua which was consolidated un- 588 556 601 600 484 til November 2008, our sales decreased by 27.4 percent year over year. The contraction in the markets serviced by the Company, mainly the beer segment, the US automotive industry and the construction industries in the US and Spain, had an adverse impact on Vitro’s sales volumes and consequently on 2009 operating results.

Glass Containers 2005 2006 2007 2008 2009 Export Foreign Domestic Consolidated Net sales for the Glass Containers business unit reached US$919 mil- subsidiaries Net Sales lion in 2009, representing a 34.8 percent decrease when compared with 2008. On a comparable basis, excluding Comegua which was consolidated until November 2008, net sales decreased 24.6 percent during Glass Containers the period. This unfavorable comparison was the result of the significant In million of US nominal dollars Consolidated Net Sales contraction in the beer and food sectors as the economic crisis reduced 1,051 1,222 1,321 1,410 919 our customers’ requirements. In addition, the average exchange rate in 2009 was higher than that of 2008 which makes a fair year over year comparison difficult, due to the effect of reporting in US Dollars, sales that were incurred in Pesos.

Flat Glass Net Sales for the Flat Glass business unit were US$845 million representing a 29.3 percent decrease versus 2008. This decline reflects the deceleration in the construction and automotive sectors in Mexico, the US 2005 2006 2007 2008 2009 and Spain, all key markets for Vitro. In addition a higher exchange rate during most of 2009 compared to 2008 makes it difficult to make a fair year over year comparison, due to the effect of reporting in US Dollars, Flat Glass sales that were incurred in Pesos. In million of US nominal dollars Consolidated Net Sales

1,130 1,149 1,212 1,195 845 Operating Income (EBIT) Consolidated Operating Income (EBIT) was US$98 million, a 38.7 percent decline from the US$160 million achieved in 2008. EBITDA decreased 27.8 percent from US$329 million at year end 2008 to US$237 million at the year end 2009. On a comparable basis, excluding Comegua which had been consolidated until November 2008, the operating income (EBIT) decreased 34.1 percent while the operating cash flow fell 21.6 percent year over year. The decline in Operating 2005 2006 2007 2008 2009

21 Income (EBIT) was mainly due to lower sales and production volumes Capital Expenditures which resulted in a reduction in fixed cost absorption and an impor- Investments in plant, property and equipment were US$48 million com- tant working capital recovery. This was partially compensated by the pared to US$176 million in the prior year, a reduction of 72.7 percent. aggressive expense and cost reduction program implemented during During the year, and in an effort to preserve liquidity, Vitro decided to the year and the positive impact of lower energy prices on Operating rationalize investments and focus Capex on maintenance of productive Income (EBIT). facilities. The Glass Containers business unit represented 68 percent of The Operating Income (EBIT) and EBITDA margin moved from 6.1 total investments in fixed assets and was mainly applied to molds and percent and 12.5 percent in 2008 to 5.5 percent and 13.4 percent in furnace maintenance. The investment in Flat Glass represented 32 per- 2009, respectively. cent of the total investment in fixed assets and was used for maintenance of installed capacity. Total Comprehensive Financing Result During 2009 the total comprehensive financing result decreased by 78.1 percent to US$165 million compared to US$752 million during 2008, principally due to a lower loss from hedging operations during Investments in Fixed Assets In millions of US nominal dollars 2009. Heading operations resulted in a US$39 million loss in 2009 compared to the US$325 million loss corresponding to the claim from the 93 108 242 176 48 Company’s derivative counterparties during 2008. Additionally, and in sharp contrast to the prior year, Vitro experienced a foreign exchange gain of US$79 million during 2009 compared to a foreign exchange loss of US$240 million in 2008, due to the appreciation of the Mexican Peso vis-à-vis the US Dollar during 2009.

