Vitro, Sociedad Anonima , (Nov. 19, 1991)

INQUIRY LETTER
Sullivan & Cromwell
125 Broad Street
New York 10004
TELEPHONE (212) 558-4000

November 18, 1991

William E. Morley, Esq.,
Chief Counsel,
Division of Corporation Finance,
Securities and Exchange Commission,
450 Fifth Street, N.W.,
Washington, D.C. 20549.

Re: Vitro, Sociedad Anonima

Dear Mr. Morley:

Vitro, Sociedad Anonima, a Mexican corporation (the "Company"), proposes to register an international secondary public offering (the "Proposed Offering") of its Common Shares and of American Depositary Shares (the "Registered ADSs") representing ordinary participation certificates ("CPOs") representing financial interests in its Common Shares. It is anticipated that the Registered ADSs will be listed on the New York Stock Exchange. In connection with the Proposed Offering, the Company proposes to offer Registered ADSs to the holders (the "Exchange Offerees") of an existing series of Rule 144A American Depositary Shares also representing CPOs (the "Rule 144A ADSs") in a registered exchange offer (the "Exchange Offer"). Rule 144A ADSs were placed in a secondary international offering pursuant to Rule 144A and Regulation S under the Securities Act of 1933. The Exchange Offer is designed to offer the Exchange Offerees, which are currently holding restricted securities, the liquidity provided by securities registered under the Securities Act and listed on the New York Stock Exchange.

This letter is to request confirmation that subsequent resales of Registered ADSs, and the CPOs and Common Shares underlying such Registered ADSs, acquired by the Exchange Offerees in the Exchange Offer will be viewed by the Securities and Exchange Commission staff no differently from resales by non-affiliated purchasers after completion of any registered primary offering of securities and, therefore, that resales of such Registered ADSs, CPOs, and Common Shares by the Exchange Offerees may be effected without any further registration under the Securities Act or the delivery of a prospectus.

We understand the facts to be as follows:

The Company

The Company is a leading glass manufacturing company which markets its products principally in North America. The Company produces and sells glass containers, flat glass for architectural and automotive uses, glassware and enamelware for table and kitchen use, major brand name household appliances, chemical and fiberglass products and other related products. The Company manufactures state-of-the-art glass forming machines, machine process controls and container molds primarily for use by its own glass containers and glassware operations and for sale to third parties. The Company also mines and processes raw materials primarily used in the production of glass, for its own use in its Mexican glass making operations and for sale to third parties.

The Company is one of the three largest producers of glass containers in the world. In Mexico, the Company is the largest manufacture of glass containers and glassware, and, through majority-owned joint ventures, the largest manufacturer of flat glass and one of the two largest manufacturers of major household appliances. The Companys Anchor Glass Container Corporation subsidiary is the second largest producer of glass containers in the United States.

In 1990, the Company and its consolidated subsidiaries had net sales of Ps. 8,699 billion (approximately U.S. $2.96 billion using the free market exchange rate prevailing at the end of such period) ¹, with total assets at December 31, 1990 of Ps. 12,660 billion (approximately U.S. $4.3 billion) and total personnel at that date of over 45,000. At October 28, 1991, the Company had a market capitalization of Ps. 7,380 billion (approximately U.S. $2.4 billion), the fifth largest market capitalization of all industrial companies listed on the Mexican Stock Exchange.

The Company is currently exempt from reporting under the Securities Exchange Act of 1934 pursuant to Rule 12g3-2(b) but anticipates becoming a reporting company under the Exchange Act as a result of the Proposed Offering and the Exchange Offer.

The Companys Capital Structure and Principal Shareholders

The Companys capital stock consists of ordinary shares without par value (the "Common Shares"). Common Shares carry one vote per share. On April 26, 1991, the Company declared a stock dividend of an aggregate of 12,500,000 Common Shares (or approximately 14% of the number of Common Shares outstanding prior to such stock dividend). As a result, there currently are 100,000,000 Common Shares issued and outstanding. No other shares of capital stock of the Company have been authorized for issuance.

A majority of the outstanding Common Shares has been owned for a number of years by the same investors. These investors include directors, alternate directors and executive officers of the Company, who as a group owned approximately 26% of the outstanding Common Shares as of September 30, 1991, and other members of their extended families.

