Concentrating...

1999 annual report

... on the markets’ needs c o n t e n t s

C o m p a n i e s 1

Financial Highlights 2

C h a i rm a n’s Letter 4

C E O ’s Letter 6

B o a rd of D i re c t o rs 8

Fl at Glass 1 0

Glass Containers 1 4

Household Pro d u c t s 1 8

D ive rse Industries 2 2

G l a s swa re 2 6

C o rp o rate Citize n s h i p 3 0

Te ch n o l ogy 3 2

C F O ’s Letter 3 4

S t o ck P e r fo rm a n c e 3 6

I n d ependent Au d i t o r ’s Rep o rt 3 7

C o n s o l i d ated Financial Stat e m e n t s 3 8

S h a reholder Info rm at i o n 6 3 perfil company corporativo profile

Vitro, S.A. de C.V. (NYSE: VTO and BMV: VITROA), through its subsidiary companies, is a major participant in five distinct businesses: flat glass, glass containers, household products, glassware and diverse industries. Vitro’s subsidiaries serve multiple product markets, including construction and automotive glass, wine, liquor, cosmetics, pharmaceutical, food and beverage glass containers, household appliances, fiberglass, plastic and aluminum containers, and glassware for commercial, industrial and consumer uses.

Founded in 1909, Monterrey, Mexico-based Vitro has joint ventures with 12 major world-class manufacturers, that provide its subsidiaries with access to international markets, distribution channels and state-of-the-art technology. Vitro’s subsidiaries do business throughout the Americas, with facilities and distribution centers in seven countries, and export products to more than 70 countries. v i t r o 1 9 9 9 companies

flat glass glass containers household products

Companies Companies Companies Vitro Plan + Pilkington, PLC (Great Britain) 1965 - 35% Empresas Comegua S.A. (Guatemala and Costa Rica) Vitromatic + Whirlpool Corporation (USA) 1987 - 49% Auto Cristales de Oriente + Cervecería Centroamericana, S.A. (Guatemala) & Sourdillon de México* + Sourdillon Auto Templex Cervecería de Costa Rica, S.A. (Costa Rica) International (France) 1995 - 66% Cristakar 1964 - 50.3% Crolls Mexicana Cristales Automotrices Metalúrgica Oriental Viplásticos Cristales Centroamericanos (Guatemala) Procesadora de Materias Primas Industrializables Industrias Acros Whirlpool Cristales Inastillables de México Vidriera Guadalajara Comercial Acros Whirlpool Distribuidora Nacional de Vidrio Vidriera Los Reyes Química "M" + Solutia Inc. (USA) 1995 - 49% Vidriera Mexicali Products Shatterproof de México Vidriera México Refrigerators, washers, ranges, molds, plastic components. Vidrio Plano Vidriera Monterrey Distributes clothes dryers, washers, dishwashers, Vidrio Plano de México Vidriera Querétaro refrigerators and mixers. Vidrios Templados Colombianos (Colombia) VidrieraToluca Vitro Colombia Vidrio Lux (Bolivia) Vitro Flex + Ford Motor Company (USA) Vitro Packaging, Inc. (USA) 1979 - 38% Vitro Flotado Products VVP America (USA) Glass containers Super Sky (USA) ACI Distribution (USA) Binswanger Glass (USA) Binswanger Mirror (USA) diverse industries glassware Glasscraft (USA) Companies Companies Ampolletas (Enbosa) + Kimble, Inc. (USA) 1978 - 49% Vitrocrisa Holding + Libbey Inc. (USA) 1997 - 49% Products Float, patterned and fabricated architectural glass, solar Envases de Borosilicato del Sur Vitrocrisa control glass, automotive glass, mirror glass, glass table Kimble-Enbosa* (USA) + Kimble, Inc. (USA) 1989 - 51% Crisa Libbey tops and polyvinyl butyral film. Envases Cuautitlán Fabricación de Cubiertos Fabricación de Máquinas Crisa Corporation (USA) Industria del Álcali Crisa Industrial (USA) Manufacturas, Ensamblajes y Fundiciones + General Electric Company (Mexico) 1997 - 49% Products Plásticos Bosco Glassware for the retail, foodservice and industrial markets Regioplast* + Owens Illinois, Inc. (USA) 1993 - 50% including drink-ware, bake-ware, dinnerware, stemware, Vitro OCF + Owens Corning (USA) 1957 - 40% ornamental, hand-made, candleholders, blender jars, coffee Vitro Fibras carafes, lighting products, stainless-steel and silver-plated Vitro-American National Can + American National Can flatware. Holding Corp. (USA) 1994 - 50% Vitro Chemical, Fibers and Mining (USA) * Not a consolidated company Products Fiberglass products, sodium carbonate, sodium The reference to the term "Joint Venture" in this Report does not imply or infer the definition of "Joint Venture" set forth in the bicarbonate, sodium chloride, calcium chloride, International Accounting Standards, it refers to those corporations ampoules, vials, laboratory glassware, plastic containers, in whichVitro owns at least 50 percent ofthe shares and one or aluminum cans, disposable plasticware, equipment, more third parties (either domestic or foreign) own the remaining shares of the corresponding corporation. We believe our usage of machinery, molds and components for the glass and the term "Joint Venture" is consistent with international business other industries. and legal practice standards.

11 financial highlights (In millions of constant pesos as of December 31, 1999, except where indicated otherwise; dollar figures are in millions of US dollars(1)).

December 31,

1999 (Ps.) 1999 (US$) % change (2) 1998 % change (3) 1997

Income Statement(4) Consolidated net sales $ 25,879 US$ 2,627 (4.0) $ 26,958 1.5 $ 26,570 Export sales (millions of US dollars) 749 9.3 685 6.4 644 Operating income 3,871 390 (15.6) 4,588 0.9 4,548 Total financing cost 297 30 (89.8) 2,911 121.7 1,313 Other income (1,094) (113) (466.8) (193) 4 Share in net income of unconsolidated associated companies 21 2 320.0 5 (97.8) 227 Gain (loss) in value of shares in trust (1,070) 53 Income before income tax and PSW 2,501 249 496.9 419 (88.1) 3,519 Income tax and PSW 1,650 169 46.1 1,129 (15.2) 1,331 Net income (loss) from continuing operations 851 80 (710) 2,188 Income on disposal of discontinued operations 504 5 3 73.2 291 (72.9) 1,075 Extraordinary item 139 15 27.5 109 (65.5) 316 Net income (loss) for the year 1,494 148 (310) 3,631 Net income (loss) of the majority interest 644 62 (829) 2,941

Balance Sheet Current assets $ 7,272 US$ 766 (6.7) $ 7,793 1.1 $ 7,706 Total assets 31,283 3,294 (8.3) 34,114 (5.3) 36,024 Current liabilities 5,726 603 (12.9) 6,577 12.3 5,854 Total liabilities 20,051 2,111 (10.0) 22,275 3.8 21,450 Stockholders’ equity 11,232 1,183 (5.1) 11,839 (18.8) 14,574 Stockholders’ equity of majority interest 7,283 767 (6.9) 7,827 (24.3) 10,342 Capital expenditures 1,657 167 (34.8) 2,540 37.5 1,847 Personnel 32,535 (2.4) 33,320 0.6 33,136

Financial Indicators Operating income / sales (%) 14.96% 14.85% 17.01% 17.11% Sales / assets (times) 0.83 0.80 0.81* 0.74** Current assets / current liabilities (times) 1.27 1.27 1.20* 1.33** Total liabilities / stockholders’ equity (times) 1.79 1.79 1.85* 1.46**

(1) Dollar figures reported herein are in nominal dollars resulting from dividing each month’s nominal pesos by that month’s ending exchange rate,except as indicated. (2) Change from 1998 to 1999. (3) Change from 1997 to 1998. (4) The amounts of Income Statement have been restated to present Anchor and Mining Operations as a discontinued operation. * Calculated using constant pesos as of December 31,1998. ** Calculated using constant pesos as of December 31,1997. v i t r o 1 9 9 9 financial highlights

33 chairman’s letter

To Our Shareholders:

In light of the general economic and competitive environment, 1999 was a positive year for Vitro. The path we have traveled over the last five years has had its up and downs. Like all major companies worldwide, Vitro is part of the global marketplace, and the domestic and international economic and financial climate resulted in some critical moments that have affected our performance.

It is important to emphasize Vitro’s sound financial position. As of December 31, 1999, we reduced our debt to US$1.6 billion, after reaching US$2.4 billion in mid-1996. We recorded a net profit in 1999, after reporting losses in 1998. We consider our ability to maintain our cash flow (in dollars) at 1998 levels, despite an overvalued peso and greater competition in our traditional containers and flat glass businesses, a significant accomplishment.

We are well positioned to meet the challenges Our strong 1999 results in household products and glassware show that we are well positioned to meet the challenges of a competitive business climate that requires high quality and productivity.

The soft drink market is still important to the glass container business, but this is changing because soft drink producers now prefer bottles made of other materials. Today, glass soft-drink bottles do not capitalize on Vitro’s technological advantages, and do not generate the returns that the company has set as its short and medium-term goals. Special edition and commemorative bottles are better suited to Vitro’s competencies in this consumer market. I can say the same for the wine and liquor market, which has shown good performance and allows us to compete in important sectors.

Under the circumstances, 1999 was a positive year for Vitro v i t r o 1 9 9 9

The Mexican flat glass market has also attracted competitors, business is dollar-based, the company has provided year-over-year particularly from South America’s weakest economies. Although financial data in both dollars and pesos. In this way, you can better this competition is aided in part by the peso’s temporary strength, evaluate the company’s achievements. It is important to note the our flat glass division has taken the necessary steps to reallocate Mexican government is expected to take the necessary steps to its production capacity and increase its efficiency. Flat glass is also reduce the gap between the overvalued peso and the U.S. dollar. maximizing and consolidating its distribution system to compete with imports. During the year 2000, we will continue to work efficiently, and we will fight to keep the advantageous position that we have earned as We are concentrating our resources on our customers’ choice for quality and service. Like the majority of clear growth opportunities economic analysts, we are expecting a good year for the Mexican Management is continually analyzing and evaluating our business economy, and, as the macro-economic indicators show, we are portfolio to ensure sustainable growth. As a result, Vitro made the confident that the authorities will manage it properly. decision to divest non-strategic businesses to concentrate its resources on clear growth opportunities that allow it to make I am convinced that our redefined business portfolio, improving maximum use of its capabilities. In 1999, in response to the financial situation, and our strategic demand-side growth in answer shrinking market for glass bottles, glass containers reduced its to the markets’ needs will allow us to selectively capitalize on clear production capacity by closing a plant in Mexico City. long-term business opportunities and maximize value for our investors. Management has also given a great deal of attention to increasing its financial strength and flexibility, to allow it to capitalize on Sincerely, business opportunities where Vitro is highly competitive. One of the strengths of our subsidiaries is their presence in international markets through exports and sales in North, Central and South America. In Mexico our subsidiaries are leaders in almost all of the market segments in which they participate. Additionally our Adrián Sada G. Chairman of the Board companies have thorough market knowledge and stable cash flow, Vitro, S.A. de C.V. strategic alliances with leading multinational companies, and February 15, 2000 continuous customer interaction.

More than 65% of our sales are in dollars More than 65% of Vitro’s total sales are either linked to or denominated in U.S. dollars. This is a fundamental strength. However, the peso’s appreciation in 1999 caused a significant difference in Vitro’s year-over-year financial results measured in constant pesos versus dollars. Because the majority of Vitro’s

55 ceo’s letter

To Our Shareholders:

The theme of our 1999 annual report is concentrating on the markets’ needs. This theme underscores our business strategy. Pursuant to this strategy, we will:

Constantly review our business portfolio to concentrate our resources on product markets that offer clear growth opportunities and build on our distinct competitive advantages.

Reduce and restructure the company’s debt to improve our financial strength and flexibility.

Concentrate on our core competencies.

Grow in selected new businesses.

We generated consolidated 1999 cash flow (EBITDA) of approximately US$586 million. With almost half of our sales coming from outside Mexico, we’ve established a solid operating platform upon which to build.

