GCC is investing in growth

In a time of dynamic opportunity and change within our industry, we have the fi nancial strength and fl exibility to expand our production capacity and product portfolio, make targeted ac-quisitions, and focus on profi table and effi cient operations.

Looking ahead, we believe that our in-vestments in growth will create even greater value for our stakeholders, a commitment we have honored for over 60 years.

2

Net SalesSales in MexicoSales in United StatesSales in Bolivia

Operating IncomeEBITDA*Comprehensive Financing CostNet Consolidated Income

Total AssetsTotal LiabilitiesTotal Stockholders´ Equity

Book Value per Share ($)Earnings per Share ($)

EBITDA* / Net SalesNet Income / Net Sales

Interest Coverage (EBITDA / Financial Expenses)Current Assets / Current Liabilities (Times)Debt / EBITDA* (Times)Debt - Cash / EBITDA* (Times)

Outstanding Shares (Thousands)

FinancialHighlights

Operating income

1,11

71,

000

995

979

1,31

3

Net consolidated income

656

694

767

803

1,00

5

EBITDA

1,45

31,

370

1,38

41,

330

1,70

7

(millions of pesos)

4,7232.2922,260

1711.3131,707(103)1,005

11,0623,9017,161

20.972.99

36.1%21.3%

20.273.621.090.45

330,485

4,0732,2051,868

NA979

1,330(44)803

9,8233,5586,265

18.742.39

32.7%19.7%

16.057.331.170.04

335,556

16.0%4.0%

20.9%NA

34.1%28.3%

131.6%25.2%

12.6%9.6%

14.3%

3,8022,1531,649

9951,384

(38)767

10,5344,9405,594

16.822.31

36.4%20.2%

14.305.872.080.39

332,433

3,8962,1001,796

1,0001,370

(13)694

10,0054,9515,054

15.212.09

35.2%17.8%

11.366.482.020.79

332,185

4,3162,4171,899

1,1171,453

67656

9,4744,7644,709

14.181.98

33.7%15.2%

7.014.331.971.22

332,097

2005 2004 2005/2004 2003 2002 2001

GCC´s market value

232

387

719

1,05

1

Dec 02 Dec 03 Dec 04 Dec 05

Net sales

4,31

63,

896

3,80

24,

073

4,72

3

(millions of pesos) (millions of pesos) (millions of pesos)

(millions of pesos)

* EBITDA = Operating Income + Depreciation and Amortization

(Figures in millions of constant Mexican pesos as of December 31, 2005)

3

The year 2005 was a remarkable one for GCC. We successfully integrated two acquisitions, posted record revenues and margins, and enhanced our market profi le. The company’s market value increased by 46% in the year, and the payment of dividends to shareholders rose by 29%.

On behalf of the Board of Directors, I am pleased to report our 2005 fi -nancial and operating results and share our strategic vision of investment and growth.

Market DevelopmentsStrong demand for our products in 2005 was driven by solid economic expansion in the markets we serve.

In the United States, the healthy pace of commercial and residential con-struction continued, while new public infrastructure projects were ap-proved as state and municipal governments increased their investment budgets.

U.S. cement consumption rose 5.6%. This strong growth, coupled with an industry already producing at full capacity, led to cement supply shortagesin many areas, including the markets in which we participate—which stretch across the Rocky Mountain corridor from the border of Mexico to the border of Canada—leading to higher cement prices in the year.

Letter toShareholders

44

The strength of the U.S. construction market under-The strength of the U.S. construction market under-scores our strategy of building a new cement plant in scores our strategy of building a new cement plant in Colorado, with capacity of one million short tons at an Colorado, with capacity of one million short tons at an investment of approximately US$220 million. The plant investment of approximately US$220 million. The plant is expected to come on line in the second half of 2007. is expected to come on line in the second half of 2007. In 2005, we signed contracts with the main equipment In 2005, we signed contracts with the main equipment providers and began basic infrastructure work.providers and began basic infrastructure work.

In March 2005, we acquired the National King Coal In March 2005, we acquired the National King Coal Mine (NKC) in Durango, Colorado, which had al-Mine (NKC) in Durango, Colorado, which had al-ready been supplying the energy requirements of our ready been supplying the energy requirements of our plants in New Mexico and Mexico. Now, this mine plants in New Mexico and Mexico. Now, this mine is a proprietary fuel source that secures the supply is a proprietary fuel source that secures the supply and stabilizes the cost of a vital raw material in the and stabilizes the cost of a vital raw material in the production of cement.production of cement.

Our results in the United States refl ect highly fa-Our results in the United States refl ect highly fa-vorable market conditions in the year. Net sales vorable market conditions in the year. Net sales rose 20.9% to Ps. 2,259.6 million. This growth was rose 20.9% to Ps. 2,259.6 million. This growth was achieved in the context of maximum capacity pro-achieved in the context of maximum capacity pro-duction at our cement plants and limited availability duction at our cement plants and limited availability of third-party cement, which led to volume growth of of third-party cement, which led to volume growth of 3% and a better pricing environment. 3% and a better pricing environment.

In Mexico, residential housing was the main engine In Mexico, residential housing was the main engine of the 3.3% growth in the construction industry. In of the 3.3% growth in the construction industry. In addition, growth mirrored local government invest-addition, growth mirrored local government invest-ment in infrastructure, as well as industrial and com-ment in infrastructure, as well as industrial and com-mercial development.mercial development.

Net sales in Mexico rose 4.0% to Ps. 2,292.2 million. Net sales in Mexico rose 4.0% to Ps. 2,292.2 million. These fi gures refl ect lower revenues derived from land These fi gures refl ect lower revenues derived from land

sales, which supplement GCC’s core business. Ex-sales, which supplement GCC’s core business. Ex-cludcluding real estate transactions, sales growth in GCC’s ing real estate transactions, sales growth in GCC’s main products was 10.0%. Sales volume rose for all main products was 10.0%. Sales volume rose for all products: cement 7.4%, concrete 20.2%, concrete products: cement 7.4%, concrete 20.2%, concrete blocks 5.4%, and aggregates 12.7%.blocks 5.4%, and aggregates 12.7%.

In 2005 we started up operations of a new pre-cast In 2005 we started up operations of a new pre-cast products plant in Ciudad Juarez and began con-products plant in Ciudad Juarez and began con-struction of a new concrete block plant, with a cu-struction of a new concrete block plant, with a cu-mulative investment of US$9 million as of December mulative investment of US$9 million as of December 2005. These new plants strengthen our portfolio of 2005. These new plants strengthen our portfolio of value-added products for clients, allowing us to pro-value-added products for clients, allowing us to pro-vide more comprehensive solutions for their needs.vide more comprehensive solutions for their needs.

GCC recognizes that geographic diversifi cation al-GCC recognizes that geographic diversifi cation al-lows us to leverage growth opportunities in different lows us to leverage growth opportunities in different markets, diversify EBITDA, and lessen reliance on the markets, diversify EBITDA, and lessen reliance on the dynamics of any one particular market. In September dynamics of any one particular market. In September 2005, we took an important step forward by acquiring 2005, we took an important step forward by acquiring a 47.02% ownership interest in Sociedad Boliviana de a 47.02% ownership interest in Sociedad Boliviana de Cemento, S.A, the leading cement producer in Bolivia. Cemento, S.A, the leading cement producer in Bolivia. The company, known as SOBOCE, also has a stake in The company, known as SOBOCE, also has a stake in the country’s second largest producer, Fábrica Nacional the country’s second largest producer, Fábrica Nacional de Cemento (FANCESA), and together they hold a 70% de Cemento (FANCESA), and together they hold a 70% share of the Bolivian market. share of the Bolivian market.

Bolivia is a fast-growing market, with a newly elected Bolivia is a fast-growing market, with a newly elected government committed to massive investment in the government committed to massive investment in the country’s infrastructure. SOBOCE’s EBITDA has grown country’s infrastructure. SOBOCE’s EBITDA has grown by over 20% on a compounded basis in the past fi ve by over 20% on a compounded basis in the past fi ve years, and should benefi t with the construction of new years, and should benefi t with the construction of new roads, schools, hospitals and housing. roads, schools, hospitals and housing.

In 2005, GCC reported record historical levels of sales, operating margin, EBITDA and net profi t

5

We began to consolidate SOBOCE’s results in the fourth We began to consolidate SOBOCE’s results in the fourth quarter of 2005, based on our proportional ownership quarter of 2005, based on our proportional ownership stake in the company. Net sales comprised 12.8% of stake in the company. Net sales comprised 12.8% of the company’s consolidated total in that period.the company’s consolidated total in that period.

Financial and Operating ResultsGCC’s net sales in the year totaled a record GCC’s net sales in the year totaled a record Ps. 4,722.9 Ps. 4,722.9 million, a 16% increase over the prior million, a 16% increase over the prior year. Excluding SOBOCE’s results, sales growth year. Excluding SOBOCE’s results, sales growth would have been 11.8%.would have been 11.8%.

Cost of sales as a percentage of net sales declined by Cost of sales as a percentage of net sales declined by 4.1 percentage points. As a result of the integration 4.1 percentage points. As a result of the integration of SOBOCE and the coal mine, sales and administra-of SOBOCE and the coal mine, sales and administra-tive expenses rose a slight 0.3 percentage points as a tive expenses rose a slight 0.3 percentage points as a percentage of sales.percentage of sales.

Operating income increased 34.1% to a record Operating income increased 34.1% to a record Ps. 1,313.2 million, representing a 3.8 percentage Ps. 1,313.2 million, representing a 3.8 percentage point expansion in the operating margin. EBITDA point expansion in the operating margin. EBITDA (operating income plus depreciation and amortiza-(operating income plus depreciation and amortiza-tion) rose 28.3% and EBITDA margin expanded by tion) rose 28.3% and EBITDA margin expanded by 3.4 percentage points, from 32.7% to 36.1%. 3.4 percentage points, from 32.7% to 36.1%.

Consolidated net income in 2005 was a record Consolidated net income in 2005 was a record Ps. 1,004.7 million, a 25.2% year over year increase. Ps. 1,004.7 million, a 25.2% year over year increase. The net profi t margin was 21.3% compared to The net profi t margin was 21.3% compared to 19.7% in 2004.19.7% in 2004.

GCC’s fi nancial position remains strong with net debt GCC’s fi nancial position remains strong with net debt of Ps. 766.4 million, and a leverage ratio (net debt to of Ps. 766.4 million, and a leverage ratio (net debt to EBITDA) of 0.4 times.EBITDA) of 0.4 times.

Investing in GrowthGCC has a clear strategy of establishing leadership GCC has a clear strategy of establishing leadership positions in the markets in which it participates. This positions in the markets in which it participates. This approach has served us well, and the company enjoys approach has served us well, and the company enjoys strong market share in each of its operating regions.strong market share in each of its operating regions.

We have the fi nancial strength and fl exibility, along We have the fi nancial strength and fl exibility, along with a fl at hierarchy that keeps us nimble, to invest in with a fl at hierarchy that keeps us nimble, to invest in the company’s long-term growth. Specifi cally, we are the company’s long-term growth. Specifi cally, we are expanding our production capacity and product of-expanding our production capacity and product of-ferings, making strategic acquisitions, and improving ferings, making strategic acquisitions, and improving the profi tability and effi ciency of our operations. the profi tability and effi ciency of our operations.

In 2005, we made important strides in each area, In 2005, we made important strides in each area, as discussed above. Construction began on our as discussed above. Construction began on our new U.S. plant that will boost the company’s total new U.S. plant that will boost the company’s total production by 25%. In Mexico, we inaugurated the production by 25%. In Mexico, we inaugurated the pre-cast products plant and began to expand our pre-cast products plant and began to expand our capacity in blocks. capacity in blocks.

Our strategic acquisitions include SOBOCE and Our strategic acquisitions include SOBOCE and NKC, as well as the transaction we announced in NKC, as well as the transaction we announced in early January 2006 of four leading ready-mix pro-early January 2006 of four leading ready-mix pro-ducers in eastern South Dakota and western Min-ducers in eastern South Dakota and western Min-nesota. These assets will improve our competitive nesota. These assets will improve our competitive position in the region, and generate a number of position in the region, and generate a number of advantages due to vertical integration with our advantages due to vertical integration with our existing cement operations. We are actively seek-existing cement operations. We are actively seek-ing additional acquisition opportunities, both ing additional acquisition opportunities, both within our core markets and in other regions within our core markets and in other regions that comply with the investment criteria of GCC’s that comply with the investment criteria of GCC’s growth strategy.growth strategy.

Total cement sales

2,69

72,

697

2,52

32,

523

2,63

62,

636

2,90

090

03,

146

(Thousands of tons)(Thousands of tons)

MexicoMexico

U.S.

BoliviaBolivia

Annual sales by country(%)(%)

47.9 48.5

3.6

6

In an environment of high energy costs, our acqui-In an environment of high energy costs, our acqui-sition of NKC is a strategic investment that allows sition of NKC is a strategic investment that allows us to increase the effi ciency and profi tability of our us to increase the effi ciency and profi tability of our operations, as well as to reduce the inherent gross operations, as well as to reduce the inherent gross margin volatility related to energy costs. margin volatility related to energy costs.

The manufacture of value-added products in Mexico, The manufacture of value-added products in Mexico, and anticipated sales of ready-mix concrete in the and anticipated sales of ready-mix concrete in the United States, allow us to retain a greater share of United States, allow us to retain a greater share of the cement value chain, which further increases our the cement value chain, which further increases our margins. We also continue to invest in software tools margins. We also continue to invest in software tools and technology infrastructure, as well as in equipment and technology infrastructure, as well as in equipment modernization, all of which enhance the company’s modernization, all of which enhance the company’s productivity and enable us to optimize client service.productivity and enable us to optimize client service.

2006 OutlookProspects for continued growth in 2006 are strong. Prospects for continued growth in 2006 are strong. The economies of the United States, Mexico and Bo-The economies of the United States, Mexico and Bo-livia are expected to expand by 3.3%, 4.0% and 4.0% livia are expected to expand by 3.3%, 4.0% and 4.0%

respectively, implying solid growth in each market. respectively, implying solid growth in each market. GCC’s results will also benefi t from the full integra-GCC’s results will also benefi t from the full integra-tion of the 2005 acquisitions and the ready-mix assets tion of the 2005 acquisitions and the ready-mix assets acquired in early 2006. We anticipate net sales growth acquired in early 2006. We anticipate net sales growth of approximately 20% to 25%, with stronger margins of approximately 20% to 25%, with stronger margins than those obtained in 2005.than those obtained in 2005.