Other Expenses Net During 2009, Other Expenses Net decreased by US$17 million from

US$38 million in 2008 to US$21 million in 2009. This was mainly driven 2005 2006 2007 2008 2009 by the gain derived from the sales of fixed assets which practically offset the expenses incurred in the debt restructuring program and the impairment charge from fixed assets in accordance with accounting regulations. Consolidated Financial Position As of December 31, 2009 the Company’s debt was US$1,540 million, Taxes a US$55 million decline from that reported in 2008 year end. The Net During 2009 we recognized a favorable deferred income tax in the debt at the end of 2009 US$1,322 million, 9.9 percent lower than amount of US$43 million compared to a favorable deferred income 2008. This was principally due to the sale of properties that took place tax of US$172 million in 2008. This variation was mainly as a result in December 2009 which increased Vitro’s cash position by US$75 mil- of the foreign exchange referred in the Total Comprehensive Financ- lion. As a result of a new Mexican accounting regulation regarding ing Result. corporate consolidations and specifically, the consolidation of special purpose entities, as of 2009 Vitro’s factoring and securitization pro- Net Loss grams were consolidated into the Company’s Financial Statements. Net loss for the period was US$47 million compared to a net loss of Therefore, debt at the end of both periods includes what was consid- US$458 million in 2008. The reduction in net loss was driven primarily by ered off balance sheet debt in 2008. the decrease in the loss from derivative financial instruments claimed by the counterparties and a foreign exchange gain in 2009 resulting from Debt Restructuring Status the appreciation of the Mexican Peso versus the US Dollar compared to As part of Vitro’s debt restructuring discussions with creditors, on July a foreign exchange loss in the prior year. 20, 2010, the Company presented a restructuring counterproposal (the “Counterproposal”) to representatives of certain holders of Senior Notes, which in their three series aggregate US$1.216 billion outstanding prin-

22 Debt profile as of December 31, 2009(1)

Floating Rate Mkt Fixed Rate Fixed spread (2) Conditions (2)

Rate 79% 13% 8%

Dollars Pesos Euros

Currency 88% 9% 3%

Banks Market

Source 15% 85%

(1) Includes overdue debt (payment default) (2) LIBOR, TIIE and CETE base rates

cipal amount. Said counterproposal, which was not accepted, provided tech”), the firm that recently acquired the DFIs claims, previously owned the restructuring of approximately US$1.5 billion of Vitro’s debt. by Credit Suisse International, Deutsche Bank AG, London Branch, Merrill While the proposal was not accepted, in order to reach a consen- Lynch Capital Services, Citibank, N.A., Barclays Bank, PLC and Cargill, In- sual restructuring agreement, the Company is working on a consent corporated. The amount of the settlement agreed with Calyon and Fintech solicitation statement. The Company believes that the proposal includ- was US$67.3 million and US$190.0 million, including interest of US$3.9 ed in the Consent will assure the sustainability of the Company and million y US$13.6 million, respectively, recognized by the Company. significantly enhancing the worthiness of its restructured debt. Ad- As a result of these settlements, all of the lawsuits related with the ditionally, the Company believes that the proposal represents a higher DFIs have been dismissed. recovery than the average market price for the last six months of the senior notes due 2012, 2013 and 2017. The Company continues to Stock Performance negotiate with the Ad Hoc Bondholder Committee in an effort to se- On June 22, 2009 the Company announced that it had notified the cure their support of the Consent in advance of its launch but there Bank of New York Mellon, the holder of the Ordinary Deposit Certifi- can be no assurances that such support will be achieved. cates represented by its shares in circulation (CPO’s), of its decision to end its Depositary Contract that had been subscribed with this in- Financial Derivative Instruments Status stitution and through which the corresponding American Depositary During February and March 2009, the Company and several of it’s sub- Receipts were issued. This action was due to the Company’s objective sidiaries, received a total of six lawsuits from counterparties involved in to focus on the attractiveness of its shares on the Mexican Stock Ex- financial derivative transactions. On April 12, 2010, the judge of the change and eliminate the high costs involved with the maintenance Supreme Court of the State of New York issued a ruling regarding the of the ADR’s on the NYSE. On August 24, 2009 the Company’s ADR’s request for summary judgment made by Vitro’s counterparties in finan- stopped trading on the New York Stock Exchange. cial derivatives transactions. The judge granted Vitro’s counterparties’ On September 8, 2010, the Company filed a Form 15-F with motions as to liability only and denied them as to the amounts sought by the U.S. Securities and Exchange Commission (the “SEC”) with the said counterparties, finding that the financial institutions had not provid- intention to deregister its American Depositary Shares (the “ADRs”), ed sufficient and reasonable detail to verify the methods and accuracy of Vitro’s 8.625% Senior Notes due 2012, Vitro’s 11.75% Senior Notes their calculations. The Court then referred the issue of damages to a Spe- due 2013 and Vitro’s 9.125% Senior Notes due 2017 (collectively, the cial Referee for further proceedings and recommendation to the Court, “Notes”), and terminate its reporting obligations under Section 12(g) and held the motions for summary judgment in abeyance pending re- of the Securities Exchange Act of 1934 (the “Exchange Act”). ceipt of the report of the recommendations of the Special Referee. Vitro is already eligible to suspend its Exchange Act reporting On June 7, 2010, the Company reached an agreement to settle the requirements as it complies with the rules of the Exchange Act given amount related to derivative financial instruments (“DFIs”) with Calyon, that there are no remaining holders of Vitro ADRs and each class of London Branch (“Calyon”). In addition, on September 6, 2010, the Com- Notes are held of record by less than 300 persons registered in the pany reached a settlement agreement with Fintech Investments Ltd. (“Fin- Depositary Trust Commission worldwide basis.