We will principally allocate our resources to those markets that offer us not only the best sustainable growth possibility in a rapidly evolving business environment, but also those that build on our core competencies and that demand technological flexibility, customization and product quality. We’re looking to the marketplace as our guide v i t r o 1 9 9 9

Quality is and will always We recently executed a collaboration agreement with IBM to share remain our focus intellectual capital in order to transform our critical business Quality is and will always remain our focus. Vitro did not become processes using e-business applications. The framework agreement a leading glass and household products manufacturer with a strong covers certain projects with customers, investors, suppliers international presence by scrimping on quality. and employees. When one of these e-business initiatives (e-procurement) is fully implemented, it would make us the first If you measure quality by the company we keep, we are truly the Latin America-based company capable of sourcing 80% of its raw industry standard. We enjoy long-standing joint ventures with material through the Internet. world-class manufacturers that provide us access to important markets, distribution channels and state-of-the-art technology. Our greatest competitive advantage, however, is our people. They are our fundamental value drivers. It is their ongoing commitment We make and supply high-end products to customers who demand to total quality that will enable us to achieve our demanding quality every step of the way, from research and development to operational and financial goals. prompt customized design solutions. Our client roster includes name brands such as Allied Domecq, Avon, Bacardí, Coca-Cola, Firmly committed to bottom-line growth Corona (Modelo), Coty, Ford, General Electric, General Motors, We are firmly committed to generating bottom-line growth through Pepsi-Cola, Tequila Cuervo, Volkswagen and Whirlpool multiple short-term steps, including restructuring our glass Corporation. containers division, downsizing corporate support areas and divesting non-strategic assets. Through these and subsequent We are further backing our commitment to quality with the right profitability enhancing efforts, we are targeting an aggregate debt manufacturing and information technology. Our proven reduction of 30% from US$1.65 billion as of June 30, 1999, by technological flexibility to quickly turnaround niche runs of the first half of 2002. customized design solutions is one of our core competitive advantages. In this area, our award-winning work speaks for itself. I thank you for your interest and support, and our valued customers, partners, employees, and suppliers for their loyalty to E–business solutions Vitro. I am confident that we are taking the right steps to capitalize While the business-to-consumer e-commerce market is growing on market opportunities and create sustainable shareholder value rapidly, we believe that business-to-business (B2B) commerce over for you. the Internet, though in its infancy today, is poised for rapid acceleration. E-business solutions have the potential to create Sincerely, competitive dynamics through cost savings and new revenue opportunities. As a result, we must look to e–business applications to enhance our competitive position, as well as to maintain pace with the "e-commerce revolution." Federico Sada G. President and Chief Executive Officer Vitro, S.A. de C.V. February 15, 2000

77 board of directors

1, 2, 3, 4 1, 2, 3, 4 Adrián Sada G. (1944) Federico Sada G. (1949) Member since 1984 Member since 1982 Chairman of the Board President and Chief Executive Officer

Member ofthe Boards of Grupo Cydsa,Gruma, Regio Chairman of the Mexican Council for Foreign Trade Empresas, Grupo ALFA,Consejo de Industriales de Nuevo (COMCE).Chairman of Trustees,Parque Ecológico León,Mexican Businessmen Council (CMHN), Fondo Chipinque. Member ofthe Boards ofInstituto Tecnológico y Chiapas and Pronatura.Member ofthe Young Presidents’ de Estudios Superiores de Monterrey (ITESM), Regio Organization. Empresas, ALPEK (a subsidiary of Grupo ALFA),MADISA, University of Texas MD Anderson Cancer Center, Institute for Educational Investigation and Improvement.Member of the World Business Council for Sustainable Development and of Consejo Coordinador Empresarial (CCE).

2 Carlos E. Represas (1945) Member since 1998 1 ExecutiveVice-president of Nestlé, S.A.Chairman of the Dionisio Garza M. (1954) Board ofNestlé Holdings, Inc. (USA) and Nestlé México. Member since 1995 Co-chairman of the Board ofCoca-Cola Nestlé Refreshment Co. (a joint venture ofNestlé and Coca-Cola) Chairman ofthe Board and ChiefExecutive Officer of Grupo ALFA,Chairman of the Board ofUniversidad de Monterrey and Member ofthe Board of Cereal PartnersWorldwide (UDEM).Member ofthe Boards of CEMEX,Grupo Cydsa, (a joint venture of Nestlé and General Mills). Grupo Financiero Bancomer and Seguros Comercial América. Member ofthe Board ofDirectors ofthe Harvard Business School.Member ofthe Mexican Businessmen Council (CMHN),the Advisory Committee ofthe NewYork Stock Exchange (NYSE),the Harvard University Advisory Committee to the David Rockefeller Center for Latin American Studies, and the Young Presidents’Organization. 1 Roberto G. Mendoza (1945) Member since 1998

Vice-chairman and Director of J.P. Morgan & Co. Inc., Member of J.P. Morgan’s Corporate Office (the firm’s 4 senior policy and planning group) since 1990. Andrés A. Yarte C. (1941) Member since 1991 Corporate Responsibility Committee President

Chairman of the Board and ChiefExecutive Officer of Nacional de Cerámica,Distribuidora de Productos Cerámicos and K-Inver.

Pablo González S. (1953) Member since 1986

Chief Operations Officer of Packaging and Textile Products at Grupo Cydsa.Chairman ofthe Board ofClub Industrial. 4 Member of the Boards of Grupo Cydsa, Regio Empresas, Adolfo Lagos E. (1948) Universidad Regiomontana and Fundación Mexicana para Member since 1998 la Calidad Total (Fundameca).Member of the University of Texas System Business Management Council. Chief Executive Officer ofGrupo Financiero Serfin. Former Deputy General Director ofGrupo Financiero Bancomer (1989-1996).

Ernesto Martens R. (1933) Member since 1986 Alternate

Chairman of the Boards of Regio Empresas and Hulnort. 2, 4 Vice-president ofConsejo Mexicano de Promoción Raúl Rangel H. (1949) Turística.Member of the Boards of Hylsamex, Regional Member since 1998 Advisory Council ofGrupo Banamex-Accival, Secretary of the Board,Secretary of the Compensations Transportación Marítima Mexicana (TMM),Afore y Ahorro and Corporate Responsibility Committees;President, Santander Mexicano, Aeropuertos del Pacífico and Administration and General Counsel. Thunderbird American Graduate School of International Chairman ofInstitutional Relations ofthe Mexican Council for Foreign Management. Trade (COMCE).Member ofthe Boards ofConsejo Coordinador Empresarial (CCE),Fundación Mexicana para la Calidad Total (Fundameca),Confederación Patronal de la República Mexicana (COPARMEX),Advisory Council ofUniversidad Autónoma de Nuevo León (UANL),Law and Criminology Faculty ofthe Universidad Autónoma de Nuevo León (UANL),Centro Patronal de Nuevo León, Cámara de la Industria de Transformación en Nuevo León (CAINTRA), Centro de Estudios en Economía y Educación. v i t r o 1 9 9 9

1 2 Adrián Sada T. (1920) Lorenzo H. Zambrano T. (1944) Member since 1969 Member since 1998 Honorary Chairman of the Board Compensations Committee President Finance Committee President Chairman ofthe Board and ChiefExecutive Officer ofCEMEX. Chairman of the Board of Vitro (1972-1991). Chairman ofInstituto Tecnológico y de Estudios Superiores de Chairman ofthe Board of Fundación Martínez Sada. Monterrey (ITESM).Member ofthe Executive Committee of Banamex.Member of the Boards ofGrupo ALFA,Grupo Cydsa, Femsa,Museo de Arte Contemporáneo (MARCO),Empresas ICA, Televisa.Member ofthe Stanford Business School Advisory Board,the Americas Society and the U.S.–Mexico Commission for Educational and Cultural Exchange.

3 Jaime Serra P. (1951) 3 Member since 1998 Tomás González S. (1943) Member since 1980 Senior Partner ofSerra and Associates International (SAI). Trustee of the Yale Corporation.Member of the Boards Chairman of the Board and ChiefExecutive Officer of Grupo ofAlcatel-Indetel, TAMSA and the Mexico Fund.Mexico’s Cydsa.Chairman ofthe Mexico-Japan Business Committee of Secretary of Finance (1994),Secretary of Trade and the Mexican Council for Foreign Trade (COMCE).Chairman of Industry (1988-1994) and Under-secretary of Finance the Board of Trustees of Universidad Regiomontana. Treasurer (1986-1988). of Fundación Martínez Sada.Member ofthe Board of Regio Empresas. Member of the Mexican Businessmen Council (CMHN) and the GeorgeWashington University - School of Business and Public Management.

1 Juan F. Muñoz T. (1922-2000) 3 Member since 1965 Gustavo Madero M. (1955) Chief Executive Officer of Fomento Bursátil. Member since 1996 Auditing Committee President

Chairman of the Board of Hermanos Madero, Electronic Publishing and Servicios de Pr evisión Integral. Regional Vice-president of Banamex. Technology Vice-president of Desarrollo Económico del Estado de Chihuahua.Member of the Boards of Instituto Tecnológico y de Estudios Superiores de Monterrey (ITESM) Campus Chihuahua and Seguros Comercial América.

2 Alejandro Garza L. (1926) Member since 1972 2 Alternate Eduardo G. Brittingham S. (1926) Member ofthe Executive Committee ofPulsar Internacional Member since 1972 (SAVIA,SEMINIS-DNAP, Seguros Comercial América, Alternate VECTOR Casa de Bolsa).Member ofthe Boards of ChiefExecutive Officer of Auto Express Rápido Nuevo Governors of the Wharton School of Business and the Laredo, Laredo Autos and Corporación Internacional de Joseph H.Lauder Institute. Member ofthe Boards ofGrupo Manufacturas. Cydsa,Grupo Industrial Ramírez,Instituto Tecnológico y de Estudios Superiores de Monterrey (ITESM) and Centro de Estudios en Economía y Educación.

Manuel Güemez (1942) Julio Escámez F. (1934) Member since 1999 Member since 1974 Examiner Alternate Examiner Chairman of the Board ofGrupo Industrial CAMESA. Member ofthe Boards of Fabricación de Máquinas, President of the Auditing Committee of Regio Empresas. Consorcio Industrial de Manufacturas y Desarrollos Member ofthe Board ofGrupo de Seguridad Integral. Regiomontanos GMP. Member ofInstituto de Contadores Públicos de Nuevo León.

Committee Affiliations 1 Finance 2 Compensations 99 3 Auditing 4 Corporate Responsibility flat glass v i t r o 1 9 9 9

Vitro’s flat glass unit concentrates on the

fabrication and distribution of glass for the

construction and automotive industry

(including safety glass for windshields, rear

and side windows for OEM’s and after-market)

in Mexico, the U.S., and Colombia, being the

leader in Mexico in both construction and

automotive glass.

1111 Staying competitive

f l a t g l a s s

Ricardo González S. 44, president, the Flat Glass Division of Vitro, 1997-present; president, diverse industries, 1994-1997; executive vice-president, finance, plastic and Enbosa (glass containers), 1989-1994; vice-president, banking relations, 1987-1989; various finance, planning and export positions, 1980-1987. Master's, advanced management program, 1993, Harvard University; master’s, business administration, 1980, Instituto de Estudios Superiores de la Empresa; bachelor’s, industrial engineering, 1977, Instituto Tecnológico y de Estudios Superiores de Monterrey (ITESM).

Vitro’s flat glass margins are very sensitive to the exchange rate. but a 5.3% improvement in dollar terms. EBITDA amounted to Approximately 88% of the division’s sales are referenced to the US$205 million, a 15.1% drop in constant pesos, but only a 5.2% U.S. dollar (including exports, auto glass sales to OEM’s in decrease in dollars. Mexico, and sales from VVP America), or peso-denominated but referenced to international prices in U.S. dollars. Consequently, Construction Glass when the peso strengthens and some local costs (e.g., labor costs) Flat glass’ domestic construction sales are based on its competitive increase in line with inflation, as they did last year, margins are position, which is founded on its extensive distribution system, reduced. production capabilities and better product portfolio, quality and service than the other market participants. In 1999 the strong peso The 1999 sales volume was relatively flat. Exports increased to and over-capacity in South America led to increasing imports of US$262 million, a 15.4% increase versus 1998. Revenues were commodity construction glass, which resulted in significant US$880 million, a 2.6% year-over-year decline in constant pesos, pressure on margins. v i t r o 1 9 9 9

We are countering the effects of a strong peso and increasing capacity to satisfy our own demands, but also those of other imports by enhancing customer service (e.g., eliminating windshield manufacturers established in the NAFTA region. stock-outs, increasing cut-to-size volumes) and installing new distribution centers. Also, the business unit implemented an The replacement market for auto glass in Mexico continues to be aggressive cost-cutting program, resulting in significant savings an attractive business for flat glass. During 1999 flat glass in the last two quarters of 1999. A lower participation in the consolidated its participation in this market, and will continue in Mexican market was offset with more exports, especially through the same direction this year. Currently, our laminated glass our U.S. business unit VVP America. facilities are operating at full capacity, so we are considering an investment to capture a greater share of this promising market. At the same time, we pushed through our strategy to grow in value-added products to take advantage of the booming domestic VVP America market and to leverage our competitive position in the export VVP America’s sales grew 6% in 1999, taking advantage of the markets, especially in the U.S. During the year, we not only U.S. continuing economic expansion. Since its acquisition in 1992, increased volumes and sales from our existing facilities, like the VVP America has significantly increased its sourcing of production tabletops plant, but also added capacity in tempered, mirrored and from our Mexican facilities, allowing it to complement and enhance insulated glass. its product lines and improve its profitability. Once the recently announced acquisition of Harding Glass is consummated, we are Automotive Glass confident that VVP America will be able to capture important The U.S. auto industry, the Mexican auto market, and flat synergies and add facilities to our current extensive presence glass’ proven ability to attract new contracts drive auto glass’ in the U.S. performance. Additionally, global OEM and supplier-base consolidation have subjected auto glass’ sales to increased competition.