On March 6, 2006, the governments of Mexico and On March 6, 2006, the governments of Mexico and the United States signed an agreement resolving their the United States signed an agreement resolving their long-standing dumping dispute on the import of grey long-standing dumping dispute on the import of grey Portland cement into the U.S. market. Under terms of Portland cement into the U.S. market. Under terms of the agreement, tariffs will be lowered to US$3 per ton the agreement, tariffs will be lowered to US$3 per ton from the current rate of US$26 per ton over a three-from the current rate of US$26 per ton over a three-year period. During that time, three million tons of year period. During that time, three million tons of Mexican cement will be permitted into the U.S. an-Mexican cement will be permitted into the U.S. an-nually on a regionally-based quota system. In case of nually on a regionally-based quota system. In case of disasters, the annual quota will be raised by 200,000 disasters, the annual quota will be raised by 200,000 tons. With the goal of fully liberalizing the trade of tons. With the goal of fully liberalizing the trade of cement between the two countries, in 2009 volume cement between the two countries, in 2009 volume

7

Federico TerrazasChairman of the Board

of Directors

restrictions and tariffs will be revoked entirely. GCC’s restrictions and tariffs will be revoked entirely. GCC’s annual allotment under the agreement allows the annual allotment under the agreement allows the company to suffi ciently meet growth demands in the company to suffi ciently meet growth demands in the markets where we currently export, including El Paso markets where we currently export, including El Paso and east Texas, New Mexico, and markets defi ned as and east Texas, New Mexico, and markets defi ned as “other regions” according to the agreement.“other regions” according to the agreement.

GCC will receive approximately US$40 million plus GCC will receive approximately US$40 million plus interest in reimbursed historical deposits. In addition, interest in reimbursed historical deposits. In addition, we will eliminate approximately US$30 million in li-we will eliminate approximately US$30 million in li-abilities and generate about US$18 million in savings abilities and generate about US$18 million in savings annually as a result of the lower tariffs.annually as a result of the lower tariffs.

We are optimistic about the future given GCC’s strong We are optimistic about the future given GCC’s strong prospects for organic growth, a solid leadership posi-prospects for organic growth, a solid leadership posi-tion, and ample fi nancial capacity to invest in future tion, and ample fi nancial capacity to invest in future acquisitions, thereby allowing us to pursue our growth acquisitions, thereby allowing us to pursue our growth strategy that generates shareholder value.strategy that generates shareholder value.

On behalf of the Board of Directors, I extend my ap-On behalf of the Board of Directors, I extend my ap-preciation to our clients, suppliers, lenders and share-preciation to our clients, suppliers, lenders and share-holders for your continued confi dence and support. I holders for your continued confi dence and support. I am particularly grateful to our employees, staff and am particularly grateful to our employees, staff and executives for the dedication and creativity you bring executives for the dedication and creativity you bring to your work, and the commitment you share to the to your work, and the commitment you share to the company’s growth. Together, we are creating value for company’s growth. Together, we are creating value for GCC’s stakeholders.GCC’s stakeholders.

Federico TerrazasChairman of the Board of DirectorsChairman of the Board of Directors

8

We are investing in the We are investing in the company’s long-term company’s long-term company’s long-term growth by expanding growth by expanding growth by expanding production capacity production capacity and developing new and developing new and developing new product offerings.product offerings.product offerings.

In the United States, where cement demand exceeds local supply, we are investing in new and expanded production capacity in order to meet growing cus-tomer demand.

In Mexico, we are strengthening our market share by further diversifying our product range, which enhanc-es our ability to provide comprehensive solutions to the construction industry.

Market Expansion

9

+9%GCC’s cement sales

volume growthin 2005

Tijeras, NM(450,000)

Rapid City, SD(1,000,000)

Pueblo, CO (2007)(900,000)

Cement production capacity in U.S.(metric tons)

19.1%

38.4% 42.5%

1Pre-cast products plant in Samalayuca, state of Chihuahua.2Concrete plantin Watertown, SD.3Overpass constructionin Albuquerque, NM.

UNITED STATES

Strong Demand Drives Capacity Expansion and Targeted AcquisitionsThe U.S. economy expanded at an impressive pace for the third consecutive year in 2005. The low interest rate the third consecutive year in 2005. The low interest rate environment, continued job creation and a recovery in environment, continued job creation and a recovery in state revenues boosted residential, commercial and state revenues boosted residential, commercial and public construction spending. As a result, demand for public construction spending. As a result, demand for cement continued to grow, with national consumption cement continued to grow, with national consumption up 5.6% in 2005. In many regions around the country, up 5.6% in 2005. In many regions around the country, production capacity was insuffi cient to meet demand, production capacity was insuffi cient to meet demand, leading to shortages of cement that even imports could leading to shortages of cement that even imports could not fulfi ll.

GCC’s U.S. cement plants operated at full capacity in GCC’s U.S. cement plants operated at full capacity in GCC’s U.S. cement plants operated at full capacity in GCC’s U.S. cement plants operated at full capacity in GCC’s U.S. cement plants operated at full capacity in 2005. To meet customer demand in our markets, we 2005. To meet customer demand in our markets, we 2005. To meet customer demand in our markets, we 2005. To meet customer demand in our markets, we 2005. To meet customer demand in our markets, we 2005. To meet customer demand in our markets, we supplemented our own production with more than supplemented our own production with more than supplemented our own production with more than supplemented our own production with more than supplemented our own production with more than supplemented our own production with more than supplemented our own production with more than supplemented our own production with more than supplemented our own production with more than 600,000 tons of imported volumes from the company’s 600,000 tons of imported volumes from the company’s 600,000 tons of imported volumes from the company’s 600,000 tons of imported volumes from the company’s 600,000 tons of imported volumes from the company’s 600,000 tons of imported volumes from the company’s 600,000 tons of imported volumes from the company’s 600,000 tons of imported volumes from the company’s 600,000 tons of imported volumes from the company’s 600,000 tons of imported volumes from the company’s Mexican plants, and purchased the limited quantity of Mexican plants, and purchased the limited quantity of Mexican plants, and purchased the limited quantity of Mexican plants, and purchased the limited quantity of Mexican plants, and purchased the limited quantity of Mexican plants, and purchased the limited quantity of Mexican plants, and purchased the limited quantity of Mexican plants, and purchased the limited quantity of Mexican plants, and purchased the limited quantity of Mexican plants, and purchased the limited quantity of third-party cement that was available on the market.third-party cement that was available on the market.third-party cement that was available on the market.third-party cement that was available on the market.third-party cement that was available on the market.third-party cement that was available on the market.third-party cement that was available on the market.third-party cement that was available on the market.third-party cement that was available on the market.third-party cement that was available on the market.third-party cement that was available on the market.

New Plant in Pueblo, ColoradoIn 2005 we began construction of a new US$220 mil-In 2005 we began construction of a new US$220 mil-In 2005 we began construction of a new US$220 mil-In 2005 we began construction of a new US$220 mil-In 2005 we began construction of a new US$220 mil-In 2005 we began construction of a new US$220 mil-In 2005 we began construction of a new US$220 mil-In 2005 we began construction of a new US$220 mil-In 2005 we began construction of a new US$220 mil-In 2005 we began construction of a new US$220 mil-In 2005 we began construction of a new US$220 mil-lion cement plant in Pueblo, Colorado. The new facility, lion cement plant in Pueblo, Colorado. The new facility, lion cement plant in Pueblo, Colorado. The new facility, lion cement plant in Pueblo, Colorado. The new facility, lion cement plant in Pueblo, Colorado. The new facility, lion cement plant in Pueblo, Colorado. The new facility, lion cement plant in Pueblo, Colorado. The new facility, lion cement plant in Pueblo, Colorado. The new facility, lion cement plant in Pueblo, Colorado. The new facility, lion cement plant in Pueblo, Colorado. The new facility, lion cement plant in Pueblo, Colorado. The new facility, scheduled to begin operations in the second half of scheduled to begin operations in the second half of scheduled to begin operations in the second half of scheduled to begin operations in the second half of scheduled to begin operations in the second half of scheduled to begin operations in the second half of scheduled to begin operations in the second half of scheduled to begin operations in the second half of scheduled to begin operations in the second half of scheduled to begin operations in the second half of scheduled to begin operations in the second half of 2007, will have annual production capacity of one mil-2007, will have annual production capacity of one mil-2007, will have annual production capacity of one mil-2007, will have annual production capacity of one mil-2007, will have annual production capacity of one mil-2007, will have annual production capacity of one mil-2007, will have annual production capacity of one mil-2007, will have annual production capacity of one mil-2007, will have annual production capacity of one mil-2007, will have annual production capacity of one mil-2007, will have annual production capacity of one mil-2007, will have annual production capacity of one mil-lion short tons of cement.lion short tons of cement.lion short tons of cement.lion short tons of cement.lion short tons of cement.

The facility will make use of the most advanced equip-The facility will make use of the most advanced equip-The facility will make use of the most advanced equip-The facility will make use of the most advanced equip-The facility will make use of the most advanced equip-The facility will make use of the most advanced equip-The facility will make use of the most advanced equip-The facility will make use of the most advanced equip-The facility will make use of the most advanced equip-The facility will make use of the most advanced equip-The facility will make use of the most advanced equip-ment and technology available to enhance effi ciency ment and technology available to enhance effi ciency ment and technology available to enhance effi ciency ment and technology available to enhance effi ciency ment and technology available to enhance effi ciency ment and technology available to enhance effi ciency ment and technology available to enhance effi ciency ment and technology available to enhance effi ciency ment and technology available to enhance effi ciency ment and technology available to enhance effi ciency ment and technology available to enhance effi ciency and profi tability, and to comply with the strict emis-and profi tability, and to comply with the strict emis-and profi tability, and to comply with the strict emis-and profi tability, and to comply with the strict emis-and profi tability, and to comply with the strict emis-and profi tability, and to comply with the strict emis-and profi tability, and to comply with the strict emis-and profi tability, and to comply with the strict emis-and profi tability, and to comply with the strict emis-and profi tability, and to comply with the strict emis-and profi tability, and to comply with the strict emis-sions levels set forth by the Colorado Department of sions levels set forth by the Colorado Department of sions levels set forth by the Colorado Department of sions levels set forth by the Colorado Department of sions levels set forth by the Colorado Department of sions levels set forth by the Colorado Department of sions levels set forth by the Colorado Department of sions levels set forth by the Colorado Department of sions levels set forth by the Colorado Department of sions levels set forth by the Colorado Department of sions levels set forth by the Colorado Department of Public Health and Environment.Public Health and Environment.Public Health and Environment.Public Health and Environment.Public Health and Environment.Public Health and Environment.Public Health and Environment.

This additional capacity will augment the company’s This additional capacity will augment the company’s This additional capacity will augment the company’s This additional capacity will augment the company’s This additional capacity will augment the company’s This additional capacity will augment the company’s This additional capacity will augment the company’s This additional capacity will augment the company’s This additional capacity will augment the company’s This additional capacity will augment the company’s This additional capacity will augment the company’s strength in the Rocky Mountain corridor by relieving strength in the Rocky Mountain corridor by relieving strength in the Rocky Mountain corridor by relieving strength in the Rocky Mountain corridor by relieving strength in the Rocky Mountain corridor by relieving strength in the Rocky Mountain corridor by relieving strength in the Rocky Mountain corridor by relieving strength in the Rocky Mountain corridor by relieving strength in the Rocky Mountain corridor by relieving strength in the Rocky Mountain corridor by relieving strength in the Rocky Mountain corridor by relieving cement shortages in the region and allowing GCC to cement shortages in the region and allowing GCC to cement shortages in the region and allowing GCC to cement shortages in the region and allowing GCC to cement shortages in the region and allowing GCC to cement shortages in the region and allowing GCC to cement shortages in the region and allowing GCC to cement shortages in the region and allowing GCC to cement shortages in the region and allowing GCC to cement shortages in the region and allowing GCC to cement shortages in the region and allowing GCC to better serve its growing customer base.better serve its growing customer base.better serve its growing customer base.better serve its growing customer base.better serve its growing customer base.better serve its growing customer base.better serve its growing customer base.better serve its growing customer base.

Sales in Mexico

2,41

72,

417

2,10

02,

153

2,20

52,

205

2,29

2

((millions of pesosmillions of pesos)

Sales in U.S.

1,89

91,

796

1,79

61,

649

1,86

81,

868

2,26

0

((millions of pesosmillions of pesos)

3

2

1

11

our production capacity and product offerings in spe-cialty cements, mortars, concrete blocks, aggregates, and other construction materials.

New Plants for Pre-Cast Products and Concrete Blocks To supplement our production and sales of bagged and bulk cement, we provide a range of cement-based construction materials in our domestic market.

In 2005, we inaugurated a new pre-cast products plant in Ciudad Juarez. These value-added products help re-duce total project costs for our clients by speeding the pace of construction.

We also initiated construction of our sixth concrete block plant, in Ciudad Juarez, to increase capacity in order to meet demand from local builders. This facility will go on line in the fi rst half of 2006.

The combined investment in both plants is approxi-mately US$11 million.

Acquisition of Ready-Mix AssetsIn the fi rst week of 2006, GCC acquired four leading ready-mix concrete companies in northeastern South Dakota and western Minnesota, which together com-mand a 70% share of the regional ready-mix market. With fourteen plants and a fl eet of 100 ready-mix trucks, these businesses will generate annual revenues of approximately $30 million for GCC, strengthening our share of the regional construction market and en-hancing our long-term growth outlook.

MEXICO

Leveraging Market Dynamics with Integrated Solutions and Product Innovation Construction spending in Mexico has been largely driven by the dynamic growth of the housing market, refl ecting the greater availability of mortgages from government-sponsored housing funds and private government-sponsored housing funds and private government-sponsored housing funds and private commercial lenders. In addition, federal, state and commercial lenders. In addition, federal, state and commercial lenders. In addition, federal, state and municipal governments have increased their infra-municipal governments have increased their infra-municipal governments have increased their infra-municipal governments have increased their infra-municipal governments have increased their infra-structure investments.structure investments.structure investments.structure investments.structure investments.

