GRUMA ANNUAL REPORT 2000 FOCUS

Transcription

1 GRUMA ANNUAL REPORT 2000 FOCUS

2 TABLE OF CONTENTS GRUMA s Mission and Business Strategy the principles that guide the company in its efforts to build value for its shareholders. Letter from the Chairman Roberto González Barrera, Chairman of GRUMA s Board of Directors, reviews the company s performance and discusses its competitive advantages and future outlook. An Interview with the Executive Committee The members of GRUMA s Executive Committee answer frequently posed questions about the company s performance and strategy. Focus snapshots of GRUMA s strengths, accomplishments, and efforts to create sustainable shareholder value. Review of Operations a summary of the market environments and value drivers of the company s operating subsidiaries. Management Discussion and Analysis an examination of GRUMA s 2000 financial results. Eleven-year Financial Summary a chart showing GRUMA s growth and financial performance over the past decade. Financial Statements a presentation of the company s audited financial results under Mexican GAAP. GRUMA S Board of Directors and Officers biographical information of GRUMA s officers and the members of its Board of Directors.

3 GRUMA, S.A. DE C.V., IS THE LARGEST CORN FLOUR AND TORTILLA PRODUCER AND DISTRIBUTOR IN THE WORLD. FOUNDED IN 1949, GRUMA HAS OPERATIONS IN MEXICO, THE UNITED STATES, CENTRAL AMERICA, VENEZUELA, AND, MORE RECENTLY, EUROPE. GRUMA IS ENGAGED PRIMARILY IN THE PRODUC- TION, SALE, AND DISTRIBUTION OF TORTILLAS, CORN FLOUR, WHEAT FLOUR, AND BREAD PRODUCTS. GRUMA s VISION is to be the absolute world leader in the manufacturing, marketing, and distribution in the growing corn flour and tortilla markets, as well as one of the primary processors of grain and basic grain-based food products in Mexico, Central America, Venezuela, and Colombia.

4 THE MARKETS FOR GRUMA S CORE BUSINESSES STILL REPRESENT A TREMENDOUS GROWTH OPPORTUNITY POTENTIAL MARKET AS OF DECEMBER 2000 (1) (U.S. dollars in millions) Corn Flour 35% 670 Tortillas 25% 1,900 UNITED STATES Corn Flour 34% 1,400 Wheat Flour Corn tortillas Bread (2) Corn Flour Corn Flour Wheat Flour 15% 1% 13% 11% 34% 23% ,500 VENEZUELA CENTRAL MEXICO AMERICA GRUMA S Market Share GRUMA S Potential Growth (1) Graphic representations are not proportional. (2) Monterrey metropolitan area, packaged bread.

5 FINANCIAL HIGHLIGHTS GRUMA, S.A. DE C.V., AND SUBSIDIARIES (millions of Mexican pesos in constant terms as of December 31, 2000, except per-share amounts) INCOME STATEMENT % Change NET SALES 18,199 16,609 10% OPERATING INCOME % OPERATING MARGIN 4.5% 2.3% n.a. (1) OP. INCOME+DEPR.+AMORT. (2) 1,711 1,184 44% NET INCOME 413 (189) n.a. NET MAJORITY INCOME 233 (300) n.a. BALANCE SHEET TOTAL ASSETS 21,824 22,287-2% TOTAL LIABILITIES 10,055 9,667 4% STOCKHOLDERS' EQUITY 11,404 12,316-7% MAJORITY STOCKHOLDERS' EQUITY 8,972 9,589-6% OTHER NUMBER OF COMMON SHARES OUTSTANDING 438,776, ,462,336 1% EARNINGS PER SHARE (3) 0.53 (0.79) n.a. BOOK VALUE PER SHARE % (1) n.a. = not assessable. (2) Depreciation and amortization that affect operating income. (3) Based on weighted average of outstanding shares of common stock.

6 FOCUS ON OUR CUSTOMERS

7 The company s MISSION is to produce dynamic and profitable longterm growth and to create maximum shareholder value by focusing primarily on its core businesses of corn flour and tortillas and by providing superior-quality corn- and wheat-based food products to its customers and consumers. GRUMA will carry out its mission through the most efficient manufacturing and marketing systems and unparalleled customer service. GRUMA s BUSINESS STRATEGY is to: Offer superior-quality products and services WE BUILD BRAND LOYALTY THROUGH OUR SUPERIOR-QUALITY PRODUCTS AND ATTENTIVE CUSTOMER SERVICE Thoroughly understand and satisfy the needs of its customers and consumers Continually enhance its brand equity through efficient and effective marketing, distribution, and customer service efforts Strengthen its competitive advantages through technology and market research Participate only in markets in which it can create long-term value through economies of scale

8 LETTER FROM THE CHAIRMAN MY FELLOW SHAREHOLDERS: Our company is well positioned and back on track for profitable growth. In 2000, we completed our expansion program, and we improved our financial results year-over-year. Supported by our renewed business strategy, our executive team is focused on increasing value by capturing the tremendous growth opportunity that our markets offer. The year 2000 was one of marked improvement after a difficult, albeit aberrational, All of our major subsidiaries except GIMSA generated greater sales volumes. More importantly, we saw strong year-over-year improvement in our margins. Despite lower prices, increased competition, and higher energy costs, operating profit increased more than 100% to Ps 813 million, and net profit rebounded to more than Ps 400 million from a net loss of Ps 189 million in GRUMA is well on its way to becoming a multinational company. Gruma Corporation s U.S. sales constituted 43% of consolidated 2000 sales, GRUMA s Mexico operations 36%, Gruma Venezuela 15%, and Gruma Centro América 6%. In the United States, Gruma Corporation leveraged its leading position in corn flour and tortillas to improve sales volume 5% yearover-year which is significantly higher than that of most major U.S. food companies. Operating margins declined primarily as a result of increased energy and transportation costs and expenses related to Gruma Corporation s proactive marketing activity. During 2000, Gruma Corporation completed the construction of one tortilla plant in England and one in North Carolina, as well as the expansion of its corn flour mill located in Plainview, Texas. GIMSA part of GRUMA s operations in Mexico increased its operating income 31% and its operating margin to 11.0% from 7.5% in 1999, despite the Mexican corn flour market s slow recovery and declining sales. The company achieved this gain through marked

9 improvements in its cost-to-selling-price ratios due to improved inventory management and, to a lesser extent, operational and administrative efficiencies. By concentrating on its customers needs, GIMSA is continuing to build brand equity and cultivate customer satisfaction amidst strong competition. In 2000, Gruma Venezuela emerged as an efficient and profitable organization. The company s integration of Monaca (which it acquired in August 1999) and its concentrated customer-service activity caused sales volumes to surge 107% over those of What s more important, operating margin grew to 9.7% from last year s 1.9%, due primarily to the successful implementation of the company s aggressive cost-reduction program. For 2001, the company plans to implement additional technological improvements and explore e-business initiatives to improve customer service and internal communication. Molinera de México, GRUMA s wheat flour subsidiary and joint venture with Archer Daniels Midland, completed a very aggressive four-year expansion plan in During that period, the company has grown sales volume by over 100% on a compounded annual basis. We expect that, through the integration of the La Asunción acquisition and improving inventory management and operating efficiencies, Molinera will generate operating profits this year. Gruma Centro América significantly improved its financial performance and profitability in The company recorded profitable volume growth and capitalized on low material costs to expand operating margins to 2.7% from 1.2% in This year, it should improve sales volumes through its continuing customer service initiatives. We will continue to grow our customer base and work to achieve operating efficiencies, and we expect to reach greater profitability in the medium term. Prodisa, GRUMA s tortilla and packaged bread subsidiary in Mexico, increased bread sales volumes by 29% in It also increased its share of the white bread market in the Monterrey metropolitan area to 13% from 11% in 1999 and its share of the sweet bread market to 17% from 14% a year ago. We expect Prodisa s comprehensive restructuring program, begun in October 2000, to reduce Prodisa s operating loss in Moving forward, our focus is to capitalize on our company s expanded business base by leveraging its sustainable competi- tive advantages, including strong brand equity, quality products, efficient manufacturing technology, and market leadership in a highly fragmented industry. GRUMA s core businesses its top priority still offer substantial growth potential. We already have the production capacity in place to grow for the next two to three years. We are also able to add even more capacity at relatively little cost by installing new lines in our existing plants. And we are taking tangible steps to return to our investment-grade status. Recently, we secured a US$400-million, three-year syndicated loan that will enable us to substantially improve our debt profile and extend our debt maturities. Our growth strategy gives top priority to improving margins and cash generation in all of our operating regions. We aim to improve GRUMA s financial performance and credit profile by (1) emphasizing higher capacity utilization, greater operating efficiencies, and increasing volumes through superior-quality products, our focus on our customers and consumers, state-of-the-art technology, and motivated people; (2) lowering capital expenditures; and (3) improving our working capital management. These measures will, in turn, increase operating margins and cash flow generation in all of our operating subsidiaries. I believe we have the capacity, capability, and drive to achieve sustainable profitable growth far into the future. Our long history of successful growth is evidence of that. I want to thank our customers for their continued loyalty and our employees for their diligent contribution. I also want to thank you, my fellow shareholders, for your continuing trust in our company and its ability to create value for all of you. Roberto González Barrera Chairman of the Board

10 AN INTERVIEW WITH THE EXECUTIVE COMMITTEE The members of the GRUMA Executive Committee Jaime Costa Lavín, President of GRUMA s Latin American operations, G. Irwin Gordon, President of GRUMA s U.S. and Europe operations, and Javier Vélez Bautista, Chief Financial Officer and Chief of Staff answer often-asked questions about the company and expectations for the coming years. What are GRUMA s primary competitive advantages? GRUMA holds a substantial leadership position in its core markets of Mexico, the United States, Central America, and Venezuela in terms of tortillas, corn flour, and wheat flour. Our strong market positions will allow us to capture a large share of the potential market in those areas as well. We consider this a sustainable competitive advantage. We have revolutionized the tortilla industry through our state-of-the-art manufacturing equipment and superior production processes. For example, with our advanced production technology, we are able to produce up to 1,200 corn tortillas per minute, while traditional machines in Mexico produce only 50 to 60. We have also developed a machine that produces up to 400 wheat tortillas per minute. These advances yield tremendous economies of scale and have helped us to improve our cost-to-sales ratio. We have ample production capacity in place to allow for significant future growth. We consider this a competitive advantage as it enables us to grow with relatively few additional capital expenditure requirements. Our brand equity gives us a distinct competitive edge. With our superior-quality products and attentive customer service, we have developed loyal consumer and customer bases that will continue to expand going forward. What are the advantages and disadvantages of having an Executive Committee as opposed to an individual CEO? Do you plan on having a CEO in the near future? Under the company s current structure, it makes sense to have the heads of each of our operating regions working together, and with our chairman, to direct and lead the company. Although all regions have the resources and support of the chairman and the central global team, each operates under very different circumstances in terms of products, competition, governmental regulation, and culture, to name a few. Each Executive Committee member has direct knowledge of the state of affairs of the operating region under his direction, and the committee allows for the exchange, integration, and implementation of ideas and management decisions throughout the company. We are aware that some analysts, and perhaps some investors, are concerned that GRUMA does not have an individual CEO, but we don t really see the current management composition as a disadvantage. In the future, we may make the transition to a central CEO, but for now, we think the Executive Committee approach will effectively deliver on our commitments. At this point, our structure enables us to respond to local situations while taking advantage of our global resources. What steps is GRUMA taking to return to investment-grade status? First and foremost, our top priority is to improve margins and cash flow generation. We are committed to improving margins by decreasing expenses and by increasing operating efficiencies and capacity utilization while volumes gradually grow. We will also continue to improve cash flow generation by lowering capital expenditures and working capital requirements. We are also focusing on lowering our debt levels and have eliminated our short-term debt. In February 2001, we received approval for a threeyear term syndicated credit facility in the amount of US$400 million, which we used to refinance debt maturing in June 2001 and August 2002 totaling US$260 million, as well as some other bilateral credits. Because interest rates on the syndicated loan are more competitive than were prior loan rates, we expect

11 Javier Vélez Bautista, G. Irwin Gordon, and Jaime Costa Lavín the credit facility to lower our interest expense. Then, as cash generation increases and our debt levels are gradually reduced, our interest coverage ratio will increase and leverage ratio will decrease, returning us to investment-grade status. Last year, GRUMA was completing a four-year, US$800- million capital expenditure program, but this year the company is focusing on more moderate growth. Does this indicate a change in GRUMA s outlook? Not at all. We began our capital expenditure program in 1997 to increase capacity and prepare for long-term future growth. The idea was that we would invest in expanding our production capacity in the United States, where we see tremendous growth potential, and in Mexico, where our markets are expected to continue growing. We also invested in the acquisition of Monaca in Venezuela, as we see great growth potential in that country as well. Having done so, we believe we are now well positioned to capitalize on the steady increase in consumption that these markets are expected to experience in the coming years. With the tortilla industry deregulation in Mexico in the beginning of 1999, industry growth has slowed somewhat; we believe that the slower growth is temporary. People continue to make and eat tortillas; the popularity of the product increases and has spread to new markets not previously seen as opportunities, such as Europe. And we re already there, having just completed construction of a new tortilla plant in England in the middle of We are targeting growth in the next few years that is in line with current trends and nearterm expectations. For 2001, we expect to have capital expenditures of around US$50 million, and we are looking at about the same for It is important to remember that we now have the capacity in place to allow us to grow commensurate with industry growth at relatively little additional cost. We will also be able to create greater value because we are well positioned to capture the growth opportunities that our markets will continue to offer. Where do you see GRUMA three years from now? We believe that the markets for GRUMA s core businesses continue to represent a tremendous growth opportunity for the company as a whole. The corn flour method of tortilla and chip production is expected to continue growing in popularity at the expense of the traditional cooked-corn, or nixtamal, method, especially in Mexico and some parts of the U.S. We think tortilla consumption will increase in all of our markets due to population growth and the increased popularity and diversity of the product. And by continuing to execute our sound business strategy, we are prepared to capture these growth opportunities. Our business strategy calls for prudent growth in the core markets that we serve. That growth will be soundly in line with expectations of industry and population growth and will continue to allow us to maintain our leadership position in those markets. As we mentioned before, we also expect to see an increase in margins and profitability through an intensified consumer and customer focus, higher capacity utilization, and reduced capital expenditures and operating expenses. As a result, we expect to see dynamic growth in operating income and operating cash flow generation. Because we have lowered our capital expenditures and working capital requirements, we expect to be able to continue improving our cash flow generation in the years to come.

12 FOCUS on profitable growth through: FOCUS ON PROFITABLE GROWTH THROUGH: SUPERIOR-QUALITY PRODUCTS AND CUSTOMER SERVICE HIGHER ASSET UTILIZATION We recognize that customers are the lifeblood of our business. GRUMA s concentration on superior-quality products and customer service translates into greater brand equity, reinforces our market leadership position, and boosts value creation. The company has implemented ongoing quality processes across all of its operations; as a result, 34 plants are now ISO-9002 certified, 6 are ISO certified, and 49 are inspected annually by the American Institute of Baking. In addition, because product improvements depend to a large extent on customer feedback, the company has implemented systems to measure customers satisfaction with its products and services. GRUMA also engages outside firms to conduct internal quality audits and grants its GRUMA Quality Awards based on the results of these voluntary audits. GRUMA continues to work to ensure that all areas of its operations participate in these ongoing initiatives. With its four-year capital expenditure program completed, the company was able to lower capital expenditures and working capital requirements in For 2001 and 2002, the company is targeting capital expenditures of around US$50 million for each year. Thus, as sales volumes rise, the company s already-built infrastructure will enable it to grow with relatively little additional cost and will allow for improved financial performance.