The Prior Offering

On April 16, 1991, a secondary international offering (the "Prior Offering"), of Common Shares was made by Nacional Financiera, S.N.C. ("Nafin"), as trustee (the "Common Shares Trustee") under the beneficiaries of which are the Company, Operadora de Bolsa, S.A. de C.V., Casa de Bolsa, a Mexican brokerage firm ("Operadora"), and Nafin, a government-owned bank whose principal business is financing economic development in Mexico and promoting the development of the Mexican securities market. The percentage beneficial ownership of the Common Shares Trust by the Company, Nafin and Operadora is approximately 83.4%, 14.8% and 1.8%, respectively. The Company Shares Trustee acquired these Common Shares in negotiated and market transactions executed through the Mexican Stock Exchange beginning in 1988 when the Common Shares Trust was established. The activities of the Common Shares Trust are managed by a Technical Committee, to which the Company appoints three members, Operadora one member and Nafin one member.

In the Prior Offering, 4,000,000 Common Shares were offered by the Common Shares Trustee, 2,000,000 of which were offered in the United States and elsewhere outside Mexico in the form of Rule 144A ADSs (the "Prior International Offering"), with The First Boston Corporation ("First Boston") and OBSA International Inc. ("OBSA") acting as purchasers (the "Purchasers"), and the remaining 2,000,000 of which were offered in Mexico (the "Prior Mexican Offering"), with Operadora acting as underwriter.

As a result of restrictions in the Companys character and foreign investment regulations in Mexico, Common Shares cannot be held directly by non-Mexican nationals and therefore were not offered directly in the Prior International Offering. Instead, a "neutral investment trust" was created under Mexical law (the "CPO Trust"), through which non-Mexican investors hold CPOs representing financial interests in the Common Shares held in the CPO Trust. Nafin acts as trustee for the CPO Trust (the "CPO Trustee"). CPOs do not grant the holders thereof a direct right of ownership in the underlying Common Shares but instead represent a right to participate in the financial benefits, if any, of such shares. CPOs do not entitle the holders thereof to exercise the voting rights of such shares. Instead, the CPO Trustee is required by the trust documents to vote all of the Common Shares held in the CPO Trust in the same manner as the majority of the Common Shares that are not held in the CPO Trust and that are voted at the relevant meeting.

The CPOs underlying the Rule 144A ADSs sold in the Prior International Offering were deposited with a custodian pursuant to a Deposit Agreement (the "Rule 144A Deposit Agreement"), among the Company, the CPO Trustee, Citibank, N.A., as depositary (the "Depositary"), and the holders from time to time of Rule 144A American Depositary Receipts (the "Rule 144A ADRs") issued thereunder. Rule 144A ADRs evidence Rule 144A ADSs. Each Rule 144A ADS represents one CPO, which represents financial interests in one Common Share.

The Rule 144A ADSs offered in the Prior International Offering were sold by the Common Shares Trustee to the Purchasers, who resold such Rule 144A ADSs to qualified institutional buyers ("QIBs") or to certain persons in offshore transactions. The Common Shares offered in the Prior Mexican Offering were sold outside the United States. Pursuant to the terms of the Rule 144A ADSs, the holders thereof may offer, sell, pledge or otherwise transfer the Rule 144A ADSs only (1) in an offshore transaction in accordance with Rule 903 or 904 of Regulation S, (2) to a person whom the seller reasonably believes is a QIB in a transaction meeting the requirements of Rule 144A or (3) pursuant to an exemption from registration provided by Rule 144 under the Securities Act (if available).

It is our understanding that a substantial majority of the 2,000,000 Rule 144A ADSs offered in the Prior International Offering were initially placed with QIBs in the United States and the remainder were placed with non-U.S. persons abroad. The Depositary has indicated that as a result of subsequent issuances (including issuances in connection with the April 26, 1991 stock dividend referred to above) and cancellations, as of October 30, 1991, there were 1,355,102 Rule 144A ADSs outstanding and that such Rule 144A ADSs were held of record by 19 persons with U.S. addresses.