23 If the SEC has no objection, the deregistration and termination of re- By reaching this Agreement, Cristalglass is now positioned for sus- porting obligations will become effective not later than 90 days after tainability and financial stability according to its business plan, which the filing. Upon filing of the Form 15-F, Vitro’s reporting obligations includes leadership in special construction projects and the diversifica- with the SEC are suspended until the deregistration is effective. How- tion of its products and markets. This plan will allow the company to ever, Vitro will continue to provide information to the Mexican Stock achieve new growth of its business and to preserve jobs. Exchange and will make such information available on its website. Trading of Vitro’s shares on the Mexican Stock Exchange and the Vitro Concluded the Sale of non Productive Real Estate ADR’s on the New York Stock Exchange was as follows: Assets Contributed to the Bancomext Trust On August 24, 2010, concluded the sale of non-productive real estate 2009 assets for US$63.8 million. The proceeds of such sale, plus US$5.5 million BMV Per share (pesos) NYSE per ADR*(US dollars) of the Company’s available cash, were applied to liquidate the Trust, with Min Max Min Max an outstanding balance of US$69.3 million, including accrued interest. 1st Quarter 3.80 8.30 0.70 1.85 The sale included unused ancillary property surrounding the corporate 2nd Quarter 4.40 8.12 0.91 1.92 headquarters. As a result of such sale, the Company has regained title of its two corporate headquarters office buildings, and their respective land, 3th Quarter 5.05 7.68 1.04** 1.71** which were part of the original assets contributed to the Trust. 4th Quarter 6.16 8.24

* ADR: American Depositary Receipt, are equivalent to three regular shares of VitroA with Vitro Refinances Credit Line for Vitro America non - voting rigths. ** August 24, 2009 the Company’s ADR’s stopped trading on the New York Stock Exchange. On June 2010, the Company refinanced a US$32.5 million credit line for Vitro America with Bank of America for an additional year.