We are confronting industry consolidation by improving productivity, ongoing expense and cost reductions, maintaining domestic market share and capturing niche markets such as bulletproof glass.

In 1999, flat glass’ OEM aggressively grew sales volumes by 11% year-over-year. General Motors’ "Supplier of the Year" and Volkswagen’s "The Leading Edge" Awards are proof of our commitment to quality and reliability worldwide. Our profitable PVB film operation showed strong results in both volume growth and profitability. We have not only expanded

1133 glass containers v i t r o 1 9 9 9

Vitro’s glass containers unit is Mexico’s leading

manufacturer and supplier of glass containers,

with operations in Central America and Bolivia.

It is also a major exporter, mainly to the United

States.

1155 Redefining the portfolio

g l a s s c o n t a i n e r s

Roberto Rubio B.

44, president, the Glass Containers Division of Vitro, 1999-present; responsibility for Vitro’s technology management, 1996-present; president (glassware), 1996-1999; operations vice-president, 1995; general manager (Vitro Flex), 1989-1995; several executive positions (Vitro Flex), 1980-1989. Master’s, science management, 1990, MIT; M.S., industrial engineering, 1980, North Carolina State University; bachelor’s, mechanical and electrical engineering, 1977, Universidad Anáhuac.

Because of our main markets’ rapidly evolving business compromise our competitive or client service levels for any of those environment, we are undertaking immediate, mid- and long-term businesses. We will allocate investments for expansion only to initiatives to restructure our business portfolio to maximize markets with clear growth opportunities. All excess cash generated profitability and free cash flow. Near-term measures, which are well by this business unit will be applied to debt reduction. underway, include redistributing production capacity to match the market’s demand, and cost and expense reductions of In a nutshell, this reorganization will give us a better market and US$20 million per year. costumer focus, provide greater flexibility to diversify business risk, enhance our competitive position, and improve our profitability. More importantly, we are reorganizing the division’s current business into four distinct segments: food, beverage (soft drinks, Last year, sales declined to US$742 million, an 8.6% drop in juice and beer), wine and liquor, and cosmetic and pharmaceutical. constant pesos (a 0.6% fall in dollars) versus 1998. Export sales This will allow glass containers to concentrate on and support the showed continued growth to US$189 million, a 0.5% markets that are of strategic value. Specifically, we are limiting year-over-year improvement. EBITDA declined 5.2% to US$182 capital expenditures in non-growth businesses to maintenance and million, mainly due to a strong peso. technological upgrades only. This rationalization will not v i t r o 1 9 9 9

Food Wine/Liquor Food is the unit’s bread and butter. Vitro’s glass containers are Liquor and wine is a promising venue for glass containers’ quality used to package myriad items, including coffee, baby food, sauces, glass products. Thanks to their customized brand requirements, preserves and peppers. Food is a traditionally strong market sophisticated mid- to high-end wines and liquors require a distinct because of steadily growing demand and a wide variety of personality that our bottles deliver. producers, product sizes and designs, which give Vitro a broader base for growth than in the more concentrated, commodity-like Last year, exports showed particular strength, growing by 10.1% beverages market. The rise of New Age juices, with less generic versus 1998. By leveraging our technological advantages, we container requirements, will continue to boost sales in our new successfully compete in the area of smaller-scale niche brands, beverage segment. including high-end liquor and wine bottles, and special edition, commemorative bottles. U.S. glass manufacturers concentrate on Beverage high-volume, long-run commodity-type orders, and would have to The single most important issue affecting the long-term future significantly re-tool to meet the needs of this more upscale, of Vitro’s beverage segment is the growing competition from PET customized niche market. bottles mainly for capacities higher than 500 ml. Even if at a much slower pace than what the U.S. market experienced, generic glass Cosmetic/Pharmaceutical bottles are losing market share to PET in lower-priced soft drinks. Cosmetic sales are particularly resistant to cheaper substitute In line with this situation and in close communication with its materials because of the need for a compelling brand image and customer base, glass containers closed a production facility in transparency. Glass is used for a range of luxury, brand-name 1999, which led to a 10% soft drink bottle production capacity products, including glass containers customers’ Avon, Coty, the reduction. House of Fuller, and Procter & Gamble. Glass sales are also resistant to lower-cost alternatives in the pharmaceutical field Most beer is currently sold in glass bottles. Today the main because of the need for product stability in many of their uses. alternative package in this market is aluminum cans, however, and This segment is clearly a priority for the division. their relative share of the market has stabilized in recent years. Brewer Modelo, the maker of Mexico’s most popular export beer, Corona, is glass containers’ most important client in this business segment.

We continue to capitalize on special commemorative glass bottles. Last summer, we reinforced a global icon when we manufactured and supplied Coke’s eight-ounce NASCAR series. This successful marketing initiative took advantage of glass containers’ distinct off line decorating capabilities and lower size run flexibility.

1177 household products v i t r o 1 9 9 9

The household products division concentrates

on three product markets: refrigerators,

washers and dryers and gas ranges. It also

makes related components, and acts as

a distributor of imported appliances with its

49% joint venture partner Whirlpool

Corporation, the world’s largest appliance

manufacturer. Whirlpool, in turn, provides

brand name recognition (e.g., the Whirlpool,

KitchenAid and Kenmore brands), U.S.

distribution, and access to technology.

1199 Well positioned for growth

h o u s e h o l d p r o d u c t s

José Manuel Contreras M.

52, president, the Household Products Division of Vitro, 1995-present; vice-president, household products, 1994-1995; finance and administration vice-president (Vitromatic), 1983-1994; several executive positions at Visa Pack, Famosa and Cigarrera La Moderna. Master’s, finance, 1971, Columbia University; bachelor’s, public accounting, 1969, Instituto Tecnológico y de Estudios Superiores de Monterrey (ITESM). v i t r o 1 9 9 9

The household products division is well positioned to capitalize on Washers/Dryers domestic growth and new export opportunities. The unit is a big In 1999, we introduced our new 10-kilogram Tornado and exporter. In 1999, export sales were up 8% to US$166 million, Volcan washers in Mexico very successfully. We also exited the accounting for roughly 34% of the division’s total sales. About three-kilogram washer market. 70% of these exports went to the U.S. and Canadian markets. We are fully aware that one unhappy customer can convince 20 not

While the U.S. appliance market is a rather mature segment, to buy our products; accordingly, we are expanding the level of our Mexico has significant growth potential. It is estimated that fewer after-sales service and leveraging our strong domestic brands to than 70% of households have refrigerators, and not even 50% increase sales. have washers or dryers. The two fundamental catalysts needed to convert this untapped demand into sales are lower interest rates Ranges and improving consumer purchasing power. We are making a new, more efficient platform of AGA (American Gas Association) approved ranges, and we expect to begin

Despite the strong peso, 1999 domestic sales rose 10% in dollar exporting to the U.S. in the beginning of the second half of this terms to US$329 million. After two months of high interest rates, year. The first order is for 100,000 ranges, and we expect to sell relative interest-rate stability, improving personal disposable 200,000 ranges in 2001. income, and increased brand leverage led to higher domestic sales volumes. EBITDA was up 25% in dollar terms thanks to a different We are producing a major new category of smaller gas stoves for product mix and our "super challenge" cost reduction initiatives. the local and Central American markets. Production recently started, and we expect to reach full capacity in 2001. Based on

Our three core objectives are to enhance customer and consumer an original investment of about US$50 million, we expect to reach satisfaction, expand in high-end appliance markets, and create sales of US$50 million to US$100 million in approximately greater value for our employees and shareholders. Bearing these three years. goals in mind, we are undertaking initiatives to increase the contribution of our domestic and export sales, improve total cost productivity, and minimize finished goods inventories and accounts receivables.

Refrigerators Last year we began exporting 16-cubic-foot refrigerators to the U.S. that carry the Whirlpool, Roper and Kenmore brands. Also, during 1999 and into the year 2000, we started manufacturing an 18-cubic-foot model. This move is consistent with our higher-end market focus.

2211 diverse industries v i t r o 1 9 9 9

The diverse industries division concentrates on

three principal product markets: glass-related

(including fiberglass and borosilicate glass),

support (comprised of glass making raw

materials and equipment), and packaging

(plastics and aluminum cans). This unit not

only serves as a breeding ground for new

business development, but also supports our

core operations.

2233 A fertile breeding ground

d i v e r s e i n d u s t r i e s

Gonzalo Escámez S.

36, president, the Diverse Industries Division of Vitro, 1997-present; sales vice-president (glass containers), 1996-1997; international vice-president, 1994-1996; various planning, finance, administration, marketing and sales positions, 1984-1994. Master's, business administration (marketing and finance specialization), 1990, Southern Methodist University; bachelor’s, business administration, 1984, St. Edward's University.

Today 70% of the unit’s sales are dollar-denominated or linked to selective strategic investments in natural growth segments. By international prices. Last year, exports, which accounted for expanding the insulation capacity of Vitro Fibras, introducing new roughly 17% of the division’s sales, grew 18.4% year-over-year to products developed by Enbosa, consolidating the calcium chloride US$58 million. Although volume grew in all but one business expansion made by Álcali, focusing on Fama sales to non-related segment, the strong peso affected 1999 sales and margins. In parties, qualifying new products to be produced at MEF, improving 1999, diverse industries accounted for 12% of Vitro’s total sales, the capacity utilization of the plastic businesses and the aluminum up from 11% in 1998. can plant, we should fuel this dynamic growth.

In 2000 we look to maximize EBITDA growth by achieving 100% capacity utilization through increased export sales, and making v i t r o 1 9 9 9

Glass-related In 1999 Fama recorded sales of US$47 million by mainly We make fiberglass reinforcements for cars and building insulation marketing glass molds and machinery to our glassware, flat glass with our joint venture partner, Owens Corning, a leader in the and glass containers divisions. fiberglass industry. We are in the process of expanding our production to meet growing domestic and export market demand. Moving forward, our strategy is to leverage Fama’s distinct Specifically, we are investing in a new insulation furnace, which competitive advantages and diversify Fama’s client base from Vitro we expect to come on line in 2001. companies to a broader range of customers. Recently, we executed a five-year agreement with Varel manufacturing, a U.S.-based firm As part of our effort to concentrate on our core markets and divest that supplies equipment for the oil industry. non-strategic assets, we sold our majority stake in Sidesa to our long-time partner, PQ Corporation. We used the proceeds from the MEF manufactures and supplies General Electric (GE) with high sale to reduce company debt and to finance selective growth precision components that meet GE’s demanding quality standards. investments. During 1999 GE’s transportation division awarded MEF the Global Supplier of the Year Award. Our Enbosa subsidiary makes and supplies pharmaceutical vials, ampoules, syringes, disposable culture tubs (DCTs) and pipettes Packaging for domestic and export markets. Through its vertical Our disposable plastic tableware business has been a success manufacturing technology, Enbosa will concentrate on story. In 1999 we reaped the benefits of our previous decision to strengthening its position in the markets it serves and expanding upgrade capacity. For the year, volume surged by 45%, sales leapt its product lines. by 16%, and EBITDA jumped by 20%. On the downside, 1999 aluminum can sales were off from the previous year’s volume Support because of the expanding use of alternative packaging materials. Our Álcali subsidiary produces soda ash, sodium bicarbonate, sodium chloride and calcium chloride. We have been steadily growing during the past years mainly through increases in productivity and the expansion in calcium chloride. During 2000 we plan to continue to consolidate this expansion by servicing the oil industry with fluid for drilling, completing and terminating oil wells, the ice melt market, and the food industry where we successfully participate.

Our Fama subsidiary is a unique vertically integrated technology center, with foundry, welding, machinery, assembly and electronic capabilities, that works to enhance machinery and equipment quality.

2255 glassware v i t r o 1 9 9 9

Vitro’s glassware unit is the largest glassware

producer in Mexico. This division focuses on

the retail, food service and industrial markets

with a diversified customer base. Its products

are made of soda lime and borosilicate glass

and include drink-ware, dinnerware, bake-ware,

flatware, candle-holders, decorative and OEM

products.

2277 Capitalizing on opportunities

g l a s s w a r e

Fernando Flores F. 53, president, the Glassware Division of Vitro, 1999-present; international vice-president (glass containers), 1998-1999; operations vice-president, 1992-1998; exports vice-president, 1990-1992; vice-president, refrigerator operations (household products), 1988-1990; vice-president, stove operations, 1986-1988; general manager (Enbosa), 1982-1986; various industrial engineering, human resources and planning positions (Vidriera Monterrey), 1974-1982. Master’s, advanced management, UT, 1979; bachelor’s, industrial engineering, 1970, Instituto Tecnológico y de Estudios Superiores de Monterrey (ITESM).