13 GREATER ADMINISTRATIVE AND PRODUCTION EFFICIENCIES STATE-OF-THE-ART TECHNOLOGY MOTIVATED PEOPLE Efficiency was the name of the game in GRUMA focused on achieving greater administrative and production efficiencies by, among others, optimizing grain inventory levels to current trends, implementing information technology, increasing raw-material yields, reducing wastage and returns, and consolidating brands. As an example, by reducing its SKU inventories to eliminate less popular products, Gruma Corporation is expected to increase efficiency in its production lines, free up valuable capacity for its more widely used products, and achieve cost savings in its production processes. GRUMA expects efficiency measures such as these to improve operating margins across all subsidiaries in the near future. We rely on superior, advanced technology in every aspect of our business to achieve higher efficiencies, better internal and external communication, and superior products and customer service. For example, our proprietary tortilla production technology, with its ability to produce up to 1,200 corn and 400 wheat tortillas per minute, has revolutionized the industry. We are also in the process of completing the installation of the SAP/R3 information technology system in all of our operations. In addition, we are exploring e-business initiatives to improve our customer service. GRUMA believes its people are its greatest strength. In order to develop motivated people whose interests are aligned with those of shareholders, the company has launched a variable compensation system that is more closely linked to value creation. The company s intranet also fosters better communication by promoting the free exchange of ideas between employees on all levels and in all areas of its operations. GRUMA regularly posts information on company developments quality initiatives and training opportunities, for example and employees can communicate via directly with the heads of each operating region.

14 FOCUS ON PRODUCTION EFFICIENCIES

15 REVIEW OF OPERATIONS GRUMA CORPORATION Market Environment Gruma Corporation improved sales volume and gross margin in 2000 while at the same time contending, like the rest of the country, with high employment levels and steadily increasing energy prices. The market for tortilla and related products continued to experience rapid growth due primarily to the growing Hispanic population in the U.S. As a result, and because these products also enjoy a high level of popularity among U.S. consumers, there remains tremendous market potential. These factors have brought several market entrants throughout the year, from small "mom and pop" producers to large corporations. In the face of this competition, Gruma Corporation was able to extend its market position and achieved sales volume growth of 5%. Because of its sound volume growth and leadership position in the market, the company was able to absorb more of its fixed costs. Despite the United States operations positive indicators, operating margin declined due primarily to higher energy and transportation costs and increased investment in promotion and advertising. Value Drivers GRUMA ACHIEVED HIGHER EFFICIENCIES BY, AMONG OTHERS, OPTIMIZING INVENTORY FOCUS ON PRUDENT GROWTH FOR SUSTAINABLE FINANCIAL PERFORMANCE In 2000, Gruma Corporation targeted a slower volume growth rate than in previous years, concentrating on financial performance over pure growth to achieve sustainable value for GRUMA s shareholders. Whereas in the past six years, CAGR has been around 10%, growth in 2000 was around 5%, still significantly higher that that of most major U.S. food companies. The company was able to take advantage of its superior technical skills and market scale to selectively increase prices on many of its products. A cautious pricing strategy, together with the company s SKU inventory reduction and better, more efficient service to customers, will enable Gruma Corporation to continue to provide sustainable growth through steadily improving financial performance. LEVELS AND INCREASING RAW-MATERIAL YIELDS YEAR CAGR (1) (year-over-year) % % % % % (1) Compound Annual Growth Rate. Gruma Corporation targeted a slower volume growth rate in 2000 to capitalize on competitive advantages and build financial performance.

16 In February 2001, Gruma Corporation s Mission Foods opened an authentic tortilla factory at the new Disney s California Adventure TM park. The factory makes both corn flour and wheat flour tortillas. Guests can watch the tortillamaking process from beginning to end and are given an opportunity to see how it has changed throughout the years. They can also sample a fresh tortilla hot off the line and can try both traditional Mexican dishes and more contemporary California cuisine. ENSURING PRODUCT SAFETY AND QUALITY: A TOP PRIORITY In October 2000, Gruma Corporation announced its intent to market only products made from white corn and initiated a voluntary recall of all of its yellow corn products. The voluntary recall was begun to ensure that none of the company s products contained the yellow corn variety known as StarLink, which contains a protein that has been approved for animal feed but not for human consumption. Starlink corn entered the human food supply when it was commingled with regular corn for human consumption. According to the Environmental Protection Agency, the United States governmental agency that approved the use of StarLink for animal feed, there is no evidence that food containing StarLink corn will cause any allergic reaction in humans, and the agency believes the risks, if any, are extremely low. Nevertheless, because the Unites States regulatory authorities could not determine an acceptable safe level of StarLink in food products, Gruma Corporation initiated the voluntary recall in an abundance of caution to protect the safety and quality of its products. Until StarLink is approved for human consumption, or until the United States authorities offer clear guidance regarding the detection and regulation of StarLink in the food supply, Gruma Corporation will continue to produce and sell only products made from white corn. Most of Gruma Corporation s products are made from white corn. The products included in the voluntary recall represent a small percentage of the company s annual revenues. In addition, in management s opinion, the company should recover most, if not all, of the costs related to the voluntary recall. SIMPLIFYING INVENTORIES TO ACHIEVE GREATER EFFICIENCIES AND BUILD BRAND EQUITY One of Gruma Corporation s more significant initiatives in 2000 was its SKU reduction program. Prior to beginning this process, the company had an inventory of more than 3,000 SKUs, many of which were either acquired through acquisitions or were low-volume, private-label SKUs. This year, in an effort to improve efficiency and build brand equity, it began discontinuing less popular items and nonbranded items, consolidating several of its brands throughout the U.S. The ultimate goal is to reduce the total number of SKUs by approximately one-third; the majority of those eliminated will come from the food service industry and the privatelabel retail segment. As a result, the company expects to increase efficiency and will be better able to focus on brand positioning and distribution efficiencies. For example, this year Gruma Corporation relaunched its popular "brown bag" tortilla chips to overwhelming demand. The company has also entered into an agreement with Penske Truck Leasing for intracompany raw material and product transport and logistics. Rather than viewing the Penske agreement as a simple outsourcing relationship, the two companies are working closely together to tailor Penske s services to Gruma Corporation s business objectives. The company sees its relationship with Penske as a valuable partnership. CAPITALIZING ON TECHNOLOGY IN EUROPE Gruma Corporation opened its new tortilla plant in England in third quarter The plant, outfitted with state-of-the-art technology and production equipment, will serve the U.K., the Scandinavian region, and several other European markets. Together, people in these regions consume about US$400 million in tortillas and chips per year. From its first day of operations, the U.K. facility has utilized SAP/R3 information technology, which enables the company to maximize efficiency and deliver superior customer service. Distribution systems are wholly automated, employees use handheld computers to streamline inventory management and distribution, and the system facilitates communication throughout all operations. The technology allows the company s European operations to enjoy built-in cost savings from the start.

17 When consumers in Mexico think of corn flour, they think of Maseca. This top-of-mind recall gives GIMSA a significant competitive advantage. GIMSA Market Environment The corn flour market in Mexico in 2000 was characterized by low corn prices and flat demand. As the government s deregulation in early 1999 eliminated many unorthodox uses of corn and corn flour, demand for raw material for tortilla production has decreased, and it is estimated that per-capita tortilla consumption has declined approximately 12% over the past two years. Yet despite the market s slow recovery, strong competition from traditional tortilla makers, and a decline in net sales of roughly 11%, GIMSA increased its operating income by 31% and its operating margin in 2000 to 11.0% from 7.5% in The company achieved this mostly through improved inventory management, which resulted in better cost-to-selling-price ratios, and, to a lesser extent, through fixed-cost reductions and administrative efficiencies. Currently, it is believed that 50% of tortillas in Mexico are made using the traditional nixtamal method. Thus, we expect corn flour demand in the coming years to be a function of not only population growth but also the company s ability to capture the tremendous market potential for corn flour. Value Drivers TARGETING SUSTAINABLE VALUE THROUGH EFFICIENCY MEASURES Like its sister subsidiary in the U.S., GIMSA concentrated more on increasing value for its shareholders through financial performance than on the pure growth of its operations. Management focused on reducing costs through a variety of efficiency measures, including: Improving inventory management Closing its Zamora plant in order to optimize production and distribution levels Improving the performance of the SAP/R3 information technology system in the administrative and logistics areas of all facilities to achieve operational efficiencies and cost savings Through these concentrated efforts to decrease working capital requirements, GIMSA lowered its cost of sales and operating expenses by 16% and 6%, respectively. As a result, operating margins rose on a year-over-year basis from 7.5% to 11.0%. In the future, GIMSA will continue to use efficiency initiatives to increase margins. CUSTOMER-ORIENTED STRATEGIES BRING LONG-TERM VALUE Although traditional tortilla makers are competing for market share, GIMSA s strong brand equity and the "top-of-mind recall" enjoyed by its signature corn flour brand, Maseca, have enabled the company to maintain a solid market position. By zeroing in on customers needs, GIMSA is continuing to build brand equity and cultivate customer loyalty amidst strong competition. The company developed new products in 2000 to better serve its customers needs. For example, its new Super 50 corn flour allows customers to produce more tortillas with less flour, helping to reduce their costs and increase profits. GIMSA has also implemented training programs for its sales force that concentrate on increasing attention to customers needs. GIMSA works with these customers, providing equipment and technical support to help them increase their yields and, in turn, their profits. GIMSA has also undertaken a concerted effort to improve customer service through programs designed to track customer preferences, measure satisfaction, and tailor products and services to their needs. The company has launched a quick-response program for attending to customer comments, which has increased customer satisfaction and loyalty. QUALITY ASSURANCE MEASURES ENSURE CONFIDENCE IN OUR BRAND GIMSA recognizes that quality assurance measures reflect on the strength of its brands. All of GIMSA s plants are ISO-9002 certified, and six of its 18 plants are ISO certified. Its plants are also inspected annually by the American Institute of Baking. This year, five plants were given an "Excellent" rating and ten a "Superior" rating, the highest rating given.

18 GRUMA VENEZUELA Through "communication, involvement, respect, and responsibility," Gruma Venezuela has created a healthy and motivating work environment. Market Environment With the acquisition of Monaca in 1999 and its integration throughout 2000, Gruma Venezuela 1 has emerged as an efficient and profitable organization. The company s performance in 2000 is largely attributable to its ability to capitalize on efficiencies in production and grain procurement, implement cutting-edge technologies, and build teams of committed, quality-oriented people. The company s acquisition of Monaca in August of 1999 was the primary contributor to the increase in sales volumes. In addition, a revitalized Venezuelan economy and increased consumption, coupled with the company s concentrated customer service efforts, contributed to Gruma Venezuela s ability to increase sales volumes by 107% over Value Drivers OUR PEOPLE: OUR GREATEST ASSET Gruma Venezuela believes that its people are its greatest strength and the source from which all else flows: product quality, customer service, efficiency, growth, and profitability. In 2000, it launched a comprehensive employee/management communication and integration system. The system facilitates the communication of company objectives and individual responsibilities. The free exchange of ideas allows for the seamless implementation of world-class quality standards in all of the company s operations. One area in which this system has led to dramatic improvements is in customer service. Intensive sales staff training, a result-oriented compensation system, and advanced methods of tracking customer orders and comments enable the company to give superior service and prompt attention to customers needs. EMPHASIS ON TECHNOLOGY FOR SUPERIOR SERVICE AND EFFICIENCY Gruma Venezuela s use of technology is revolutionizing the way it does business. The company has implemented technological innovations in nearly every aspect of its business, from production efficiency methods to transforming the sales force. For example, the company has developed methods to increase raw material yields, significantly reducing inventory levels and raw material costs. As a result of these initiatives, cost of sales, as a percentage of net sales, have been reduced by almost 800 bps in 2000 compared to During 2000, the company completed the installation of the SAP/R3 information technology system in all of its operations. The system allows employees access to real-time information and speeds decision-making processes as well as the communication and implementation of decisions. It also allows managers to track operations and financial performance information on a daily basis. In 2001, the company plans to implement additional technological improvements in the sales force and will explore e-business initiatives to improve customer service and internal communications. 1 Gruma Venezuela refers to Monaca and Demaseca, GRUMA s operating subsidiaries in Venezuela. Together, these companies make GRUMA the country s second-largest corn flour and wheat flour producer.

19 MOLINERA DE MÉXICO The acquisition of La Asunción in Puebla enabled the company to achieve a national presence and a leadership position in the market. Market Environment For the past several years, and in particular the past two years, the wheat flour industry in Mexico has been undergoing consolidation. In the next couple of years, a few major players are expected to dominate the industry. Molinera currently enjoys a leading position in a market characterized, in 2000 in particular, by depressed wheat prices and intense price competition. It is, however, well positioned to command a significant share in the consolidating yet still highly fragmented market. Despite the less-than-optimal market conditions, Molinera achieved national coverage and maintained its leadership position in the market. It also increased volumes and revenues year-over-year, while gross margin declined slightly to 16.9% from 17.1% in 1999, due primarily to the lower absorption of fixed costs because of an average decline in pricing. Through the integration of its newly acquired facilities, continuing improvements in inventory management, and its superior-quality products and customer-centered service, the company expects to achieve operating profits in Value Drivers INTEGRATION OF OPERATIONS: INCREASING EFFICIENCY WHILE ENSURING QUALITY STANDARDS Molinera acquired three wheat flour mills in 1999 and one in 2000, increasing its installed capacity by about 60%. It then faced the challenge of bringing the new acquisitions up to the quality standards of the rest of its facilities. This year, the company devoted its efforts to integrating and standardizing production processes and sales and distribution functions. The goal: to maximize efficiency while ensuring superior product quality and customer service. Molinera saw a temporary rise in operating expenses, mostly as a result of the integration. Yet integration will enable the company to dramatically increase the efficiency of its operations, strengthen and consolidate its brands, and increase sales volumes through consistent and superior product quality. It expects to complete the integration by the end of SUPERIOR PRODUCTS AND CUSTOMER SERVICE OFFER COMPETITIVE ADVANTAGES Through the quality of its products and its customer-oriented approach both significant competitive advantages confidence in the company s brands has increased, enabling Molinera to build brand equity, increase sales volumes, and reinforce its leadership market position. Some of Molinera s key customers are its industrial accounts. The company not only supplies them with superior-quality products but also assures that all of these clients manufacturing facilities comply with the American Institute of Baking s sanitation and product-protection regulations. Molinera s technical staff also provides value-added services for these customers, including testing, analysis, formulation, and technical support. Molinera has also enhanced its market position through the introduction of new products tailored to meet customers needs. For example, this year the company began selling a type of flour formulated for making dough for pizza, which is fast becoming a popular food in Mexico. Its Selecta Pan, a type of flour formulated especially for bread, is also allowing the company to attract loyal customers and achieve greater market share. The company also plans to introduce a new premixed wheat flour for use in bakeries. Top-quality products and a customer-oriented approach to product development also enable Molinera to command premium prices for its products. Despite the low wheat flour prices in 2000, Molinera was able to maintain its leadership position and sales while keeping its product prices at a premium.

20 Through its employee health and safety program, GCA expects to realize cost savings through reduced absenteeism. GRUMA CENTRO AMÉRICA Market Environment Gruma Centro América (GCA) substantially improved performance and profitability in In a market characterized by strong competition, GCA saw profitable volume growth mostly from the corn flour business, mainly due to better pricing and customer service. The company capitalized on low raw-material costs to achieve better cost-to-selling-price ratios, especially in the corn flour business; as a result, gross margin rose to 36.2% from 35.3% in To a lesser extent, by trimming selling expenses, GCA improved its operating margin to 2.7% from 1.2% in the previous year. GCA s primary targets in 2000 were customer service and cost reduction through increased distribution efficiencies and reduced selling costs. In 2001, the company expects to continue to build brand equity and expand its customer base through concentrated customer-service initiatives. We also expect improved operating efficiencies to help us reach greater profitability in the medium term. Value Drivers A CUSTOMER-CENTERED APPROACH BRINGS ADDED VALUE GCA attributes its performance in 2000 to a variety of factors, perhaps the most important of which is its intense focus on the customer. By paying close attention to customers needs, the company introduced several new products and improved others, satisfying customers and increasing sales volumes. Among the new products introduced during the year are frozen sweet bread and enriched Maseca corn flour. Through its incentive program, the 100 Club, GCA trains its small business customers, primarily traditional tortilla makers, in corn flour tortilla production, provides equipment for manufacturing corn flour tortillas, and offers discounts for frequent purchases. It also provides technical support to help customers improve profits by obtaining higher tortilla yields from GCA s products. ACHIEVING EFFICIENCIES FOR HIGHER PROFITABILITY For 2000, GCA concentrated on improving efficiency in virtually all of its operations, from production processes to marketing and sales efforts. Perhaps the most important of these was the achievement of efficiencies in corn procurement and inventory management. By using its solid market share and superior bargaining power, GCA attained better prices for its raw material purchases. Through decreased raw material costs, better inventory management, and higher raw-material-to-product yields, the company significantly reduced production costs and realized better cost-to-selling-price ratios. As a result, it achieved higher operating margins. GCA also realized distribution efficiencies by consolidating routes and selectively outsourcing distribution in certain regions of its operations.

