MY FELLOW SHAREHOLDERS:

By focusing on its vision and long-term business objectives, GRUMA has resumed its course of sustainable and profitable growth. The company is rapidly moving ahead in its efforts to overcome the temporary effects of Mexico's tortilla industry deregulation. As a result, GRUMA is emerging stronger than ever and is now better positioned to enhance its market leadership.

GRUMA's financial performance in 1999 -one of our most difficult fiscal years ever- was influenced by two nonrecurring factors. First, the extraordinary surplus of corn in the Mexican market following the tortilla industry deregulation unexpectedly caused the country's corn prices to plummet. This situation adversely affected the operating and financial results of GIMSA, the company's corn flour subsidiary in Mexico and its primary cash flow and profit generator. The second factor was GRUMA's decision to continue with its long-term expansion strategy. GRUMA took advantage of key strategic business opportunities with great potential, but increased capital expenditure levels and operating expenses for the year. The bottom line is that the company sustained a net loss of Ps 178 million, an anomaly in a long history of strong, steady growth.

Yet we would not have done things differently. Though the corn surpluses and lower prices were beyond our control, we were determined not to let these temporary circumstances distract us from our long-term business objectives. Convinced that corn supplies, as well as GIMSA's cost-price relationship, would soon return to normal levels, GRUMA determined that its best course was to continue with its expansion plans.

Most of our ongoing capital investment program - which, from 1997 to 1999, reached 611 million dollars, half of which was invested last year - concentrated on strategic investments, which broadened our business base in all of the regions in which we operate. The maturation period for these investments and their attendant operating expenses contributed to the company's decrease in operating margins.

Such investments, however, give GRUMA two significant advantages. First, they provide capacity for future growth; without further new investment, our installed production capacity will allow us to increase sales volume by at least 45%. Second, they allow for a significantly stronger business base and heightened competitivity, both essential in order for the company to face the challenges of an increasingly global economy.

Consequently, GRUMA will substantially reduce capital expenditures in 2000; it will very selectively continue to pursue its expansion strategy, seeking only those opportunities that offer great potential.

As a result of the company's decision to move forward with its long-term strategy despite unfavorable conditions in GIMSA, GRUMA's revenues rose steadily throughout the year. Total revenues increased 8% over 1998 due to subsidiary expansion and acquisitions. Sales volumes in all major subsidiaries except GIMSA rose, and GRUMA's international operations increased net sales by 23%. We expect sales in 2000 to rise with greater market coverage and demand for our products.

In the United States, Gruma Corporation enhanced its leadership position in the corn flour and tortilla markets, in which it has a 25% and 82% share, respectively. The subsidiary acquired two tortilla companies with operations in Texas and on the East Coast, and it built a new tortilla plant in the state of Washington. It continued to expand its corn flour plant in Plainview, Texas, and also extended operations in Europe, building a new, state-of-art tortilla and snack plant in England. The England plant will allow for greater and more efficient coverage of the European Union, a growing and profitable market. Net sales and operating profit increased by 11% and 18%, respectively, over last year.

Despite lagging performance in 1999, GIMSA - part of GRUMA Mexico (1)- is now well positioned for profitable future growth. To keep profitability at the highest level possible in adverse market conditions, GIMSA decided to maintain prices at the expense of volume. Accordingly, sales volumes declined 13% from 1998. Operating margins improved steadily quarter by quarter throughout the year, as the subsidiary consumed its higher-priced corn inventories purchased in late 1998 and as the benefits of the cost reduction program rolled in.

GRUMA

NET SALES BY DIVISION

Ps 15,624 MILLION

Going forward, GIMSA's superior production and information technology and available capacity will pay off in greater operating efficiencies. As GIMSA continues to promote the advantages of corn flour over the nixtamal method of tortilla production, and as the corn market gradually normalizes, sales volumes should also rise. Thus, although competition in this sector is now stronger, we expect significant increases in operating income and margins in 2000.

Molinera de México, GRUMA's wheat flour subsidiary - a joint venture with Archer-Daniels-Midland - saw sales volume rise 30% in 1999. Approximately half of that increase was due to acquisitions in northwestern Mexico. Today, Molinera is the market leader in Mexico's wheat flour industry; the completion of the La Asuncion mill acquisition in January 2000 reinforces that position.