The construction industry grew by 3.3% in 2005, while The construction industry grew by 3.3% in 2005, while The construction industry grew by 3.3% in 2005, while The construction industry grew by 3.3% in 2005, while GCC’s own cement and concrete volumes rose by 7.4% GCC’s own cement and concrete volumes rose by 7.4% GCC’s own cement and concrete volumes rose by 7.4% GCC’s own cement and concrete volumes rose by 7.4% GCC’s own cement and concrete volumes rose by 7.4% and 20.2% respectively. In our regional market, we en-and 20.2% respectively. In our regional market, we en-and 20.2% respectively. In our regional market, we en-and 20.2% respectively. In our regional market, we en-and 20.2% respectively. In our regional market, we en-and 20.2% respectively. In our regional market, we en-joy strong brand recognition and a large share of the joy strong brand recognition and a large share of the joy strong brand recognition and a large share of the joy strong brand recognition and a large share of the joy strong brand recognition and a large share of the joy strong brand recognition and a large share of the joy strong brand recognition and a large share of the joy strong brand recognition and a large share of the market.market.market.market.market.

To better serve our customers throughout To better serve our customers throughout To better serve our customers throughout To better serve our customers throughout To better serve our customers throughout To better serve our customers throughout To better serve our customers throughout To better serve our customers throughout the lifecycle of their construction the lifecycle of their construction the lifecycle of their construction the lifecycle of their construction the lifecycle of their construction the lifecycle of their construction the lifecycle of their construction the lifecycle of their construction the lifecycle of their construction the lifecycle of their construction projects, we provide technical projects, we provide technical projects, we provide technical projects, we provide technical projects, we provide technical projects, we provide technical projects, we provide technical projects, we provide technical projects, we provide technical support and consult-support and consult-support and consult-support and consult-support and consult-support and consult-support and consult-ing services, and ing services, and ing services, and continuously continuously continuously continuously enhance enhance enhance enhance enhance enhance

12

We are investing in the We are investing in the company’s long-term growth by strategically growth by strategically diversifying into new markets and products.

GCC is broadening its base of revenues and earn-ings through international acquisitions and a wide-ranging portfolio of value-added products. Strategic diversifi cation lowers our risk profi le by lessening dependency on any one market, and expands the up-side potential of the business by exposing us to new growth opportunities.

With the purchase of common control in SOBOCE of Bolivia, GCC now has presence in both North and South America. Our core operations in the United States and Mexico have a counterpart in South America, which rep-resents a new platform for growth and diversifi cation.

Strategic Diversification

13

171.2Contribution of SOBOCE

to 2005 net sales

+million

14

NEW MARKETS

GCC Expands into South American MarketIn September 2005, we acquired a 47.02% stake in Sociedad Boliviana de Cemento, S.A., or SOBOCE, the largest cement company in Bolivia with a strong track record of growth, a talented management team with comprehensive knowledge of the Bolivian market, and extensive relationships with government, corporate, and community leaders.

Market Leadership in Bolivia SOBOCE has annual cement production capacity of 870 thousand tons, four ready-mix concrete plants, and a limestone aggregates plant.

The company also holds management control and The company also holds management control and an ownership stake in Fábrica Nacional de Cemento, an ownership stake in Fábrica Nacional de Cemento, an ownership stake in Fábrica Nacional de Cemento, S.A. (FANCESA), the second largest cement producer S.A. (FANCESA), the second largest cement producer S.A. (FANCESA), the second largest cement producer in Bolivia, with 444 thousand tons of annual cement in Bolivia, with 444 thousand tons of annual cement in Bolivia, with 444 thousand tons of annual cement production capacity, one ready mix concrete plant, production capacity, one ready mix concrete plant, production capacity, one ready mix concrete plant, one limestone aggregates plant, and three precast one limestone aggregates plant, and three precast one limestone aggregates plant, and three precast concrete products plants.

SOBOCE and FANCESA, with combined production SOBOCE and FANCESA, with combined production SOBOCE and FANCESA, with combined production capacity of 1.3 million tons, hold a 70% share of the capacity of 1.3 million tons, hold a 70% share of the capacity of 1.3 million tons, hold a 70% share of the Bolivian market with sales of US$83 million per year Bolivian market with sales of US$83 million per year Bolivian market with sales of US$83 million per year and well-positioned brand names.

Demand for cement in Bolivia has grown at a com-Demand for cement in Bolivia has grown at a com-Demand for cement in Bolivia has grown at a com-Demand for cement in Bolivia has grown at a com-Demand for cement in Bolivia has grown at a com-Demand for cement in Bolivia has grown at a com-Demand for cement in Bolivia has grown at a com-Demand for cement in Bolivia has grown at a com-Demand for cement in Bolivia has grown at a com-Demand for cement in Bolivia has grown at a com-Demand for cement in Bolivia has grown at a com-Demand for cement in Bolivia has grown at a com-Demand for cement in Bolivia has grown at a com-Demand for cement in Bolivia has grown at a com-Demand for cement in Bolivia has grown at a com-pounded annual rate of 4.7% in the last four years pounded annual rate of 4.7% in the last four years pounded annual rate of 4.7% in the last four years pounded annual rate of 4.7% in the last four years pounded annual rate of 4.7% in the last four years pounded annual rate of 4.7% in the last four years pounded annual rate of 4.7% in the last four years pounded annual rate of 4.7% in the last four years pounded annual rate of 4.7% in the last four years pounded annual rate of 4.7% in the last four years pounded annual rate of 4.7% in the last four years pounded annual rate of 4.7% in the last four years pounded annual rate of 4.7% in the last four years pounded annual rate of 4.7% in the last four years pounded annual rate of 4.7% in the last four years (compared to GDP growth of 2.6% in the same pe-(compared to GDP growth of 2.6% in the same pe-(compared to GDP growth of 2.6% in the same pe-(compared to GDP growth of 2.6% in the same pe-(compared to GDP growth of 2.6% in the same pe-(compared to GDP growth of 2.6% in the same pe-(compared to GDP growth of 2.6% in the same pe-(compared to GDP growth of 2.6% in the same pe-(compared to GDP growth of 2.6% in the same pe-(compared to GDP growth of 2.6% in the same pe-(compared to GDP growth of 2.6% in the same pe-(compared to GDP growth of 2.6% in the same pe-(compared to GDP growth of 2.6% in the same pe-riod), while SOBOCE’s sales volume growth was 9.4% riod), while SOBOCE’s sales volume growth was 9.4% riod), while SOBOCE’s sales volume growth was 9.4% riod), while SOBOCE’s sales volume growth was 9.4% riod), while SOBOCE’s sales volume growth was 9.4% riod), while SOBOCE’s sales volume growth was 9.4% riod), while SOBOCE’s sales volume growth was 9.4% riod), while SOBOCE’s sales volume growth was 9.4% riod), while SOBOCE’s sales volume growth was 9.4% in the same period. in the same period. in the same period.

Demand for cement is expected to grow signifi cantly Demand for cement is expected to grow signifi cantly Demand for cement is expected to grow signifi cantly Demand for cement is expected to grow signifi cantly Demand for cement is expected to grow signifi cantly with investments in highways and public infrastruc-with investments in highways and public infrastruc-with investments in highways and public infrastruc-with investments in highways and public infrastruc-with investments in highways and public infrastruc-ture, mining and housing; consumption in the retail ture, mining and housing; consumption in the retail ture, mining and housing; consumption in the retail ture, mining and housing; consumption in the retail self-construction segment will continue to refl ect self-construction segment will continue to refl ect self-construction segment will continue to refl ect strong GDP growth. strong GDP growth.

New Platform for GrowthThis strategic acquisition positions us as the market leader in a fast-growing economy, allowing us to es-tablish a solid foothold in a new region with a plat-form for future growth.

The country’s GDP rose by 4.1% in 2005, with further 4.0% growth forecast for 2006. Bolivia has enjoyed one of the lowest rates of infl ation in Latin America for the past 15 years. The country extends full capital repatriation rights and enjoys access to regional and overseas markets through several accords, including Mercosur and the World Trade Organization.

The recently elected government has committed to an ambitious investment program in the country’s infra-

15

structure, including the construction of new highways, structure, including the construction of new highways, structure, including the construction of new highways, structure, including the construction of new highways, structure, including the construction of new highways, structure, including the construction of new highways, structure, including the construction of new highways, structure, including the construction of new highways, structure, including the construction of new highways, structure, including the construction of new highways, structure, including the construction of new highways, structure, including the construction of new highways, structure, including the construction of new highways, structure, including the construction of new highways, structure, including the construction of new highways, structure, including the construction of new highways, structure, including the construction of new highways, structure, including the construction of new highways, structure, including the construction of new highways, hospitals and schools. In addition, private sector in-hospitals and schools. In addition, private sector in-hospitals and schools. In addition, private sector in-hospitals and schools. In addition, private sector in-hospitals and schools. In addition, private sector in-hospitals and schools. In addition, private sector in-hospitals and schools. In addition, private sector in-hospitals and schools. In addition, private sector in-hospitals and schools. In addition, private sector in-hospitals and schools. In addition, private sector in-hospitals and schools. In addition, private sector in-hospitals and schools. In addition, private sector in-hospitals and schools. In addition, private sector in-hospitals and schools. In addition, private sector in-hospitals and schools. In addition, private sector in-hospitals and schools. In addition, private sector in-hospitals and schools. In addition, private sector in-hospitals and schools. In addition, private sector in-hospitals and schools. In addition, private sector in-hospitals and schools. In addition, private sector in-vestment, particularly in mining and housing, will aug-vestment, particularly in mining and housing, will aug-vestment, particularly in mining and housing, will aug-vestment, particularly in mining and housing, will aug-vestment, particularly in mining and housing, will aug-vestment, particularly in mining and housing, will aug-vestment, particularly in mining and housing, will aug-vestment, particularly in mining and housing, will aug-vestment, particularly in mining and housing, will aug-vestment, particularly in mining and housing, will aug-vestment, particularly in mining and housing, will aug-vestment, particularly in mining and housing, will aug-vestment, particularly in mining and housing, will aug-vestment, particularly in mining and housing, will aug-vestment, particularly in mining and housing, will aug-vestment, particularly in mining and housing, will aug-vestment, particularly in mining and housing, will aug-vestment, particularly in mining and housing, will aug-vestment, particularly in mining and housing, will aug-vestment, particularly in mining and housing, will aug-vestment, particularly in mining and housing, will aug-ment demand for cement, concrete and aggregates. ment demand for cement, concrete and aggregates. ment demand for cement, concrete and aggregates. ment demand for cement, concrete and aggregates. ment demand for cement, concrete and aggregates. ment demand for cement, concrete and aggregates. ment demand for cement, concrete and aggregates. ment demand for cement, concrete and aggregates. ment demand for cement, concrete and aggregates. ment demand for cement, concrete and aggregates. ment demand for cement, concrete and aggregates. ment demand for cement, concrete and aggregates. ment demand for cement, concrete and aggregates. ment demand for cement, concrete and aggregates. ment demand for cement, concrete and aggregates. ment demand for cement, concrete and aggregates. ment demand for cement, concrete and aggregates. ment demand for cement, concrete and aggregates. ment demand for cement, concrete and aggregates. ment demand for cement, concrete and aggregates. SOBOCE, as the market leader in Bolivia, stands to SOBOCE, as the market leader in Bolivia, stands to SOBOCE, as the market leader in Bolivia, stands to SOBOCE, as the market leader in Bolivia, stands to SOBOCE, as the market leader in Bolivia, stands to SOBOCE, as the market leader in Bolivia, stands to SOBOCE, as the market leader in Bolivia, stands to SOBOCE, as the market leader in Bolivia, stands to SOBOCE, as the market leader in Bolivia, stands to SOBOCE, as the market leader in Bolivia, stands to SOBOCE, as the market leader in Bolivia, stands to SOBOCE, as the market leader in Bolivia, stands to SOBOCE, as the market leader in Bolivia, stands to SOBOCE, as the market leader in Bolivia, stands to SOBOCE, as the market leader in Bolivia, stands to SOBOCE, as the market leader in Bolivia, stands to SOBOCE, as the market leader in Bolivia, stands to SOBOCE, as the market leader in Bolivia, stands to SOBOCE, as the market leader in Bolivia, stands to benefi t from these investment programs. benefi t from these investment programs. benefi t from these investment programs. benefi t from these investment programs. benefi t from these investment programs. benefi t from these investment programs. benefi t from these investment programs. benefi t from these investment programs. benefi t from these investment programs. benefi t from these investment programs. benefi t from these investment programs. benefi t from these investment programs. benefi t from these investment programs. benefi t from these investment programs. benefi t from these investment programs.

NEW PRODUCTS

GCC’s Research & Development Yields New Val-ue-Added Products and Services Our R&D efforts generate new value-added products Our R&D efforts generate new value-added products Our R&D efforts generate new value-added products Our R&D efforts generate new value-added products Our R&D efforts generate new value-added products Our R&D efforts generate new value-added products Our R&D efforts generate new value-added products Our R&D efforts generate new value-added products Our R&D efforts generate new value-added products Our R&D efforts generate new value-added products Our R&D efforts generate new value-added products Our R&D efforts generate new value-added products Our R&D efforts generate new value-added products Our R&D efforts generate new value-added products Our R&D efforts generate new value-added products Our R&D efforts generate new value-added products Our R&D efforts generate new value-added products Our R&D efforts generate new value-added products Our R&D efforts generate new value-added products and advanced technologies. and advanced technologies. and advanced technologies. and advanced technologies. and advanced technologies. and advanced technologies. and advanced technologies. and advanced technologies. and advanced technologies. and advanced technologies. and advanced technologies. and advanced technologies.