In 1997, Vitro formed a joint venture with Libbey Inc., under which on new business opportunities. During 1999, Libbey entered into Libbey became a 49% partner in Vitrocrisa. Libbey and Vitrocrisa a production realignment plan by which their Canadian plant was complement each other’s products and distribution channels, with closed and a significant part of production was transferred to Libbey distributing Vitrocrisa’s glassware products for the retail and Vitrocrisa. food service markets in the U.S. and Canada, and Vitrocrisa distributing Libbey´s products in Mexico, Central and In 1999, year-over-year volume increased 7%. Sales were US$203 South America. million, a 0.6% increase in constant pesos, a 12% jump in dollar terms. Exports accounted for approximately 36% of 1999 division Vitrocrisa’s competitive cost structure combined with Libbey´s sales. Twenty-eight percent of total exports went to the NAFTA extensive distribution capabilities are helping us to capitalize region, including an increase during the third and fourth quarters v i t r o 1 9 9 9

of US$5.5 million resulting from the transfer of production from Foodservice Libbey´s plants. The remaining exports went to the rest of the Glassware’s products are offered to the food service industry in Americas, Europe, the Middle East, China and the Far East. Mexico through its extensive chain of distributors. In the U.S., Libbey is already supplying Vitrocrisa’s glassware products, such

Margins were maintained throughout 1999, notwithstanding the as pressed goblets, to 1,600 Chili´s and Applebee’s restaurants adverse effects of the strengthening peso and a significant increase across America. in commodity prices such as packaging and natural gas, as compared to the previous year. Industrial On the industrial side, glassware’s strategy is to concentrate on

The outlook for 2000 is promising. The domestic glassware market growing the business through increased exports and new product should grow in line with the Mexican economy, subject to expected offerings. Glassware already supplies blender jars and coffee exchange rate pressures. Better productivity and fixed cost carafes to companies like Sunbeam and Hamilton Beach. New absorption from increased capacity utilization should offset the industrial products include microwave plates for important exchange rate’s effect on exports. We expect to increase our customers such as Matsushita (Panasonic). These durable, domestic market share through improved service, new product non-heat-absorbent plates underscore our ongoing commitment offerings and capitalizing on our extensive distribution system. to quality. Export sales to the U.S. and Canada should show continued growth as a result of Libbey´s transfer of production and the continued sales growth of Crisa-branded products.

Retail Vitrocrisa enjoys a leading market share in the Mexican retail market through its Crisa-branded products. Additionally, through our partnership with Libbey, we’ve expanded our customer base in the U.S. to include major retail outlets such as Wal-Mart, Target, and Crate ‘n Barrel. Moreover, we’re supplying these stores with higher-end glassware products, such as handmade pitchers and large floral items.

Our decorating machines give us the capability to manufacture decorative glassware in up to eight different colors. This enables us to respond to our customer’s and consumer’s most exacting design needs.

2299 corporate citizenship

Raúl Rangel H.

50, president, administration and general counsel, Vitro, 1995-present; public sector, 1991-1995; vice-president, international legal affairs (Vitro), 1975-1991. Bachelor’s, business administration, 1973, Instituto Tecnológico y de Estudios Superiores de Monterrey (ITESM); law and social sciences, 1970, Universidad Autónoma de Nuevo León (UANL).

Commited to total quality v i t r o 1 9 9 9

Corporate Governance & Responsibility Civic Involvement The identification and implementation of top corporate practices are Vitro actively encourages our executives to participate in civic fundamental to Vitro and Mexico’s long-term business success. organizations. As Chairman of the Mexican Council for Foreign Trade (COMCE), CEO Federico Sada takes a direct and leading role Vitro further works to incorporate new practices through its strong in developing and supporting strong international ties with Board of Directors. Its independent directors are senior executives Mexico’s business community. from leading corporations, who enable the company to learn from their varied knowledge and business experiences. To promote the cultural importance of glass, Vitro owns Mexico and Latin America’s only glass museum, where visitors can learn Award-Winning Quality the history of glass and enjoy the work of world-renowned glass Vitro is proud of its 90 years of award-winning quality. In 1999 artists. The company further offers educational workshops for Mexico’s President Ernesto Zedillo granted Vitromatic Comercial children. the first-ever National Technology Award. Mexico’s President also Quality of Life presented Vidriera Los Reyes with the 1999 National Award for At Vitro, we put the welfare of our people and their families first. Quality. We strongly value the health and safety of our employees.

Eco-Efficiency We want our employees to feel that they are part of Vitro. To As part of our commitment to total quality, we take our encourage social and familial interaction, we have developed responsibility to preserve the environment very seriously. entertainment and recreational centers, like Vitro Club, in Mexico We work not only to comply with but also to surpass official City, Monterrey, Guadalajara and Querétaro. environmental standards, to make efficient use of our natural resources, and to instill environmental awareness in our people, Vitro strongly values its employees and their ongoing career suppliers and the community. development. We continue to intensify our training efforts to build people’s enthusiasm, leadership skills and creative vision. Along Our goal is to search for a balance between earth friendly policies, with this employee focus, our compensation plan aligns executives’ operational competitiveness and profitability. interests with those of our shareholders.

As an active member of the World Business Council for Vitro enjoys a historically strong relationship with our unionized Sustainable Development (WBCSD), Vitro is united with 125 employees. In 1999 we concluded mutually satisfactory international companies from 30 countries and more than 20 major negotiations with various segments of our organized labor force. industrial sectors to develop closer cooperation between business, We are proud of our union relationships, and view them as an government and non-governmental organizations to encourage important element in our stable and productive business high standards of environmental management. environment.

3311 technology

A competitive advantage v i t r o 1 9 9 9

Market-driven Structure & Strategy Customized Technology Solutions We employ a market-driven technology strategy. Our mission Each division’s technology centers work closely with our customers is to ensure that our technology provides a distinct competitive to ensure that our development efforts effectively meet and exceed advantage, seeking to create, develop and support highly profitable their current and future needs. For example, our glass containers businesses and product markets. Our Corporate Technology division’s interactive customized design centers conveniently Council, integrated by senior executive management, guides and located in New York, Dallas, Mexico City, Monterrey and coordinates our technological activity. Guadalajara, enable our clients to directly work with our on-site glass designers to create their own branded images. Our expert Our technological activity is essentially conducted on three fronts: system gives them immediate access to our library of (a) Independent and dedicated technology areas focus on each three-dimensional templates, feasibility data and a myriad division’s products and markets, maximizing the technological of design alternatives. assistance and know-how that most of our subsidiaries have access to, either through our joint venture partners (i.e., Pilkington, E-business ANC, Whirlpool, Solutia and Owens Corning) or through other We are closely scrutinizing those e-business opportunities that best firms and/or companies that grant us access to specific technology fit our markets’ needs. As more and more of our partners, that complements specialized processes; (b) Formal development customers and suppliers implement e-business solutions, we groups, consisting of scientists and technologists from each expect to capitalize on the growth that should come from business with the experience and expertise to facilitate and develop increasing technological proficiency and ubiquity. For example, our strategic cross-business projects; and, (c) A corporate technology online design capability complements our manufacturing dexterity, office or "virtual lab" that supports and complements each allowing quicker execution and turnaround on our customers’ division’s technological needs, capitalizes on economies of scale design changes. and tests new solutions.

Technology Network We also work closely with outside institutions to supplement our R&D and technology management capabilities. These institutions include Instituto Tecnológico y de Estudios Superiores de Monterrey (ITESM), Massachusetts Institute of Technology (MIT), Industrial Research Institute, Universidad Autónoma de Nuevo León, Universidad Nacional Autónoma de México, Instituto Politécnico Nacional, National Institute of Nuclear Research, Stanford Research Institute, Alfred University (UICGR), Consejo Nacional de Ciencia y Tecnología (Conacyt), and others.

3333 cfo’s letter

We are acting on our commitment to improve our financial strength and flexibility

José Antonio López M.

50, president and chief financial officer, Vitro, 1995-present; president, finance and development, 1991-1995; executive vice-president (glass containers), 1989-1991; vice-president, planning and finance, 1985-1989; treasury manager, 1979-1985; various finance positions (Financiera del Norte), 1974-1979. Master's, administration, 1983, MIT; bachelor's, economics, 1971, Instituto Tecnológico y de Estudios Superiores de Monterrey (ITESM). product mix changes. Overall, 1999 consolidated sales were Ps. 25.9 billion (US$2.6 billion), a 4% year-over-year decline in constant pesos and a 5.5% increase in dollar terms. Approximately To Our Shareholders: 46% of total revenues were directly generated in U.S. dollars.

The strong peso exerted significant pressure on our dollar-based Cash Flow (EBITDA) businesses. As a result of the peso’s marked appreciation this year, The peso’s appreciation particularly affected operating margins there is a very wide divergence in our year-over-year financial (15% versus 17%). For the year, Vitro’s subsidiaries generated performance measured in constant pesos versus dollars. Neither cash flow (EBITDA) of Ps. 5.8 billion (US$586 million), a 10.4% constant pesos nor dollars is an entirely perfect measure of our year-over-year drop in constant pesos and a 0.1% increase in financial performance because we do not make 100% of our dollar terms. revenues or expenses in either currency. However, considering that, the majority of our business is dollar-based. To help you to better Earnings evaluate our progress, we have provided year-over-year financial Net majority income was Ps. 1.3 billion (US$132 million), before data in both dollars and pesos. an extraordinary, non-operating and non-cash charge of US$70 million related to a plant closing. As a result of that extraordinary Sales charge, net majority income for the year was Ps. 644 million Strong exports and sales from our foreign subsidiaries partially (US$62 million). Earnings per share was Ps. 2.08 or US$0.66 per offset the effect on consolidated sales from the peso’s ADR, versus losses per share of Ps. (2.44) or US$(0.77) per ADR appreciation, domestic price pressures in certain markets, and the preceding year. v i t r o 1 9 9 9

Capital Expenditures Through these and other initiatives, we will continue to act on our Capital expenditures dropped to Ps. 1.66 billion (US$167 million), commitment to improve our financial strength and flexibility, so we versus Ps. 2.54 billion (US$229 million) in 1998, pursuant to the can selectively capitalize on natural growth opportunities. company’s program to rationalize capital expenditures. This We continue using the economic value added (EVA) model to program limits capital expenditures in non-growth businesses to measure and maximize the return on all investments. maintenance and technological upgrades only.

Sincerely, Financial Structure Vitro is committed to improving its financial strength and flexibility. The company reduced interest expenses by a total of Ps. 85 million (but an increase of US$14 million), bringing the average cost of Vitro’s debt to 11.5%. Eighty-six percent of the company’s debt is José Antonio López M. Chief Financial Officer long-term. The average life of Vitro’s debt is 3.9 years and no debt February 15, 2000 in the international public markets matures until year 2002. The company maintained its debt-to-EBITDA ratio at 2.6 times, same level as 1998, while the EBITDA to interest expense ratio, was 2.8 times, a slight decrease from 3.0 times in 1998.

Key Developments At the end of the third quarter of 1999, Vitro announced the following initiatives to generate US$150 million for the 18-month period from July 1999 to December 2000:

Restructuring its glass containers division by shutting down excess capacity and reducing annual costs and expenses by US$20 million.

Downsizing corporate support areas to achieve estimated annual cost savings of US$12 million to US$15 million.

Rationalizing annual capital expenditures to between US$160 and US$170 (versus a historical average of US$200 million).

Divesting several small, non-strategic assets for an estimated aggregate amount of US$100 million.

3355 stock performance

The price range for Vitro's common stock on the New York Stock Exchange (NYSE) and the Mexican Stock Exchange (BMV) over 1999 was as follows:

1999 NYSE BMV ADR Shares (in dollars) (in pesos)

High Low High Low

First Quarter 5.94 3.75 19.20 13.00 Second Quarter 7.38 5.00 22.95 15.74 Third Quarter 5.56 4.00 17.50 12.54 Fourth Quarter 5.81 3.81 17.92 12.02

note: one ADR represents three ordinary shares. Independent Auditors’ Report

Board of Directors and Stockholders of Vitro, S.A. de C.V. San Pedro Garza García, N.L.

We have audited the accompanying consolidated balance sheets In our opinion, based upon our audits and the reports of other of Vitro, S.A.de C.V. and Subsidiaries as of December 31, 1998 auditors mentioned in the first paragraph, such consolidated and 1999,and the related consolidated statements of operations, financial statements present fairly, in all material respects, the stockholders' equity and changes in financial position for each consolidated financial position of Vitro, S.A. de C.V. and of the three years in the period ended December 31, 1999 (all Subsidiaries as of December 31, 1998 and 1999, and the expressed in millions of Mexican pesos). These financial c o n s o l i d ated results of their operat i o n s, ch a n ges in their statements are the responsibility of the Company's management. stockholders' equity and changes in their financial position for Our responsibility is to express an opinion on these financial the years ended December 31, 1997, 1998 and 1999, in statements based on our audits. The financial statements of the conformity with accounting principles generally accepted in subsidiaries and associated companies named in note 2 b), were México. audited by other auditors and our opinion, regarding the amounts reported by these companies, is based only on the reports of such other auditors. The total assets of the Our audits also comprehended the translation of Mexican peso companies above mentioned represent 21% in 1998 and 1999 amounts into United States dollar amounts and, in our opinion, ofthe consolidated total assets,whereas their net sales represent such translation has been made in conformity with the basis 27% ofthe consolidated net sales in 1997 and 28% in 1998 and stated in note 2. Such United States dollar amounts are 1999. presented solely for the convenience of readers.