21 PRODISA Expansion of distribution routes is just one way Prodisa is improving the efficiency of its operations. Market Environment In 1998, Prodisa increased capacity, in part, to prepare for a rise in consumption following the tortilla industry deregulation. As the industry has been slow to consolidate, however, and growth in packaged tortillas has not been as expected, in October 2000 Prodisa began adjusting its sales, distribution, and administrative operations to comport with adjusted growth assumptions. Initiatives have included, among others, consolidation of distribution routes and implementation of cost-containment measures. Prodisa has increased bread sales volumes by 29% due, in part, to its expansion into the state of Coahuila. The company has also increased its share of the white bread market in the Monterrey metropolitan area to 13% from 11% in 1999 and its share of the sweet bread market to 17% from 14% (measured against comparable products). Value Drivers COMPANY-WIDE RESTRUCTURING FOR GREATER EFFICIENCY AND COST SAVINGS The company has undertaken a comprehensive restructuring of its operations. By the end of 2000, it initiated a restructuring plan, implementing programs to reduce overhead and increase the number of clients visited per distribution route. In 2000, Prodisa emphasized greater efficiencies in its production and marketing areas. For example, through selective marketing, the company reduced marketing costs over 1999 while still increasing bread sales volumes. It also increased tortilla yields by approximately 10% (using GIMSA s Super 50 flour product) and reduced bread plant wastage to 2.6% from 8.3% in The company eliminated around 10% of its SKU inventory in In simplifying its inventories, it expects to strengthen its more popular brands and increase market share and sales volumes while achieving greater production efficiencies. Prodisa began a comprehensive training program for its sales force in October 2000 that resulted in a decline in returned products by approximately 20% in the fourth quarter versus third quarter It has also implemented an aggressive training program for its managers that has one important goal: performance. The company s compensation system is tied to financial performance, and the training program emphasizes customer service. The company expects that the restructuring program will reduce operating losses in 2001.

22 FOCUS ON OPTIMAL ASSET UTILIZATION

23 MANAGEMENT DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION FOR 2000 (peso amounts are stated in millions of Mexican pesos of constant terms as of December 31, 2000) In 2000, GRUMA s financial performance significantly improved compared to Net sales increased 10% versus 1999 Gross profit increased 16%; gross margin improved to 36.2% from 34.1% Operating income increased 112%; operating margin improved to 4.5% from 2.3% Net majority income improved to Ps 233 million from a loss of Ps 300 million in 1999 BY ELIMINATING UNPROFITABLE AND IDLE ASSETS, WE HAVE REDUCED OUR WORKING CAPITAL REQUIREMENTS AND IMPROVED CAPACITY UTILIZATION GRUMA saw operating income growth of Ps 430 million, or 112%, over 1999, primarily because it has: recovered from the effects of the tortilla industry deregulation in Mexico, largely through improved cost-to-price ratios increased volumes in most subsidiaries improved net sales and margins, most notably in GIMSA and Gruma Venezuela 1 increased efficiency and capacity utilization and improved gross margins in nearly all of its subsidiaries, primarily GIMSA and Gruma Venezuela completed it s comprehensive US$800-million capital expenditure program, begun in 1997, and is now focused on profitable growth by capitalizing on its already-built infrastructure Net sales reached Ps billion, 10% higher than in 1999 on 13% volume growth. Volume growth outpaced revenue growth mainly because of lower grain prices in Mexico. Gruma Corporation accounted for 43% of net sales; GIMSA, 26%; Gruma Venezuela, 15%; Molinera de México, 8%; Gruma Centro América, 6%; and Prodisa, 2%. Expressed as a percentage of consolidated net sales, net sales from foreign operations increased to 64% from 60% in 1999 and were largely derived from the Monaca acquisition in Venezuela in August Higher net sales were due primarily to higher volumes in most subsidiaries, most notably Gruma Venezuela (due to the acquisition of Monaca), Gruma Corporation, and Molinera de México. Gruma Corporation experienced sales volume growth across both corn flour and tortilla businesses. The corn flour business showed its volume growth due mainly to higher retail sales as well as higher sales to major tortilla and chip producers as Gruma Corporation continues to promote the consumption of corn flour and gain market share at the 1 Gruma Venezuela refers to Monaca and Demaseca, GRUMA s operating subsidiaries in Venezuela.

24 15% expense of the traditional cooked-corn nixtamal method. In the tortilla business, growth was strong across both the retail and food-service sectors, with most of the contribution coming from the larger retail sector. At Molinera de México, higher revenues resulting from the acquisition of La Asunción in January 2000 drove the increase. 8% 26% % 60% 6% % % % 43% SALES COMPOSITION Gruma Corporation GIMSA Gruma Venezuela Molinera de México Gruma Centro América Prodisa SALES COMPOSITION (pesos in billions) Foreign operations Domestic operations As a percentage of net sales, cost of sales improved to 63.8% from 65.9% in 1999, primarily due to better performance across all subsidiaries, most notably Gruma Venezuela and Gruma Corporation and, to a lesser extent, Prodisa and GIMSA. Gruma Venezuela lowered its cost of sales as a percentage of net sales, from 80.6% in 1999 to 72.2% in 2000, mainly because of better pricing and, more importantly, the implementation of a rigorous costreduction program oriented to increasing and taking advantage of yields in raw materials, labor, and overhead. In conjunction with this cost-reduction program, Gruma Venezuela has, through better control and monitoring supported by information technology systems, improved efficiencies in returns, grain procurement (purchasing, handling, and warehousing), and management of finished products. Gruma Corporation reduced its cost of sales as a percentage of net sales to 54.5% from 56.6% due to higher pricing and a favorable mix in the tortilla business. Lower raw-material costs (especially corn) and higher capacity utilization resulting from the opening of the fourth mill in Plainview also drove the improvement. GIMSA experienced better cost-to-selling-price ratios due to better corn inventory management and the temporary closing of the Chalco and Zamora plants. The improvements in Prodisa have primarily resulted from important efficiencies in terms of shrinkage/waste, returns, and higher capacity utilization as new regions were covered during Additionally, Prodisa s 1999 bread operations were in a startup phase and did not reflect a full year s results since seven months of 1999 were capitalized versus the full year (twelve months) in Overall, GRUMA s total cost of sales increased 6% to Ps billion from Ps billion in Gross profit of Ps 6.60 billion was 16% higher than in Gross margin increased to 36.2% from 34.1% in the previous year. Selling, general, and administrative (SG&A) expenses were 9% higher than in The primary drivers of the increase were Gruma Venezuela (due to the acquisition of Monaca) and Gruma Corporation. Gruma Corporation s increased SG&A expenses derived primarily from higher fuel costs for transportation, higher plant-to-plant shipments and increased spending on advertising and in-store promotions. Plant-to-plant shipment costs increased as Gruma Corporation shipped products from one plant to another to meet higher-thanexpected local demand for recently introduced products. Expressed as a percentage of net sales, SG&A expenses remained flat at 31.8%. Operating income was Ps 813 million, 112% higher than in 1999 due mainly to the 1999 acquisition of Monaca and its accompanying operating margin increase (to 9.7% from 1.9% in 1999), and, to a lesser extent, GIMSA s increase in operating margin to 11.0% from 7.5% in 1999, and improvements in Other and Eliminations. 2 Other and Eliminations achieved a 53% reduction in operating losses due to administrative efficiencies in the corporate services areas. 2 Other and Eliminations include corporate services, technology operations, and accounting eliminations.

25 Consolidated operating margin increased to 4.5% compared to 2.3% in Operating income plus depreciation and amortization 3 rose 49% to Ps 1.76 billion compared to Ps 1.18 billion in 1999; most of the increase derived from higher operating income driven mostly by Gruma Venezuela and GIMSA. Net comprehensive financing cost increased 126% to Ps 479 million due mostly to foreign exchange losses and higher interest expense. The components of comprehensive financing cost, together with an explanation of the significant changes, are detailed in the following chart: OPERATING INCOME (pesos in millions) % Operating margin 2.3% 4.5% NET COMPREHENSIVE FINANCING COST ITEMS CHANGE COMMENTS Ps millions Ps millions Ps millions Interest Expense Higher average debt levels Slightly higher weighted-average interest rate Write-off of deferred bank fees in connection with loan repayment Interest Income (147) (151) (4) FX Loss (Gain) 58 (85) 143 Peso devaluation in 2000 versus peso revaluation in 1999 Monetary Position Loss (Gain) (222) (208) (14) Higher net monetary liability position Total Other expenses, net, amounted to income of Ps 31 million, Ps 201 million higher than in 1999, resulting primarily from the amortization of the negative goodwill derived from the Monaca acquisition and lower expenses associated with GRUMA s information technology modernization program. Provisions for income taxes and employee profit sharing were Ps 21 million, Ps 248 million less than in In 1999, deferred taxes were determined through a partial liability method of accounting. Deferred taxes were only provided for identifiable, nonrecurring temporary differences (i.e., those that are expected to reverse over a definite period of time, at the tax rate expected to be in effect when the temporary difference reverses). Effective January 1, 2000, GRUMA adopted the provisions of revised Bulletin D-4, "Accounting Treatment of Income Tax, Asset Tax and Employees Profit Sharing." The new Bulletin D-4 changes the accounting treatment from the partial liability method to the full asset and liability method and thus requires the recognition of the deferred tax effects for the temporary differences between the accounting and tax basis of assets and liabilities. The new bulletin resulted in lower provisions for GRUMA due mainly to the recognition 3 Depreciation and amortization that affect operating income.

26 of deferred tax effects for its temporary differences, such as the tax inflation restatement of its tax loss carry-forwards and the recognition of deferred tax assets for the current-year asset tax, which, under the previous partial liability method, was not recognized. GRUMA s share of unconsolidated associated companies net income was Ps 69 million, a decline of Ps 10 million, or 12%, compared to 1999, due to the increased amortization of goodwill relating to the investment in Grupo Financiero Banorte, S.A. de C.V. GRUMA sustained a total net income of Ps 413 million, of which net majority income was Ps 233 million versus a net majority loss of Ps 300 million in DEBT PROFILE as of December 31, 2000 Pro forma after US$400 millon Syndicated Loan (millions of dollars) Financial Situation As of December 31, 2000, GRUMA s total assets were Ps billion, of which Ps 5.57 billion were current assets; Ps billion represented property, plant, and equipment; and Ps 3.71 billion represented other assets. Total assets were Ps 463 million lower than the balance as of December 31, 1999, primarily due to lower grain inventories as a result of GRUMA s program to improve its working capital requirements, especially in GIMSA and Molinera de México and, to a lesser extent, from lower cash balances. Total liabilities increased Ps 388 million to Ps billion as of December 31, 2000, primarily due to higher trade accounts payable, as grain purchases in Venezuela were made under contracts to be paid at the time of grain consumption, and increased accounts payable as a result of higher deferred taxes in connection with the implementation of Bulletin D-4. Total liabilities consisted of Ps 7.12 billion in debt (Ps 5.84 billion long-term and Ps 1.28 billion shortterm), and Ps 2.94 million in other liabilities. GRUMA has eliminated its short-term debt and, on February 15, 2001, announced that it has obtained a three-year term syndicated loan for US$400 million at LIBOR plus a spread ranging from 125 bps to bps, based on GRUMA s debt-to-cash-flow ratio. One hundred percent of the proceeds were used to refinance GRUMA s short- and medium-term debt specifically, two existing syndicated loans and a number of bilateral loans. The new syndicated loan allows the company to substantially improve its debt profile and extend its debt maturities. In addition, GRUMA expects to achieve interest expense reductions, as interest rates on the syndicated loan are more competitive than were prior loan rates and beyond One hundred percent of GRUMA S debt is dollar denominated, with an average cost of approximately 7.7% at the end of At the end of 2000, GRUMA had long-term lines of credit for US$419 million, of which US$319 million were available; US$132 million of the available funds were committed. Additionally, GRUMA had a committed short-term facility for US$120 million, of which US$60 million were available, and uncommitted revolving short-term lines of credit for US$259 million, of which US$187 million were available. Stockholders equity as of December 31, 2000, totaled Ps billion, Ps 912 million lower than the balance as of December 31, DEBT RATIOS Interest Op.Income+Depr.+Amort Coverage Interest Expenses Leverage Total Debt Op.Income+Depr.+Amort. Capitalization Total Debt Total Debt + Equity As a result of significant improvements in cash generation, derived mainly from Gruma Venezuela and GIMSA, GRUMA s debt ratios also showed important improvements.

27 GRUMA s investment strategy is to invest in companies and facilities that are (1) consistent with and complementary to its core businesses, and (2) located in markets that facilitate its ability to create long-term value. GRUMA s financial strategy is to reduce its cost of capital by, among others, improving financial ratios by significantly increasing cash generation, reducing debt, and maintaining longer debt maturities at competitive interest rates. GRUMA is committed to improving its debt rating to investment grade by, among others, improving leverage and interest coverage ratios. Investment Program During 2000, the company completed its acquisitions and investments program of approximately US$800 million. As a result, GRUMA is now focusing on profitable growth by capitalizing on its already-built infrastructure and is able to add even more capacity at a relatively low cost by installing new lines in existing plants. Capital expenditures in 2000 totaled US$146 million and were allocated primarily to: the acquisition of La Asunción, a wheat flour mill located in Puebla, Mexico, which allowed GRUMA to strengthen its leadership position in the wheat flour industry and achieve nationwide coverage the expansion of a corn flour mill located in Plainview, Texas the construction of a tortilla plant in England the construction of a tortilla plant in North Carolina maintenance of fixed assets and improvements in production processes For 2001, GRUMA expects to invest exclusively in maintenance and upgrades; capital expenditures should, therefore, amount to approximately US$50 million. INVESTMENTS (millions of dollars) (1) Dollar figures are based on convenience translation. (1) Estimated. INSTALLED CAPACITY Thousands of metric tons GRUMA CORP. Corn flour Tortillas 12 % 24 % Corn flour 35 % 2,325 MEXICO Wheat flour 36 % 752 Tortillas and bread 64 % 81 GRUMA C.A. Corn flour 14 % 126 GRUMA VENEZUELA Corn flour Wheat flour Utilized capacity 41 % 57 % Available capacity to grow

28 FINANCIAL HIGHLIGHTS BY SUBSIDIARY GRUMA, S.A. DE C.V., AND SUBSIDIARIES (millions of constant pesos as of December 31, 2000) SALES VOLUME VAR(%) GRUMA CORP. (1) GIMSA (2) 1,507 1,547 (3) GRUMA VENEZUELA (3)(4) MOLINERA DE MÉXICO (5) GRUMA CENTRO AMÉRICA (2) PRODISA (6) (3) NET SALES VAR(%) GRUMA CORP. (7) 7,841 7,647 3 GIMSA 4,774 5,341 (11) GRUMA VENEZUELA 2,798 1, MOLINERA DE MÉXICO 1,368 1, GRUMA CENTRO AMÉRICA 1,063 1,006 6 PRODISA OTHER & ELIMINATIONS (8) (14) (60) (77) CONSOLIDATED 18,199 16, GROSS PROFIT 2000 Gross Mg Gross Mg. VAR(%) GRUMA CORP. 3, % 3, % 8 GIMSA 1, % 1, % 5 GRUMA VENEZUELA % % 196 MOLINERA DE MÉXICO % % 24 GRUMA CENTRO AMÉRICA % % 8 PRODISA % % 194 OTHER & ELIMINATIONS % % (28) CONSOLIDATED 6, % 5, % 16 OPERATING INCOME 2000 Gross Mg Gross Mg. VAR(%) GRUMA CORP % % (8) GIMSA % % 31 GRUMA VENEZUELA % % 990 MOLINERA DE MÉXICO (39) (2.9%) 7 0.7% (634) GRUMA CENTRO AMÉRICA % % 136 PRODISA (274) (74.2%) (273) (112.8%) 0 OTHER & ELIMINATIONS (108) (29.3%) (232) (95.7%) (53) CONSOLIDATED % % 112 OP.INCOME+DEPR.+AMORT VAR(%) GRUMA CORP GIMSA GRUMA VENEZUELA MOLINERA DE MÉXICO (38) GRUMA CENTRO AMÉRICA (11) PRODISA (149) (219) (32) OTHER & ELIMINATIONS (34) (227) (85) CONSOLIDATED 1,762 1, DEBT VAR(%) GRUMA CORP ,018 (35) GIMSA 0 3 (100) GRUMA VENEZUELA (38) MOLINERA DE MÉXICO GRUMA CENTRO AMÉRICA (26) PRODISA OTHER & ELIMINATIONS 6,243 6,098 2 CONSOLIDATED 7,115 7,417 (4) (1) Thousands of metric tons of corn flour and tortillas. (2) Thousands of metric tons of corn flour. (3) Gruma Venezuela refers to Monaca and Demaseca, GRUMA S operating subsidiaries in Venezuela. (4) Thousands of metric tons of corn flour, wheat flour, and other products. (5) Thousands of metric tons of wheat flour. (6) Thousands of metric tons of tortillas and bread. (7) Gruma Corporation s 1999 financial statements have been restated in order to include the operations in Europe and some other U.S. operations. (8) Other & Eliminations include corporate services, technology operations, and accounting eliminations.