Derived from the decision of the Company to postpone the filing of its Vitro Receives Notification Regarding 2009 fourth quarter audited financial report and, subsequently, its an- Bonds Maturing in 2013 nual report for the year ending December 31, 2009, since June 2, 2010, On April 12, 2010 the Company announced that it received a docu- the Company’s share was suspended from trading from the Mexican ment on letterhead of the U.S. Bank National Association, which serves Stock Exchange; once the Company presents said information it share as trustee of the Senior Notes due 2013 (the “2013 Notes”), entitled will resume trading. “Notice of Default and Acceleration” referenced to the 2013 Notes. The outstanding principal amount of the 2013 Notes, as of such date was $216 million. A notice of acceleration is commonly issued when an issuer is in RELEVANT EVENTS payment default and does not mean that such issuer has entered into a new litigation. Acceleration of the 2013 Notes has been anticipated Financial Position by the Company and could not in any way impact Vitro’s ability to con- Vitro Successfully Refinances its Credit Lines tinue to operate in the normal course while continuing the negotiation of its Spanish Subsidiary process with bondholders. On August, 2010, the Company through Vitro Cristalglass S.L. (“Cris- talglass”), its Spanish subsidiary, has reached an agreement to refi- Vitro Receives Notification Regarding nance most of its credit lines (the “Agreement”) with its major banking Bonds Maturing in 2012 and 2017 institutions, allowing it to continue its business plan for the next three On January 4, 2010 the Company announced that it had received no- years. The Agreement was signed in Ponferrada, with eight financial tification by a group of bondholders which they labeled as an accelera- institutions. The amount of the Agreement is €44.8 million euros. tion of payment. This notification refers exclusively to those bonds with Cristalglass is Vitro’s main subsidiary in Europe and has production maturities in 2012 (“2012 bonds”) and 2017 (“2017 bonds” together sites in the province of León (Camponaraya and La Rozada in Paran- with the 2012 “the bonds”) totaling US$1 billion. dones) and other parts of Spain (Madrid - Fuenlabrada, Valencia - Ná- According to Vitro’s indenture agreements, a minority group of quera and Asturias - Porceyo). It is also the holding company for the at least 25 percent of bondholders for each of the bonds may submit subsidiaries of France and Portugal. an acceleration notification.