Specialty products are a strategic component of our Specialty products are a strategic component of our Specialty products are a strategic component of our Specialty products are a strategic component of our Specialty products are a strategic component of our Specialty products are a strategic component of our Specialty products are a strategic component of our Specialty products are a strategic component of our Specialty products are a strategic component of our Specialty products are a strategic component of our Specialty products are a strategic component of our Specialty products are a strategic component of our Specialty products are a strategic component of our Specialty products are a strategic component of our Specialty products are a strategic component of our Specialty products are a strategic component of our Specialty products are a strategic component of our Specialty products are a strategic component of our Specialty products are a strategic component of our product mix, enabling us to secure a larger share of product mix, enabling us to secure a larger share of product mix, enabling us to secure a larger share of product mix, enabling us to secure a larger share of product mix, enabling us to secure a larger share of product mix, enabling us to secure a larger share of product mix, enabling us to secure a larger share of product mix, enabling us to secure a larger share of product mix, enabling us to secure a larger share of product mix, enabling us to secure a larger share of product mix, enabling us to secure a larger share of product mix, enabling us to secure a larger share of product mix, enabling us to secure a larger share of product mix, enabling us to secure a larger share of product mix, enabling us to secure a larger share of product mix, enabling us to secure a larger share of product mix, enabling us to secure a larger share of product mix, enabling us to secure a larger share of product mix, enabling us to secure a larger share of construction budgets, reduce cyclicality associated construction budgets, reduce cyclicality associated construction budgets, reduce cyclicality associated construction budgets, reduce cyclicality associated construction budgets, reduce cyclicality associated construction budgets, reduce cyclicality associated construction budgets, reduce cyclicality associated construction budgets, reduce cyclicality associated construction budgets, reduce cyclicality associated construction budgets, reduce cyclicality associated construction budgets, reduce cyclicality associated construction budgets, reduce cyclicality associated construction budgets, reduce cyclicality associated construction budgets, reduce cyclicality associated construction budgets, reduce cyclicality associated construction budgets, reduce cyclicality associated construction budgets, reduce cyclicality associated construction budgets, reduce cyclicality associated construction budgets, reduce cyclicality associated construction budgets, reduce cyclicality associated with the cement business, and derive higher margins with the cement business, and derive higher margins with the cement business, and derive higher margins with the cement business, and derive higher margins with the cement business, and derive higher margins with the cement business, and derive higher margins with the cement business, and derive higher margins with the cement business, and derive higher margins with the cement business, and derive higher margins with the cement business, and derive higher margins with the cement business, and derive higher margins with the cement business, and derive higher margins with the cement business, and derive higher margins with the cement business, and derive higher margins with the cement business, and derive higher margins with the cement business, and derive higher margins with the cement business, and derive higher margins with the cement business, and derive higher margins with the cement business, and derive higher margins with the cement business, and derive higher margins from the sale of value-added products. from the sale of value-added products. from the sale of value-added products. from the sale of value-added products. from the sale of value-added products. from the sale of value-added products. from the sale of value-added products. from the sale of value-added products. from the sale of value-added products. from the sale of value-added products. from the sale of value-added products. from the sale of value-added products. from the sale of value-added products. from the sale of value-added products. from the sale of value-added products.

Current GCC offerings include fast-drying products Current GCC offerings include fast-drying products Current GCC offerings include fast-drying products Current GCC offerings include fast-drying products Current GCC offerings include fast-drying products Current GCC offerings include fast-drying products Current GCC offerings include fast-drying products Current GCC offerings include fast-drying products Current GCC offerings include fast-drying products Current GCC offerings include fast-drying products Current GCC offerings include fast-drying products Current GCC offerings include fast-drying products Current GCC offerings include fast-drying products Current GCC offerings include fast-drying products Current GCC offerings include fast-drying products Current GCC offerings include fast-drying products with thermal and high-resistance properties, among with thermal and high-resistance properties, among with thermal and high-resistance properties, among with thermal and high-resistance properties, among with thermal and high-resistance properties, among with thermal and high-resistance properties, among with thermal and high-resistance properties, among with thermal and high-resistance properties, among with thermal and high-resistance properties, among with thermal and high-resistance properties, among with thermal and high-resistance properties, among with thermal and high-resistance properties, among with thermal and high-resistance properties, among with thermal and high-resistance properties, among with thermal and high-resistance properties, among with thermal and high-resistance properties, among others, which were developed by our R&D personnel others, which were developed by our R&D personnel others, which were developed by our R&D personnel others, which were developed by our R&D personnel others, which were developed by our R&D personnel others, which were developed by our R&D personnel others, which were developed by our R&D personnel others, which were developed by our R&D personnel others, which were developed by our R&D personnel others, which were developed by our R&D personnel others, which were developed by our R&D personnel others, which were developed by our R&D personnel others, which were developed by our R&D personnel others, which were developed by our R&D personnel others, which were developed by our R&D personnel others, which were developed by our R&D personnel staff working closely with the sales force to identify staff working closely with the sales force to identify staff working closely with the sales force to identify staff working closely with the sales force to identify staff working closely with the sales force to identify staff working closely with the sales force to identify staff working closely with the sales force to identify staff working closely with the sales force to identify staff working closely with the sales force to identify staff working closely with the sales force to identify staff working closely with the sales force to identify staff working closely with the sales force to identify staff working closely with the sales force to identify staff working closely with the sales force to identify staff working closely with the sales force to identify staff working closely with the sales force to identify changing client needs.changing client needs.changing client needs.

1 & 3Quality control and laboratory in Rapid

City, SD cement plant2

Pre-cast products in Samalayuca, state

of Chihuahua.

1

2

3

16

We are investing in the We are investing in the We are investing in the We are investing in the We are investing in the We are investing in the We are investing in the We are investing in the We are investing in the We are investing in the We are investing in the We are investing in the We are investing in the We are investing in the We are investing in the We are investing in the company’s long-term company’s long-term company’s long-term company’s long-term company’s long-term company’s long-term company’s long-term company’s long-term company’s long-term company’s long-term company’s long-term growth with margin growth with margin growth with margin growth with margin growth with margin growth with margin growth with margin growth with margin growth with margin growth with margin growth with margin enhancing initiatives.enhancing initiatives.enhancing initiatives.enhancing initiatives.enhancing initiatives.enhancing initiatives.enhancing initiatives.enhancing initiatives.enhancing initiatives.enhancing initiatives.enhancing initiatives.enhancing initiatives.enhancing initiatives.enhancing initiatives.enhancing initiatives.enhancing initiatives.enhancing initiatives.

Margin Margin Margin Margin Margin Margin Margin Margin Enhancement

GCC’s extraordinary results in 2005 were driven by de-mand for our products and upward price momentum, as well as the ongoing efforts to improve our margins with the implementation of initiatives such as vertical integration, cost controls, modernization and technol-ogy upgrades.

In addition, we began to implement the Economic Value Added (EVA®) management system that encompasses everything from planning and budgeting, capital invest-ment decisions, acquisitions, and the setting of goals and objectives, to incentive compensation. We are confi dent that with EVA®, GCC’s fi nancial and operat-ing performance will improve, leading to greater value creation for our shareholders.

17

36.1%EBITDA marginin 2005, comparedto 32.7% in 2004

18

Coal Mine Acquisition Secures Supply and Reduces Volatility in Cost of EnergyIn an energy-intensive industry such as cement, it is vitally important to stabilize and secure the supply and administration of fuel.

In 2005, we made the strategic decision to acquire the assets of the National King Coal (NKC) mine in Duran-go, Colorado to guarantee the supply and stabilize the cost at GCC’s plants in Mexico and New Mexico, and to provide the fuel for our plant in Pueblo, Colorado. In addition, GCC will generate added revenue from sales of coal to third parties.

Our Modern Facilities Lessen Maintenance Requirement Our philosophy of upgrading and modernizing existing plants, as well as investing in new plants with state-of-the art technology, allows us to reduce maintenance costs and increase effi ciency.

In 2005 we benefi ted from the 2004 modernization project at the South Dakota plant, which resulted in signifi cant maintenance savings. This year, we invested in modernizing the distribution terminals in South Da-kota and Texas.

Enhancing Margins with Vertical Integration GCC derives higher margins by managing key compo-nents of the cement value chain, such as raw materi-als, our new proprietary energy source, and the sale of cement and value-added cement-based products.

In our domestic market we have long participated in all segments of the cement industry, including con-crete, mortars, aggregates and blocks. Now, with the acquisition of ready-mix assets in the United States, announced in early 2006, we will gain additional ben-efi ts in that market with greater vertical integration.

19

1National King Coal

Mine (NKC) in Durango, CO.

2Cement terminal in Albuquerque, NM.

3Cement plant,

Tijeras, NM.

1

2

3

Agreement to Reduce Import Tariffs on Cement in the United States to Benefi t GCC’s Results In March 2006, the U.S. and Mexican governments signed an agreement allowing three million tons of Mexican grey Portland cement to be imported to the U.S. market, with tariffs lowered from US$26 to US$3 per ton. After a three year period, the quotas and tar-iffs will be eliminated entirely.

The agreement provides for unliquidated historical duties to be shared by the Mexican and U.S. cement industries. As such, in 2006, GCC expects to receive a cash reimbursement of approximately US$40 million. In addition, we will eliminate US$30 million in liabili-ties from our balance sheet.

The most important benefi t to GCC is savings of ap-proximately US$18 million annually based on current export levels. Furthermore, it enhances our ability to meet the cement needs of our customers.

15.2

17.8

20.2

19.7

21.3

Net income margin(%)

33.7

35.2

35.2

36.4

36.4

36.4

32.7

36.1

EBITDA margin(%)(%)(%)(%)

Operating income margin

25.9

25.7

26.2

24.0

27.8

(%)(%)

2020

Board ofBoard of Directors

ExecutiveExecutive Management

I,PI,PI,PP,RI,PI,PP,RI,PI,PI,PI,P

I,PI,PI,PI,PI,PI,PI,PI,PI,PI,PI,P

Board MembersArmando García SegoviaArmando García SegoviaFrancisco Garza ZambranoFrancisco Garza ZambranoMiguel Márquez PrietoMiguel Márquez PrietoMiguel Márquez VillalobosMiguel Márquez VillalobosHéctor Medina AguiarHéctor Medina AguiarVíctor Romo MuñozVíctor Romo MuñozSalvador Terrazas BaezaSalvador Terrazas BaezaEnrique G. Terrazas TorresEnrique G. Terrazas TorresFederico Terrazas TorresFederico Terrazas TorresEmilio Touché FaresEmilio Touché FaresLorenzo Zambrano TreviñLorenzo Zambrano Treviñoo

Alternate Board MembersJuan Rodrigo Castro LunaJuan Rodrigo Castro LunaRamiro Villarreal MoralesRamiro Villarreal MoralesMartha Márquez De CorralMartha Márquez De CorralLuis Márquez VillalobosLuis Márquez VillalobosJorge Guajardo TouchéJorge Guajardo TouchéHéctor Velázquez GarzaHéctor Velázquez GarzaSergio Rodríguez AlvaradoSergio Rodríguez AlvaradoAlberto Terrazas SeyffertAlberto Terrazas SeyffertFederico Terrazas BecerraFederico Terrazas BecerraLuis E. Terrazas SeyffertLuis E. Terrazas SeyffertJaime Elizondo ChapaJaime Elizondo Chapa

ChairmanFederico Terrazas TorresFederico Terrazas Torres

Statutory AuditorsLuis GonzáLuis González Parás lez Parás Fernando Ruiz SahagúnFernando Ruiz Sahagún

Alternate Statutory Auditor

Américo de la Paz de la GarzaAmérico de la Paz de la Garza

Audit CommitteeVíctor Romo MuñozVíctor Romo MuñozSalvador Terrazas BaezaSalvador Terrazas BaezaFederico Terrazas BecerraFederico Terrazas BecerraLuis Enrique Terrazas SeyffertLuis Enrique Terrazas SeyffertRamiro Villarreal MoralesRamiro Villarreal Morales

Compensation and Evaluation CommitteeVíctor Romo MuñozVíctor Romo MuñozSalvador Terrazas BaezaSalvador Terrazas BaezaFederico Terrazas TorresFederico Terrazas Torres

Planning and Finance CommitteeArmando García SegoviaArmando García SegoviaMiguel Márquez VillalobosMiguel Márquez VillalobosVíctor Romo MuñozVíctor Romo MuñozFederico Terrazas BecerraFederico Terrazas BecerraFederico Terrazas TorresFederico Terrazas Torres

Corporate DirectorSalvador Terrazas Salvador Terrazas BaezaBaeza

Chief Executive Offi cerManuel Milán Manuel Milán ReyesReyes

President, Mexico DivisionRogelio González LechugaRogelio González Lechuga

President, United States DivisionEnrique Escalante OchoaEnrique Escalante Ochoa

Chief Financial Offi cerMartha Rodríguez RicoMartha Rodríguez Rico

Vice President,Research and DevelopmentPedro Burciaga MeléndezPedro Burciaga Meléndez

Vice President, PlanningJaime Fernández HorcasitasJaime Fernández Horcasitas

Vice President, Human ResourcesSalvador Inda CunninghamSalvador Inda Cunningham

Vice President,Information Technology and EngineeringJosé Medina GutiérrezJosé Medina Gutiérrez

I IndependentIndependent P ProprietarProprietary R RelaRelatedted

21

OVERVIEWIn 2005, GCC reported record historical levels of In 2005, GCC reported record historical levels of sales, operating margin, EBITDA and net profit driv-sales, operating margin, EBITDA and net profit driv-en by volume and price gains in Mexico and the en by volume and price gains in Mexico and the United States; the acquisitions of SOBOCE in United States; the acquisitions of SOBOCE in Bolivia, whose results were consolidated as of the fourth whose results were consolidated as of the fourth quarter of 2005, and NKC in the United States (see quarter of 2005, and NKC in the United States (see Highlights on page 23); lower cost of sales; and on page 23); lower cost of sales; and greater financial income.greater financial income.

KEY TRENDS IN THE YEARThe company’s fi nancial and operating performance The company’s fi nancial and operating performance refl ected favorable economic and industry conditions, refl ected favorable economic and industry conditions, as well as optimization of the company’s processes:as well as optimization of the company’s processes:

· Solid volume growth in Mexico from housing, infra- Solid volume growth in Mexico from housing, infra-structure and private sector construction, and strong structure and private sector construction, and strong demand for cement in all construction sectors of the demand for cement in all construction sectors of the U.S. market, drove the company’s net sales growth.U.S. market, drove the company’s net sales growth.

·· Limited availability of third-party cement for resale in Limited availability of third-party cement for resale in the U.S. resulted in similar year over year sales vol-the U.S. resulted in similar year over year sales vol-ume, but also lower cost of sales as a percentage of ume, but also lower cost of sales as a percentage of sales because third-party purchases generate lower sales because third-party purchases generate lower profi t margins.profi t margins.

All the fi gures herein were prepared in accordance with Generally Accepted Accounting Principles in Mex-ico, and have been restated in constant Mexican pesos with purchasing power of December 31, 2005. Unless otherwise stated, all percentage changes refer to the difference between full year 2005 and full year 2004 fi gures, and are expressed in real terms.

Management’sManagement’sDiscussion and Analysis

Total concreteblock sales

26.5

28.2

35.4

37.3

37.3

39.3

(millions of pieces)(millions of pieces)

Total cement sales in Mexico

877

877

761

875

875

892

892

957

(Thousands of tonsThousands of tons)

Total cement salesin U.S.