29 ELEVEN-YEAR FINANCIAL SUMMARY GRUMA, S.A. DE C.V., AND SUBSIDIARIES (pesos in millions as of December 31, 2000, except per-share amounts) INCOME STATEMENT NET SALES 18,199 16,609 15,347 14,757 17,744 13,425 11,306 11,545 10,744 8,963 9,288 GROSS PROFIT 6,597 5,668 5,603 5,040 5,645 4,938 4,023 4,159 3,747 3,109 3,028 OPERATING INCOME ,149 1,052 1, , ,072 OPERATING MARGIN 4.5% 2.3% 7.5% 7.1% 8.2% 7.2% 8.6% 11.8% 9.2% 8.3% 11.5% COMPREHENSIVE FINANCING COST (INCOME) (20) (951) (1,711) OTHER (INCOME) EXPENSE (31) (46) (56) NET INCOME 413 (189) ,892 2, , NET MAJORITY INCOME 233 (300) ,514 1, , BALANCE SHEET CASH AND EQUIVALENTS ,165 1, , CURRENT ASSETS 5,566 6,173 5,261 6,164 5,461 3,531 4,751 4,732 3,791 3,587 3,071 PROPERTY, PLANT, AND EQUIPMENT, NET 12,543 12,166 10,420 9,513 9,078 8,820 9,045 6,244 5,184 4,196 3,254 TOTAL ASSETS 21,824 22,287 19,134 18,623 17,193 14,780 16,495 13,083 11,014 8,627 6,633 TOTAL DEBT 7,115 7,417 6,153 5,291 4,139 6,830 7,356 5,287 4,955 3,808 2,415 OTHER LIABILITIES 2,940 2,250 1,736 1,794 1,912 1,678 1,563 1,504 1, TOTAL LIABILITIES 10,055 9,667 7,889 7,085 6,051 8,508 8,918 6,791 6,106 4,604 3,335 STOCKHOLDERS' EQUITY 11,404 12,316 11,245 11,538 11,142 6,272 7,576 6,292 4,908 4,023 3,298 MAJORITY STOCKHOLDERS' EQUITY 8,972 9,589 8,583 8,877 8,743 4,582 5,815 4,737 4,017 3,193 2,294 SHARE AND OTHER FINANCIAL DATA NUMBER OF OUTSTANDING SHARES 438,776, ,462, ,196, ,271, ,122, ,385, ,953, ,383, ,269, ,569, ,569,893 EARNINGS PER SHARE (1) 0.5 (0.8) BOOK VALUE PER SHARE DEPRECIATION AND AMORTIZATION (2) OP. INCOME+DEPRECIATION +AMORTIZATION 1,711 1,184 1,804 1,702 2,128 1,505 1,286 1,761 1,305 1,024 1,293 WORKING CAPITAL (3) 3,416 4,153 3,601 2,811 2,673 2,116 2,569 2,321 2,341 2,206 1,634 CURRENT ASSETS / CURRENT LIABILITIES TOTAL LIABILITIES / STOCKHOLDERS' EQUITY TOTAL DEBT / (TOTAL DEBT + STOCKHOLDERS' EQUITY) (1) Based on weighted average of outstanding shares of common stock. (2) Depreciation and amortization affecting operating income. (3) Working capital is defined as accounts receivable, net, plus inventories minus trade accounts payable.

30 FOCUS ON FINANCIAL RESULTS

31 WE ARE COMMITTED TO IMPROVING SALES, MARGINS, AND PROFITS TO INCREASE SHAREHOLDER VALUE CONSOLIDATED FINANCIAL STATEMENTS (as of December 31, 2000) CONTENTS 28 Management s statement of financial responsibility 29 Report of independent accountants Consolidated financial statements: Consolidated balance sheet Consolidated statements of income Consolidated statements of changes in stockholders equity Consolidated statements of changes in financial position 35 Notes to consolidated financial statements

32 MANAGEMENT S STATEMENT OF FINANCIAL RESPONSIBILITY To the stockholders of GRUMA, S.A. de C.V.: Management has prepared and is responsible for the integrity of the consolidated financial statements and related information contained in this annual report. The financial statements, which include some amounts based on judgment, have been prepared in conformity with generally accepted accounting principles in Mexico, which have been consistently applied. The company maintains an effective internal control structure supported by comprehensive systems and control procedures, a program of selecting and training qualified staff, and written policies that are communicated to all personnel through appropriate channels. Management believes that these controls provide reasonable assurance to shareholders, the financial community, and other interested parties that transactions are executed in accordance with management authorization, that accounting records are reliable as a basis for the preparation of the consolidated financial statements, and that assets are safeguarded from loss or unauthorized use. An important element of the control environment is an ongoing internal audit program. PricewaterhouseCoopers, S.C., independent accountants, have audited the consolidated financial statements as described in their report. The report expresses an independent opinion on the fairness of management s presentation of the company s financial statements and, in so doing, provides an objective assessment of the manner in which management executes its responsibility for fairness and accuracy in financial reporting. Jaime Costa Lavín G. Irwin Gordon Javier Vélez Bautista

33 REPORT OF INDEPENDENT ACCOUNTANTS PricewaterhouseCoopers, S.C. Condominio Losoles D-21 Av. Lázaro Cárdenas Poniente Garza García, N.L. Teléfono (8) Fax (8) Monterrey, N.L., Mexico, March 16, 2001 To the Stockholders of Gruma, S.A. de C.V.: We have audited the accompanying consolidated balance sheets of Gruma, S.A. de C.V. and subsidiaries, as of December 31, 2000 and 1999, and the related consolidated statements of income, changes in stockholders equity and changes in financial position for the years then ended. These consolidated financial statements have been prepared in accordance with generally accepted accounting principles in Mexico and are the responsability of the Company s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards in Mexico. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. As discussed in Note 3-O to the financial statements, in 2000 the Company adopted the provisions established by revised Bulletin D-4 Accounting Treatment of Income Tax, Asset Tax and Statutory Employees Profit Sharing, issued by the Mexican Institute of Public Accountants, whose effects are describe in such Note. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Gruma, S.A. de C.V., and subsidiaries as of December 31, 2000 and 1999, and the consolidated results of their operations, changes in stockholders equity and changes in their financial position for the years then ended, in conformity with accounting principles generally accepted in Mexico. PricewaterhouseCoopers Carlos Arreola Enríquez Public Accountant

34 Gruma S.A. de C.V. and subsidiaries CONSOLIDATED BALANCE SHEETS As of December 31, 2000 and 1999 (Expressed in thousands of Mexican pesos of constant purchasing power as of December 31, 2000) (Notes 1 and 3) ASSETS: Current: Cash and cash equivalents Ps. 116,330 Ps. 405,399 Restricted cash (Note 12) 6,337 6,783 Notes and accounts receivable, net (Note 4) 2,666,639 2,446,618 Refundable taxes (Note 4) 183, ,375 Inventories (Note 5) 2,438,800 2,803,553 Prepaid expenses 154, ,462 Total current assets 5,566,477 6,173,190 Investment in common stock of associated companies (Note 6) 1,123,179 1,193,539 Property, plant and equipment, net (Note 7) 12,542,690 12,166,189 Intangible assets, net (Note 8) 1,240,431 1,307,011 Excess of cost over book value of subsidiaries acquired, net 1,005,185 1,093,027 Other assets (Note 9) 346, ,301 Total assets Ps. 21,824,105 Ps. 22,287,257 LIABILITIES: Current: Bank loans (Note 10) Ps. 650,154 Ps. 215,124 Current portion of long-term debt (Note 10) 628, ,912 Trade accounts payable 1,163, ,093 Accrued liabilities and other accounts payable 1,294,839 1,215,213 Employees statutory profit sharing payable 6,533 3,644 Total current liabilities 3,742,600 2,355,986 Long-term debt (Note 10) 5,836,973 7,093,230 Deferred income taxes (Note 15) 377, ,040 Deferred employees statutory profit sharing (Note 15) 50,064 13,989 Other liabilities 48,135 58,187 Total long-term liabilities 6,312,726 7,311,446 Total liabilities 10,055,326 9,667,432 Excess of book value over cost of subsidiaries acquired, net 364, ,821 Commitments and contingencies (Note 12) STOCKHOLDERS EQUITY Majority interest (Note 13): Common stock 4,266,883 4,226,613 Restatement of common stock 5,115,802 5,115,003 9,382,685 9,341,616 Additional paid-in capital 2,820,624 2,912,729 12,203,309 12,254,345 Deficit from restatement (9,859,511 ) (9,217,545) Cumulative effect of a change in an accounting principle for deferred income taxes and employees statutory profit sharing (Note 3-O) (167,983 ) - Retained earnings (Note 13-C): Prior years 6,369,297 6,474,990 Net income (loss) for the year 232,872 (300,076) Foreign currency translation adjustments (Note 13-E) 194, ,616 Total majority interest 8,971,985 9,589,330 Minority interest 2,432,264 2,726,674 Total stockholders equity 11,404,249 12,316,004 Ps. 21,824,105 Ps. 22,287,257 The accompanying notes are an integral part of these consolidated financial statements

35 Gruma S.A. de C.V. and subsidiaries CONSOLIDATED STATEMENTS OF INCOME For the years ended December 31, 2000 and 1999 (Expressed in thousands of Mexican pesos of constant purchasing power as of December 31, 2000, except per share amounts) (Notes 1 and 3) Net sales Ps. 18,199,045 Ps. 16,608,614 Cost of sales (11,602,428) (10,940,182) Gross profit 6,596,617 5,668,432 Selling, general and administrative expenses (5,783,288) (5,284,943) Operating income 813, ,489 Comprehensive financing cost, net: Interest expense (789,555) (655,666) Interest income 146, ,108 Monetary position gain, net 221, ,597 Foreign exchange (loss) gain, net (Note 16-A) (57,662) 85,077 (478,740) (211,884) Other income (expense), net (Note 14) 30,687 (170,335) Income before income taxes, employees statutory profit sharing, equity in earnings of associated companies and minority interest 365,276 1,270 Income taxes (Note 15): Current (148,380) (281,983) Deferred 126,859 15,426 (21,521) (266,557) Employees statutory profit sharing (Note 15): Current (5,392) (1,627) Deferred 5,838 (560) 446 (2,187) Income (loss) before equity in earnings of associated companies and minority interest 344,201 (267,474) Equity in earnings of associated companies, net 68,894 78,706 Income (loss) before minority interest 413,095 (188,768) Minority interest (180,223) (111,308) Majority net income (loss) for the year Ps. 232,872 Ps. (300,076) Earnings (loss) per share Ps Ps. (0.79) Weighted average shares outstanding (thousands) 435, ,456 The accompanying notes are an integral part of these consolidated financial statement

36 Gruma S.A. de C.V. and subsidiaries CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY For the years ended December 31, 2000 and 1999 (Expressed in thousands of Mexican pesos of constant purchasing power as of December 31, 2000, except number of shares) (Notes 1 and 3) Common stock (note 13-A) Number of shares Additional Deficit from (thousands) Amount paid-in capital restatement Balances at December 31, ,197 Ps. 7,904,872 Ps. 2,910,221 Ps. (8,747,668) Appropriation of prior year net income Issuance of new common stock 89,770 1,573,933 (4,284 ) Stock and minority interest dividends (Note 13-A) 5, ,899 Net purchases of Company s common stock (12,388 ) (255,088 ) 6,792 Issuance of subsidiaries stock Decrease of minority interest Recognition of inflation effects for the year (469,877) Foreign currency translation adjustments Net loss for the year Balances at December 31, ,462 9,341,616 2,912,729 (9,217,545) Appropriation of prior year net loss Minority interest dividends Net purchases of company s common stock 2,314 41,069 (92,105 ) Issuance of subsidiaries stock Decrease of minority interest Cumulative effect of a change in an accounting principle for deferred income taxes and employees statutory profit sharing (Note 3-O) Recognition of inflation effects for the year (641,966) Foreign currency translation adjustments Net income for the year Balances at December 31, ,776 Ps. 9,382,685 Ps. 2,820,624 Ps. (9,859,511) The accompanying notes are an integral part of these consolidated financial statements

37 Retained earnings (Note 13-C) Cumulative effect Forreign of deferred income currency taxes and employee s Net income translation Total Total statutory profit Prior (loss) for adjustments majority minority stockholders sharing (Note 3-O) years the year (Note 13-E) interest interest equity Ps. 5,627,477 Ps. 463,756 Ps. 451,500 Ps. 8,610,158 Ps. 2,655,514 Ps. 11,265, ,756 (463,756) 1,569,649 1,569,649 (117,899 ) (56,479 ) (56,479) 46,644 (201,652) 14,373 (187,279) 146, ,359 (368,506 ) (368,506) 455,012 (14,865) 224, ,240 (73,884) (73,884) (73,884) (300,076) (300,076) 111,308 (188,768) 6,474,990 (300,076) 377,616 9,589,330 2,726,674 12,316,004 (300,076 ) 300,076 (22,505 ) (22,505) 43,085 (7,951) 1,494 (6,457) 202, ,357 (433,666 ) (433,666) (167,983) (167,983) (218,905 ) (386,888) 151,298 (490,668) (3,408 ) (494,076) (183,615) (183,615) (183,615) 232, , , ,095 Ps. (167,983) Ps. 6,369,297 Ps. 232,872 Ps. 194,001 Ps. 8,971,985 Ps. 2,432,264 Ps. 11,404,249

38 Gruma S.A. de C.V. and subsidiaries CONSOLIDATED STATEMENTS OF CHANGES IN FINANCIAL POSITION For the years ended December 31, 2000 and 1999 (Expressed in thousands of Mexican pesos of constant purchasing power as of December 31, 2000) (Notes 1 and 3) Operating activities: Mayority net income (loss) for the year Ps. 232,872 Ps. (300,076) Minority interest 180, ,308 Consolidated net income (loss) 413,095 (188,768) Adjustments to reconcile net income (loss) to net resources provided by operating activities: Depreciation and amortization 653, ,551 Write-off of idle assets and other intangible assets 100,643 - Equity in earnings of associated companies, net (68,894) (78,706) Deferred income taxes and employees statutory profit sharing (132,697) (14,866) Seniority premium , ,658 Changes in working capital: Restricted cash 446 (1,391) Accounts receivable, net (34,495) (357,506) Inventories 190,399 (476,034) Prepaid expenses 21,571 (48,630) Trade accounts payable 347, ,658 Accrued liabilities and other accounts payable 76, ,865 Income taxes and employees statutory profit sharing payable 21,108 37, ,577 (335,721) Net resources provided by operating activities 1,588, ,937 Financing activities: Proceeds from bank loans and long-term debt 2,370,064 4,258,503 Repayment of bank loans and long-term debt (2,632,468) (2,884,344) Proceeds from issuance of common stock - 1,569,649 Proceeds from issuance of subsidiaries stock 202, ,359 Decrease of minority interest (433,666) (368,506) Net purchases of Company s common stock (6,457) (187,279) Dividends paid by subsidiary to minority stockholders (22,505) (56,479) Other (52,615) 225,333 Net resources (used in) provided by financing activities (575,290) 2,703,236 Investing activities: Purchases of property, plant and equipment (1,371,856) (1,877,999) Acquisition of new plants (122,588) (710,677) Excess of book value over cost of subsidiaries acquired 366, ,496 Deferred assets (98,757) (937,728) Investment in common stock (56,012) 218,570 Other (19,143) (69,254) Net resources used in investing activities (1,302,054) (3,021,592) Net (decrease) increase in cash and cash equivalents (289,069) 41,581 Cash and cash equivalents at beginning of year 405, ,818 Cash and cash equivalents at end of year Ps. 116,330 Ps. 405,399 The accompanying notes are an integral part of these consolidated financial statements