24 Vitro Strengthens its Liquidity the recourse presented by Vitro opposing the decision issued by the lower On December 16, 2009 the Company announced it had settled a trans- court. At this time, Vitro is preparing to present a final appeal through an action for US$75 million with Fintech Advisory Limited (“Fintech”) “Amparo” against the decision issued by the Appeals Court. through the creation of a Trust in Mexico (the “Trust”). Vitro and its subsidiaries: Industria del Álcali, S.A. de C.V., Vidriera Guadalajara, Legal Proceedings on Certificados Bursátiles S.A. de C.V., Vidriera Monterrey, S.A. de C.V., Vidriera Querétaro, S.A. Vitro 03 and RBS Bank de C.V., Vidriera Los Reyes, S.A. de C.V. and Vidriera Toluca, S.A. de In May 2009 the Company received notification of an executive mer- C.V. all contributed seven properties (land) to the Trust receiving in cantile trial initiated by Scotia Bank Inverlat, Casa de Bolsa, S.A. de exchange through the Trust US$75 million that were contributed to C.V. Grupo Financiero Scotia Inverlat in its capacity as common rep- the Trust by Fintech. resentative for the holders of Certificados Bursátiles with the ticker Vitro retained the right to repurchase these properties and signed a symbol “VITRO 03” demanding payment of $150.3 million Pesos plus lease agreement for 15 years with the Trust which will allow the Com- interest. Evidence and pleas were heard during September and Octo- pany to continue to use the properties. In an additional effort to increase ber 2009. At that time the court ruled that the plaintiff had wrongfully the Company’s liquidity, Vitro also successfully concluded the refinanc- conducted this proceeding and therefore, the process would have to ing of its accounts receivable for three subsidiaries of Viméxico, S.A. de be handled as an ordinary mercantile trial. In October 2009, the judge C.V. (Viméxico) originally due on August 22, 2010. made a definitive ruling against Vitro, and sentenced it to pay the The original private issuance, which was for US$21.5 million, was disputed amount plus interest, therefore, the Company filed an ap- replaced by a new issuance for $300 million Pesos maturing in 5 years. peal against this ruling, requesting that the proceedings begin again, This transaction benefits Vitro’s cash position and improves its cash out- to cancel the liens, to reverse the ruling and to pronounce judgment look for 2010 considerably. against the plaintiff and order payment of legal expenses. During April 2010, the appeals court granted Vitro its petition and revoked the de- Vitro Successfully Completes the Refinancing cision of the lower court and invalidated the proceedings and ordered of its Securitization of Trade Receivables Program the parties to begin the case again. On April 1, 2009 the Company successfully completed the refinancing In July 2009 the Company and other defendant subsidiaries re- of its securitization of trade receivables program for two of its sub- ceived notification of an executive mercantile lawsuit brought by RBS sidiaries. The preferential portion of the securitization program, with Bank in its character as creditor demanding the payment of US$15 mil- a value of $550 million Pesos, was placed on the Mexican Stock Ex- lion plus interest. change and purchased by Ixe Banco, S.A., Institución de Banca Múl- During the months of September and October 2009 hearings ended tiple, as well as by Ixe Grupo Financiero. The subordinated portion with on the evidence and pleas. In October a preliminary ruling was given a value of US$19 million was placed with a foreign bank. As of June 29, requiring the Company to pay the principal amount plus ordinary and 2009 Vitro paid US$9 million for the subordinated portion to Rabobank default interest. In January 18, 2010 the Company appealed this resolu- and retained the remaining balance of US$10 million. tion as well as others that were issued in this proceedings where certain evidence was dismissed. In September 2010 the Court of Appeals accepted one of the appeals being revised, because it had merits due to Legal Situation violation of certain defense rights and order to restart the proceeding Vitro Stock Litigation to gather evidence by the Company, leaving without effects the first Regarding the lawsuit that the Company brought against Banamex, instance judgement and the appeal without merits. S.A., Institución de Banca Múltiple, subsidiary of Grupo Financiero Banamex, S.A, where the Company asked the courts to nullify the Receivable from Sale of Real Estate acquisition and holding of Vitro ‘s shares for violating the Company´s In December 2006, Vitro sold real estate located in Mexico City for bylaws, on January 2010 a District judge ruled in favor of Banamex. US$ 100 million, 80% payable on the date of sale and the remainder Vitro is contesting the irregular purchase of these shares amounting payable on the delivery date of the property. As of December 31, to 14.9 percent of its shareholders’ equity. The Company has submit- 2008, the Company fulfilled all the requirements demanded under ted its appeal in a timely and correct manner to this sentence issued the contract and as of the date is seeking legal remedies for payment by a lower court. of the remaining amount. On August 16, 2010, final decision in first On August 18, 2010, the Appeals Court issued a resolution denying instance was issued in which it absolved the purchaser of the real

25 estate sold by the Company of the remaining payment claimed. The • Two of our three float glass manufacturing facilities (both located Company has filed an appeal against the decision, which is pending in García) were also affected by this event; one of the affected to be resolved. The Company and its legal counsel believe it has suf- facilities resumed normal operations initially in the last week of ficient evidence to obtain a favorable final ruling on this issue. July; however, its operations were temporarily suspended due to stability issues and it resumed full operations again in the last week Natural Disasters of August; the other affected facility is expected to resume opera- In April, 2010, the float glass manufacturing facilitiy located in Mexi- tions in October; our float glass facility in Mexicali, which is cur- cali was affected by an earthquake, causing damages in its infrastruc- rently operating at 100 percent capacity, is temporarily supplying ture and inventory; whithin seven days the plant was in full operation. glass to our OEM glass processing plants; and As of today, we are working on full damage recovery through insurance, less applicable deductible. • Our facilities at Álcali suspended operations for a few days and a On July 1st, 2010, as a result of the severe flooding and damages portion of Álcali’s end-product, raw material and packaging in- caused by Hurricane Alex to the State of Nuevo León’s infrastructure, ventories were damaged; however, we were able to minimize the particularly to the Municipality of García, Vitro’s Flat Glass, automo- impact on our clients by working jointly to supply only the minimal tive manufacturing and processing facilities, as well as Álcali, were amount necessary for them to continue operating. forced to temporarily interrupt operations. In particular: We have not yet determined the full impact on our operating results • Two of our four automotive glass manufacturing facilities (both located in of the damage caused by Hurricane Alex. We expect such damages García) were affected by this event; however, because of current inven- will be covered by insurance less any applicable deductibles; however, tory levels and measures taken to restore production in the succeeding we can provide no assurance as to the amount and timing of such days, we were able to minimize the impact on our original equipment recovery. manufacturer (“OEM”) clients and auto glass replacement clients;