We conducted our audits in accordance with auditing standards The accompanying financial statements have been translated into generally accepted in México, which are substantially the same English language for the convenience of readers. as those followed in the United States. 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 m a n age m e n t , as well as eva l u ating the ove rall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. February 15, 2000

37 Vitro, S.A. de C.V. and Subsidiaries Consolidated Balance Sheets (Millions ofconstant Mexican pesos as ofDecember 31,1999)

Millions of US dollars (Convenience Translation) December 31, December 31, 1998 1999 1999

AS S E T S

Cash and cash equivalents Ps. 628 Ps. 570 $ 60 Trade receivables, net of allowance for doubtful accounts of Ps. 54 and Ps. 59 2,927 2,737 288 Other receivables 798 889 94 Inventories (note 5) 3,237 3,076 324 Other current assets 203 Current assets 7,793 7,272 766

Deferred tax assets (note 18 a) 757 775 82 Investment in associated companies (note 6) 216 148 16 Long-term investments (note 7) 157 Land and buildings (note 8) 9,547 9,044 952 Machinery and equipment (note 8) 12,834 11,535 1,214 Construction in progress 1,228 968 102 Excess of cost over fair value of net assets acquired, net of accumulated amortization of Ps. 76 and Ps. 87 184 154 16 Intangible pension asset 773 746 79 Other assets 625 641 67 26,321 24,011 2,528

Total assets Ps. 34,114 Ps. 31,283 $ 3,294 Millions of US dollars (Convenience Translation) December 31, December 31, 1998 1999 1999

LI A B I L I T I E S

Short-term borrowings (note 9) Ps. 2,060 Ps. 1,339 $ 141 Current maturities of long-term debt (note 10) 883 837 88 Trade payables 2,112 2,173 229 Accrued expenses payable 517 499 53 Other current liabilities 1,005 878 92 Current liabilities 6,577 5,726 603 Long-term debt (note 10) 14,359 12,912 1,359 Seniority premiums, pensions and other long-term liabilities (note 11) 1,339 1,413 149 Long-term liabilities 15,698 14,325 1,508 Total liabilities 22,275 20,051 2,111

STOCKHOLDERS' EQUITY

Majority interest: Capital stock: no par value shares issued and outstanding, 360,000,000 in 1998 and 324,000,000 in 1999 360 324 34 Restatement of capital stock 5,371 4,834 509 Capital stock restated 5,731 5,158 543

Treasury stock, (46,222,540 shares in 1998 and 23,081,540 in 1999, note 14c) (958) (414) (44) Paid-in capital 1,167 1,044 110 Shortfall in restatement of capital (12,879) (13,564) (1,428) Minimum pension liability adjustment (94) (133) (14) Retained earnings reser ved for reacquisition of shares of Vitro 1,300 1,300 137 Retained earnings 14,389 13,248 1,395 Net (loss) income for the year (829) 644 68

Total majority interest 7,827 7,283 767

Minority interest in consolidated subsidiaries 4,012 3,949 416

Total stockholders' equity (note 14) 11,839 11,232 1,183

Total liabilities and stockholders' equity Ps. 34,114 Ps. 31,283 $ 3,294

The accompanying notes are an integral part José Antonio López Federico Sada G. of these consolidated financial statements. President and ChiefFinancial Officer President and ChiefExecutive Officer

39 Vitro, S.A. de C.V. and Subsidiaries Consolidated Statements of Operations (Millions ofconstant Mexican pesos as ofDecember 31, 1999, except per share amounts)

Millions of US dollars, (Convenience Translation) Year ended Year ended December 31, December 31, 1997 1998 1999 1999

Net sales Ps. 26,570 Ps. 26,958 Ps. 25,879 $ 2,725 Cost of sales 18,008 18,269 17,903 1,885

Gross profit 8,562 8,689 7,976 840 General, administrative and selling expenses 4,014 4,101 4,105 432

Operating income 4,548 4,588 3,871 408

Total financing cost (note 15) 1,313 2,911 297 31

Income after financing 3,235 1,677 3,574 377

Other income (loss),net (note 16) 4 (193) (1,094) (115) Share in net income of unconsolidated associated companies (note 6) 227 5 21 2 Gain (loss) in value of shares in trust (note 6) 53 (1,070)

Income before income tax and workers' profit sharing 3,519 419 2,501 264

Income and asset tax (note 18) 1,124 942 1,421 150 Workers' profit sharing (note 18) 207 187 229 24

Net income (loss) from continuing operations 2,188 (710) 851 90 Net income from discontinued operations (note 4) 52 Income on disposal of discontinued operations (note 4) 1,075 291 504 53 Extraordinary item (note 19) 316 109 139 14

Net income (loss) for the year Ps. 3,631 Ps. (310) Ps. 1,494 $ 157

Net income of minority interest Ps. 690 Ps. 519 Ps. 850 $ 89 Net income (loss) of majority interest 2,941 (829) 644 68 Ps. 3,631 Ps. (310) Ps. 1,494 $ 157 Earnings per common share (based on weighted average shares outstanding of 360,000,000 for 1997, 340,197,532 for 1998 and 310,464,210 for 1999): Net income (loss) from continuing operations Ps. 6.08 Ps. (2.09) Ps. 2.74 $ 0.29 Net income from discontinued operations 0.14 Income on disposal of discontinued operations 2.99 0.86 1.62 0.17 Extraordinary item 0.88 0.32 0.45 0.05 Net income of minority interest (1.92) (1.53) (2.73) (0.29)

Net income (loss) of majority interest Ps. 8.17 Ps. (2.44) Ps. 2.08 $ 0.22

The accompanying notes are an integral part of these consolidated financial statements. Vitro, S.A. de C.V. and Subsidiaries Consolidated Statements of Changes in Financial Position (Millions of constant Mexican pesos as ofDecember 31,1999)

Millions of US dollars (Convenience Translation) Year ended Year ended December 31, December 31, 1997 1998 1999 1999

OPERATING ACTIVITIES: Net income (loss) from continuing operations Ps. 2,188 Ps. (710) Ps. 851 $ 90 Add (deduct) non cash items: Depreciation and amortization 1,677 1,826 1,879 198 Provision for seniority premiums and pensions 55 81 68 7 Amortization of debt issue costs 49 48 45 5 Share in net income of unconsolidated associated companies (227) (5) (21) (2) (Gain) loss from sale of subsidiaries and associated companies (169) (73) 73 7 Loss to reduce investments to market value 172 311 188 20 Write-off and loss from sale of fixed assets 769 81 (Gain) loss in value of shares in trust (53) 1,070 Deferred income tax and workers' profit sharing 131 57 (17) (2) Tax effect from discontinued operations and extraordinary item 726 400 643 67 4,549 3,005 4,478 471 Increase in trade payables 174 289 93 10 Decrease in trade receivables 75 234 146 15 Increase in inventories (171) (524) (118) (12) Change in other current assets and liabilities, net (295) 329 (221) (23)

Resources generated from continuing operations 4,332 3,333 4,378 461 Net income from discontinued operations 52 Proceeds from sale of discontinued operations 1,377 Operating assets and liabilities from discontinued operations 11

Resources generated from operations 5,772 3,333 4,378 461

FINANCING ACTIVITIES: Short-term bank loans 5,171 5,325 6,539 688 Long-term bank loans 15,361 11,784 5,126 540 Capital stock contributed by (paid to) minority interest 31 (180) Monetary effect on liabilities with financing cost (2,777) (2,876) (1,862) (196) Payment of short-term loans (5,510) (5,605) (5,447) (573) Payment of long-term loans (17,158) (8,663) (6,606) (696) Dividends paid to stockholders of Vitro (153) (319) (312) (33) Dividends paid to minority interest (494) (374) (507) (53) Effect from discontinued operations (24) Resources used in financing activities (5,553) (908) (3,069) (323)

INVESTMENT ACTIVITIES: Investment in land and buildings and machinery and equipment (1,847) (2,540) (1,657) (174) Sale of fixed assets 126 203 322 34 Investment in subsidiaries and associated companies (43) (29) (35) (4) Sale of subsidiaries and associated companies 3,292 100 149 16 Long-term investments (2,201) 1,005 Acquisition of treasury stock (958) (165) (18) Effect from discontinued operations (19) Other (189) (316) 19 2

Resources used in investment activities (881) (2,535) (1,367) (144)

Net decrease in cash and cash equivalents (662) (110) (58) (6)

Balance at beginning of year 1,400 738 628 66 Balance at end of year Ps. 738 Ps. 628 Ps. 570 $ 60

The accompanying notes are an integral part ofthese consolidated financial state m e n t s .

41 Vitro, S.A. de C.V. and Subsidiaries Consolidated Statements of Stockholders' Equity (Millions ofconstant Mexican pesos as of December 31,1999, except per share amounts)

Mi n i mu m Ne t Shortfall in pe n s i o n in c o m e Stock- Capital Treasury Paid-in restatement li ab i l i t y Retained (loss) for Minority holders’ stock stock capital of capital ad j u s t m e n t earnings the yea r interest equity

Balance at December 31, 1996 Ps. 5,731 Ps. Ps. 1,163 Ps. (11,052) Ps. (100) Ps. 20,005 Ps. (6,938) Ps. 4,268 Ps. 13,077 Appropriation of net loss from prior year (6,938) 6,938 Loss from holding non-monetary assets (1,508) (1,508) Decrease in minority interest (36) (36) Minimum pension liability adjustment 100 100 Net income for the year 2,941 2,941

Balance at December 31, 1997 5,731 1,163 (12,560) 13,067 2,941 4,232 14,574 Appropriation of net income from prior year 2,941 (2,941) Dividends (Ps. 0.89 per share) (319) (319) Loss from holding non-monetary assets (319) (319) Decrease in minority interest (220) (220) Minimum pension liability adjustment (94) (94) Paid in capital 4 4 Acquisition of treasury stock (958) (958) Net loss for the year (829) (829)

Balance at December 31, 1998 5,731 (958) 1,167 (12,879) (94) 15,689 (829) 4,012 11,839 Appropriation of net income from prior year (829) 829 Dividends (Ps. 0.89 per share) (312) (312) Loss from holding non-monetary assets (685) (685) Decrease in minority interest (63) (63) Minimum pension liability adjustment (39) (39) Paid in capital 13 13 Capital stock redemption (573) 709 (136) Acquisition of treasury stock (165) (165) Net income for the year 644 644

Balance at December 31, 1999 Ps. 5,158 Ps. (414)Ps. 1,044 Ps. (13,564) Ps. (133) Ps. 14,548 Ps. 644 Ps. 3,949 Ps. 11,232

The accompanying notes are an integral part of these consolidated financial statements. Vitro, S.A. de C.V. and Subsidiaries Notes to Consolidated Financial State m e n t s (Millions ofconstant Mexican pesos as of December 31,1999, except per share amounts)

1. Activities of the company

Pursuant to the stockholders meeting held on March 26, 1998, Vitro, S.A. changed its name to Vitro, S.A. de C.V. ("Vitro"). Vitro is a holding company, the subsidiaries of which manufacture and market glass and plastic containers, thermoformed articles, aluminum cans, flat glass for architectural and automotive uses, glassware for table and kitchen use, fiberglass insulation and reinforcements, certain chemical products and minerals, household appliances and capital goods, and conduct related research and development activities.

2. Basis of presentation and principles of consolidation

a) Basis of presentation The consolidated financial statements of Vit r o and its subsidiaries (the "Company") are prepa r ed in accordance with accounting principles generally accepted in México ("Mexican GAAP") as further described in note 3.

The consolidated financial statements presented herein are expressed in millions of constant Mexican pesos as of December 31, 1999, except per share amounts. However, solely for the convenience of users, the consolidated financial statements as of and for the year ended December 31, 1999 have been translated into United States (US) dollars at the rate of 9.4986 pesos per one dollar, the rate of exchange published by Banco de México (Mexico's Central Bank) on December 31, 1999. The translation should not be construed as a representation that the peso amounts shown could be converted into US dollars at such rate or at any rate.

b) Consolidated subsidiaries Those companies in which Vitro holds, directly or indirectly, more than 50% of the capital stock or which Vitro controls are included in the consolidated financial statements. For those companies in which Vitro has joint control, the proportionate consolidation method is used.

Vitro's subsidiaries Vitromátic, S. A. de C. V. and its subsidiaries; Empresas Comegua, S.A. and subsidiaries; and Vitro Flex, S. A. de C. V.; as well as certain other subsidiaries and associated companies which in the aggregate are not material, are audited by firms of public accountants other than the Company's principal auditor. Grupo Financiero Serfin, S. A. ("GFS"),an associated company until November 1997 (see note 7), is also audited by another firm of public accountants.

In order to consolidate the financial statements of subsidiaries located in the United States of America, the effect of inflation was taken into consideration in accordance with Bulletin B-10, as amended which is the principal difference between US generally accepted accounting principles ("US GAAP") and Mexican GAAP for these companies. Such companies' financial statements are initially prepared in accordance with US GAAP and are translated into Mexican pesos under the current rate method. The assets, liabilities, stockholders' equity (except capital stock) and the income statement accounts are translated into Mexican pesos using the exchange rate as of the date of the most recent balance sheet presented. The accumulated translation adjustment is included as a component of stockholders' equity.