39 1. ENTITY AND NATURE OF BUSINESS Gruma S.A. de C.V. and subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2000 and 1999 (Expressed in thousands of Mexican pesos of constant purchasing power of December 31, 2000, except otherwise indicated) Gruma, S.A. de C.V., a Mexican corporation, is a holding company whose subsidiaries are located in Mexico, the United States of America, Central and South America and recently in Europe. These subsidiaries are primarily engaged in manufacturing and distributing corn flour, wheat flour, tortillas, bread and other related products. Gruma, S.A de C.V. and its subsidiaries are herein collectively referred to as "the Company". 2. NEW OPERATIONS In August, 1999, the Company acquired the majority ownership of Molinos Nacionales, C.A. (Monaca) for Ps.200,495 (U.S.$18,957 thousands). Monaca s principal activity is the processing and commercialization of grain for industrial products and human consumption products in Venezuela. As a result of this acquisition, an estimated negative goodwill of Ps.374,423 was recognized. However, during January 2000, valuation of assets and liabilities acquired, an increase in the negative goodwill was recorded for Ps.410,744. The total amount of negative goodwill is amortized by the straight-line method over 30 months period. During 1999, the Company acquired all of the shares, assets and liabilities of certain tortilla-producing entities in the United States for Ps.430,462 (U.S.$40,757 million). The excess of the purchase price over the fair value of net assets acquired was allocated to the excess of cost over book value of the subsidiaries acquired, patents and trade names and non-compete agreements for Ps.364,555, Ps.8,844 and Ps.3,931, respectively (U.S.$37,098, U.S.$900 and U.S.$400, respectively). In June, 1999, the Company in Mexico acquired the assets and trade names of three wheat flour mills for a total amount of Ps.87,582 (U.S.$8,120 million). In addition, in December, 1999, the Company acquired trade receivables and inventories of a wheat flour mill for Ps.124,493 (U.S.$12,242). In January, 2000, the Company acquired the remaining assets and trade names of this mill for Ps.372,226 (U.S.$37,514). The results of these new operations have been consolidated since the acquisition date. 3. SIGNIFICANT ACCOUNTING POLICIES The consolidated financial statements have been prepared in accordance with generally accepted accounting principles in Mexico. A. Basis for consolidation The consolidated financial statements include the accounts of Gruma, S.A. de C.V. and all of its subsidiaries. All significant intercompany balances and transactions have been eliminated from the consolidated financial statements. The principal subsidiaries included in the consolidation are the following: % of ownership Grupo Industrial Maseca, S.A. de C.V. and subsidiaries Gruma Corporation and subsidiaries Gruma Centro América, S.A. and subsidiaries Molinos Nacionales, C.A Derivados de Maíz Seleccionado, C.A Productos y Distribuidora Azteca, S.A. de C.V. and subsidiaries Investigación de Tecnología Avanzada, S.A. de C.V. and subsidiaries Molinera de México, S.A. de C.V. and subsidiaries Asesoría de Empresas, S.A. de C.V Transporte Aéreo Técnico Ejecutivo, S.A. de C.V Inmobiliaria Residencial San Pedro, S.A. de C.V. and subsidiaries

40 Gruma S.A. de C.V. and subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued 3. SIGNIFICANT ACCOUNTING POLICIES (Continued) B) Use of estimates The preparation of the financial statements in conformity with generally accepted accounting principles requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities as of the dates of the financial statements, and reported amounts of revenues, costs and expenses during the reporting years. Actual results may differ from these estimates. C) Foreign currency translation Financial statements of foreign subsidiaries have been restated to recognize the effects of inflation and translated to Mexican pesos of constant purchasing power as of December 31, 2000, as follows: Financial statements are restated to year-end constant local currencies following the provisions of Bulletin B-10, applying the General Consumer Price Index ("GCPI") of the foreign country, which reflects the change in purchasing power of the local-currency in which the subsidiary operates. Once financial statements are restated, assets, liabilities, income and expenses are translated to Mexican pesos applying the exchange rate in effect at each period end. The effects of translation are recognized as a component of equity entitled "Foreign Currency Translation Adjustments" (Note 13). D) Recognition of the effects of inflation The consolidated financial statements have been restated to recognize the effects of inflation and are expressed in thousands of Mexican pesos of constant currencies of purchasing power as of December 31, 2000, determined as follows: For comparability purposes, the financial statements as of and for the year ended December 31, 1999 have been restated by utilizing a weighted average restatement factor, which considers the relative total sales contribution by country for the year ended December 31, 1999 and the corresponding inflation and exchange rate fluctuations during that year. The consolidated statements of income and of stockholders equity for the year ended December 31, 2000 were restated applying GCPI factors from the country in which the subsidiary operates and applied to periods in which the transactions occurred and year-end. The consolidated statements of changes in financial position present, in Mexican pesos of constant purchasing power, the resources provided by or used in operating, financing and investing activities. The factors used to recognize the effects of inflation were the following: Mexican Weighted national average consumer restatement Year price index factor % 6.30% % 4.55% The methodology used to restate financial statement items is as follows: Restatement of non-monetary assets Inventory and cost of sales are restated using the estimated replacement cost method. As set forth in Note 3-I, property, plant and equipment, net, is restated using the National Consumer Price Index ("NPCI") factors, except for machinery and equipment of foreign origin which are restated on the basis of a specific index composed of the GPCI factor from the country of origin, to the related foreign currency amounts, and then translated to Mexican pesos using the year-end exchange rate.

41 Gruma S.A. de C.V. and subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued 3. SIGNIFICANT ACCOUNTING POLICIES (Continued) Restatement of common stock, additional paid-in capital and retained earnings This restatement reflects the amounts necessary to maintain the stockholder s investment at the original purchasing power amounts, and it is determined by applying NCPI factors from the dates on which capital stock and additional paid-in capital were contributed and earnings were generated or losses incurred, and is included within the related stockholders equity captions. Deficit from restatement Deficit from restatement primarily represents the difference between the replacement cost values of non-monetary assets or specific index restatement of machinery and equipment of foreign origin, as described above, and the historical cost of those assets restated for inflation, as measured by NCPI and GCPI factors for foreign subsidiaries. Monetary position gain (loss) Monetary position gain (loss) represents the inflationary effect, measured by NCPI and GCPI factors, on the net balance of monetary assets and liabilities at the beginning of each month as expressed in local currency. The monetary gain recognized on the net monetary position of foreign subsidiaries is based on the inflation rate of the respective country, as measured by the relevant GCPI factor, prior to the translation to Mexican pesos. E) Foreign currency transactions Foreign currency transactions are recorded at the exchange rate in effect on the dates the transactions are entered into and settled. Monetary assets and liabilities denominated in foreign currencies are translated into Mexican pesos at the exchange rate in effect at the balance sheet dates. Currency exchange fluctuations from valuation and liquidation of these balances are credited or charged to income, except for the effects of translation arising from foreign currency denominated liabilities, which are accounted for as a hedge of the Company s net investment in foreign subsidiaries, and are recognized as a component of equity under "Foreign currency translation adjustments". F) Cash equivalents All highly liquid investments with maturities of three months or less at the date of purchase are considered to be cash equivalents and are stated at cost, which approximates market value. G) Inventories and cost of sales Inventories are stated at the lower of estimated replacement cost or market. Estimated replacement cost is determined by the last purchase price, the first-in, first-out method and the last production cost. Cost of sales is determined from replacement costs calculated for the month in which inventories are sold. H) Investment in common stock Investments in common stock with ownership between 10% and 50% of the investees voting stock, or where the Company exercises significant influence, are accounted for by the equity method. The excess of cost over book value of an investment in common stock is restated by NCPI factors. The restated amount is amortized using the straight-line method over a period not to exceed 20 years. I) Property, plant and equipment, net Property, plant and equipment are restated utilizing the NCPI factors, except for machinery and equipment of foreign origin which are restated on the basis of a specific index composed of the GCPI from the foreign country and the change in value of the Mexican peso against the foreign currency. Depreciation expense is computed based on the net book value less salvage value, using the straight-line method over the estimated useful lives of the assets. Useful lives of the assets are as follows: Years Buildings Machinery and equipment 3-27

42 Gruma S.A. de C.V. and subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued 3. SIGNIFICANT ACCOUNTING POLICIES (Continued) Maintenance and repairs are expensed as incurred. Costs of major replacements and improvements are capitalized. Comprehensive financing cost, including interest expense, foreign currency exchange fluctuations, and monetary position of the related debt for major construction projects, are capitalized as part of the assets during the construction period. When assets are retired, sold or otherwise disposed of, the restated value and accumulated depreciation are removed from the appropriate accounts and any resulting gain or loss is included in "Other income (expense), net". Direct internal and external costs related to the development of internal use software are capitalized and amortized over the estimated useful life beginning when such software is ready for its intended use. J) Intangible assets, net Intangible assets are restated using NCPI factors. Amortization expense is computed on the restated values using the straight-line method, over a period of 5 to 20 years. Expenses incurred during stages dedicated to the beginning of industrial and commercial operations are capitalized as pre-operating expenses. This capitalization stage concludes when the Company begins its commercial activities. Pre-operating expenses are restated using the NCPI factor and amortized using the straight-line method over a period not to exceed 12 years. The excess of cost over book value and the excess of book value over cost of subsidiaries acquired are restated using the NCPI factors. Amortization expense is computed based on the restated values using the straight-line method, over a period not to exceed 5 and 20 years for the excess of book value over cost and for the excess of cost over book value, respectively. Debt issuance costs are capitalized and amortized over the term of the related debt. K) Long-lived assets The Company evaluates the carrying value of long-lived assets to be held and used, including property, plant and equipment, goodwill, pre-operating expenses and any assets to be disposed of, when events or circumstances suggest that the carrying value may not be recoverable. Any impairment of these assets is included in income for the year, for the difference between the carrying value and the fair market value of long-lived assets to be held and used, and the difference between the carrying value and fair market value less costs to sell for long-lived assets to be disposed of. As of December 31, 2000, the Company s management believes there is no impairment in the carrying value of long-lived assets. L) Seniority premium plans and indemnities Seniority premium to which Mexican personnel are entitled after 15 years of service are charged to income as determined by annual actuarial valuations. Indemnities to which Mexican workers may be entitled in the case of dismissal or death, under certain circumstances established by Mexican Labor Law, are expensed when they become payable. M) Hedging transactions The Company hedges a portion of its production requirements in the United States through commodity futures contracts, in order to reduce the risk created by price fluctuations of corn, wheat, soybeans and soybean oil. The open positions for hedges of purchases do not exceed the maximum production requirements for a one-year period. Unrealized gains or losses on open futures contracts are not recognized in the financial statements until the futures contracts are settled. Realized gains or losses are deferred as a component of inventory, not to exceed the lower of cost or market, and recognized as a cost of production as the inventory is utilized.

43 Gruma S.A. de C.V. and subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued 3. SIGNIFICANT ACCOUNTING POLICIES (Continued) N) Revenue recognition Revenue on product sales is recognized upon shipment to, and acceptance by the Company s customers or when the risk of ownership has passed to the customers. Provisions for discounts and rebates to customers, returns and other adjustments are recorded in the same period the related sales are recorded and are based upon either historical estimates or actual terms. O) Income taxes and employees statutory profit sharing Effective January 1, 2000, the Company adopted the provisions established by the revised Bulletin D-4 "Accounting Treatment of Income Tax, Asset Tax and Statutory Employees Profit Sharing", issued by the Mexican Institute of Public Accountants; therefore, the Company changed its method of accounting for income tax from the partial liability method to the full liability method for all temporary differences arising between the carrying values for financial reporting and tax values of assets and liabilities. The cumulative effect as of January 1, 2000 of this accounting change required the recognition of a net liability for deferred income tax of Ps.386,888 which reduced the stockholders equity for the same amount. As of and for the year ended December 31, 2000, the temporary differences arising after January 1, 2000 decreased the net liability for deferred income tax and increased the net income for the year by approximately Ps.132,697. P) Earnings per share Earnings per share are computed by dividing majority net income for the year by the weighted average number of common shares outstanding during the year. 4. NOTES AND ACCOUNTS RECEIVABLE, NET AND REFUNDABLE TAXES Notes and accounts receivable, net are comprised of the following as of December 31: Trade accounts receivable Ps. 2,281,968 Ps. 2,272,737 Allowance for doubtful accounts (141,385) (110,154) 2,140,583 2,162,583 Refundable expenses for product recall (Note 12) 208,646 - Related parties (Note 19) 137,950 65,990 Employees 30,572 29,086 Notes receivable 23,657 24,583 Other debtors 125, ,376 Ps. 2,666,639 Ps. 2,446,618 Refundable taxes are comprised of the following as of December 31: Value-added tax Ps. 61,135 Ps. 101,322 Income taxes 18, ,107 Production and services tax 91,400 79,754 Other 12,780 30,192 Ps. 183,511 Ps. 319,375

44 Gruma S.A. de C.V. and subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued 5. INVENTORIES Inventories consist of the following as of December 31: Finished products Ps. 211,359 Ps. 238,539 Production in process 53,119 51,064 Raw materials, mainly corn and wheat 1,923,692 2,189,110 Materials and spare parts 235, ,309 Inventory in transit 12,177 81,117 Advances to suppliers 3,182 6,414 Ps. 2,438,800 Ps. 2,803, INVESTMENT IN COMMON STOCK OF ASSOCIATED COMPANIES Investments in common stock of associated companies primarily consist of the investment in common stock of Grupo Financiero Banorte, S.A. de C.V. and subsidiaries ("GFNorte"), which is a financial institution regulated by the policies and accounting practices of the Comisión Nacional Bancaria y de Valores (the "Mexican National Banking and Securities Commision" or "CNBV"), and Harinera de Monterrey, S.A.de C.V. which produces wheat flour and related products in Mexico. These investments, accounted for by the equity method, are comprised of the following as of December 31: Ownership GFNorte: Book value Ps. 851,011 Ps. 772,621 11% Excess of cost over book value, net 146, , ,135 1,031,501 Convertible debentures in common stock of GFNorte - 45,178 Harinera de Monterrey, S.A. de C.V 126, ,860 40% Ps. 1,123,179 Ps. 1,193,539 During 2000, the Company evaluated the recovey of the carrying value of the excess of cost over book value related to the investment in GFNorte. Based on an analysis of the operating results and other economic events related to the financial environment in Mexico, the Company determined that the carrying value of the excess of cost over book value will be recovered over a period of 2.5 years instead of 6 years as originally was estimated; the impact of the change in the estimated remaining life increased the amortization expense by Ps.56,825 for the year The 1999 convertible debentures of GFNorte were convertible to shares at 2002 maturing date or before. On December 7, 2000, the debentures were converted to GFNorte outstanding Series "O" shares. At December 31, 2000 and 1999, the excess of cost over book value is presented net of accumulated amortization of Ps.595,369 and Ps.530,003, respectively.