26 Organizational Changes value added and after more than two years of research and efforts to Executive Changes develop the necessary technology, Vitro brought on line its new Produc- In June 2009 the Company designated David González Morales as Pres- tion Line CR1 of Low Emission and Solar Control glass Eficient-e® and ident of Vitro’s Flat Glass business unit replacing Roberto Rubio who Reflectasol®, both products destined for the architectural market. left the Company to join Libbey, Inc., Alfonso Gómez Palacio, who was President of Glass Containers prior to his retirement in 2007, assumed Vitro and its Partners Agree on an Extension of the the responsibility of Interim President of the Glass Containers business Period for the Purchase of 40 Percent of Vitro Cristalglass unit during the Company’s restructuring process. In January 2009 a new schedule for the payment of the purchase price of 40 percent of its partners’ share ownership in Vitro Cristalglass was Vitro Temporarily Creates the Chief Restructuring agreed upon, moving it through the 2009-2010 periods. Officer Position In April 2009 the Company designated, on a temporary basis, Claudio Vitro Receives the Roveted Distinction for Best Del Valle as Chief Restructuring Officer responsible for carrying out the Ethical Business Practices Company’s financial restructuring process. Claudio Del Valle continues In September 2009 Vitro was recognized by the Mexican Philanthropic as Vitro’s Chief Financial and Administrative Officer and is backed by an Center, A.C. (Cemefi) as well as the Alliance for Social Responsibility in executive team that supports him in his current responsibilities. Mexico (AliaRSE) for the practice of “Institutionalization and Corporate Transparency” under the category of “Best Ethical Business Practices” in Mexico for 2009. Other Events The evaluating committee gave Vitro the award after considering Vitro Brings on Line its First Production Line the value added that this practice generates to Vitro’s strategy and of Low Emission Glass in Mexico management that guarantee the institutionalization of the Company In line with its announced strategy of focusing on products with higher through the professionalization of its administration.

27 Management’s Financial Responsibility

One of Management’s many responsibilities is the preparation of the The Company’s financial statements were audited by Galaz, Yamazaki, Company’s Financial Statements and the additional financial informa- Ruiz Urquiza, S.C., members of Deloitte Touche Tohmatsu, an independent tion included in this Report. This responsibility assures that the financial certified public accountant firm. Their audit was conducted according to statements and accompanying notes are prepared in strict adherence Generally Accepted Audit Norms. For additional information regarding with Mexican Financial Reporting Standards (NIF for its initials in Span- said audit please refer to the complete external auditors’ report included ish) currently in effect. as part if this Report. The Company relies on an administrative and IT structure deemed The Audit Committee of the Board of Directors, among other duties, sufficient to confirm that the books and records reasonably reflect confirms that Management complies with the applicable regulations re- the transactions derived from day to day operations. Vitro maintains garding the correct registration and disclosure of the Company’s transac- an internal control system that validates the correct use of its assets tions. The Audit Committee meets with Management on a regular basis, and, in addition, avoids the material depreciation of the Company’s as well as with the external and internal auditors. The Audit Committee assets. determines and authorizes compensation and supervises the performance To ensure the Company’s internal controls are adequate and con- of the External Auditor. In addition, the Committee is the only entity that form to the prevailing practices, Vitro has well established and commu- can authorize the hiring and compensation of the independent auditor for nicated policies and procedures in place throughout the organization. any services other than or complementary to the audit related tasks. Their proper application is frequently validated through internal audit The external and internal auditors have free and total access to the programs at all of its larger business operations. Audit Committee and frequently meet to discuss its performance, internal controls and all matters related to the financial statements.

Hugo A. Lara García Claudio L. Del Valle Cabello Chief Executive Officer Chief Financial and Administrative Officer

September, 2010