43 All significant intercompany balances and transactions have been eliminated in consolidation.

c) Investment in associated companies Associated companies are those companies in which Vitro holds, as a permanent investment, less than 50% of the capital stock and maintains significant influence. Such investments are accounted for by the equity method.

3. Principal accounting policies

a) Accounting method for the treatment of the effects of inflation The consolidated financial statements of the Company have been prepared in accordance with Bulletin B-10, "Recognition of the Effects of Inflation in Financial Information", as amended, issued by the Mexican Institute of Public Accountants ("IMCP"), which relates to the recognition of the effects of inflation. The Third Amendment to Bulletin B-10 (the "Third Amendment") has been adopted in preparing such consolidated financial statements. The Third Amendment requires the restatement of all comparative financial statements to constant pesos as of the date of the most recent balance sheet presented. For that purpose,Vitro's Mexican subsidiaries and associated companies use the "Indice Nacional de Precios al Consumidor" (Mexican National Consumer Price Index:"INPC"),published by Banco de México; Vitro's US subsidiaries use the Consumer Price Index - All Urban Consumers - All Items, Unadjusted ("CPI") published by the US Labor Department.

Bulletin B-12 set the rules related to the statement of changes in financial position. This statement presents the sources and uses of funds during the period measured as the differences, in constant pesos, between the beginning and ending balances of balance sheet items adjusted by the excess (shortfall) in restatement of capital. As required by Bulletin B-12, the monetary ef fect and the effect of cha n g es in excha n g e rates are not considered non-cash items in the determi n a tion of res o u rc e s gen e r ate d from operations due to the fact they affect the purchasing power of the entity.

The following is a description of the items that have been restated and the methods used:

• Inventories and cost of sales - Inventories are valued at the price of the last purchase made during the year, at the latest production cost or, in some cases, at standard cost, without exceeding the net realizable value. Cost of sales is determined by using the price of the last purchase prior to the date of consumption, the latest production cost at the time of sale or the standard cost.

• Land, buildings, machinery and equipment - Expenditures for land, buildings, machinery and equipment,including renewals and improvements that extend useful lives, are capitalized. The Company follows the principles of the Fifth Amendment to Bulletin B-10,issued by the IMCP and which became effective on January 1,1997,under which,fixed assets are restated under the method of consumer price index adjustment, using the INPC. The starting balance to apply the INPC is the net replacement value as of December 31, 1996. For machinery and equipment purchased in a foreign country, the restatement is based on a general consumer price index from the country of origin and the exchange rate at the end of each period.

Depreciation is calculated using the straight-line method, taking into consideration the estimated useful life of the asset, in order to depreciate the original cost and the revaluation. The depreciation begins in the month in which the asset comes into service. The estimated useful lives of the assets are as follows:

Years Buildings 20 to 50 Machinery and equipment 5 to 30 • Excess of cost over fair value of net assets acquired - The excess of cost over fair value of net assets acquired of Mexican subsidiaries and associated companies is restated using the INPC. The excess of cost over fair value of net assets acquired of US subsidiaries is restated using the CPI, and such excess is translated to Mexican pesos at the exchange rate at the date of the most recent balance sheet presented.

• Excess (shortfall) in restatement of capital - This item, which is an element of stockholders' equity, reflects the accumulated effect of holding non-monetary assets and the effect of the initial monetary position gain or loss. The accumulated effect of holding non-monetary assets represents the difference between the specific values of non-monetary assets in excess of or below the increase attributable to general inflation as measured by the INPC and CPI.

• Restatement of capital stock and retained earnings - Capital stock and retained earnings, for Mexican subsidiaries, are restated using the INPC from the respective dates such capital was contributed or net income generated to the date of the most recent balance sheet presented. Retained earnings for US subsidiaries are restated using the CPI.

• Exchange fluctuations - Exchange gains or losses of Mexican subsidiaries are included in the cost of financing and are calculated by translating monetary assets and liabilities denominated in foreign currencies at the exchange rate in effect at the end of each month.

• Transactions in foreign currency for Mexican subsidiaries - All transactions in foreign currency are translated at the exchange rate as of the date of such transactions. In accordance with the Third Amendment, such transactions are restated using the INPC.

• Gain (loss) from monetary position - The gain (loss) from monetary position reflects the result of holding monetary assets and liabilities during periods of inflation. Values stated in current monetary units represent a decreasing purchasing power over time. This means that losses are incurred by holding monetary assets over time, whereas gains are realized by maintaining monetary liabilities. The net effect is presented in the statements of operations as part of the total financing cost. For subsidiaries located in the US the result from monetary position is calculated using the CPI. b) Cash and cash equivalents Highly liquid short-term investments with original maturity of ninety days or less, consisting primarily of Mexican Government Treasury Bonds and money market instruments, are classified as cash equivalents. c) Maintenance expenses Maintenance and repair expenses are recorded as costs and expenses in the period when they are incurred. d) Long-term investments Certain long-term investments, which are not accounted for by the equity method, are accounted for by the cost method indexed for inflation using the INPC. Under the indexed cost method, periodic income of the investee is not recognized by the Company based on (i) its share ofthe investee's income or loss or (ii) changes in market value of the shares of the investee. The value of such long-term investments is reduced, against the results of the period, when management determines that the market value is consistently below carrying value.

45 e) Seniority premiums, retirement plans and severance payments Seniority premiums and pension plans for all personnel are considered as costs in the periods in which services are rendered. Periodic costs are calculated in accordance with Bulletin D-3 issued by the IMCP, and the actuarial computations were made by an independent actuary, using estimates of the salaries that will be in effect at the time of payment. Personnel not yet eligible for statutory seniority premiums are also taken into account,with any necessary adjustments made in accordance with the probability of their acquiring the required seniority. The past service cost is amortized over the average period required for workers to reach their retirement age. The method used is the projected unit credit.

Severance payments are expensed in the period in which such payments are made. f) Employee stock option plan An employee stock option plan (see note 14b) was adopted in 1998. The Company is accounting for stock-based compensation using a fair value based method. Compensation cost is measured at the grant date based on the value of the stock option award and is recognized over the vesting period. g) Income tax Income tax expense for the Mexican subsidiaries is computed in accordance with the partial liability method, as required by Bulletin D-4 issued by the IMCP, under which deferred income taxes are provided for identifiable, nonrecurring timing differences that are expected to reverse over a definite period of time, at the tax rate in effect at the end of each period (see note 24). h) Excess of cost over fair value of net assets acquired The excess of cost over fair value of net assets acquired is amortized on a straight-line basis over a period of 20 years. Amortization expense for the years ended December 31, 1997, 1998 and 1999 was Ps. 7, Ps. 14 and Ps. 12, respectively. i) Reclassification of selling, general and administrative expenses to cost of goods sold In order to improve comparative analysis with other companies, to reflect ongoing changes in Vitro’s management of production facilities, and to facilitate the control of such expenses, a change in classification of certain costs and expenses is reflected in the 1999 results. Expenses related to the production of goods have been reclassified, from selling, general and administrative expenses to cost of goods sold. Those expenses include, among others, supervisors’ salaries, packing materials, certain freight expenses, and warehousing costs. For comparison purposes, historical figures for the years 1997 and 1998 have been reclassified in the amount of Ps. 1,560 and Ps. 1,629, respectively. Additionally, as a result of the reclassification, Ps. 110 was capitalized in ending inventory at December 31, 1999 and operating income for the year then ended was increased by the same amount. j) Earnings per share Earnings per share are computed by dividing income (loss) by the weighted average number of shares outstanding during each period. k) Use of estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of these consolidated financial statements and its disclosures. Actual results could differ from those estimated. 4. Discontinued operations

a) Anchor Glass Container Corporation On September 13, 1996,Anchor filed a voluntary petition for reorganization under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the District of Delaware (the "Bankruptcy Court"). As a result of Anchor's bankruptcy filing, the investment of Vitro in Anchor was completely written off as of August 31, 1996.

The 1997, 1998 and 1999 tax benefits of Ps . 41 0 , Ps . 291 and Ps. 50 4 , res p e c t i vel y, resulting from utilization of net operati n g losses of Anchor generated in 1996 are presented in the 1997, 1998 and 1999 statements of operations as "Income on disposal of discontinued operations".

As part of Anchor’s disposal in a transaction approved by the Bankruptcy Court, Vitro provided to the Pension Benefit Guaranty Corporation ("PBGC"), a United States governmental agency that guarantees pensions, a limited guarantee of Anchor's pension under funding liability. No payments would be made under the guarantee unless the PBGC terminates any of Anchor's pension plans, and the guarantee would be payable only to the extent the PBGC could not otherwise recover the under funding liabilities from the entity that purchased Anchor’s assets. The amount of the guarantee is limited to US$ 70 million. Payments would not begin until August 1, 20 0 2 , and would then gen e ra l l y be payable in equal semiannual installments over the fol l o wing 10 yea r s. Payments would not bear interes t . The amount and the term of the guarantee would be pro p o rt i o n at e ly reduced if the pension plans wer e termi n a ted after Janu a r y 31, 20 0 2 .

b) Operations engaged in the mining of silica sand and feldspar ("Mining Operations") On June 27, 1997, Vitro sold 100% of its interest in the subsidiaries of the Company engaged in the mining of silica sand and feldspar to Unimin Corporation for approximately US$ 129.5 million in cash. A gain of Ps. 665 was recognized from the disposal of the Mining Operations. Also, Vitro and Unimin Corporation signed a 10-year contract, whereby Unimin will supply substantially all Vitro's requirements of silica sand and feldspar, two key raw materials in the manufacture of glass, at prevailing market prices.

These Mining Operations results are included in "Net income from discontinued operations". The following sets forth certain statements of operations data for these Mining Operations for the period from January 1 to June 27, 1997:

Sales to unaffiliated customers Ps. 99 Intercompany sales within the Company 203 Total net sales 302 Cost of sales 163 Gross profit 139 General, administrative and selling expenses 40 Operating income 99 Total financing costs 10 Income tax 37 Net income Ps. 52

47 5. Inventories

Inventories are summarized as follows:

December 31, 1998 1999 Semi-finished and finished products Ps. 2,218 Ps. 2,164 Raw materials 490 424 Packaging materials 76 73 2,784 2,661 Spare parts 303 266 Refractory 33 30 Merchandise in transit 104 100 Other 13 19 Ps. 3,237 Ps. 3,076

6. Investment in associated companies

An analysis of the investment in associated companies follows (the percentage of ownership as of December 31, 1998 and 1999, respectively, appears in parenthesis):

December 31, 1998 1999 Regioplast, S.A. de C.V. (50%, 50%) Ps. 106 Ps. 107 Compañía Manufacturera de Vidrio del Perú Ltda., S.A. (23.66%, 0%) 71 Sourdillon de México, S.A. de C.V. (34%, 34%) 39 41 Ps. 216 Ps. 148

The Company's share in net income (loss) of unconsolidated associated companies is as follows:

Year ended December 31, 1997 1998 1999 Regioplast, S.A. de C.V. Ps. 12 Ps 2 Ps. 19 Compañía Manufacturera de Vidrio del Perú, Ltda., S.A. (2) 2 Sourdillon de México, S.A. de C.V. 1 2 GFS (see note 7) (9) Cydsa, S.A. (“Cydsa”)(1) 226 Ps. 227 Ps. 5 Ps. 21 (1) In October 1997, Vitro made an agreement with the González Sada family to sell its 49.9% interest in Cydsa in exchange for the right to receive the proceeds of the sale of approximately 47.6 million of Vitro common shares, which was recorded as a non-current receivable. The sale generated a loss of Ps. 365 based on the market value of the Vitro shares. Also, during 1997 a gain of Ps. 53 was recorded and during 1998 a loss of Ps. 1,070 was recorded when such shares were valued at market value.

7. Long-term investments

Long-term investments at December 31, 1998 consists of a Ps. 157 investment in GFS, a Mexican corporation, which is a financial service holding company. Until November 1997 the Company's investment in GFS was accounted for using the equity method. During 1997, because the Company did not make further investments in GFS, its investment in GFS was diluted from 11.4% to 6.8%. Effective November 30, 1997, the Company concluded it no longer had significant influence with respect to GFS and, accordingly, discontinued the use of the equity method of accounting for its investment in GFS, resulting in a write-down included in other income (loss) of Ps. 172 and Ps. 261 for 1997 and 1998, respectively, to reduce the carrying value of its investment in GFS to market value.

On July 8, 1999, the shareholders of GFS and Banca Serfin, S.A., at the Ordinary and Extraordinary meetings, approved the reclassification of the accumul a ted deficit against the remaining equity of both companies. The remaining equity was insuffi c i e n t to absorb the total accumul at e d deficit. As a result, all shares representing the capital stock of both companies were canceled in accordance with legal requirements and the law of Instituto para la Protección del Ahorro Bancario (IPAB). Immediately, new nominative shares were issued in order to increase the stockholders´ equity. Previous shareholders (among them Vitro) had rights of preference to subscribe such shares. The rights were not exercised, therefore, the IPAB subscribed and paid all the new shares and took control of both companies. As a result Vitro wrote-off its investment in GFS, for Ps. 157, which is included in Other income (loss), net.