45 Gruma S.A. de C.V. and subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued 7. PROPERTY, PLANT AND EQUIPMENT, NET Property, plant and equipment, net consists of the following as of December 31: Land Ps. 901,706 Ps. 900,012 Buildings 3,967,954 3,743,981 Machinery and equipment 13,378,506 12,377,997 Construction in progress 579, ,025 Software 560, ,679 Leasehold improvements 224, ,125 Advances to suppliers - 61,419 Other 57,648 31,452 19,670,337 18,804,690 Accumulated depreciation and amortization (7,127,647 ) (6,638,501 ) Ps.12,542,690 Ps. 12,166,189 For the years ended December 31, 2000 and 1999, comprehensive financing cost of Ps.5,779 and Ps.6,544, respectively, was capitalized to property, plant and equipment; depreciation expense for those years amounted to Ps.829,986 and Ps.700,884, respectively. As of December 31, 2000, property, plant and equipment includes assets temporarily idled with a carrying value of approximately Ps.752,398, resulting from the temporary shut down of the productive operation of various plants in Mexico, Central America and Venezuela. The Company s management has the intention to use these assets in the short-term. Additionally, for the year then ended the Company recognized a write-off of idle assets for Ps.43, INTANGIBLE ASSETS, NET Intangible assets, net are comprised of the following as of December 31: Covenants not to compete Ps. 697,410 Ps. 683,321 Pre-operating expenses 420, ,657 Debt issuance costs 124, ,322 Patents 175, ,384 Research on new projects 93,526 84,591 Other 59,597 57,528 1,570,921 1,549,803 Accumulated amortization (330,490 ) (242,792) Ps. 1,240,431 Ps. 1,307,011

46 Gruma S.A. de C.V. and subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued 8. INTANGIBLE ASSETS, NET (Continued) Expenditures for research and development are expensed as incurred and amounted to Ps.139,474 and Ps.167,012 for the years ended December 31, 2000 and 1999, respectively. The amortization of pre-operating expenses charged to income for the years ended December 31, 2000 and 1999 amounted to Ps.32,983 and Ps.26,054, respectively. During 2000, the Company wrote-off certain capitalized pre-operating expenses for Ps.22,279 against other expenses, net. The Company determined that these assets will not be recovered from the future profits of the related businesses. 9. OTHER ASSETS Other assets as of December 31, consist of the following: Trust funds for research and development of technology Ps. 190,866 Ps. 193,791 Long-term refundable asset tax 88,602 - Long-term notes receivable 32,184 44,704 Related parties - 81,917 Guaranty deposits 13,810 15,683 Clubs memberships 20,681 18,206 Ps. 346,143 Ps. 354, SHORT-TERM BANK LOANS AND LONG-TERM DEBT Short-term bank loans and long-term debt as of December 31 are summarized as follows: Senior unsecured notes denominated in U.S. dollars, maturing in October 2007 and bearing interest at annual rate of 7.625% payable semiannual Loans in U.S. dollars maturing in 2002 and bearing interest at an annual rate of LIBOR plus 3.25% payable monthly or quarterly Loans in U.S. dollars, supported by revolving credit agreements due in 2003, bearing interest at an annual rate of LIBOR plus 1.35% to 1.75% payable monthly Loans in U.S. dollars, supported by revolving credit agreements due in 2001, bearing annual interest at variable rates (7.56% and 6.94% at December 31, 2000 y 1999, respectively) payable monthly and quarterly Short-term bank loans in U.S. dollars, bearing interest at variable rates payable monthly Ps.2,400,000 Ps. 2,524,625 1,920,000 2,019, , ,000 1,211, ,440 95,936

47 Gruma S.A. de C.V. and subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued 10. SHORT-TERM BANK LOANS AND LONG-TERM DEBT (Continued) Loans in U.S. dollars, supported by revolving credit agreements due in 2003, bearing interest at the prime rate (9.5% at December 31, 2000) or LIBOR rate plus 0.21% to 0.60% (6.64% at December 31, 2000) payable quarterly Loans in U.S. dollars, bearing interest at annual rates from 4.90% to 7.96% payable quarterly,and due in annual payments form 2000 through Some of these loans are collateralized by fixed assets totaling approximately Ps.208,166 Long-term notes in U.S. dollars, bearing annual interest at a rate of 7.5% payable quarterly and maturing in annual payments 2000 through 2004 Short-term bank loans in U.S. dollars bearing interest at an annual rate of LIBOR plus 4.5% to 5.5% for 2000 and 1999, respectively (payable monthly and quarterly) Loans in U.S. dollars bearing interest at annual rates from 8.38% to 8.44% (payable quarterly) and maturing in 2001 through 2007 Loans in U.S. dollars, due in 2006, bearing interest at variable rates payable semiannual Loan in Venezuelan bolivares payable in 2001 and bearing interest at variable annual rates (11.79% at December 31, 2000), payable monthly Loans in U.S. dollar due in June 2002, bearing annual interest at the LIBOR rate plus 4.5% Loan in Honduran lempiras, bearing interest at annual variable rates ranging from 21% to 25% Short-term bank loans Current portion of long-term debt Long-term debt 345, , , , , , ,718 97,899 81, ,380 6,701 7,585 4,985 9,528-31,558-21,234 7,115,128 7,417,266 (650,154 ) (215,124) (628,001 ) (108,912) Ps. 5,836,973 Ps. 7,093,230 At December 2000, the Company has long-term credit line agreements, ranging from two to three years, for a maximum amount of U.S.$539 million (Ps.5,174,400), bearing interest at variable rates, of which U.S.$379 million (Ps.3,642,240) were available as of December 31, These agreements include a line of credit for U.S.$120 million (Ps.1,152,000) which requires the payment of an annual commitment fee of 0.5% over the unused amounts. Various credit agreements contain covenants requiring the Company to maintain certain financial ratios. The Company s ability to pay dividends is restricted upon the failure to maintain such financial ratios. At December 31, 2000, the Company was in compliance with these covenants.

48 Gruma S.A. de C.V. and subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued 10. SHORT-TERM BANK LOANS AND LONG-TERM DEBT (Continued) At December 31, 2000, the annual maturities of long-term debt outstanding are as follows: Year Amount 2002 Ps. 2,029, , , , and thereafter 2,665,554 Ps. 5,836, SENIORITY PREMIUM AND SAVINGS PLAN Seniority premium cost and other employee retirement benefits are determined by independent actuaries and are principally based on the employees years of service, age, and salaries. The Company has established trust funds to meet these obligations. The components of the net seniority premium cost for the years ended December 31, consist of the following: Service cost Ps. 2,386 Ps. 2,626 Interest cost Expected return on plan assets (1,583 ) (749) Net amortization 1,174 (1,567) Net cost Ps. 2,569 Ps. 887 As of December 31, the status of the plan is as follows: Actuarial present value of benefit obligations: Vested benefit obligation Ps. (6,433) Ps. (4,980) Non-vested benefit obligation (6,442) (6,054) (12,875) (11,034) Excess of projected benefit obligation over accumulated benefit obligation (4,104) (4,508) Projected benefit obligation (16,979) (15,542) Plan assets at fair value 14,109 15,125 (Deficit) excess of plan assets over projected benefit obligation (2,870) (417) Unrecognized amounts to be amortized over 17 years: Cumulative net gain (77) (2,256) Net transition liability Prior service cost (16) (373) Adjustment required to recognize minimum liability (1,609) - Seniority premium liability Ps. (3,825) Ps. (2,538)

49 Gruma S.A. de C.V. and subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued 11. SENIORITY PREMIUM AND SAVINGS PLAN (Continued) For the years ended December 31, 2000 and 1999, the changes in projected benefit obligation and plan assets are summarized as follows: Projected benefit obligation at beginning of year Ps. 15,542 Ps. 12,462 Effect of inflation on beginning balance 902 1,017 Service cost 2,386 2,626 Interest cost Benefits paid (3,293 ) (95) Actuarial loss 850 (1,045) Projected benefit obligation at end of year Ps. 16,979 Ps. 15,542 Fair value of plan assets at beginning of year Ps. 15,125 Ps. 13,812 Effect of inflation on beginning balance 371 1,010 Actual return on plan assets 1, Benefits paid. (2,970 ) (446) Fair value of plan assets at end of year Ps. 14,109 Ps. 15,125 Significant assumptions (weighted average rates, net of expected inflation) used in determining the seniority premium cost were as follows: Discount rate 4.0% 4.0% Rate of increase in future compensation levels 2.0% 2.0% Expected long-term rate of return on plan assets 5.0% 5.0% Inflation rate 8.0% 8.0% In the United States, the Company has a saving and investment plan that incorporates voluntary employee 401(K) contributions with Company contributions. For the years ended December 31, 2000 and 1999, total expenses related to this plan were U.S.$2,098 (Ps.20,141) and U.S.$1,918 (Ps.18,413), respectively. In Venezuela, the Company records a liability for seniority premium and indemnities for dismissal established by the local Labor Law, which amounted Ps.13,642 and Ps.14,254 as of December 31, 2000 and 1999, respectively. In Central America the labor legislation of Costa Rica, Nicaragua, El Salvador, Honduras and Guatemala establishes that the accumulated payments to which workers may be entitled, based on the years of services, can be paid in the case of death, retirement or dismissal. The Company records a liability at 8.33% of salaries which to amounted Ps.5,733 and Ps.13,043 as of December 31, 2000 and 1999, respectively.

50 Gruma S.A. de C.V. and subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued 12. COMMITMENTS AND CONTINGENCIES The Mexican tax authorities have disallowed certain deductions for income tax purposes, the effect of which on prior years income tax amounted to Ps.6,937 plus the related surcharges and penalties. The Company is also involved in a number of claims arising in the ordinary course of business in the United States, which have not been finally adjudicated. The resolution of these matters is not expected to have a material adverse effect on the Company s consolidated financial position or results of operations. The Company entered into sale-leaseback agreements for various production equipment located in its U.S. plants. The Company has a purchase option at fair market value at the expiration of the leases and an early purchase option, which permits to acquire the equipment at fair market value at approximately three-fourths of the lease term. These agreements are accounted for as operating leases. Rental expense was approximately Ps.412,376 and Ps.377,703 for the years ended December 31, 2000 and 1999, respectively. As of December 31, 2000, the Company is leasing certain equipments under long-term operating lease agreements expiring through Future minimum lease payments under such leases amount to approximately U.S. $143,638 (Ps.1,378,924), as follows: U.S. dollars (thousands) Year Facilities Equipment Total 2001 U.S. $ 7,663 U.S. $ 28,369 U.S. $ 36, ,356 21,887 28, ,920 16,650 21, ,388 14,400 17, ,213 14,949 17, and thereafter 3,719 19,124 22,843 U.S. $ 28,259 U.S. $ 115,379 U.S.$ 143,638 Ps. 271,286 Ps. 1,107,638 Ps. 1,378,924 At December 31, 2000, the Company has various outstanding commitments in the United States to purchase commodities and raw materials of approximately U.S.$62 million (Ps.595,306), which will be delivered during As of December 31, 2000, the Company has outstanding commitments to purchase machinery and equipment amounting to U.S.$660 (Ps.6,336). As of December 31, 2000 and 1999, restricted cash of Ps.6,337 and Ps.6,783, respectively, includes undisbursed proceeds from the issuance of tax-exempt industrial development revenue bonds in the United States amounting to Ps.1,632 (U.S.$170) which are available to pay interest expense on outstanding balances on these bonds; in 1999, it was included Ps.$1,773 ($53,897 Costa Rican colons) that represent a fixed deposit as a fulfillment guarantee for the purchase of white corn in Central America. The Company hedges a portion of its production requirements in the United States through commodity futures contracts, in order to minimize the risk created by price fluctuations of corn, wheat, soybeans and soybean oil. For the years ended December 31, 2000 and 1999, total amortization of deferred losses to cost sales was Ps.21,869 and Ps.49,462, respectively. As of December 31, 2000 and 1999, the deferred losses included as a component of inventory were Ps.23,789 and Ps.23,004, respectively. At December 31, 2000 the Company had no open futures and options contracts.

51 Gruma S.A. de C.V. and subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued 12. COMMITMENTS AND CONTINGENCIES (Continued) In September 2000, the Company learned that some products made with yellow corn flour manufactured by the Company were found to contain traces of Starlink DNA, indicating that the products may have contained Starlink. Starlink is a genetically modified organism approved by U.S. government agencies for animal feed, but not for human consumption. Shortly thereafter, the Company voluntarily recalled all of their yellow corn products and ceased manufacturing products made with yellow corn. During the voluntary product recall, the Company incurred significant costs primarily related to raw material and finished goods inventories on hand that will not be sold for human consumption, return of yellow corn products sold to customers for credit or replacement with white corn products, unusable packaging material, laboratory testing fees and other legal and consulting fees. The Company also has outstanding commitments to purchase yellow corn amounting to U.S.$13,154 (Ps.126,278) at December 31, The Company is in negotiations to either exit those contracts or to substitute white corn for the yellow corn variety contracted and may incur further costs associated with these contracts. Based upon discussions with the company that developed Starlink and analyses of the Company s insurance coverage, management believes the amounts included in accounts receivable of Ps.208,646 (U.S.$21,734) will be recovered. As a result of possible Starlink contamination, a number of lawsuits against the Company and other defendants have been filed in which the plaintiffs allege some damage from buying yellow corn products that are suspected to have contained Starlink. These plaintiffs are seeking to have their claims certified as class actions. These claims have only recently been filed and no discovery has taken place; however, it is the Company s view that these claims are without merit and the Company intends to vigorously defend itself against such claims. 13. STOCKHOLDERS EQUITY A) Common stock At the Stockholders Meeting held on April 28, 1999, approved the issuance of 5,882,717 common shares through the distribution of stock dividends as a result retained earnings were capitalized for an amount of Ps.117,899. At the Stockholders Extraordinary Meeting held on August 19, 1999, approved the issuance of 97,139,425 common shares of which 89,770,216 shares were totally subscribed and paid. The remaining 7,369,209 shares were held in Treasury and expired in December At December 31, 2000, Gruma outstanding common stock consisted of 438,776,086 shares of Series "B", with no par value, which can only be withdrawn with stockholders approval, and 13,773,866 authorized shares held in Treasury. At December 31, 1999, Company s outstanding common stock consisted of 436,462,336 shares and 23,456,825 shares held in Treasury. B) Executive stock purchase plan Gruma S.A. de C.V. has established through an irrevocable grantor trust an "Executive Stock Purchase Plan" designating up to 5,422,519 common shares which are reserved for issuance pursuant to this plan, all of which are subscribed and paid. The shares will be granted to executives, and such executives will have the right to receive dividends during the six year term after joining the plan. As of December 31, 2000, the Company had granted 1,348,346 Series "B" shares under this plan, of which 703, 962, 414, 384 and 230,000 shares will fully vested by December 31, 2001, 2002 and 2003, respectively. The Company recognizes an expense equal to the market value of the shares at grant date using the straight-line method over a six-year period. The amount recognized as expense for the years ended December 31, 2000 and 1999 was Ps.3,208 and Ps.8,585, respectively.

52 Gruma S.A. de C.V. and subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued 13. STOCKHOLDERS EQUITY (Continued) C) Retained earnings In accordance with Mexican Corporate Law, the legal reserve must be increased annually by 5 % of annual net profits until it reaches 20 % of the fully paid capital stock amount. A 53.85% tax is payable by the Company if dividends are paid from earnings that have not been subject to Mexican income tax. Additionally, dividends paid to individuals and foreign residents will be subject to a maximum withholding tax of 7.69%. D) Purchase of common stock The Stockholders Meeting approved a Ps.650,000 reserve to repurchase the Company s own shares. The total amount of repurchased shares cannot exceed either the reserve amount or 5% of total equity. As of December 31, 2000, the Company has repurchased 13,773,866 of its own shares with market value of Ps.103,855. In September 2000, the Company has entered into an Equity Swap agreement with a Mexican financial institution and sold 4,500,000 of its own shares for a total amount of U.S.$3,887. The agreement matures in September The Company is subject to the payment of a 10.25% over the contractual amount. The agreement requires a settlement on the maturity date under which the Company will receive or pay the difference between the value of the shares under the contract price and market value. Additionally the Company has the option to repurchase its own shares at market value on the maturity date. E) Foreign currency translation adjustments As of December 31, 2000 and 1999, "Foreign currency translation adjustments" consist of the following: Accumulated effect from translating the opening net investment in foreign subsidiaries Ps. 386,866 Ps. 485,037 Effect from translating stockholders equity items at year-end exchange rates (239,032 ) (239,885 ) Exchange differences arising from foreign currency liabilities accounted for as a hedge of the Company s net investments in foreign subsidiaries 46, ,464 Ps. 194,001 Ps. 377,616

53 Gruma S.A. de C.V. and subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued 13. STOCKHOLDERS EQUITY (Continued) F) Inflation effects As of December 31, 2000, the majority stockholders equity is comprised of the following: Nominal Restatement Total Common stock Ps. 4,266,883 Ps. 5,115,802 Ps. 9,382,685 Additional paid-in capital 1,193,708 1,626,916 2,820,624 Deficit from restatement - (9,859,511) (9,859,511) Cumulative effect of a change in an accounting principle for deferred income taxes and employee s statutory profit sharing (156,322) (11,661) (167,983) Retained earnings from prior years 2,040,687 4,328,610 6,369,297 Net income for the year 229,479 3, ,872 Foreign currency translation adjustments 176,687 17, ,001 Ps. 7,751,122 Ps.1,220,863 Ps. 8,971,985 G) Tax values of common stock and retained earnings As of December 31, 2000, tax amounts of common stock and the retained earnings were Ps.7,773,765 and Ps.40,834, respectively. 14. OTHER INCOME (EXPENSES), NET Other income (expenses), net is comprised of the following: Software implementation expenses Ps. (33,417 ) Ps. (87,843 ) Reorganization expenses (45,202 ) (17,409 ) Amortization of excess of cost over book value and excess of book value over cost, net 282,671 28,340 Amortization of other deferred assets (73,179 ) (124,727 ) Write-off of idle assets (Note 7) (43,575 ) - Write-off of pre-operating expenses and other intangibles (Note 8) (22,279 ) - Other (34,332 ) 31,304 Ps. 30,687 Ps. (170,335 ) During 2000 and 1999, the Company recorded reorganization costs, which included employee severance costs, write-off of idle assets, other plant closure costs, and relocation expenses primarily related to the closure of certain tortilla manufacturing operations in the United States.