1,82

01,

820

1,76

21,

762

1,76

11,

761

2,2,00

800

82,

064

((Thousands of tonsThousands of tons))

Total concrete sales

1,00

11,

001

740

740

706

706

743

743

930

(Thousands of cubic (Thousands of cubic metersers))

2222

· In Mexico, lower land sales in 2005 led to lower cost In Mexico, lower land sales in 2005 led to lower cost of sales as a percentage of sales, as this complemen-of sales as a percentage of sales, as this complemen-tary business generates lower profi t marginstary business generates lower profi t margins

· The purchase and integration of NKC (see The purchase and integration of NKC (see Highlights) ) in the second quarter of the year generated supple-in the second quarter of the year generated supple-mental revenues from coal sales to third parties and mental revenues from coal sales to third parties and reduced volatility in fuel costs, bust also increased reduced volatility in fuel costs, bust also increased fi xed costs with the integration of its operations.fi xed costs with the integration of its operations.

· The purchase and integration of SOBOCE (see The purchase and integration of SOBOCE (see High-lights) in the fourth quarter of the year was refl ected ) in the fourth quarter of the year was refl ected in GCC’s results with an increase in total sales and in GCC’s results with an increase in total sales and corresponding costs and expenses, as well as higher corresponding costs and expenses, as well as higher net debt derived from the proportional consolidation net debt derived from the proportional consolidation of fi gures.of fi gures.

· Lower maintenance expenses in the South Dakota Lower maintenance expenses in the South Dakota plant were the result of modernization and upgrades plant were the result of modernization and upgrades completed in 2004.completed in 2004.

FINANCIAL AND OPERATING RESULTSSalesSales rose by 16.0% to a record Ps. 4,722.9 million rose by 16.0% to a record Ps. 4,722.9 million due to strong demand and higher prices in the com-due to strong demand and higher prices in the com-pany’s markets, along with the integration of the two pany’s markets, along with the integration of the two acquisitions made in the year. This included increases acquisitions made in the year. This included increases of 20.9% and 4.0% in the United States (Ps. 2,259.6 of 20.9% and 4.0% in the United States (Ps. 2,259.6 million) and Mexico (Ps. 2,292.2 million) respectively. million) and Mexico (Ps. 2,292.2 million) respectively. Sales in the domestic market would have increased by Sales in the domestic market would have increased by 10.0% excluding land sales in Mexico. The total sales 10.0% excluding land sales in Mexico. The total sales fi gure refl ects the 47.02% proportional consolidation fi gure refl ects the 47.02% proportional consolidation of Sociedad Boliviana de Cemento, S.A. (SOBOCE) as of Sociedad Boliviana de Cemento, S.A. (SOBOCE) as of the fourth quarter of 2005; excluding SOBOCE’s re-of the fourth quarter of 2005; excluding SOBOCE’s re-sults in that period, organic sales growth for the year sults in that period, organic sales growth for the year would have been 11.8%would have been 11.8%

Cost of SalesCost of Sales, as a percentage of sales decreased as a percentage of sales decreased 4.1 percentage points, to 61.9%, primarily due to low-4.1 percentage points, to 61.9%, primarily due to low-

er operating expenses in the cement plants, lower land er operating expenses in the cement plants, lower land sales, and a decrease in third-party cement purchases sales, and a decrease in third-party cement purchases that were replaced with imports from Mexico into the that were replaced with imports from Mexico into the U.S. Cost of sales totaled Ps. 2,921.4 million. The re-U.S. Cost of sales totaled Ps. 2,921.4 million. The re-sulting gross margin was 38.1%.sulting gross margin was 38.1%.

Sales and Administrative ExpensesSales and Administrative Expenses totaled totaled Ps. 488.3 million, comprising 10.3% of net sales, an in-Ps. 488.3 million, comprising 10.3% of net sales, an in-crease of 0.3 percentage points, primarily as a result of crease of 0.3 percentage points, primarily as a result of the integration of the NKC and SOBOCE acquisitions the integration of the NKC and SOBOCE acquisitions into GCC’s results.into GCC’s results.

Operating IncomeOperating Income rose 34.1% to a record Ps. 1,313.2rose 34.1% to a record Ps. 1,313.2million due to higher sales in the period and a better million due to higher sales in the period and a better gross margin. Excluding SOBOCE, operating income gross margin. Excluding SOBOCE, operating income would have risen 29.4% in the year.would have risen 29.4% in the year.

Operating Cash Flow,Operating Cash Flow, or EBITDA,EBITDA, rose 28.3% to rose 28.3% to Ps. 1,706.8 million as a result of higher sales and gross Ps. 1,706.8 million as a result of higher sales and gross margin. Excluding SOBOCE, EBITDA would have risen margin. Excluding SOBOCE, EBITDA would have risen 24.4% in 2005. EBITDA margin was 36.1% in the year, 24.4% in 2005. EBITDA margin was 36.1% in the year, a 3.4 percentage point increase over 2004.a 3.4 percentage point increase over 2004.

The company generated The company generated Free Cash FlowFree Cash Flow of Ps. 1,056.6 of Ps. 1,056.6Free Cash Flow of Ps. 1,056.6Free Cash FlowFree Cash Flow of Ps. 1,056.6Free Cash Flowmillion pesos in 2005, an increase of 60.6% over 2004, million pesos in 2005, an increase of 60.6% over 2004, due primarily to higher EBITDA and a decrease of Ps. due primarily to higher EBITDA and a decrease of Ps. 29.8 million in working capital needs.29.8 million in working capital needs.

Comprehensive Financing CostComprehensive Financing Cost was a positive gain was a positive gain of Ps. 102.9 million, compared to a gain of Ps. 44.4of Ps. 102.9 million, compared to a gain of Ps. 44.4million in 2004. The increase was primarily attribut-million in 2004. The increase was primarily attribut-able to exchange-related gains resulting from a dol-able to exchange-related gains resulting from a dol-lar-denominated liability position and the revaluation lar-denominated liability position and the revaluation of the peso.of the peso.

The company registered The company registered Other Financial CostsOther Financial Costs of Ps. 212.1 million in 2005, compared to Ps. 205.5 mil-Ps. 212.1 million in 2005, compared to Ps. 205.5 mil-lion in 2004, due to higher deposits and accruals in lion in 2004, due to higher deposits and accruals in

23

antidumping tariffs resulting from greater volumes of antidumping tariffs resulting from greater volumes of cement exported from Mexico to the United States. cement exported from Mexico to the United States. In March 2006, the governments of Mexico and the In March 2006, the governments of Mexico and the United States signed a trade agreement that resolves United States signed a trade agreement that resolves the long-standing dispute on exports of Portland ce-the long-standing dispute on exports of Portland ce-ment by Mexican producers into the U.S. market. Un-ment by Mexican producers into the U.S. market. Un-der terms of the agreement, tariffs were reduced to der terms of the agreement, tariffs were reduced to US$3 per ton from the current $26 per ton rate.US$3 per ton from the current $26 per ton rate.

Consolidated Net IncomeConsolidated Net Income totaled a record totaled a record Ps. 1,004.7Ps. 1,004.7 million, a 25.2% year over year increase. million, a 25.2% year over year increase. Excluding SOBOCE results, consolidated net income Excluding SOBOCE results, consolidated net income would have would have risen 19.9%. Net margin in 2005 was risen 19.9%. Net margin in 2005 was 21.3%, 1.6 percentage points greater than the 2004 21.3%, 1.6 percentage points greater than the 2004 net margin of 19.7%.net margin of 19.7%.

Short-termShort-term Interest-Bearing DebtInterest-Bearing Debt as of Decem-as of Decem-ber 31, 2005 totaled Ps. 136.8 million, all of which ber 31, 2005 totaled Ps. 136.8 million, all of which was dollar-denominated. Long-term debt totaled was dollar-denominated. Long-term debt totaled Ps. 1,717.9 million pesos, of which $1,200 million Ps. 1,717.9 million pesos, of which $1,200 million was in domestic bonds converted to dollars under a was in domestic bonds converted to dollars under a cross-currency swap, and Ps. 517.9 million was dol-cross-currency swap, and Ps. 517.9 million was dol-lar-denominated. lar-denominated.

The company had a committed credit line to refi nance The company had a committed credit line to refi nance the domestic bond maturing in December 2006. the domestic bond maturing in December 2006.

GCC’s net leverage ratio, as measured by net debt GCC’s net leverage ratio, as measured by net debt to EBITDA, was 0.4 times. This low level of leverage to EBITDA, was 0.4 times. This low level of leverage offers fi nancial fl exibility and additional fi nancing offers fi nancial fl exibility and additional fi nancing capacity for ongoing investment in the company’s capacity for ongoing investment in the company’s growth.growth.

HIGHLIGHTSAcquisition of a 47.02% stake in Sociedad Bo-Acquisition of a 47.02% stake in Sociedad Bo-liviana de Cemento, S.A. (SOBOCE)liviana de Cemento, S.A. (SOBOCE)In September 2005, GCC acquired a 47.02% stake in In September 2005, GCC acquired a 47.02% stake in SOBOCE in a US$65.4 million cash transaction.SOBOCE in a US$65.4 million cash transaction.

SOBOCE has annual cement production capacity of SOBOCE has annual cement production capacity of 870 thousand tons, four ready-mix concrete plants, 870 thousand tons, four ready-mix concrete plants, and a limestone aggregates plant. The company and a limestone aggregates plant. The company also holds management control and an ownership also holds management control and an ownership stake in Fábrica Nacional de Cemento (FANCESA), stake in Fábrica Nacional de Cemento (FANCESA), the second largest cement producer in Bolivia, with the second largest cement producer in Bolivia, with 444 thousand tons of annual cement production ca-444 thousand tons of annual cement production ca-pacity, one ready-mix concrete plant, one limestone pacity, one ready-mix concrete plant, one limestone aggregates plant, and three precast concrete prod-aggregates plant, and three precast concrete prod-ucts plants. ucts plants.

SOBOCE and FANCESCA, with combined production SOBOCE and FANCESCA, with combined production capacity of 1.3 million tons, hold a 70% share of the capacity of 1.3 million tons, hold a 70% share of the Bolivian market with sales of US$83 million per year Bolivian market with sales of US$83 million per year and well-positioned brand names.and well-positioned brand names.

SOBOCE will be an affiliate of GCC whose finan-SOBOCE will be an affiliate of GCC whose finan-cial results are proportionally consolidated in GCC’s cial results are proportionally consolidated in GCC’s results based on its 47.02% ownership stake. The results based on its 47.02% ownership stake. The consolidation is undertaken in accordance with the consolidation is undertaken in accordance with the proportional consolidation method set out in Inter-proportional consolidation method set out in Inter-national Accounting Standards “Financial Reporting national Accounting Standards “Financial Reporting of Interest in Joint Ventures” (IAS 31).of Interest in Joint Ventures” (IAS 31).

Acquisition of National King Coal Mine (NKC),Acquisition of National King Coal Mine (NKC),Colorado, USAColorado, USAThis Durango, Colorado-based mine is the primary This Durango, Colorado-based mine is the primary supplier of coal to GCC’s cement plants in Tijeras, supplier of coal to GCC’s cement plants in Tijeras, New Mexico; Samalayuca and Chihuahua, and will New Mexico; Samalayuca and Chihuahua, and will be the primary supplier of fuel for the Colorado be the primary supplier of fuel for the Colorado plant.plant.

Start up of operations at pre-cast concrete Start up of operations at pre-cast concrete products plantproducts plantThe new pre-cast products plant, located in Ciudad The new pre-cast products plant, located in Ciudad Juárez, Chihuahua, started up operations in the Juárez, Chihuahua, started up operations in the fourth quarter of 2005 following an investment of fourth quarter of 2005 following an investment of Ps. 42 million.Ps. 42 million.

2424

ConsolidatedConsolidated Financial Statements

Report of Independent Auditors 25 Consolidated Balance Sheets 26 Consolidated Statements of Income 2828 Consolidated Statements of Changes in Financial Position 29 Consolidated Statements of Changes in Stockholders´ Equity 30 Notes to Consolidated Financial Statements 32

25

The Stockholders of Grupo Cementos de Chihuahua, S.A. de C.V.

We have audited the accompanying consolidated balance sheets of Grupo Cementos de Chi-We have audited the accompanying consolidated balance sheets of Grupo Cementos de Chi-huahua, S.A. de C.V. and its subsidiaries as of December 31, 2005 and 2004, and the related huahua, S.A. de C.V. and its subsidiaries as of December 31, 2005 and 2004, and the related consolidated statements of income, changes in stockholders’ equity and changes in fi nancial po-consolidated statements of income, changes in stockholders’ equity and changes in fi nancial po-sition for the years then ended. These fi nancial statements are the responsibility of the Company’s sition for the years then ended. These fi nancial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these fi nancial statements based on management. Our responsibility is to express an opinion on these fi nancial statements based on our audits.our audits.

The fi nancial statements of some of the subsidiaries abroad were audited by other independent The fi nancial statements of some of the subsidiaries abroad were audited by other independent auditors. The fi nancial statements of these subsidiaries refl ect total assets and operating income auditors. The fi nancial statements of these subsidiaries refl ect total assets and operating income that represent 9.7% and 3.6% in 2005 for subsidiaries in Bolivia and 49.4% and 45.9% in 2004 that represent 9.7% and 3.6% in 2005 for subsidiaries in Bolivia and 49.4% and 45.9% in 2004 for subsidiaries in the U.S., respectively, of the related consolidated amounts. Our opinion, insofar for subsidiaries in the U.S., respectively, of the related consolidated amounts. Our opinion, insofar as it relates to the total amounts reported by these subsidiaries, is based solely on the reports of as it relates to the total amounts reported by these subsidiaries, is based solely on the reports of the other independent auditors.the other independent auditors.

We conducted our audits in accordance with auditing standards generally accepted in Mexico. We conducted our audits in accordance with auditing standards generally accepted in Mexico. Those standards require that we plan and perform the audit to obtain reasonable assurance about Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the fi nancial statements are free of material misstatement and are prepared in conformity whether the fi nancial statements are free of material misstatement and are prepared in conformity with accounting principles generally accepted in Mexico. An audit includes examining, on a test with accounting principles generally accepted in Mexico. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the fi nancial statements. An audit also basis, evidence supporting the amounts and disclosures in the fi nancial statements. An audit also includes assessing the accounting principles used and signifi cant estimates made by management, includes assessing the accounting principles used and signifi cant estimates made by management, as well as evaluating the overall fi nancial statement presentation. We believe that our audits pro-as well as evaluating the overall fi nancial statement presentation. We believe that our audits pro-vide a reasonable basis for our opinion.vide a reasonable basis for our opinion.