8. Land and buildings, and machinery and equipment

Land and buildings, and machinery and equipment are summarized as follows:

December 31, 1998 1999 Land Ps. 3,302 Ps. 3,234 Buildings 10,026 10,086 Accumulated depreciation 3,781 4,276 Ps. 9,547 Ps. 9,044 Machinery and equipment Ps. 27,377 Ps. 26,392 Accumulated depreciation 14,543 14,857 Ps. 12,834 Ps. 11,535

As mentioned in note 3 a), machinery and equipment purchased in a foreign country, in the amount of Ps. 5,450 as of December 31, 1999, was restated using the CPI.

49 9. Short-term borrowings

At December 31, 1998 and 1999, s h o rt - t e rm borrowings denominated in Mexican pesos totaled Ps. 115 and Ps. 92 , res p e c t i vel y, and short-term borrowings denominated in foreign currency (all of which are denominated in US dollars) totaled Ps. 1,945 and Ps. 1,247, respectively.

10. Long-term debt

Long-term debt consists of the following:

December 31, 1998 1999 I. Foreign subsidiaries (payable in US dollars): Secured debt, floating interest rate based on LIBOR plus a spread between 2.0% and 2.5%, principal payable in several installments through 2005. Ps. 151 Ps. 245

Unsecured debt, floating interest rate based on LIBOR plus a spread between 2% and 3%, principal payable in several installments through 2003. 315 138

II. Mexican subsidiaries (payable in US dollars): Secured debt, floating interest rate based on LIBOR plus a spread between 1.5% and 2.3%, principal payable in several installments through 2006. 2,297 1,303

Unsecured debt, floating interest rate based on LIBOR plus a spread between 0.5% and 2.3%, principal payable in several installments through 2004. 4,042 4,700

Unsecured debt, fixed interest rate 5.9% payable in 2004. 64

10 1/4% guaranteed senior unsecured notes due in year 2002 and 11 3/8% guaranteed senior unsecured notes due in year 2007. 4,612 3,942

III. Vitro and Mexican subsidiaries (payable in Mexican pesos): Secured debt, floating interest rate based on TIIE (interbank equilibrium rate) or TIIP (interbank average rate) adjusted by a spread between -2% and 0.5%, principal payable in 2006. 16 December 31, 1998 1999 Unsecured debt, floating interest rate based on TIIE, plus a spread up to 1%, principal payable in several installments through 2004. Ps. 417 Ps. 354

Unsecured medium term notes, floating interest rate based on TIIE; plus a spread between 0.4% and 0.7%, principal payable in several installments through 2004. 1,550 1,380

Unsecured medium term note, interest rate based on TIIE plus 2%, principal payable in 2004. 786

IV. Vitro and Mexican subsidiaries (denominated in UDI’s (investment units), payable in pesos): Unsecured debt, interest rate of 8.75%, payable in 2006. 245 247

9.0% and 10.0% unsecured medium term notes, principal payable in 2002 and 2006. 1,242

Unsecured medium term notes, rate based on average of UNIBONO (indexed long-term Mexican government bond) plus 1.75%, principal payable in 2004. 134

13% secured medium term notes, payable in 2004. 811 15,242 13,749 Less current maturities. 883 837 Ps. 14,359 Ps. 12,912

As of December 31, 19 9 9 , the interest rate of TI I E , TI I P , CETES and LIBOR wer e 18.75%, 18 . 7 0 % , 16.25% and 6.13%, res p e c t i vel y.

The schedule of principal payments of long-term debt as of December 31, 1999 is as follows:

Year ending, December 31, 2001 Ps. 2,035 2002 4,958 2003 814 2004 1,654 2005 and after 3,451 Ps. 12,912

51 Certain of the Company's long-term debt agreements contain restrictions and covenants that require the maintenance of various financial ratios. The Company has complied with the restrictions and covenants during 1999.

Debt of the Company totaling Ps. 1,548 is collateralized with fixed assets and trade accounts receivable with a book value of Ps. 4,900 as of December 31, 1999.

11. Pension plans and seniority premiums

The disclosures relating to the Company's pension plans and seniority premiums required by Bulletin D-3, issued by IMCP, calculated as described in note 3 e), together with certain actuarial assumptions utilized are presented below as of December 31, 1998 and 1999:

December 31, 1998 1999 Accumulated benefit obligation Ps. 1,324 Ps. 1,419 Projected benefit obligation 1,414 1,526 Plan assets at fair value 11 12 Unrecognized net loss 183 223 Unrecognized transition obligation 630 567 Changes in assumptions and adjustments from experience 142 191 Projected net liability Ps. 448 Ps. 533 Additional minimum liability Ps. 871 Ps. 882 Net periodic cost (Ps. 148 for 1997) 195 208

Weighted-average assumptions: December 31, 1998 1999 Discount rate 5 % 5 % Expected rate of return on plan assets 7 % 9 % Rate of compensation increase 1 % 1 %

12. Commitments and contingencies

On December 20, 1999 the Company signed a power and steam supply agreement with Enron Energía Industrial de México, S. de R.L. de C.V. This commitment will be for 15 years starting March of 2002 and will provide energy to most Mexican subsidiaries of the Company. Vitro will not be required to make any investment in this project. This plan when fully implemented might result in cost saving for the Company.

The Company is not a party and none of its assets are subject to any pending legal proceedings nor is the Company subject to any co n t i n gent liabilities, other than as described in note 4 and legal proceedings and contingent liabilities arising in the normal course of business and against which the Company is adequately insured or indemnified or which the Company believes are not material in the aggregate. 13. Foreign currency operations

a) At December 31,1999, the assets and liabilities denominated in foreign currency (other than Mexican pesos) of the Company's Mexican subsidiaries consist of the following:

Millions of Millions of US dollars Mexican Pesos Monetary assets $ 141 Ps. 1,342 Inventories 46 440 Fixed assets 574 5,450 Monetary liabilities 1,289 12,240

b) Foreign operations of the Company's Mexican subsidiaries during 1999 consisted of the following:

Millions of Millions of US dollars Mexican Pesos Exports $ 749 Ps. 7,153 Imports 442 4,222 Interest expense, net 120 1,144

c) The exchange rates used for purposes of the Company's consolidated financial statements at the following dates were:

December 31, 1996 Ps. 7.8765 December 31, 1997 8.0681 December 31, 1998 9.8963 December 31, 1999 9.4986

On February 15, 2000, the date of issuance of these consolidated financial statements, the exchange rate was Ps. 9.3880 per one US dollar.

14. Stockholders' equity

a ) C apital stock of the Company consisted of 360,000,000 ord i n a ry, n o m i n at ive, f u l ly paid common share s, without par va l u e, as of December 31, 1 9 9 8 . At the ex t ra o rd i n a ry share h o l d e rs ’ meeting held on March 26, 1999 the share h o l d e rs ap p rove d the cancellation of 36,000,000 shares held as tre a s u ry stock , t h e re fo re the capital stock of the Company consisted of 324,000,000 shares as of December 31, 1 9 9 9 .

53 b) In March 1998, the Company adopted an employee stock option plan (the "Plan"). Pursuant to the Plan, on March 1, 1998 and 1999 (the "Grant Date"), the Company granted to certain of its employees, executive officers and directors (the "Eligible Executives") stock options pursuant to which the Eligible Executives have the right to buy an aggregate of 2,813,300 and 2,893,000 common shares of the Company, respectively, at an e xercise price to be determined at the time such options are exercised. These options have been granted at an initial exercise price of Ps. 31.31 and Ps. 14.88 for 1998 and 1999, re s p e c t ive ly, wh i ch is equal to the ave rage closing price on the Mexican Stock Exch a n ge of the common shares on the 20 t rading days prior to the Grant Dat e. The ex e rcise price of the options will be determined at the time such options are exercised by indexing the initial exercise price using an indexing factor based on the cumulative performance of the Company's common shares relative to the cumulative performance of the Indice de Precios y Cotizaciones of the Mexican Stock Exchange (the "MSE Price Index"), which indexing factor is subject to certain ceilings and floors. The effect of the indexation is that the initial exercise price will be increased less if the Company's common shares outperform the MSE Price Index and will be increased more if the common shares under perform the MSE Price Index.

Subject to certain exc eptions in case of ch a n ges in the employment stat u s, 5 0 % , 25% and 25% of the options become exe rcisable, respectively, on the third, fourth and fifth anniversary of the Grant Date, and all of the options expire on the tenth anniversary date of the Grant Date. Although the Plan contemplates yearly grants for a total of 5 years, the Company may at any time, at its sole discretion, amend any of the terms of the ungranted options, or otherwise terminate the Plan.

I f s u ch options w e re exe rc i s able as of December 31, 1 9 9 9 , the exe rcise price per share would be Ps. 37.70 for the options granted in 1998 and Ps. 17.99 for the options granted in 1999. The closing price of the Company's shares on the Mexican stock exchange on December 31, 1999 was Ps. 17.90.

C o m p e n s ation cost ch a rged against income for such plan we re Ps. 4 and Ps. 13 for 1998 and 1999, re s p e c t ive ly. Th e fair value of each option granted in 1998 and 1999 was estimated to be Ps. 8.46 and Ps. 8.25 per share, respectively. Such es t i m a te was made on the Grant Date using the Black- S c holes option-pricing model with the fol l o wing assumptions: vol at i l i t y of 44%; risk free interest rate of 15%; and an expected life of five years. c) As of December 31, 1998 and 1999 the trea s u r y shares held by the Company wer e 46,222,540 and 23,081,540, res p e c t i vel y, among these are the shares held by Stock Option Trust (see note 14b) which were 15,195,540 and 23,081,540 as of December 31, 1998 and 1999, respectively. d) Stockholders' equity includes accrued profits and results from the restatement of assets that, in case of distribution, will be subject, under certain circumstances, to the payment of income tax by the Company. Effective January 1, 1999, after a change made to the Income Tax Law in México, the taxable rate for those distributions is 35% and in all cases, when dividends are paid to individuals or foreign residents, an additional 5% withholding tax will be paid. e) Dividends declared and paid:

Dividend amount Stockholders’meeting date Nominal pesos Constant Pesos Payment date

April 26, 1996 Ps. 108 Ps. 191 May, 1996 April 26, 1996 108 153 July, 1997 March 26, 1998 252 319 April, 1998 March 26, 1999 292 312 April, 1999 f) Minority interest in consolidated subsidiaries consists of the following:

December 31, 1998 1999 Capital stock Ps. 3,589 Ps. 3,540 Shortfall in restatement of capital (2,268) (2,553) Retained earnings 2,172 2,112 Net income for the period 519 850 Ps. 4,012 Ps. 3,949

g) Majority interest stockholders' equity consists of the following:

December 31, 1999 Nominal value Restatement Restated value Capital stock Ps. 324 Ps. 4,834 Ps. 5,158 Treasury stock (297) (117) (414) Paid-in capital 180 864 1,044 Minimum pension liability adjustment (133) (133) Retained earnings (2,720) 17,268 14,548 Net income for the year 588 56 644

h) Retained earnings reserved for reacquisition of Vitro's shares is the amount reserved pursuant to the shareholders' meeting with the purpose to repurchase shares of Vitro. In accordance with Mexican regulations once the reser ve is established the Board of Directors has the authority to decide when the repurchase is made.

55 15. Total financing cost

Following is a disclosure of the most important items that are included in total financing cost.

Year ended December 31, 1997 1998 1999 In t e r est expense on debt denominated in dollars Ps. 1,215 Ps. 1,347 Ps. 1,185 In t e r est expense on debt denominated in pesos 1,458 607 692 In t e r est expense on debt denominated in UDI’S 312 189 181 Res t a tement of UD I ’ S 386 269 167 In t e r est income (52) (50) (31) Ex cha n g e loss (ga i n ) ,n e t 386 2,722 (398) Gain from monetary position (2,624) (2,509) (1,764) Other financial exp e n s e s 232 336 265 Total financing cost Ps. 1,313 Ps. 2,911 Ps. 297

16. Restructuring charges included in Other income (loss), net.

The Company downsized the production capacity of its glass containers business unit to match the market’s demand. The downsizing involved closing the facility known as Vidriera Oriental, located in México City. A one-time charge of Ps. 672 was taken in the third quarter of 1999 to reduce the book value of the operation to its net realizable value associated with the plant shut-down. Also during the last quarter of 1999 the Company downsized its corporate services at headquarters and certain business units, which resulted in a charge of Ps.123.