54 Gruma S.A. de C.V. and subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued 15. INCOME TAXES, ASSET TAX AND EMPLOYEES STATUTORY PROFIT SHARING A) Income tax and asset tax Gruma, files a consolidated income tax return for Mexican income tax purposes, consolidating taxable income and losses of Gruma and its controlled Mexican subsidiaries. Filing a consolidated tax return had the effect of reducing income tax expense for the years ended December 31, 2000 and 1999 by Ps.109,304 and Ps.93,364, respectively, as compared to filing a tax return on an unconsolidatedbasis. Effective January 1, 1999, new tax regulations limit the income tax consolidation to 60% of the ownership interest of controlled Mexican subsidiaries. In accordance with the applicable tax law, Mexican corporations must pay the higher of either income tax or asset tax (1.8%). Asset tax is determined on the average value of substantially all of the Company s Mexican assets less certain liabilities. Payments of asset tax are recoverable against the excess of income tax over asset tax of the three prior years and the ten subsequent years. For the years ended December 31, 2000 and 1999, asset tax amounted to Ps.82,603 and Ps.87,542, respectively. B) Reconciliation of financial and taxable income In Mexico, differences arise between financial and taxable income, causing the statutory income tax rate (35%) to be different from the effective income tax rate. The most important difference corresponds to permanent differences, mainly attributable to inflation effects. For the years ended December 31, 2000 and 1999, the reconciliation between the effective income tax amounts and the statutory income tax amounts is summarized as follows: Statutory federal income tax (35%) Ps. 127,846 Ps. 445 Foreign income tax differences (28,231) (8,558) Differences between tax and financial accounting for: Inventories purchases, labor and overhead versus cost of sales (6,638) 35,899 Financing cost, net and other income statement effects related to inflation 53, ,133 Amortization of accounting income no subject to income taxes (66,563) - Capitalized costs deducted for tax purposes - (56,661) Accrued expenses that will result in future tax deductible amounts 1,460 11,652 Tax deduction of contributions to research and development trust funds - (748) Restatement of tax loss carryforwards (66,372) - Asset tax - 94,070 Losses of Mexican subsidiaries which cannot be utilized for income tax consolidation 73, ,379 Others (66,986) (98,054) Effective income tax rate (5.9%) Ps. 21,521 Ps. 266,557

55 Gruma S.A. de C.V. and subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued 15. INCOME TAXES, ASSET TAX AND EMPLOYEES STATUTORY PROFIT SHARING (Continued) The tax effects of main differences that give rise to significant portions of the deferred tax assets and liabilities as December 31, 2000, are as follows: Employees Income Statutory tax Profit Sharing Deferred tax assets: Accrued liabilities Ps. (117,455) Ps. (17,774) Net operating loss carryforwards and other tax credits (897,465) - Refundable asset tax (498,516) - Intangible asset resulting from intercompany operation (277,149) Other (68,474) - (1,859,059) (17,774) Deferred tax liabilities: Property, plant and equipment, net 1,544,714 24,092 Inventories 379,720 36,750 Intangible assets and other 126,477 6,996 Investment in partnership and equity method investee 185,702-2,236,613 67,838 Net deferred tax liability Ps. (377,554) Ps. (50,064) C) Tax loss carryforwars and recoverable asset tax At December 31, 2000, in Mexico the Company has tax loss carryforwards of approximately Ps.1,447,026 available to offset its taxable income in subsequent years, and asset tax available to offset the excess of income tax over asset tax in future years, as shown below: Tax loss Recoverable Expiration year carryforwards asset tax 2002 Ps. - Ps. 32, , ,618 32, ,192 26, until , ,662 Ps. 1,447,026 Ps. 554,855 At December 31, 2000, some of Company s foreign subsidiaries have tax loss carryforwards of approximately Ps.48,365 (U.S.$5,038 million) available to offset future taxable income through fiscal 2014; Ps.91,122 (3,019 million of Costa Rican colons) which will expired in 2001 to 2003; Ps.378,012 ($27,572 million bolivares) which will expire in 2001 and 2002.

56 Gruma S.A. de C.V. and subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued 15. INCOME TAXES, ASSET TAX AND EMPLOYEES STATUTORY PROFIT SHARING (Continued) D) Employees statutory profit sharing In Mexico, employees statutory profit sharing is determined for each subsidiary on an unconsolidated basis, as 10% of taxable income determined on a basis similar to income tax, except that the employee s statutory profit sharing does not consider inflation effects (inflationary component), depreciation expense is based on the historical cost, and a foreign exchange gain or loss is recognized when a monetary asset or liability is contractually due. 16. FOREIGN CURRENCY A) Exchange differences For the years ended December 31, 2000, and 1999, the effects of exchange rate fluctuations on the Company s monetary assets and liabilities were recognized as follows: Exchange differences arising from foreign currency liabilities accounted for as a hedge of the Company s net investment in foreign subsidiaries recorded directly to stockholders equity as an effect of foreign currency translation adjustments Ps. 46,167 Ps. 132,464 Exchange differences arising from foreign currency transactions credited (charged) to income (57,662 ) 85,077 Ps. (11,495 ) Ps. 217,541 B) Foreign currency position As of December 31, 2000 and 1999, monetary assets and liabilities held or payable in U.S. dollars are summarized below: Thousands of U.S. dollars By companies located in Mexico: Assets U.S.$ 11,538 U.S.$ 17,373 Liabilities (689,002) (625,204) U.S.$ (677,464) U.S.$ (607,831) By foreign companies: Assets U.S.$ 179,986 U.S.$ 147,811 Liabilities (280,290) (259,904) U.S.$ (100,304) U.S.$ (112,093) At December 31, 2000 and 1999, the exchange rates used to translate U.S. dollar assets and liabilities were Ps.9.60 and Ps.9.50, respectively. On March 16, 2001, date of issuance of these financial statements, the exchange rate for the U.S. dollar was Ps.9.62.

57 Gruma S.A. de C.V. and subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued 16. FOREIGN CURRENCY (Continued) Gruma and its Mexican subsidiaries had transactions in U.S. dollars as follows for the years ended December 31: Thousands of U.S. dollars Corn purchases and other inventories U.S. $ 103,714 U.S. $ 68,906 Interest expense 58,621 2,900 Equipment purchases Services U.S. $ 162,703 U.S. $ 72,130 Fixed assets of foreign origin, which are restated on the basis of the GPCI from the foreign country of origin, are summarized as follows: Foreign Year-end Foreign Year-end currency exchange currency exchange (thousands) rate (thousands) rate U.S. dollars 441, , Swiss francs 11, , Deutsche marks 31, , Italian liras 3,194, ,456, Spanish pesetas 659, , Venezuelan bolivares 98,436, ,598, Costa Rican colon 31,204, ,894, SEGMENT INFORMATION The Company s reportable segments are strategic business units that offer different products in different geographical regions. These business units are managed separately because each business requires different technology and marketing strategies. The Company reportable segments are as follows: Corn flour division (Mexico) engaged principally in the production, distribution and sale of corn flour in Mexico. Corn flour produced by this division is used mainly in the preparation of tortillas and other related products. Corn flour and packaged tortilla division (United States of America) manufactures and distributes over 20 varieties of corn flour that are used mainly to produce and distribute different types of tortillas and tortilla chips products in the United States through MISSION and GUERRERO, its principal brands. Corn flour and other grains division (Venezuela) engaged mainly in producing and distributing corn and wheat flour, used principally for industrial and human consumption. Bread and packaged tortilla division (Mexico) produces and distributes tortillas, bread and other related products in Mexico.

58 Gruma S.A. de C.V. and subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued 17. SEGMENT INFORMATION (Continued) Wheat flour division (Mexico) engaged in the production and marketing of wheat flour. Corn flour and related products (Central America) manufactures corn flour, tortillas, snack, bread and rice and cultivates and sells hearts of palm "Other" division this segment represents the technology and equipment division which are in Mexico and conducts research and development regarding flour and tortilla manufacturing equipment, produces machinery for corn flour and tortilla production and is engaged in the construction of the Company s corn flour manufacturing facilities. The "Other reconciling items" row includes the corporate expenses and the elimination of inter-business unit transactions. All intersegment sales prices are market based. The Company evaluates performance based on operating income of the respective business units. Summarized financial information concerning the Company s reportable segments is shown in the following tables. Segment information as of and for the year ended December 31, 2000: Net sales to Depreciation external Inter-segment Operating and Segment customers net sales income amortization Corn flour division (Mexico) Ps. 4,739,392 Ps. 34,655 Ps. 524,738 Ps. 251,253 Corn flour and packaged tortilla division (United States) 7,841, , ,085 Corn flour and other grains (Venezuela) 2,797, ,718 64,219 Bread and packaged tortilla (Mexico) 345,143 23,878 (273,741) 125,133 Wheat flour (Mexico) 1,349,037 18,703 (39,279) 65,943 Corn flour and related products (Central America) 1,063, ,462 41,554 Other 30, ,817 (20,681) 9,831 Other reconciling items 32,076 (581,140) (87,167) (131,181) Total Ps. 18,199,045 Ps. 0 Ps. 813,329 Ps. 753,837 Total Total for long- Segment assets liabilities lived assets Corn flour division (Mexico) Ps. 6,756,959 Ps. 1,464,872 Ps. 43,218 Corn flour and packaged tortilla division (United States) 6,985,450 2,148, ,606 Corn flour and other grains (Venezuela) 2,828, ,861 12,609 Bread and packaged tortilla (Mexico) 1,168, ,032 (2,681 ) Wheat flour (Mexico) 1,908, , ,157 Corn flour and related products (Central America) 1,354, , ,837 Other 507, ,678 (24,599 ) Other reconciling items 315,016 4,721, ,297 Total Ps. 21,824,105 Ps.10,055,326 Ps.1,494,444

59 Gruma S.A. de C.V. and subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued 17. SEGMENT INFORMATION (Continued) Segment information as of and for the year ended December 31, 1999: Net sales to Depreciation external Inter-segment Operating and Segment customers net sales income amortization Corn flour division (Mexico) Ps.5,274,546 Ps. 66,162 Ps. 399,952 Ps. 252,682 Corn flour and packaged tortilla division (United States) 7,463,916 60, , ,157 Corn flour and other grains (Venezuela) 1,349, , ,897 Bread and packaged tortilla (Mexico) 240,823 1,715 (262,383) 54,038 Wheat flour (Mexico) 1,083, ,358 35,952 Corn flour and related products (Central America) 1,005, , ,609 Other 8, ,139 8,899 11,535 Other reconciling items 182,267 (864,485) (295,612) 77,681 Total Ps.16,608,614 Ps. 0 Ps. 383,489 Ps. 977,551 Expenditures Total Total for long- Segment assets liabilities lived assets Corn flour division (Mexico) Ps. 6,709,842 Ps. 824,600 Ps. 143,128 Corn flour and packaged tortilla division (United States) 6,802,335 2,167, ,302 Corn flour and other grains (Venezuela) 2,146, , ,830 Bread and packaged tortilla (Mexico) 1,309, , ,324 Wheat flour (Mexico) 1,683, , ,142 Corn flour and related products (Central America) 1,410, , ,499 Other 1,186, ,328 (18,742) Other reconciling items 1,037,217 5,158, ,193 Total Ps. 22,287,257 Ps. 9,667,432 Ps. 2,588,676 The following table presents the details of "Other reconciling items" for operating income: Other reconciling items Corporate expenses Ps. (116,162) Ps. (327,848) Elimination of inter-business unit transactions 28,995 32,236 Total Ps. (87,167) Ps. (295,612)

60 Gruma S.A. de C.V. and subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued 17. SEGMENT INFORMATION (Continued) Additionally a summary of information by geographic segments is as follows: 2000 % 1999 % NET SALES: Mexico Ps. 6,201, Ps. 6,186, United States 8,136, ,066, Venezuela 2,797, ,349,013 8 Central America 1,063, ,005,902 6 Ps.18,199, Ps.16,608, IDENTIFIABLE ASSETS: Mexico Ps.10,634, Ps. 11,892, United States 7,007, ,837, Venezuela 2,828, ,146,583 9 Central America 1,354, ,410,751 7 Ps. 21,824, Ps.22,287, CAPITAL EXPENDITURES: Mexico Ps. 674, Ps. 980, United States 604, , Venezuela 12, , Central America 202, , Ps. 1,494, Ps. 2,588, FINANCIAL INSTRUMENTS A) Fair value of financial instruments The carrying amounts of cash and cash equivalents, accounts receivable, notes receivable, restricted cash, trade accounts payable, bank loans, current portion of long-term debt and accrued liabilities and other payables approximate their fair value, due to their short maturity. In addition, the net book value of accounts receivable and refundable taxes represent the expected cash flow. The estimated fair value of the Company s long-term debt is as follows: Carrying amount Fair value At December 31, 2000: Liabilities: Senior unsecured notes in U.S. dollars bearing interest at annual rate of 7.625% Ps.2,400,000 Ps. 2,291,040 Equity Swap 36,181 35,833 At December 31, 1999: Assets: Convertible debentures in GFNorte common shares Ps. 45,178 Ps. 45,353 Liabilities: Senior unsecured notes in U.S. dollars bearing interest at annual rate of 7.625% Ps. 2,524,625 Ps. 2,320,888 Fair values were determined as follows: Convertible debentures are based upon on quoted market prices for these instruments. The fair value of debt is estimated based on quoted market prices for similar issues or on current rates available to the Company for debt of the same maturity and similar terms.