In our opinion, based on our audits and the reports of the other independent auditors, the conso-In our opinion, based on our audits and the reports of the other independent auditors, the conso-lidated fi nancial statements referred to above present fairly, in all material respects, the consolida-lidated fi nancial statements referred to above present fairly, in all material respects, the consolida-ted fi nancial position of Grupo Cementos de Chihuahua, S.A. de C.V. and subsidiaries at December ted fi nancial position of Grupo Cementos de Chihuahua, S.A. de C.V. and subsidiaries at December 31, 2005 and 2004, and the consolidated results of their operations, changes in their stockholders’ 31, 2005 and 2004, and the consolidated results of their operations, changes in their stockholders’ equity and changes in their fi nancial position for the years then ended, in conformity with accoun-equity and changes in their fi nancial position for the years then ended, in conformity with accoun-ting principles generally accepted in Mexico.ting principles generally accepted in Mexico.

As mentioned in Note 1 to the accompanying consolidated fi nancial statements, effective January As mentioned in Note 1 to the accompanying consolidated fi nancial statements, effective January 1, 2005, the Company adopted the requirements of Mexican accounting Bulletin B-7, Business 1, 2005, the Company adopted the requirements of Mexican accounting Bulletin B-7, Business Acquisitions, Bulletin C-10, Accounting for Derivative Instruments and Hedging Activities, and Bu-Acquisitions, Bulletin C-10, Accounting for Derivative Instruments and Hedging Activities, and Bu-lletin C-2, Financial Instruments, as amended, as well as the revised accounting Bulletin D-3, lletin C-2, Financial Instruments, as amended, as well as the revised accounting Bulletin D-3, Labor Obligations, all issued by the Mexican Institute of Public Accountants. The related effects are Labor Obligations, all issued by the Mexican Institute of Public Accountants. The related effects are described in the same note.described in the same note.

These fi nancial statements have been translated into English for the convenience of readers out-These fi nancial statements have been translated into English for the convenience of readers out-side of Mexico.side of Mexico.

Mancera, S.C.Mancera, S.C.A A Member Practice ofMember Practice of Ernst & Young Global Ernst & Young Global

C.P.C. José Antonio Reyes CedeñoC.P.C. José Antonio Reyes CedeñoChihuahua, Chih., MéxicoChihuahua, Chih., MéxicoFebruary 17,February 17, 2006 2006

Report of independentReport of independent auditors

26

GRUPO CEMENTOS DE CHIHUAHUA, S.A. DE C.V. AND SUBSIDIARIES

(In thousands of Mexican pesos with purchasing power at December 31, 2005)

The accompanying notes are an integral part of these fi nancial statements.

December 31 2005 2004

Assets Current assets: Current assets: Current assets:

Cash and cash equivalents Ps. 1,088,418 Ps. 1,505,334 Ps. 1,505,334Accounts receivable:

Trade, net of allowance for doubtful accounts ofPs. 95,983 in 2005 and Ps. Ps.69,994 in 2004 Ps. 95,983 in 2005 and Ps. Ps.69,994 in 2004 Ps. 95,983 in 2005 and Ps. Ps.69,994 in 2004 747,711 733,990 733,990

Recoverable taxes and other accounts receivable Recoverable taxes and other accounts receivable Recoverable taxes and other accounts receivable 63,051 97,210 97,210 810,762 831,200 831,200

Inventories Inventories Inventories 786,042 584,389 584,389Prepaid expenses Prepaid expenses Prepaid expenses 85,020 43,916 43,916

Total current assets Total current assets Total current assets 2,770,242 2,964,839 2,964,839

Equity investment Equity investment Equity investment 73,590 70,320 70,320Property, machinery and equipment, net Property, machinery and equipment, net Property, machinery and equipment, net 7,167,415 6,211,667 6,211,667Goodwill, net of amortization of Ps. 89,384 in

2005 and 2004 2005 and 2004 2005 and 2004 926,901 418,887 418,887Other intangible assets Other intangible assets Other intangible assets 123,587 157,151 157,151

Total assets Ps. 11,061,735 Ps. 9,822,864

Consolidated balance sheets

27

December 31, December 31, 2005 2004

Liabilities and stockholders’ equityCurrent liabilities:

Bank loans and current portion of long-term debt Ps. 136,828 Ps. 29,244 Ps. 29,244 Ps. 29,244Suppliers Suppliers Suppliers Suppliers 231,960 139,833 139,833 139,833Other accounts payable and accrued expenses Other accounts payable and accrued expenses Other accounts payable and accrued expenses Other accounts payable and accrued expenses 378,071 235,471 235,471 235,471Income tax and employee profi t sharing Income tax and employee profi t sharing Income tax and employee profi t sharing Income tax and employee profi t sharing 17,459 - - -

Total current liabilities Total current liabilities Total current liabilities Total current liabilities 764,318 404,548 404,548 404,548

Long-term debt Long-term debt Long-term debt Long-term debt 1,515,358 1,233,592 1,233,592 1,233,592Labor obligations Labor obligations Labor obligations Labor obligations 134,660 67,184 67,184 67,184Other long-term liabilities Other long-term liabilities Other long-term liabilities Other long-term liabilities 531,787 796,904 796,904 796,904Deferred income tax Deferred income tax Deferred income tax Deferred income tax 954,799 1,055,810 1,055,810 1,055,810

Total liabilities Total liabilities Total liabilities 3,900,922 3,558,038 3,558,038 3,558,038

Stockholders’ equity:Capital stock Capital stock Capital stock Capital stock 741,185 741,476 741,476 741,476Additional paid-in capital Additional paid-in capital Additional paid-in capital Additional paid-in capital 2,550,270 2,550,270 2,550,270 2,550,270Stock premium Stock premium Stock premium Stock premium 877,593 867,527 867,527 867,527Reserve for repurchase of Company’s own shares Reserve for repurchase of Company’s own shares Reserve for repurchase of Company’s own shares Reserve for repurchase of Company’s own shares 107,031 103,074 103,074 103,074Retained earnings Retained earnings Retained earnings Retained earnings 5,649,369 4,957,494 4,957,494 4,957,494Defi cit from restatement of stockholders’ equity Defi cit from restatement of stockholders’ equity Defi cit from restatement of stockholders’ equity Defi cit from restatement of stockholders’ equity (4,244,865) (3,990,322) (3,990,322) (3,990,322)Effect of translation of foreign entities Effect of translation of foreign entities Effect of translation of foreign entities Effect of translation of foreign entities 308,314 255,387 255,387 255,387Defi cit from labor obligations Defi cit from labor obligations Defi cit from labor obligations (30,099) (23,957) (23,957) (23,957)Majority net income Majority net income Majority net income Majority net income 989,977 802,668 802,668 802,668

Majority stockholders’ equity Majority stockholders’ equity Majority stockholders’ equity Majority stockholders’ equity 6,948,775 6,263,617 6,263,617 6,263,617Minority stockholders’ equity Minority stockholders’ equity Minority stockholders’ equity 212,038 1,209 1,209 1,209Total stockholders’ equity Total stockholders’ equity Total stockholders’ equity Total stockholders’ equity 7,160,813 6,264,826 6,264,826 6,264,826Total liabilities and stockholders’ equity Ps. 11,061,735 Ps. 9,822,864

The accompanying notes are an integral part of these fi nancial statements.

28

GRUPO CEMENTOS DE CHIHUAHUA, S.A. DE C.V. AND SUBSIDIARIES

(In thousands of Mexican pesos with purchasing power at December 31, 2005)

The accompanying notes are an integral part of these fi nancial statements.

Consolidated statements of income Year ended December 31 2005 2004

Net sales Ps. 4,722,920 Ps. 4,072,719 Ps. 4,072,719Cost of sales Cost of sales Cost of sales 2,921,365 2,686,593 2,686,593Gross profi t Gross profi t Gross profi t 1,801,555 1,386,126 1,386,126

Operating expenses Operating expenses Operating expenses 488,310 406,740 406,740Operating income Operating income Operating income 1,313,245 979,386 979,386

Comprehensive fi nancing income Comprehensive fi nancing income Comprehensive fi nancing income 102,932 44,446 44,446Other expenses, net Other expenses, net Other expenses, net 212,093 205,490 205,490Income before income tax and employee profi t sharing Income before income tax and employee profi t sharing Income before income tax and employee profi t sharing 1,204,084 818,342 818,342

Income tax Income tax Income tax 198,422 15,668 15,668Employee profi t sharing Employee profi t sharing Employee profi t sharing 968 - -Net consolidated income Net consolidated income Net consolidated income 1,004,694 802,674 802,674Minority net income Minority net income Minority net income 14,717 6 6Majority net income Ps. 989,977 Ps. 802,668 Ps. 802,668Weighted average number of shares outstanding (thousands) Weighted average number of shares outstanding (thousands) Weighted average number of shares outstanding (thousands) 330,485 335,556 335,556Earnings per share Ps. 2.99 Ps. 2.39

29The accompanying notes are an integral part of these fi nancial statements.

GRUPO CEMENTOS DE CHIHUAHUA, S.A. DE C.V. AND SUBSIDIARIES

(In thousands of Mexican pesos with purchasing power at December 31, 2005)

Year ended Year ended December 31 December 31 2005 2004

Operating activitiesMajority net income Ps. 1,004,694 Ps. 802,674 Ps. 802,674 Ps. 802,674Items not requiring the use of (providing) resources:

Depreciación and amortization Depreciación and amortization Depreciación and amortization Depreciación and amortization 393,600 350,457 350,457 350,457Deferred income tax Deferred income tax Deferred income tax Deferred income tax (27,956) (97,577) (97,577) (97,577)Minority interest Minority interest Minority interest Minority interest (14,717) (6) (6) (6)

1,355,621 1,055,548 1,055,548 1,055,548Variances in working capital:

Accounts receivable Accounts receivable Accounts receivable Accounts receivable 183,800 (153,509) (153,509) (153,509)Inventories Inventories Inventories Inventories (152,900) (2,137) (2,137) (2,137)Other assets Other assets Other assets Other assets (10,000) (28,529) (28,529) (28,529)Suppliers and other accounts payable Suppliers and other accounts payable Suppliers and other accounts payable Suppliers and other accounts payable (157,226) (69,836) (69,836) (69,836)

Resources provided by operating activities Resources provided by operating activities Resources provided by operating activities Resources provided by operating activities 1,219,295 801,537 801,537 801,537

Financing activitiesDecrease in short and long-term fi nancing Decrease in short and long-term fi nancing Decrease in short and long-term fi nancing Decrease in short and long-term fi nancing (68,800) (1,225,328) (1,225,328) (1,225,328)Premium on re-placement of Company’s own shares Premium on re-placement of Company’s own shares Premium on re-placement of Company’s own shares Premium on re-placement of Company’s own shares 10,066 32,628 32,628Re-placement of Company’s own shares Re-placement of Company’s own shares Re-placement of Company’s own shares Re-placement of Company’s own shares 3,927 (48,657) (48,657) (48,657)Dividends paid Dividends paid Dividends paid Dividends paid (110,793) (91,990) (91,990) (91,990)

Resources used in fi nancing activities Resources used in fi nancing activities Resources used in fi nancing activities Resources used in fi nancing activities (165,600) (1,333,347) (1,333,347) (1,333,347)

Investing activitiesPurchase of shares of subsidiary in Bolivia Purchase of shares of subsidiary in Bolivia Purchase of shares of subsidiary in Bolivia (710,500) - - -Purchase of property, machinery and equipment Purchase of property, machinery and equipment Purchase of property, machinery and equipment Purchase of property, machinery and equipment (760,111) (328,035) (328,035) (328,035)Resources used in investing activities Resources used in investing activities Resources used in investing activities Resources used in investing activities (1,470,611) (328,035) (328,035) (328,035)

Net decrease in cash and cash equivalents Net decrease in cash and cash equivalents Net decrease in cash and cash equivalents Net decrease in cash and cash equivalents (416,916) (859,845) (859,845) (859,845)Cash and cash equivalents at beginning of year Cash and cash equivalents at beginning of year Cash and cash equivalents at beginning of year Cash and cash equivalents at beginning of year 1,505,334 2,365,179 2,365,179 2,365,179Cash and cash equivalents at end of year Ps. 1,088,418 Ps. 1,505,334

CConsolidaonsolidatedted statements ofstatements of changes in fi nancial positionin fi nancial position

3030

GRUPO CEMENTOS DE CHIHUAHUA, S.A. DE C.V. AND SUBSIDIARIES

The accompanying notes are an integral part of these fi nancial statements.

Consolidated onsolidated statements ofstatements of changes in stockholders’ equity in stockholders’ equity Years Ended December 31, 2005 and 2004

(In thousands of Mexican pesos with purchasing power at December 31, 2005)

Reserve for Defi cit from Effect of repurchase of Defi cit from restatement of translation of Total majority Minority Capital Additional Stock Company’s Retained labor stockholders’ foreign Majority stockholders’ stockholders’ Comprehensive stock paid-in capital premium own shares earnings obligations equity subsidiaries net income equity equity income

Balance at December 31, 2003 Ps. 741,370 Ps. 2,550,270 Ps. 833,899 Ps. 151,838 Ps. 4,273,827 Ps. (11,876) Ps. (3,944,451) Ps. 263,211 Ps. 775,657 Ps. 5,633,745 Ps. 2,099 Ps. Balance at December 31, 2003 Ps. 741,370 Ps. 2,550,270 Ps. 833,899 Ps. 151,838 Ps. 4,273,827 Ps. (11,876) Ps. (3,944,451) Ps. 263,211 Ps. 775,657 Ps. 5,633,745 Ps. 2,099 Ps. Balance at December 31, 2003 Ps. 741,370 Ps. 2,550,270 Ps. 833,899 Ps. 151,838 Ps. 4,273,827 Ps. (11,876) Ps. (3,944,451) Ps. 263,211 Ps. 775,657 Ps. 5,633,745 Ps. 2,099 Ps.