The Rule 144A ADR facility and the CPO Trust have been designed to enable Rule 144A ADR holders to instruct the Depositary to instruct the CPO Trustee to sell the underlying Common Shares in transactions on the Mexican Stock Exchange. In order to conduct such a sale, under the terms of the Rule 144A Deposit Agreement, the Rule 144A ADR holder is charged a fee of $5.00 per every 100 Rule 144A ADSs so sold and canceled; there are no comparable fees under the CPO trust documents. The proceeds of such sales (after deducting applicable fees and brokerage commissions) are distributed to the respective Rule 144A ADR holder. CPO holders may also instruct the CPO Trustee to conduct such a sale.

The Proposed Offering

It is expected that the Proposed Offering will involve the offering by the Common Shares Trustee of at least (a) 2,100,000 Registered ADSs in North and South America, excluding Mexico (the "U.S. Offering"), with First Boston, Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ"), OBSA and Shearson Lehman Brothers Inc. acting as representatives of the underwriters (the "U.S. Underwriters"), (b) 2,100,000 Registered ADSs outside North and South America, with Credit Suisse First Boston Limited, DLJ, International Finance Corporation, Lehman Brothers International Limited, OBSA and other firms which may be named in the subscription agreement acting as managers (the "Managers"), and (c) 2,100,000 Common Shares in Mexico, with Operadora acting as underwriter (the "Mexican Underwriter"). Up to at least an additional 945,000 Common Shares (which may be represented by Registered ADSs) may be purchased by the U.S. Underwriters, Managers and Mexican Underwriter to cover over-allotments. Pursuant to an Agreement Among U.S. Underwriters, Managers and Mexican Underwriter, Registered ADSs and Common Shares may be resold among the U.S. Underwriters, Managers and Mexican Underwriter.

Although the Proposed Offering is a secondary offering, the Common Shares are being sold by the Common Shares Trustee (which is effectively controlled by the Company) on behalf of the trust beneficiaries, which are the Company (83.4%), Nafin (14.8%) and Operadora (1.8%). Operadora is both the Mexican Underwriter and the sole shareholder of OBSA, which is one of the representatives of the U.S. Underwriters. At September 30, 1991, certain of the directors and officers of the Company owned in the aggregate approximately 14% of the shares of Operadoras sole shareholder. Apart from the foregoing, none of the participants in the Proposed Offering is known to be an "affiliate" or "promoter" (as such terms are defined in Rule 405 under the Securities Act) of the Company, the common Shares Trustee or any of the beneficiaries of the Common Shares Trust.

On October 30, 1991, a registration statement on Form F-6 (Registration No. 33-43659) with respect to the Registered ADSs to be offered in the Proposed Offering, and the CPOs underlying such Registered ADSs, was filed with the Securities and Exchange Commission. On the same date, a registration statement on Form F-1 (Registration No. 33-43660) with respect to the Common Shares underlying such CPOs, and the Common Shares to be offered in Mexico in the Proposed Offering, was also filed. On the date of this letter, the Company plans to file a Pre-Effective Amendment No. 1 to such registration statement on Form F-1, which amendment will increase the total number of Common Shares to be registered thereunder to 11,307,678. This increase will permit the size of the Proposed Offering to be increased and, under certain circumstances, all of the Common Shares held in the Common Shares Trust to be sold in the Proposed Offering.

Each Registered ADS will represent one CPO. American Depositary Receipts (the "Registered ADRs") evidencing the Registered ADSs will be issued pursuant to a new Deposit Agreement (the "Registered Deposit Agreement"), to be entered into among the Company, the CPO Trustee, Citibank, N.A., as depositary, and the holders from time to time of the Registered ADRs.

As of the date of this letter, a total of 11,307,678 Common Shares, or approximately 11.3% of the outstanding Common Shares, are held by the Common Shares Trustee on behalf of the Common Shares Trust. Pursuant to recent changes in Mexican law, the Company is now permitted to hold its Common Shares directly for up to one year, and the Common Shares Trustee is required either to sell the Common Shares held by it on behalf of the Company or to distribute such Common Shares to the Company. If less than all of the Common Shares held in the Common Shares Trust are sold in the Proposed Offering, the Common Shares remaining in the Common Shares Trust will be distributed pro rata to the beneficiaries of the Common Shares Trust. Following the sale or distribution of all of the Common Shares held in the Common Shares Trust, the Common Shares Trust will be terminated.