61 Gruma S.A. de C.V. and subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued 18. FINANCIAL INSTRUMENTS (Continued) The fair value of equity swap is estimated based on quoted market prices of the share and on the agreement terms. The carrying value of the remainder of the long-term debt was similar to its fair value B) Concentration of credit risk The financial instruments which are potentially subject to a concentration of risk are principally cash and cash equivalents and trade accounts receivable. The Company deposits its cash and cash equivalents in recognized financial institutions. The concentration of the credit risk, with respect to trade receivables, is limited due to the Company sells its products to a large number of clients located in different parts of Mexico, United States, Central America and South America. 19. RELATED PARTY TRANSACTIONS The Company owns an % interest in GFNorte, a Mexican financial institution. In the normal course of business, the Company obtains long-term financing from GFNorte and other subsidiaries of this institution at market rates and terms. The interest paid to GFNorte s subsidiaries for the year ended December 31, 2000 and 1999 was Ps.3,347 and Ps.23,002, respectively. For the years ended December 31, 2000 and 1999, the Company made loans to its controlling shareholders, bearing interest at market rates, and are of a short-term nature without due dates. As of December 31, 2000 and 1999, short-term amounts receivable from these transactions totaled Ps.137,950 and Ps.65,990, respectively. At December 31, 1999, the Company has long-term notes receivable to some of its shareholders totaling Ps.81,917, which bear interest at market rates and LIBOR rate plus 4% and matures between 2002 and 2005 During 2000 and 1999, the Company purchased inventory ingredients from a shareholder, amounting to U.S.$75 million (Ps.720,172) and U.S.$62 million (Ps.625,725), respectively. 20. SUBSEQUENT EVENT During February, 2001, the Company obtained a sindicated loan for U.S.$400 million (Ps.3,880 million) due in February This loan has a mandatory repayment of U.S.$100 million (Ps.970 million) which has to be paid no more than 24 months after the disposition date. The Company used the proceeds to pay short and long term liabilities. This loan bears interest at the LIBOR rate plus a margin ranging from 1.25% to 2.875%. 21. RECENT ACCOUNTING PRONOUNCEMENTS In February 2000, the Mexican Institute of Public Accountants issued Bulletin C-2, "Financial Instruments", which is effective as of January 1, Bulletin C-2 provides guidance for recognizing, measuring and disclosing information about financial assets and liabilities, including accounting for certain hedging transactions. Bulletin C-2 requires that all financial instruments be recorded in the balance sheet at their fair value and changes in the fair value be recorded in each period in the income statement. Management of the Company is evaluating the effect of the adoption of Bulletin C-2 on its financial statements. In August 2000, the Mexican Institute of Public Accountants issued Bulletin B-4, "Comprehensive Income". Bulletin B-4 defines comprehensive income as the net income for the period presented in the income statement plus other results for the period reflected in the stockholders equity in accordance with the Mexican GAAP, and requires the disclosure of the components of comprehensive income in the presentation of financial statements. Bulletin B-4 is effective as of January 1, 2001, with earlier adoption allowed. The Group will adopt Bulletin B-4 in 2001.

62 FOCUS ON MOTIVATED PEOPLE AND INTEGRATED MANAGEMENT

63 GRUMA S BOARD OF DIRECTORS AND OFFICERS EXECUTIVE COMMITEE JAIME COSTA LAVÍN, 47 President of GRUMA s Latin American Operations Mr. Costa joined GRUMA as the President of the company s Latin American operations in July 2000 and was simultaneously named as a member of GRUMA s Executive Committee. Before joining GRUMA, he held positions as the President of Coca Cola-FEMSA, Industrias LALA, and most recently, Allied Domecq. He holds an M.A. in Marketing and Management from the Instituto Panamericano de Alta Dirección de Empresas (IPADE) and a B.A. in Business Administration from the Univesidad Iberoamericana. G. IRWIN GORDON, 50 President of GRUMA s United States and Europe Operations Before joining GRUMA in July 2000 as the President of its United States operations, Mr. Gordon was the President and Chief Operating Officer of Suiza Foods Corporation. Prior to that, he served as the President and COO of the Morning Star Group and its Executive Vice President of Planning and Marketing. Before joining Suiza Foods Corporation, he held several management positions with the Frito-Lay Company. He received his B.A. in Education from the University of British Columbia in Vancouver, Canada, and a Management Certificate from Stanford University in Palo Alto, California. EXPERIENCED, DYNAMIC MANAGEMENT TEAMS GIVE THE COMPANY STRENGTH AND DIRECTION JAVIER VÉLEZ BAUTISTA, 44 Chief Financial Officer and Chief Staff Mr. Vélez joined GRUMA in 1991 as Director of Finance and Planning of Gruma Corporation. He has been the Chief Financial Officer of GRUMA since 1995, and he was appointed to the Executive Committee in Prior to joining GRUMA, Mr. Vélez directed a number of international finance and corporate strategy projects for Booz-Allen & Hamilton. He earned his M.B.A. from the University of Pennsylvania s Wharton School and a B.A. in Industrial Engineering from the Universidad Iberoamericana in Mexico City.

64 BOARD OF DIRECTORS MEMBERS ROBERTO GONZÁLEZ BARRERA, 70 Chairman of the Board Elected April 1994 (shareholder, related) 1 Mr. González is the founder and Chairman of the Board of GRUMA. He has also been a shareholder and the President of the Board of Directors of Grupo Financiero Banorte, S.A. de C.V., since Mr. González is the founder and President of Patronato al Fomento Educativo y Asistencial de Cerralvo A.B.P., an institution of regional development, and he also participates in other social and cultural development organizations. G. ALLEN ANDREAS, 57 Elected September 1996 (shareholder, independent) Mr. Andreas is the Chairman of the Board of Directors of Archer Daniels Midland (ADM) and Chairman of ADM s Executive Committee. He has served in various capacities for ADM since joining it in 1973, including Chief Financial Officer of European Operations and Vice President and Counsel to the Executive Committee. Prior to joining ADM, Mr. Andreas was an attorney for the United States Treasury Department. He is a member of the Supervisory Board of the A.C. Toepfer International Group, the Trilateral Commission, and the International Council on Agriculture, Food and Trade, among others. He is also a member of the Bar of the Supreme Court of the State of Colorado. He holds a B.A. from Valparaiso University and a J.D. from the Valparaiso University School of Law. ROBERTO GONZÁLEZ MORENO, 48 Elected April 1994 (shareholder, related) Mr. González is the President and Chairman of the Board of Directors of Corporación Noble, S.A. de C.V., and Noble Marketing International, Inc. Prior to holding those positions, he held several management positions within GRUMA, including Director of Operations and Director of GRUMA s Food Division. He was also President of RGM Inc., Exportaciones El Parian, S.A., from 1983 to He holds a bachelor s degree in business administration from the Universidad de Monterrey and an MBA from Cornell University s Graduate School of Business. CRAIG L. HAMLIN, 55 Elected September 1996 (shareholder, independent) Mr. Hamlin is the Senior Vice President of ADM. He previously held positions as the Corporate Group Vice President of ADM and President of ADM Milling Company. He currently serves on the boards of directors of the United Grain Growers, ADM/Riceland Joint Venture and the American Institute of Baking. He holds a B.A. from Friends University and attended Graduate School at Wichita State University in Wichita, Kansas. CARLOS HANK RHON, 53 Elected April 1994 (related) Mr. Hank is the Chairman of the Board and Chief Executive Officer of GRUPO HERMES. He also serves as the Chairman of the Board of Directors and principal shareholder for Grupo Financiero Interacciones, S.A. de C.V. Mr. Hank is currently a member of the boards of directors for Grupo Tribasa, S.A. de C.V., Grupo Financiero Banorte, S.A. de C.V., and Mercedes Benz Mexico, S.A. de C.V. He holds a B.A. in Engineering from the Universidad Nacional Autónoma de México. ROBERTO HERNÁNDEZ RAMÍREZ, 59 Elected April 1994 (independent) Mr. Hernández is the Chairman and Chief Executive Officer of Banco Nacional de México, S.A. He is also the Chairman of the Board of Acciones y Valores de México and of the seven Mutual Investment Funds managed by Accival. He is a member of the boards of Grupo Televisa, S.A. de C.V., Ingenieros Civiles Asociados, S.A. (ICA), Grupo Modelo, S.A. de C.V., and Müenchener de México, S.A. de C.V. He has held a number of prestigious positions during his professional career, including Chairman of the boards of 1 Director classifications are defined in the Code of Best Corporate Practices promulgated by a committee formed by the Mexican Entrepreneur Coordinating Board (Consejo Coordinador Empresarial).

65 directors of the Mexican Stock Exchange, Universidad Iberoamericana, and the Mexican Banking Association. He holds a B.A. in Administration from the Universidad Iberoamericana. JUAN MANUEL LEY LÓPEZ, 68 Elected April 1994 (independent) Mr. Ley is the Chairman of the Board of Directors and CEO of Grupo Ley and the Chief Executive Officer of Casa Ley, S.A. de C.V. He is the Chairman of the Sinaloa-Baja California Consultant Council and the National Association of Supermarket and Retail Stores and a member of the Board of Grupo Financiero Banamex- Accival, S.A. de C.V. He attended the Advanced Management Program of the University of San Diego School of Business and the High-Standard Business Management Studies program at IPADE, as well as several other business management courses. EDUARDO LIVAS CANTÚ, 58 Elected April 1994 (independent) Mr. Livas was the CEO of GRUMA and GIMSA from 1994 to He has also been a member of the Board of Grupo Financiero Banorte, S.A. de C.V., since Mr. Livas is currently an advisor to GRUMA s Chairman and a consultant to other companies on financial and strategic issues, succession planning, and mergers and acquisitions. He holds a Ph.D in Economics from the University of Texas at Austin and a J.D. from the Universidad Autónoma de Nuevo León. BERNARDO QUINTANA ISAAC, 59 Elected April 1995 (independent) Mr. Quintana is the Chairman of the Boards of Ingenieros Civiles Asociados (ICA). He also serves on the boards of directors of several companies and banks, including Banco Nacional de México, S.A. He previously served as the Executive Vice President for the Industrial Sector and the Vice President of the Tourist and Urban Development Division for Grupo ICA. He holds a B.A. in Civil Engineering from the Universidad Nacional Autónoma de México and an M.B.A. from the University of California in Los Angeles, California. ALFONSO ROMO GARZA, 50 Elected April 1994 (independent) Mr. Romo is the Chairman of the Board and Chief Executive Officer of Pulsar Internacional, which he founded in He serves as a member of the World Bank s External Advisory Board for Latin America and the Caribbean and is a member of the boards of directors of several national and international companies. He holds a B.A. in Agricultural Engineering from the Instituto Tecnológico y de Estudios Superiores de Monterrey. ADRIÁN SADA GONZÁLEZ, 56 Elected April 1994 (independent) Mr. Sada is the Chairman of the Board of Vitro, S.A. de C.V. He served as President of the Administrative Board of Grupo Financiero Serfín, S.A. de C.V., from 1992 to He also serves as a member of the boards of directors of ALFA, Cydsa, and Regio Empresas and is a member of the Latin American Executive Board for the University of Pennsylvania s Wharton School of Finance. He holds a B.S. in Business Administration from Georgetown University and M.B.A. degrees from the University of Statyclyde and the Wharton School. He also attended Harvard s Advanced Management Program. ALTERNATE MEMBERS JUAN DIEZ-CANEDO RUÍZ EDGAR VALVERDE RUBIZEWSKY OTHÓN RUÍZ MONTEMAYOR JAVIER VÉLEZ BAUTISTA ROMAN MARTÍNEZ MÉNDEZ JUAN ANTONIO QUIROGA GARCÍA RICARDO ÁLVAREZ-TOSTADO PENELLA STATUTORY AUDITOR Hugo Lara Silva EXAMINER Salvador Vargas Guajardo

66 CORPORATE OFFICERS MANUEL DE JESÚS RUBIO PORTILLA, 73 Chief Technology Officer Since Mr. Rubio joined GRUMA in 1965 as its Chief Technology Officer, he has developed 40 patents for GRUMA s processes as well as machinery for the corn flour and tortilla industry. He holds a B.S. and an M.S. in Chemical Engineering. He also holds a B.S. in Mechanical Engineering from the Universidad de Oriente de Santiago of Cuba. JUAN ANTONIO QUIROGA GARCÍA, 51 Chief Administrative and Internal Auditing Officer Mr. Quiroga joined GRUMA in 1973 and served as Vice President of Administration of Gruma Corporation from 1988 to In 1999, he became Chief Administrative and Internal Auditing Officer. Mr. Quiroga is a C.P.A. He received his B.A. in Accounting from the Universidad Autónoma de Nuevo León. SALVADOR VARGAS GUAJARDO, 48 General Counsel Mr. Vargas joined GRUMA in 1996 as General Counsel. He earned his Ph.D. in Commercial Law from the Universidad Complutense of Madrid, Spain, Master of Laws (LLM) degrees in Corporate and International Law from the University of Illinois, and a Master in Comparative Law (MCL) from New York University. LEONEL GARZA RAMÍREZ, 51 Chief Procurement Officer Mr. Garza joined GRUMA in 1975 as Manager of Quality and Corn Procurement. He left the company in 1981 and, upon rejoining in 1991, was appointed Vice President of Corn Procurement. In 1999, he was appointed to his present position. He holds a B.S. in Biochemistry from the Instituto Tecnológico y de Estudios Superiores de Monterrey and a Masters degree in Food Microentomology from the University of Florida. OPERATING OFFICERS JOAQUÍN RUBIO LAMAS, 41 Chief Operating Officer of Grupo Industrial Maseca, S.A. de C.V. (GIMSA) Mr. Rubio joined GRUMA in 1982 and, during these 18 years, has held several executive positions within the company, including Chief Executive Officer of Electra Foods Machinery from 1990 to 1997 and Chief Executive Officer of Azteca Milling Co. In 1997, Mr. Rubio was appointed Chief Operating Officer of GIMSA. He holds a B.A. in Administration from the Universidad Regiomontana. ENRIQUE ORJUELA, 51 Chief Operating Officer of Monaca Mr. Orjuela joined GRUMA in 1999 as Chief Operating Officer of Monaca in Venezuela. He holds a B.A. in Administration from the Universidad de Bogotá and an M.B.A., emphasis in Marketing, from Saint Louis University in Saint Louis, Missouri. DANIEL E. LYNN, 44 Chief Operating Officer of Azteca Milling, L.P. Mr. Lynn joined GRUMA in 1999 as President of Azteca Milling, L.P. He holds a B.A. in Labor Relations and an M.B.A. from Cornell University in New York. RAFAEL ÁNGEL GÁRATE MUÑOZ, 44 Chief Operating Officer of Molinera de México, S.A. de C.V. Mr. Gárate joined GRUMA in January 2000 as Chief Operating Officer of Molinera de México, S.A. de C.V. He holds a B.A. in Economics from the Universidad Autónoma de Nuevo León in Mexico. ROBERTO GONZÁLEZ ALCALÁ, 36 Chief Operating Officer of Gruma Centro América Mr. González joined GRUMA in 1995 as President of the Tortilla Division in Costa Rica. In 1998, he was promoted to President of the Corn Flour Division in Central America and in 1999 was appointed Chief Operating Officer of Gruma Centro América. He holds a B.A. from the Universidad Nacional de México. FRANCISCO ALBISUA GOROSTIZAGA, 49 Chief Operating Officer of Productos y Distribuidora Azteca,S.A.deC.V. Mr. Albisua joined GRUMA in January He holds a B.A. in Mechanical and Electrical Engineering from the Universidad de México and an M.B.A. from Stirling University in Edinburgh, U.K. PHOTO Downtown Dallas... (p.26): Gary Cralle - The Image Bank PHOTO Road, motion, speed,... (p.58): Pete Turner - The Image Bank

67 GRAPHIC DESIGN: Entrelínea S.A. de C.V. MAIN PHOTOGRAPHY: 33 Photo / Martín L. Vargas SUPPORT PHOTOGRAPHY: Estudio Segarra / Enrique Segarra PRINTED IN: Artes Gráficas Panorama S.A. de C.V. INVESTOR AND MEDIA CONTACTS CORPORATE OFFICES Monterrey GRUMA, S.A. de C.V. Río de la Plata 407 Ote. Col. del Valle San Pedro Garza García, Nuevo León México Tel: (528) Cd. de México Paseo de la Reforma 300, 9th floor Col. Juárez, México, D.F México Tel: (525) WEBSITE: INVESTOR RELATIONS CONTACTS Rogelio Sánchez Corporate Finance Vice President Tel: (528) rogelio_sanchez@gruma.com Lilia Gómez Investor Relations Manager Tel: (528) lilia_gomez@gruma.com MEDIA CONTACTS Eduardo Sastré de la Riva Tel: (525) /4760 eduardo_sastre@gruma.com Ayax Carranza Tel: (525) ayax_carranza@gruma.com SHARE INFORMATION Bolsa Mexicana de Valores (BMV): GRUMAB New York Stock Exchange (NYSE): GMK Each ADR represents four ordinary shares DEPOSITARY BANK / REGISTRAR OF GRUMA AMERICAN DEPOSITARY RECEIPTS Citibank N.A., a member of Citigroup Depositary Receipts Department 111 Wall Street, 20th Floor/Zone 7 New York, New York Tel: (212) Fax: (212) /2103 Contact: miguel.perez-lafaurie@citicorp.com

68 GRUMA, S.A. DE C.V. Paseo de la Reforma 300, 9th floor Col. Juárez, México D.F., México Río de la Plata 407 Ote., Col. del Valle San Pedro Garza García, Nuevo León, México