Transfer from net majority income 775,657 (775,657) -Transfer from net majority income 775,657 (775,657) -Transfer from net majority income 775,657 (775,657) -

Dividends paid (91,990) (91,990)Dividends paid (91,990) (91,990)Dividends paid (91,990) (91,990)

Re-placement of Company’s own shares 106 33,628 (48,764) (15,030) Re-placement of Company’s own shares 106 33,628 (48,764) (15,030) Re-placement of Company’s own shares 106 33,628 (48,764) (15,030)

Result from holding non-monetary assets (45,871) (45,871) (45,871) Result from holding non-monetary assets (45,871) (45,871) (45,871) Result from holding non-monetary assets (45,871) (45,871) (45,871) Result from holding non-monetary assets (45,871) (45,871) (45,871) Result from holding non-monetary assets (45,871) (45,871) (45,871)

Effect of translation of foreign subsidiaries (7,824) (7,824) (7,824) Effect of translation of foreign subsidiaries (7,824) (7,824) (7,824) Effect of translation of foreign subsidiaries (7,824) (7,824) (7,824) Effect of translation of foreign subsidiaries (7,824) (7,824) (7,824) Effect of translation of foreign subsidiaries (7,824) (7,824) (7,824)

Deficit from labor obligations (12,081) (12,081) (12,081) Deficit from labor obligations (12,081) (12,081) (12,081) Deficit from labor obligations (12,081) (12,081) (12,081) Deficit from labor obligations (12,081) (12,081) (12,081) Deficit from labor obligations (12,081) (12,081) (12,081)

Restatement of investment and movements

in minority interest (896)in minority interest (896)in minority interest (896)

Majority net income 802,668 802,668 6 Ps. 802,668Majority net income 802,668 802,668 6 Ps. 802,668Majority net income 802,668 802,668 6 Ps. 802,668

Balance at December 31, 2004 741,476 2,550,270 867,527 103,074 4,957,494 (23,957) (3,990,322) 255,387 802,668 6,263,617 1,209 Ps. 736,892Balance at December 31, 2004 741,476 2,550,270 867,527 103,074 4,957,494 (23,957) (3,990,322) 255,387 802,668 6,263,617 1,209 Ps. 736,892Balance at December 31, 2004 741,476 2,550,270 867,527 103,074 4,957,494 (23,957) (3,990,322) 255,387 802,668 6,263,617 1,209 Ps. 736,892

Transfer from net majority income Transfer from net majority income Transfer from net majority income Transfer from net majority income 802,668 (802,668)

Dividends paid (110,793) (110,793)

Repurchase of Company’s own shares (291) 10,066 3,957 13,732

Result from holding non-monetary assets Result from holding non-monetary assets Result from holding non-monetary assets Result from holding non-monetary assets (254,543) (254,543) (254,543)

Effect of translation of foreign subsidiaries Effect of translation of foreign subsidiaries Effect of translation of foreign subsidiaries Effect of translation of foreign subsidiaries 52,927 52,927 52,927

Deficit from labor obligations (6,142) (6,142) (6,142)

Restatement of investment and movements

in minority interest in minority interest in minority interest in minority interest 196,108

Majority net income 989,977 989,977 14,721 989,977

Balance at December 31, 2005 Ps. 741,185 Ps. 2,550,270 Ps. 877,593 Ps. 107,031 Ps. 5,649,369 Ps. (30,099) Ps. (4,244,865) Ps. 308,314 Ps. 989,977 Ps. 6,948,775 Ps. 212,038 Ps. 782,219

31

Reserve for Defi cit from Effect of repurchase of Defi cit from restatement of translation of Total majority Minority Capital Additional Stock Company’s Retained labor stockholders’ foreign Majority stockholders’ stockholders’ Comprehensive stock paid-in capital premium own shares earnings obligations equity subsidiaries net income equity equity income

Balance at December 31, 2003 Ps. 741,370 Ps. 2,550,270 Ps. 833,899 Ps. 151,838 Ps. 4,273,827 Ps. (11,876) Ps. (3,944,451) Ps. 263,211 Ps. 775,657 Ps. 5,633,745 Ps. 2,099 Ps. Balance at December 31, 2003 Ps. 741,370 Ps. 2,550,270 Ps. 833,899 Ps. 151,838 Ps. 4,273,827 Ps. (11,876) Ps. (3,944,451) Ps. 263,211 Ps. 775,657 Ps. 5,633,745 Ps. 2,099 Ps.

Transfer from net majority income 775,657 (775,657) -Transfer from net majority income 775,657 (775,657) -

Dividends paid (91,990) (91,990)Dividends paid (91,990) (91,990)

Re-placement of Company’s own shares 106 33,628 (48,764) (15,030) Re-placement of Company’s own shares 106 33,628 (48,764) (15,030)

Result from holding non-monetary assets (45,871) (45,871) (45,871) Result from holding non-monetary assets (45,871) (45,871) (45,871)

Effect of translation of foreign subsidiaries (7,824) (7,824) (7,824) Effect of translation of foreign subsidiaries (7,824) (7,824) (7,824)

Deficit from labor obligations (12,081) (12,081) (12,081) Deficit from labor obligations (12,081) (12,081) (12,081)

in minority interest (896)in minority interest (896)

Majority net income 802,668 802,668 6 Ps. 802,668Majority net income 802,668 802,668 6 Ps. 802,668

Balance at December 31, 2004 741,476 2,550,270 867,527 103,074 4,957,494 (23,957) (3,990,322) 255,387 802,668 6,263,617 1,209 Ps. 736,892Balance at December 31, 2004 741,476 2,550,270 867,527 103,074 4,957,494 (23,957) (3,990,322) 255,387 802,668 6,263,617 1,209 Ps. 736,892

802,668 (802,668)

(110,793) (110,793)

(291) 10,066 3,957 13,732

(254,543) (254,543) (254,543)

52,927 52,927 52,927

(6,142) (6,142) (6,142)

196,108

989,977 989,977 14,721 989,977

Balance at December 31, 2005 Ps. 741,185 Ps. 2,550,270 Ps. 877,593 Ps. 107,031 Ps. 5,649,369 Ps. (30,099) Ps. (4,244,865) Ps. 308,314 Ps. 989,977 Ps. 6,948,775 Ps. 212,038 Ps. 782,219

3232

GRUPO CEMENTOS DE CHIHUAHUA, S.A. DE C.V. AND SUBSIDIARIES

The accompanying notes are an integral part of these fi nancial statements.

1. Operations and Summary of Signifi cant Accounting PoliciesDescription of the BusinessDescription of the BusinessGrupo Cementos de Chihuahua, S.A. de C.V. (hereinafter the Company) is the holding company whose subsidiaries are engaged Grupo Cementos de Chihuahua, S.A. de C.V. (hereinafter the Company) is the holding company whose subsidiaries are engaged primarily in producing and marketing ready-mix concrete and cement.primarily in producing and marketing ready-mix concrete and cement.

The Company is a subsidiary of Control Administrativo Mexicano, S.A. de C.V.The Company is a subsidiary of Control Administrativo Mexicano, S.A. de C.V.

In September and October 2005, the Company acquired 924,442 shares, representing 47.02% of the total shares of Sociedad In September and October 2005, the Company acquired 924,442 shares, representing 47.02% of the total shares of Sociedad Boliviana de Cemento, S.A. (SOBOCE), a company located in La Paz, Bolivia whose main business activity is the manufacturing Boliviana de Cemento, S.A. (SOBOCE), a company located in La Paz, Bolivia whose main business activity is the manufacturing and sale of cement in Bolivia’s market. Total purchase price of said shares was Dls. 65.4 million (Ps. 710.5 million).and sale of cement in Bolivia’s market. Total purchase price of said shares was Dls. 65.4 million (Ps. 710.5 million).

Accounting PoliciesAccounting PoliciesThe most important accounting policies observed by the Company in the preparation of the fi nancial statements are described The most important accounting policies observed by the Company in the preparation of the fi nancial statements are described below:

a) Basis of consolidation of fi nancial statementsConsolidationConsolidationThe accompanying consolidated fi nancial statements include the accounts of Grupo Cementos Chihuahua, S.A. de C.V. and its The accompanying consolidated fi nancial statements include the accounts of Grupo Cementos Chihuahua, S.A. de C.V. and its subsidiaries, as follows:subsidiaries, as follows:

Percentage equity interest at Percentage equity interest at December 31December 31

2005 2004Mexican companies: Cementos de Chihuahua, S.A. de C.V. 99.99 99.99 99.99 99.99Materiales Industriales de Chihuahua, S.A. de C.V. 99.96 99.96 99.96 99.96GCC Concreto, S.A. de C.V. 99.99 99.91 99.91 99.91Minera Rarámuri, S.A. 99.99 99.98 99.98 99.98Construcentro de Chihuahua, S.A. de C.V. 99.99 99.99 99.99 99.99Eurotec de México, S.A. de C.V. - 99.99 99.99 99.99Promotora de Desarrollos Inmobiliarios de Chihuahua, S.A. de C.V. 99.99 99.91 99.91 99.91GCC Cemento, S.A. de C.V. 99.99 99.99 99.99 99.99GCC Ingeniería y Proyectos, S.A. de C.V. 99.99 99.99 99.99 99.99GCC Inversiones y Comercialización, S.A. de C.V. 99.99 99.99 99.99 99.99GCC Tecnología y Materiales, S.A. de C.V. 99.99 99.99 99.99 99.99GCC Transporte, S.A. de C.V 99.96 99.97 99.97 99.97GCC Comercial, S.A. de C.V. 99.99 99.99 99.99 99.99GCC Proyectos y Administración, S.A. de C.V. 99.99 - - -Urbanizaciones Contemporáneas, S.A. de C.V. 99.99 - - -GCC Latinoamérica, S.A. de C.V. 99.99 - - -

Foreign companies (mainly located in the U.S.)GCC of America, Inc. 100.00 100.00 100.00 100.00GCC Rio Grande, Inc. 100.00 100.00 100.00 100.00Rio Grande Materials, Inc. 100.00 100.00 100.00 100.00GCC Dacotah, Inc. 100.00 100.00 100.00 100.00Mexcement, Inc. 100.00 100.00 100.00 100.00GCC of Denver, Inc. 100.00 100.00 100.00 100.00GCC Holding Company, LLC. 100.00 100.00 100.00 100.00Materiales (Hungary) Investment Group Financing Ltd. 100.00 100.00 100.00 100.00GCC Technology and Processes, S.A. 99.99 100.00 100.00 100.00American Investments Company, LLC 100.00 100.00 100.00 100.00National King Coal, LLC 100.00 - - -CRM Acquisition, Inc. 100.00 - - -

Notes to consolidated fi nancial statementsto consolidated fi nancial statementsDecember 31, 2005 and 2004December 31, 2005 and 2004(In thousands of Mexican pesos with purchasing power at December 31, 2005 and thousands of U.S. dollars, except for per share values and exchange rates)(In thousands of Mexican pesos with purchasing power at December 31, 2005 and thousands of U.S. dollars, except for per share values and exchange rates)

33

Signifi cant intercompany balances, investments and transactions were eliminated in the consolidation.Signifi cant intercompany balances, investments and transactions were eliminated in the consolidation.

The consolidated fi nancial statements include the statements of Grupo Cementos de Chihuahua and those of subsidiaries in The consolidated fi nancial statements include the statements of Grupo Cementos de Chihuahua and those of subsidiaries in which the Company has control and holds more than 50% equity interest. In SOBOCE and subsidiaries, where Grupo Cementos which the Company has control and holds more than 50% equity interest. In SOBOCE and subsidiaries, where Grupo Cementos de Chihuahua holds 47.02% equity interest, the proportional consolidation method has been used as required by International de Chihuahua holds 47.02% equity interest, the proportional consolidation method has been used as required by International Accounting Standard 31, Financial Reporting of Interests in Joint Ventures (IAS 31), since they are jointly controlled.Accounting Standard 31, Financial Reporting of Interests in Joint Ventures (IAS 31), since they are jointly controlled.

A summary of the consolidated fi nancial information for the period is as follows, proportionally as consolidated (47.02%):A summary of the consolidated fi nancial information for the period is as follows, proportionally as consolidated (47.02%):

2005Current assets Ps. 303,395Fixed assets Ps. 747,655Current liabilities Ps. 280,752Long-term liabilities Ps. 332,360Income Ps. 170,295Costs and expenses Ps. 128,251

On August 17, 2005, GCC Latinoamerica, S.A. de C.V., was incorporated. The corporate purpose of the company is to manage On August 17, 2005, GCC Latinoamerica, S.A. de C.V., was incorporated. The corporate purpose of the company is to manage all types of companies, acquire partnership or equity interest in other business corporations and partnerships, and to sell or all types of companies, acquire partnership or equity interest in other business corporations and partnerships, and to sell or transfer said shares or partnerships. The shares of SOBOCE were acquired through this subsidiary.transfer said shares or partnerships. The shares of SOBOCE were acquired through this subsidiary.

On November 29, 2005, CRM Acquisition, Inc. was incorporated. The company is primarily engaged in producing and marketing On November 29, 2005, CRM Acquisition, Inc. was incorporated. The company is primarily engaged in producing and marketing ready-mix concrete.ready-mix concrete.

On December 21, 2005, two business corporations were incorporated: Urbanizaciones Contemporaneas, S.A. de C.V., a com-On December 21, 2005, two business corporations were incorporated: Urbanizaciones Contemporaneas, S.A. de C.V., a com-pany primarily engaged in land urbanization and in selling houses and GCC Proyectos y Administracion, S.A. de C.V., a company pany primarily engaged in land urbanization and in selling houses and GCC Proyectos y Administracion, S.A. de C.V., a company that promotes investments in related companies.that promotes investments in related companies.

On August 26, 2005, Grupo Cementos de Chihuahua, S.A. de C.V. sold all of its shares held in Eurotec de Mexico, S.A. de C.V. On August 26, 2005, Grupo Cementos de Chihuahua, S.A. de C.V. sold all of its shares held in Eurotec de Mexico, S.A. de C.V.

On June 21, 2004, GCC Technology and Processes, S.A., was incorporated. The corporate purpose of the company is the ac-On June 21, 2004, GCC Technology and Processes, S.A., was incorporated. The corporate purpose of the company is the ac-quisition, management, transfer and disposition of intellectual property rights, brands and trademarks, author’s rights, patents, quisition, management, transfer and disposition of intellectual property rights, brands and trademarks, author’s rights, patents, investments, processes, designs, know-how and other intangible property, as well as research and development of manufactur-investments, processes, designs, know-how and other intangible property, as well as research and development of manufactur-ing and production processes for construction materials.ing and production processes for construction materials.