The Markets for the Companys Common Shares

The Common Shares are traded on the Mexican Stock Exchange. There is no public market outside Mexico for the Common Shares. Prior to the Proposed Offering, there has been no active public market for the CPOs or any other securities representing interests in Common Shares. Given the restrictions on the trading of such securities, the Rule 144A ADSs are traded in the United States only in the Rule 144A-QIB market. CPOs outstanding as of October 30, 1991 represented financial interests in approximately 1.4% of the outstanding Common Shares. In addition, ordinary participation certificates ("Master Trust cpos"), issued by Nafin as trustee of another neutral investment trust for Common Shares, outstanding as of such date represented financial interests in approximately 5.2% of the outstanding Common Shares. Following the Proposed Offering and the Exchange Offer, the Company expects that an active public market for the Registered ADSs will develop in the United States on the New York Stock Exchange.

The Exchange Offer

Although under no legal or contractual obligation to do so, the Company would like to conduct the Exchange Offer in connection with the Proposed Offering in order to make Registered ADSs available to the existing holders of Rule 144A ADSs. First Boston and OBSA, both of which are U.S. Underwriters, will act as dealer managers in connection with the Exchange Offer (the "Dealer Managers"). Apart from the Company and OBSA, none of the participants in the Exchange Offer is known to be an "affiliate" or "promoter" (as such terms are defined in Rule 405 under the Securities Act) of the Company, the Common Shares Trustee or any of the beneficiaries of the Common Shares Trust.

The Exchange Offer will involve the surrender of the existing Rule 144A ADRs by the tendering Exchange Offerees, withdrawal of the CPOs underlying the Rule 144A ADSs evidenced by such Rule 144A ADRs from the Rule 144A Deposit Agreement arrangement, deposit of such CPOs with Citibank, N.A., as depositary under the Registered Deposit Agreement, and issuance and delivery of Registered ADRs to the tendering Exchange Offerees on the basis of one Registered ADS for one Rule 144A ADS. Except for the absence of resale restrictions, the terms of the Registered ADSs received in the Exchange Offer will be substantially identical to the terms of the tendered Rule 144A ADSs, and the Registered ADSs received in the Exchange Offer will represent the same CPOs that were previously represented by the tendered Rule 144A ADSs.

It is expected that the Registered ADSs offered in the Exchange Offer will represent approximately two percent of the estimated worldwide public float for the Common Shares and securities representing interests in Common Shares. For this purpose, worldwide public float is estimated to be the total number of outstanding Common Shares (100,000,000) less (1) the number of Common Shares held by the Companys directors, alternate directors and executive officers in the aggregate (approximately 26,200,000) and (2) the maximum number of Common Shares (if any) expected to be received by the Company as its pro distribution from the Common Shares Trust at the time of the termination of such trust following the completion of the Proposed Offering and Exchange Offer (approximately 4,177,000).

It is likewise expected that the Registered ADSs offered in the Exchange Offer will represent approximately 16% of the estimated U.S. float for Common Shares and securities representing interests in Common Shares following the Proposed Offering and Exchange Offer. For this purpose, U.S. float is estimated to be approximately eight and one-half million, which estimate is based upon the premise that (1) the 1,355,102 Registered ADSs expected to be delivered in the Exchange Offer (based upon the number of outstanding Rule 144A ADSs as of October 30, 1991), (2) substantially all the 5,187,874 Master Trust cpos outstanding as of October 30, 1991 and (3) at least 2,100,000 Registered ADSs sold in the U.S. Offering in the aggregate will represent the U.S. float following the Proposed Offering and Exchange Offer. This premise depends upon certain assumptions (e.g., that substantially all Master Trust cpos are held in the United States) which are difficult to verify on the basis of the information available to the Company. Also, actual U.S. float at the time of the Exchange Offer could be higher or lower as a result of subsequent issuances or cancellations of Rule 144A ADSs and Master Trust cpos.