17. Amortizable tax losses

At December 31, 1 9 9 9 , the tax loss carry fo r wa rd s, the asset tax to be re c ove red and the capital losses that can be amort i ze d against capital gains consist of the following:

Expiration Tax loss carry forwards Asset Tax Year Majority interest Minority interest Majority interes t Minority interest Capital losses 2000 Ps. Ps. Ps. Ps. 3 Ps. 2001 3 2002 6 913 2003 4 2004 54 193 8 2,374 2005 362 4 2006 49 1 2007 2,121 110 1 2008 3,851 129 166 3 2009 85 40 8 9 Ps. 6,057 Ps. 744 Ps. 367 Ps. 42 Ps. 3,287 18. Income tax and workers' profit sharing

a) The income tax and workers' profit sharing included in the Company's results are:

Year ended December 31, 1997 1998 1999 Income tax: Current Ps. 998 Ps. 710 Ps. 1,361 Deferred 126 53 (50) 1,124 763 1,311 Asset Tax 179 110 Ps. 1,124 Ps. 942 Ps. 1,421

Year ended December 31, 1997 1998 1999 Workers’ profit sharing: Current Ps. 209 Ps. 206 Ps. 241 Deferred (2) (19) (12) Ps. 207 Ps. 187 Ps. 229

Deferred tax assets (liabilities) presented on the balance sheet result from the following:

December 31, 1998 1999 Deferred tax benefit from provision for furnace repair Ps. 417 Ps. 438 Deferred tax benefit from the future deduction of inventories held on December 31, 1986 514 496 Deferred tax from deduction of fixed assets (174) (159) Ps. 757 Ps. 775

b) At December 31, 1999, there were Ps. 2,092 of previously deducted inventories and Ps. 507 of non-deductible provisions related to seniority premium and pension payments for which no deferred taxes have been provided in accordance with Mexican GAAP (see note 24).

57 c) The reconciliation between the Company's effective income tax rate and the statutory income tax rate is as follows:

Year ended December 31, 1997 1998 1999 Effective income tax rate 31.9 % 224.8 % 56.8 % Asset tax included as income tax (38.3) (5.6) Effect of loss in value of long term investments (82.7) 2.0 Loss on sale of subsidiaries (2.1) Purchase deductions 1.0 24.2 0.2 Difference between tax and accounting basis for monetary gain 2.0 (10.8) 0.7 Reserves (0.9) (16.2) 0.4 Loss from foreign companies and minority interest 0.8 (13.5) Difference between tax and accounting basis for depreciation 4.1 (17.0) (2.4) Difference between tax and accounting basis on sale and write-down of fixed assets (12.5) Other (4.9) (36.5) (2.5) Statutory income tax rate 34.0 % 34.0 % 35.0 %

d) Ef fec t i ve Janu a r y 1, 19 9 9 , the Mexican income tax law was cha n g ed in sever al res p e c t s . In addition to the cha n g es described in note 14 d), other significant changes include (i) a company which files a consolidated tax return is allowed to consolidate only 60% of its share of its subsidiaries for tax purposes, (ii) estimated tax payments are based on the taxable income of each subsidiary individually as opposed to a consolidated basis, and (iii) the overall tax rate increased from 34% to 35%; however, in 1999 income taxes are currently payable based on a 32% rate and the remaining 3% will be paid when such amounts are paid out as dividends. The 32% rate will decrease to 30% effective January 1, 2000 and the remaining 5% will be paid when such amounts are paid out as dividends. Taxpayers have the option to pay 35% currently rather than deferring a remainder until dividends are paid.

19. Extraordinary item

The extraordinary item is the tax benefit that resulted from the utilization of tax loss carryforwards and the recovery of the asset tax paid in previous years. 20. Related party information

The following reflects transactions between the Company and GFS:

Year ended December 31, 1997 1998 1999 * Short-term investments Ps. 9 Ps. 22 Ps. Short-term loans pa yable to GFS 125 189 Long-term loans payable to GFS 1,503 751 Interest paid to GFS 947 430

* see note 7

21. Business dispositions

a) Sale of Silicatos y Derivados, S.A.- In December 1999, Vitro sold its 55% interest in Silicatos y Derivados, S.A., to its long-standing partner in such company, PQ Corporation, for US$ 9.9 million. A loss of Ps. 38 was realized as a result of this transaction and is included in Other income (loss), net. This company produces sodium silicate and aluminum sulfate for the soap, detergent, water treatment and paper industries. The company’s sales represented approximately 1.4% of Vitro’s consolidated sales.

b) Sale of Compañía Manufacturera de Vidrio de Perú Ltda., S.A.- In December 1999, Vitro accepted the November 17, 1999 public tender offer made byVidrios Industriales,S.A.(a subsidiary of Owens-Illinois, Inc.) for its 23.66% interest ofCompañía Manufacturera de Vidrio de Perú Ltda, S.A. The amount received for the sale was US$ 6.6 million. A loss of Ps. 35 was realized as a result of this transaction and is included in Other income (loss), net. Vitro accounted for this investment under the equity method.

c) Partnership with Libbey Inc.- On August 29, 1997 Vitro entered into a partnership with Libbey Inc., through which Vitro sold 49% of its glassware business and 100% of its World Crisa subsidiary in the US. The proceeds received in this transaction were US$ 100 million in cash. A gain of Ps. 632 was realized as a result of this transaction and is included in Other income (loss), net.

d) Sale of Mining Operations.- During 1997 Vitro sold 100% of its interest in the subsidiaries engaged in the mining of silica sand and feldspar (see note 4b).

e) Sale of Cydsa.- On December 15, 1997 Vitro sold its 49.9% interest in Cydsa (see note 6).

22. Business segment data

The accounting policies of the segments are the same as those described in notes 2 and 3. The Company evaluates the performance of its segments on the basis of operating income. Intersegment sales and transfers are accounted for as if the sales and transfers were to third parties, that is, at current market prices.

59 Vitro's reportable segments are strategic business units that offer different products. The segments are managed separately; each requires different manufacturing operations, technology and marketing strategies; and each segment primarily serves a different customer base.

The Company's five reportable operating segments are: Glass Containers, Flat Glass, Glassware, Household Products and Diverse Industries. The principal products of each of the segments are summarized below:

Segment Principal products Glass Containers Glass containers.

Flat Glass Flat glass for the construction and automotive industries.

Household Products Home appliances.

Glassware Glassware for table and kitchen use.

Diverse Industries Soda ash, fiberglass, laboratory ware, plastic and aluminum can containers; high precision components; and glass forming machines and molds for glass containers.

The segment data presented below does not include discontinued operations for any of the periods presented.

Flat Ho u s e h o l d Di vers e Containers Glass Pro d u c t s Glassware In d u s t r i e s Corporate Consolidated December 31, 1997: Net sales Ps. 7,851 Ps. 8,429 Ps. 4,988 Ps. 2,461 Ps. 3,204 Ps. 53 Ps. 26,986 Intersegment sales 21 12 383 416 Consolidated net sales to external customers 7,851 8,408 4,988 2,449 2,821 53 26,570 Operating income 1,479 1,763 542 495 517 (248) 4,548 Assets 11,886 8,629 4,268 2,356 4,067 4,818 36,024 Capital expenditures 495 681 321 86 198 66 1,847 Depreciation and amortization 673 443 184 141 191 45 1,677 December 31, 1998: Net sales Ps. 7,969 Ps. 8,854 Ps. 5,062 Ps. 1,996 Ps. 3,508 Ps. 57 Ps. 27,446 Intersegment sales 8 19 10 451 488 Consolidated net sales to external customers 7,961 8,835 5,062 1,986 3,057 57 26,958 Operating income 1,399 1,886 496 462 640 (295) 4,588 Assets 12,507 8,684 4,310 2,421 4,274 1,918 34,114 Capital expenditures 1,257 287 357 185 414 40 2,540 Depreciation and amortization 702 498 222 140 216 48 1,826 December 31, 1999: Net sales Ps. 7,287 Ps. 8,624 Ps. 4,911 Ps. 2,007 Ps. 3,438 Ps. 44 Ps. 26,311 Intersegment sales 4 26 20 382 432 Consolidated net sales to external customers 7,283 8,598 4,911 1,987 3,056 44 25,879 Operating income 1,022 1,557 558 437 547 (250) 3,871 Assets 11,397 8,360 4,152 2,439 3,770 1,165 31,283 Capital expenditures 699 306 347 74 214 17 1,657 Depreciation and amortization 770 473 236 139 212 49 1,879 Export sales from México, substantially all of which are denominated in US dollars, are mainly to the United States and Canada and were as follows (in millions of US dollars):

Year ended December 31, 1997 1998 1999 $ 644 $ 685 $ 749

Certain geographic information about the Company's operations and assets is summarized as follows:

Year ended December 31, 1997 1998 1999 Net sales (1) to external customers: México Ps. 15,831 Ps. 15,196 Ps. 14,153 All foreign countries, mainly the United States and Canada 10,739 11,762 11,726 Consolidated Ps. 26,570 Ps. 26,958 Ps. 25,879

Consolidated net sales to a single external customer did not equal 10% or more of Vitro's total consolidated net sales.

(1) Net sales are attributed to countries based on location of customer.

December 31, 1997 1998 1999 Land and buildings, machinery and equipment, and construction in progress: México Ps. 21,796 Ps. 22,336 Ps. 19,912 All foreign countries, mainly Central and South America and the United States 1,316 1,273 1,635 Consolidated Ps. 23,112 Ps. 23,609 Ps. 21,547

23. Year 2000

The Company’ s year 2000 project to identify and correct the systems app l i c a tions affected by the year 2000 issue was completed according to schedule. The Company achieved the objective of maintaining continuous operations in all its manufacturing plants and information systems according to the plan. During the transition period to the year 2000, all the operations performed normally and in the following months the Company will continue to monitor the performance of all year 2000 sensitive elements in all its operations.

61 24. New accounting standard

On January 1, 2000 a new accounting standard became effective, new Bulletin D-4, issued by the IMCP, which defines the accounting treatment for income taxes and worker’s profit sharing (WPS). In accordance with this new bulletin the financial statements should recognize deferred income taxes for all temporary differences between accounting and tax bases for all assets and liabilities and deferred WPS for temporary differences between tax and accounting results, which are expected to reverse in the future. Additionally, net operating losses and asset tax paid are recognized as assets.

The initial cumul at i ve effect at Janu a r y 1, 20 0 0 , fr om the app l i c a tion of the new Bulletin D-4 will increase liabilities by Ps. 1, 2 6 5 , decrease total assets by Ps. 775 and decrease stockholders’equity by Ps. 2,040. The cumulative effect as of January 1, 2000 will be charged directly to stockholders’ equity and will have no effect on cash flow.

25. Subsequent event

In January 2000, the Company announced the signing of a letter of intent to acquire Harding Glass Inc., a distributor of flat glass products for the automotive and construction sectors in the United States of America. The transaction when closed would double the Company’s distribution outlets in that country (Harding’s sales for 1999 were US$ 118 million). The investment would be approximately US$ 34 million. shareholder information

Corporate Headquarters Exchange Listings Av. Ricardo Margáin Zozaya 400 Bolsa Mexicana de Valores (BMV), Mexico Col. Valle del Campestre, 66265 New York Stock Exchange (NYSE), USA Garza García, Nuevo León México Ticker Symbols Tel: (528) 329 1210 BMV, VITROA Fax: (528) 329 1290 NYSE, VTO (American Depositary Receipt, ADR, consisting of http://www.vto.com three non-voting VITROA Shares)

Media Contact Ulrich Sander ADR Depositary Bank Vice President, Communications Citibank, N.A. Grupo Vitro 111 Wall Street, 20th Floor/Z7 Tel: (528) 329 1332 New York, New York 10005 e-mail: [email protected] USA Tel: (212) 657 9522 Financial Community Contact Hugo Jaime García Dividend Policy Vice President, Corporate Financing The declaration, amount and payment of dividends are deter- Grupo Vitro mined by the majority of the voting stock. This Tel: (528) 329 1210 decision is generally, but not necessarily, based on the e-mail: [email protected] recommendation of the Board of Directors. This payment depends on different factors with regards to the Company’s US Contact financial condition. It is not guaranteed that the Company will Kristin Anderson pay dividends. Ludgate Communications Tel: (212) 688 5144 e-mail: [email protected] SEC Filings The Company files and submits periodical reports to the U.S. Assistant General Counsel Securities and Exchange Commission (SEC). Tomás Cantú Assistant General Counsel Grupo Vitro Tel: (528) 329 1272 This Annual Report contains both historical information and e-mail: [email protected] certain forward-looking statements that are based on the beliefs of its management as well as on assumptions made by and Independent Auditors information currently available to the Company. Such statements Deloitte & Touche / Galaz, Gómez Morfín, Chavero, reflect the current views of the Company with respect to future Yamasaki, S.C. events and are subject to certain risks, uncertainties and Av. Lázaro Cárdenas 2321 Pte. assumptions. A summary of these risks is included in the Edificio Alestra, Piso 6B, 66260 Company’s filings to the SEC (20F report). Garza García, Nuevo León México Tel: (528) 152 5200 Fax: (528) 152 5242 http://www.deloitte.com.mx Av. R i c a rdo Margáin Zoz aya 400 C o l . Valle del Campestre, 6 6 2 6 5 Garza Garc í a , N u evo León M é x i c o w w w. v t o. c o m