Prodisa, the tortilla and packaged bread subsidiary in Mexico, expanded to new territories in northeast Mexico during the year. Total sales volume grew 61%, while tortilla sales increased by 23%. Following the deregulation, the price differential between packaged and nonpackaged tortillas decreased, allowing for volume growth in this subsidiary. Important distribution synergies between packaged tortillas and bread products also allow for greater efficiency, which, together with increased brand awareness, should result in steady sales increases.

Gruma Centro América increased total sales volumes by 9%. Corn flour sales volume grew 7% as a result of the company's promotional activities and the advantage of corn flour over the nixtamal method of tortilla preparation. Sales of bread products rose 52% as the company continues to expand its frozen bread business.

In the third quarter of 1999, GRUMA Venezuela(2) considerably expanded its corn flour operations by completing the acquisition of Molinos Nacionales, C.A. (Monaca), the country's second-largest corn flour and wheat flour producer. Including Monaca, GRUMA Venezuela's net sales reached Ps 1.27 billion and operating profits Ps 24 million. Due to its high consumption of corn-based products, Venezuela is a key country in GRUMA's long-term strategy.

It is worth pointing out that, in 1999, Gruma Corporation accounted for 49% of sales, GRUMA Mexico 37%, GRUMA Venezuela 8%, and Gruma Centro America the remaining 6%. Thus, GRUMA is fulfilling its vision to be a multinational concern.

GRUMA is the world's leader in the rapidly growing corn flour and tortilla markets; we cannot, however, rest on that distinction. To strengthen our leadership position, we are constantly striving to enhance product quality, marketing efforts, customer service, and manufacturing technology. Our SAP information technology system, which is being implemented throughout all subsidiaries, is also helping us to streamline production, sales and distribution systems, and to develop better, more responsive customer service initiatives. We have invested US$50 million in this technology, which is reinforcing GRUMA's position as the lowest-cost producer in the corn flour and tortilla industry.

We are also applying the same business approach to wheat milling and its derivatives, an area we are successfully developing. In 1994, total wheat product sales were only 158 thousand metric tons; in 1999 sales of these products reached a total of 609 thousand metric tons. In addition to offering significant growth prospects, this business offers important potential synergies with the company's other operations.

GRUMA is committed to sustaining its strong financial position and solid balance sheet. In 1999, the company entered into two important transactions: a US$200 million syndicated credit loan transaction and a rights offering totaling US$151 million. These transactions helped GRUMA to further strengthen its financial structure.

The company also plans to improve its financial ratios by decreasing investment levels, increasing cash generation, and improving its interest coverage. In 1997, GRUMA received an investment-grade foreign debt rating of BBB-. For the reasons discussed above, Standard & Poor's downgraded that rating to BB+ in the fourth quarter of 1999. GRUMA is determined to return to investment-grade status in the near future.

We have tremendous competitive advantages: strong brands and market leadership, superior technology, a solid business strategy, with an unwavering long-term vision of sustainable and profitable growth.

In sum, we expect to see a substantial increase in profitability in 2000. The deregulation of the tortilla industry ensures healthy competition and a truly free market, in which GRUMA is certain to thrive. The transformation to this market and the temporary aftereffects of the initial shift have nearly disapeared. Of course, we are well aware that we will always face new challenges and that competition will be increasingly intense. But we are well prepared for this. Sales volumes are rising in all subsidiaries. Demand for GRUMA's core products is rapidly growing. Thus, we expect a strong increase in operating margins and profits in the coming year.

I want to thank our customers for their loyalty and our employees for their diligent contribution throughout this year of transition. And I thank you, my fellow shareholders, for your continuing trust in GRUMA's strength and ability to make good on its promise - to achieve sustainable, increasingly profitable growth and prosperity in this global marketplace and throughout this new millennium, and beyond.

Roberto González Barrera

Chairman of the Board

(1) GRUMA refers to its operations in Mexico - GIMSA, Molinera de México, and Prodisa - as GRUMA Mexico.

(2) GRUMA refers to its operations in Venezuela - Monaca and Demaseca - as GRUMA Venezuela.