As of October 30, 1991, the outstanding Rule 144A ADSs were held of record by 19 holders with United States addresses, and holdings per record holder ranged from one to 343,769 Rule 144A ADSs. On this basis, the Exchange Offeree holding of record the largest number of Rule 144A ADSs would receive Registered ADSs in the Exchange Offer representing approximately one-half of one percent of the worldwide public float for the Common Shares and securities representing interests in Common Shares, approximately four percent of the U.S. float for such securities and approximately nine percent of the Registered ADSs offered in the Proposed Offering. The Company has no reason to believe that any person beneficially owns a larger number of Rule 144A ADSs than the number held of record by the largest holder of record of Rule 144A ADSs. Based on the information regarding the holders of Rule 144A ADSs available to the Company, the Company expects that most of the Exchange Offerees will receive a significantly smaller number held of record by the largest holder of record of Rule 144A ADSs.

As noted above, the Company plans to increase the number of registered Common Shares in order to permit the Common Shares Trustee to sell up to the total number of Common Shares held in the Common Shares Trust. In the event that the number of Common Shares sold in the Proposed Offering (in the form of Registered ADSs or Common Shares) exceeds the 6,300,000 Common Shares used in the calculations of worldwide public float and U.S. float presented above, the percentages of such worldwide public float and U.S. float represented by the Registered ADSs offered in the Exchange Offer and by the number of Registered ADSs that would be received by the largest holder of record of Rule 144A ADSs will either remain the same or be reduced.

The Registered ADSs to be offered in the Exchange Offer, and the CPOs underlying such Registered ADSs, will be registered on the same Form F-6 registration statement as the Registered ADSs offered in the Proposed Offering, and the Common Shares underlying such CPOs will be registered on a separate Form F-1 registration statement under the Securities Act. A prospectus (the "Exchange Offer Prospectus") will be sent to Exchange Offerees as soon as practicable after commencement of the Proposed Offering. Unless extended, the Exchange Offer will remain open for 20 business days after its commencement and will be conditioned upon the consummation of the Proposed Offering. We have submitted two letters to the Division of Market Regulation requesting certain relief in connection with the Proposed Offering and the Exchange Offer under Sections 10(b) and 13(e) of the Exchange Act, copies of which letters are enclosed for your convenience.

The Exchange Offer Prospectus will include the same financial statements and Company and business related disclosure as the prospectus used in the U.S. Offering. The principal terms of the Exchange Offer will be disclosed in the prospectus used in the U.S. Offering. The letter of transmittal to be executed by an Exchange Offeree in order to participate in the Exchange Offer will include a representation to the effect that by accepting the Exchange Offer the Exchange Offeree represents that it is not engaged in, and does not intend to engage in, a distribution of the Registered ADSs to be received in the Exchange Offer. The Exchange Offer Prospectus will indicate that if any Exchange Offeree is engaged in, or intends to engage in, a distribution of the Registered ADSs to be received in the Exchange Offer, such Exchange Offeree would not be entitled to rely on the staff position enunciated in response to this letter. The Company acknowledges that a secondary resale transaction in the United States by an Exchange Offeree who is using the Exchange Offer to participate in a distribution of the Registered ADSs to be acquired in the Exchange Offer should be covered by an effective registration statement containing the selling securityholder information required by Item 507 of Regulation S-K.

Because the Exchange Offer will provide the existing Rule 144A ADS holders with the opportunity without incurring any charge to obtain freely tradeable, New York Stock Exchange-listed Registered ADSs in Exchange for their restricted Rule 144A ADSs, the Company and the Dealer Managers expect that virtually all of the Exchange Offerees will participate in the Exchange Offer. The Company intends to disclose to the Exchange Offerees its intention to terminate the Rule 144A Deposit Agreement in accordance with its terms approximately 90 days following the close of the Exchange Offer, or immediately thereafter if all of the outstanding Rule 144A ADRs are tendered. If for any reason less than all of the outstanding Rule 144A ADSs are exchanged in the Exchange Offer, the holder of any Rule 144A ADS that remains outstanding will have the option, prior to the termination of the Rule 144A Deposit Agreement, to (1) cause the sale of the Common Shares underlying its Rule 144A ADSs and CPOs in transaction on the Mexican Stock Exchange, (2) sell its Rule 144A ADSs in an offshore transaction in accordance with Rule 903 or 904 of Regulation S or to a person it reasonably believes is a QIB in a transaction meeting the requirements of Rule 144A or (3) subject to certain provisions of the Rule 144A Deposit Agreement, withdraw the CPOs underlying its Rule 144A ADSs. Upon termination of the Rule 144A Deposit Agreement, such holder will be entitled to receive the CPOs underlying its Rule 144A ADSs.

The Exchange Offer provides a number of benefits to both the tendering Exchange Offerees and the Company. The Exchanges Offerees that participate in the Exchange Offer will obtain the liquidity provided by securities registered under the Securities Act and listed on the New York Stock Exchange. The Company will avoid the unnecessary expense of maintaining distinct series of Rule 144A ADSs and Registered ADSs, each of which represent interests in the same class of deposited securities. Furthermore, the Company and the Dealer Managers believe that by conducting the Exchange Offer and eliminating the series of Rule 144A ADSs, the liquidity and effeciency of the U.S. public market for the Registered ADSs will be enhanced. Under these circumstances, we believe it appropriate that the staff provide the confirmation sought below.

Resales by Exchange Offerees

In Exxon Capital Holdings Corporation (April 13, 1988), in connection with private placements of broker-remarketed preferred stock, which placements were to be followed by an exchange offer to the holders of such preferred stock of a substantially identical series of preferred stock registered under the Securities ACt, the staff concluded that holders who were not affiliates of the issuer could resell the registered preferred stock without any further registration under the Securities Act or the delivery of a prospectus, provided that such holders acquired the registered securities in the ordinary course of their business and had no arrangement with any person to participate in the distribution of such securities. In Morgan Stanley & Co. Incorporated (June 5, 1991), the staff confirmed their position in the Exxon Capital letter in connection with registered exchange offers to be made to the holders of certain privately placed debt securities or preferred stock.

The purpose of this letter is to request confirmation from the Securities and Exchange Commission staff that subsequent resales of the Registered ADSs acquired in the Exchange Offer by any Exchange Offeree that (1) is not an "affiliate" or "promoter" (as such terms are defined in Rule 405 under the Securities Act) of the Company, the Common Shares Trustee or any of the beneficiaries of the Common Shares Trust, (2) is not participating in a distribution of such Registered ADSs, (3) is not a broker-dealer that purchased the Rule 144A ADSs exchanged in the Exchange Offer directly from the Common Shares Trustee for resale pursuant to Rule 144A or another available exemption under the Securities Act and (4) is acquiring such Registered ADSs in the ordinary course of its business, will be viewed no differently from resales by non-affiliated purchasers after completion of any registered primary offering of securities and, therefore, that resales of such Registered ADSs, and the CPOs and Common Shares underlying such Registered ADSs, by such Exchange Offeree may be effected without any further registration under the Securities Act or the delivery of a prospectus.

Each of the Company, the Common Shares, Trustee, Nafin and Operadora has represented that it has not entered into any arrangement or understanding with any person to distribute the Registered ADSs to be received in the Exchange Offer. To the best knowledge of the Company, there is no reason to believe that any of the Exchange Offerees will fail to satisfy the criteria set forth in (1) through (4) in the immediately preceding paragraph.

Please call me at (212) 558-3644, or Kevin W. Kelley at (212) 558-4052, with any questions you may have concerning this request.

Very truly yours,

Daniel Dunson

(Enclosures)

cc: S. Tevis Grinstead, Esq.
Jeffery A. Smisek, Esq.
(Vinson & Elkins)
Sarah P. Hanks, Esq.
(Rogers & Wells)

STAFF REPLY LETTER

November 19, 1991

RESPONSE OF THE OFFICE OF INTERNATIONAL CORPORATE FINANCEDIVISION OF CORPORATION FINANCE

Re: Vitro, Sociedad Anonima
Incoming Letter dated November 18, 1991

Based on the facts presented, it is the Divisions view that the described Exchange Offerees who exchange Rule 144A ADSs for Registered ADSs issued pursuant to the Exchange Offer ("Exchange Securities") may resell the Exchange Securities without compliance with the registration and prospectus delivery provisions of the Securities Act of 1933, provided that the Exchange Offeree acquires the Exchange Securities in the ordinary course of its business and is not participating in the distribution of the Exchange Securities.

Because this position is based on the representations made to the Division in your letter, it should be noted that any different facts or conditions might require a different conclusion.

Sincerely,

Richard M. Kosnik
Chief

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