On December 27, 2004, American Investments Company, LLC, was incorporated. The corporate purpose of the company is to On December 27, 2004, American Investments Company, LLC, was incorporated. The corporate purpose of the company is to manage all types of companies, acquire partnership or equity interest in other business corporations and partnerships, and to manage all types of companies, acquire partnership or equity interest in other business corporations and partnerships, and to sell or transfer said shares or partnerships.sell or transfer said shares or partnerships.

b) Incorporation of foreign subsidiaries In conformity with Mexican accounting Bulletin B-15, Transactions in Foreign Currency and Translation of Financial Statements In conformity with Mexican accounting Bulletin B-15, Transactions in Foreign Currency and Translation of Financial Statements of Foreign Operations, the fi nancial statements of foreign subsidiaries have been incorporated into the consolidated fi nancial of Foreign Operations, the fi nancial statements of foreign subsidiaries have been incorporated into the consolidated fi nancial statements as follows:statements as follows:

• The transactions of foreign subsidiaries are considered an entity: The transactions of foreign subsidiaries are considered an entity:

• The 2004 fi nancial statements were restated at December 31, 2005 based on the consumer price index (CPI) of each country, The 2004 fi nancial statements were restated at December 31, 2005 based on the consumer price index (CPI) of each country, which was 1.0394 in the U.S. The current year monetary effect was determined based on the annual infl ation factor derived which was 1.0394 in the U.S. The current year monetary effect was determined based on the annual infl ation factor derived from the CPI.from the CPI.

• Asset, liabilities and income accounts were translated using the prevailing exchange rate at the end of the year, 10.7777 per Asset, liabilities and income accounts were translated using the prevailing exchange rate at the end of the year, 10.7777 per U.S. dollar and Ps. 1.355 per Bolivian peso. The translation adjustments are refl ected in a separate stockholders’ equity caption U.S. dollar and Ps. 1.355 per Bolivian peso. The translation adjustments are refl ected in a separate stockholders’ equity caption known as Effect of translation of foreign subsidiaries.known as Effect of translation of foreign subsidiaries.

3434

• Exchange differences from fi nancing contracts for the acquisition of subsidiaries abroad are presented under the caption Effect Exchange differences from fi nancing contracts for the acquisition of subsidiaries abroad are presented under the caption Effect of translation of foreign subsidiaries, considering the investments in such subsidiaries as equivalent to hedges. The exchange of translation of foreign subsidiaries, considering the investments in such subsidiaries as equivalent to hedges. The exchange loss included in the effect of translation at December 31, 2005 and 2004 was Ps. ( 48,450) and Ps. ( 753), respectively.loss included in the effect of translation at December 31, 2005 and 2004 was Ps. ( 48,450) and Ps. ( 753), respectively.

• The monetary position gain or loss derived from fi nancing is determined using the price index in the subsidiary’s own country The monetary position gain or loss derived from fi nancing is determined using the price index in the subsidiary’s own country since it is considered an integral part of the equity investment abroad and is recorded in the caption Effect of translation of since it is considered an integral part of the equity investment abroad and is recorded in the caption Effect of translation of foreign subsidiaries. foreign subsidiaries.

• Goodwill derived from the acquisition of foreign subsidiaries is recorded in the currency in which the equity investment is de- Goodwill derived from the acquisition of foreign subsidiaries is recorded in the currency in which the equity investment is de-nominated since it is the currency in which the goodwill is expected to be recovered. Goodwill is restated based on the rate of nominated since it is the currency in which the goodwill is expected to be recovered. Goodwill is restated based on the rate of infl ation in the country in which the subsidiary is located and the prevailing exchange rate at the balance sheet date.infl ation in the country in which the subsidiary is located and the prevailing exchange rate at the balance sheet date.

c) Use of estimatesThe preparation of fi nancial statements in conformity with generally accepted accounting principles requires management to The preparation of fi nancial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of it assets and liabilities at the date of the consolidated make estimates and assumptions that affect the reported amounts of it assets and liabilities at the date of the consolidated fi nancial statements and revenues and expenses during the reporting period. Actual consolidated results could differ from these fi nancial statements and revenues and expenses during the reporting period. Actual consolidated results could differ from these estimates.

d) Recognition of the effects of infl ation• The Company recognizes the effects of infl ation on fi nancial information as required by Mexican accounting Bulletin B-10, Ac- The Company recognizes the effects of infl ation on fi nancial information as required by Mexican accounting Bulletin B-10, Ac-

counting Recognition of the Effects of Infl ation on Financial Information, as amended, issued by the Mexican Institute of Public counting Recognition of the Effects of Infl ation on Financial Information, as amended, issued by the Mexican Institute of Public Accountants. Bulletin B-10 requires that all fi nancial information presented be expressed in Mexican pesos with purchasing Accountants. Bulletin B-10 requires that all fi nancial information presented be expressed in Mexican pesos with purchasing power at the latest balance sheet date. The restatement factor applied to the fi nancial statements for the year ended December power at the latest balance sheet date. The restatement factor applied to the fi nancial statements for the year ended December 31, 2004 was 1.0316, which represents the annual rate of infl ation for 2005, as determined based on the Mexican National 31, 2004 was 1.0316, which represents the annual rate of infl ation for 2005, as determined based on the Mexican National Consumer Price Index (NCPI) published by Banco de México.Consumer Price Index (NCPI) published by Banco de México.

• The Company decided to use the specifi c-cost method to restate inventories. The Company decided to use the specifi c-cost method to restate inventories.

• Stockholders’ equity accounts were restated based on the NCPI. Stockholders’ equity accounts were restated based on the NCPI.

The most important infl ation accounting concepts and procedures are described below:The most important infl ation accounting concepts and procedures are described below:

• Net monetary effectThis represents the effect of infl ation on monetary assets and liabilities. The net monetary effect of each year is included in the This represents the effect of infl ation on monetary assets and liabilities. The net monetary effect of each year is included in the consolidated statement of income under the caption Comprehensive fi nancing income.consolidated statement of income under the caption Comprehensive fi nancing income.

• Defi cit from restatement of stockholders’ equityThis caption consists of the accumulated monetary position result determined at the time the provisions of Bulletin B-10 were This caption consists of the accumulated monetary position result determined at the time the provisions of Bulletin B-10 were fi rst applied, as well as the accumulated result from holding non-monetary assets. The result from holding non-monetary assets fi rst applied, as well as the accumulated result from holding non-monetary assets. The result from holding non-monetary assets represents the net difference between the increase in the specifi c value of non-monetary assets and the increase in the value represents the net difference between the increase in the specifi c value of non-monetary assets and the increase in the value of such assets as measured solely by infl ation.of such assets as measured solely by infl ation.

e) Cash and cash equivalentsCash and cash equivalents consist basically of bank deposits and highly liquid investments with maturities of less than 90 days. Cash and cash equivalents consist basically of bank deposits and highly liquid investments with maturities of less than 90 days. These investments are stated at cost plus accrued interest, similar to market value.These investments are stated at cost plus accrued interest, similar to market value.

f) Restricted cashRestricted cash consists of cash deposited into an escrow account required by the State of Colorado Mined Land Reclamation Restricted cash consists of cash deposited into an escrow account required by the State of Colorado Mined Land Reclamation Board in the U.S. of Ps. 26,944. Withdrawals will be subject to the terms and conditions of said account. Board in the U.S. of Ps. 26,944. Withdrawals will be subject to the terms and conditions of said account.

g) Allowance for doubtful accountsCompany policy is to provide for accounts receivable with specifi c collection problems. For this purpose, it conducts a study of Company policy is to provide for accounts receivable with specifi c collection problems. For this purpose, it conducts a study of the collectability of accounts due from each customer, taking into consideration the age of balances and the specifi c situation the collectability of accounts due from each customer, taking into consideration the age of balances and the specifi c situation of each account.of each account.

35

h) Inventories and cost of salesInventories are stated at estimated replacement cost, not in excess of net realizable value. The valuation method used is the Inventories are stated at estimated replacement cost, not in excess of net realizable value. The valuation method used is the weighted averaged based on the direct costing method.weighted averaged based on the direct costing method.

This caption includes land (including development expenses) available for sale, restated at market value.This caption includes land (including development expenses) available for sale, restated at market value.

Cost of sales represents estimated replacement cost at the time inventories were sold, expressed in constant year-end pesos.Cost of sales represents estimated replacement cost at the time inventories were sold, expressed in constant year-end pesos.

i) Equity investmentEquity investments in affi liated companies in which the Company holds from 10% to 50% of the capital stock and over which Equity investments in affi liated companies in which the Company holds from 10% to 50% of the capital stock and over which the Company exercises signifi cant infl uence are accounted for using the equity method over the stockholders’ equity of the the Company exercises signifi cant infl uence are accounted for using the equity method over the stockholders’ equity of the issuing companies. Investments in companies in which the Company holds less than 10% equity interest are recorded at cost, issuing companies. Investments in companies in which the Company holds less than 10% equity interest are recorded at cost, restated based on the NCPI.restated based on the NCPI.

j) Property, plant and equipmentProperty, plant and equipment of domestic origin are restated based on the NCPI.Property, plant and equipment of domestic origin are restated based on the NCPI.

Imported plant and equipment are stated at their current estimated value based on the rate of infl ation in the country of origin Imported plant and equipment are stated at their current estimated value based on the rate of infl ation in the country of origin and the prevailing exchange rate at the balance sheet date.and the prevailing exchange rate at the balance sheet date.

At December 31, 2005, approximately 70% of machinery and equipment of the subsidiaries in Mexico was restated based on At December 31, 2005, approximately 70% of machinery and equipment of the subsidiaries in Mexico was restated based on specifi c factors.specifi c factors.

Depreciation is computed on the restated value of fi xed assets using the straight-line method based on the estimated useful Depreciation is computed on the restated value of fi xed assets using the straight-line method based on the estimated useful lives of the related assets as determined by management periodically.lives of the related assets as determined by management periodically.

Comprehensive fi nancing costs incurred during the building and installation period are capitalized. Such costs are restated Comprehensive fi nancing costs incurred during the building and installation period are capitalized. Such costs are restated using the NCPI.using the NCPI.

The caption property, plant and equipment includes spare parts inventories for which the Company records an allowance for The caption property, plant and equipment includes spare parts inventories for which the Company records an allowance for slow-moving or obsolete inventory in accordance with the estimated usage time of each spare part.slow-moving or obsolete inventory in accordance with the estimated usage time of each spare part.

k) Financial instrumentsEffective January 1, 2005, the Company adopted the requirements of new Mexican accounting Bulletin C-2, Financial Instru-Effective January 1, 2005, the Company adopted the requirements of new Mexican accounting Bulletin C-2, Financial Instru-ments, issued by the Mexican Institute of Public Accountants. Such amendments establish that, unlike the previous Bulletin C-2, ments, issued by the Mexican Institute of Public Accountants. Such amendments establish that, unlike the previous Bulletin C-2, changes in the fair value of instruments classifi ed as available-for-sale are to be disclosed in stockholders’ equity.changes in the fair value of instruments classifi ed as available-for-sale are to be disclosed in stockholders’ equity.

Effective January 1, 2005, the Company also adopted the requirements of Mexican accounting Bulletin C-10, Accounting for Effective January 1, 2005, the Company also adopted the requirements of Mexican accounting Bulletin C-10, Accounting for Derivative Instruments and Hedging Activities. Bulletin C-10 establishes the defi ning characteristics that fi nancial instruments Derivative Instruments and Hedging Activities. Bulletin C-10 establishes the defi ning characteristics that fi nancial instruments must have to be considered derivatives, as well as the conditions that must be met for specifi cally designating derivatives as must have to be considered derivatives, as well as the conditions that must be met for specifi cally designating derivatives as hedges. Bulletin C-10 also provides guidelines for assessing the effectiveness of hedging derivatives and the rules for their valu-hedges. Bulletin C-10 also provides guidelines for assessing the effectiveness of hedging derivatives and the rules for their valu-ation and the accounting for changes in their fair value.ation and the accounting for changes in their fair value.

l) GoodwillGoodwill represents the difference between the purchase price and the fair value of the net assets acquired at purchase date.Goodwill represents the difference between the purchase price and the fair value of the net assets acquired at purchase date.

Effective January 1, 2005, the Company adopted the requirements of Mexican accounting Bulletin B-7, Business Acquisitions, Effective January 1, 2005, the Company adopted the requirements of Mexican accounting Bulletin B-7, Business Acquisitions, issued by the Mexican Institute of Public Accountants. Bulletin B-7 establishes the purchase method as the only method for rec-issued by the Mexican Institute of Public Accountants. Bulletin B-7 establishes the purchase method as the only method for rec-ognizing business and entity acquisitions, thus eliminating the amortization of goodwill. Through December 31, 2004, goodwill ognizing business and entity acquisitions, thus eliminating the amortization of goodwill. Through December 31, 2004, goodwill was amortized using the straight-line method over periods of 20 years.was amortized using the straight-line method over periods of 20 years.

The adoption of this accounting pronouncement gave rise to an increase in the Company’s net income at December 31, 2005 The adoption of this accounting pronouncement gave rise to an increase in the Company’s net income at December 31, 2005 of Ps. 22.3 million derived from the proscription of amortization of goodwill.of Ps. 22.3 million derived from the proscription of amortization of goodwill.

Goodwill is recorded initially at acquisition cost and then restated using adjustment factors derived from the NCPI.Goodwill is recorded initially at acquisition cost and then restated using adjustment factors derived from the NCPI.

3636

Goodwill is subject to impairment testing at each year-end.Goodwill is subject to impairment testing at each year-end.

The acquisition of the shares of SOBOCE gave rise to goodwill of Ps. 469.5 million.The acquisition of the shares of SOBOCE gave rise to goodwill of Ps. 469.5 million.

m) Intangible assetsMexican accounting Bulletin C-8, Intangible Assets, specifi es that project development costs are to be capitalized if they meet Mexican accounting Bulletin C-8, Intangible Assets, specifi es that project development costs are to be capitalized if they meet certain established requirements with respect to their recognition as assets. Preoperating costs not identifi ed as development certain established requirements with respect to their recognition as assets. Preoperating costs not identifi ed as development costs are to be recognized as an expense of the period and intangible assets with indefi nite useful lives are not to be amortized, costs are to be recognized as an expense of the period and intangible assets with indefi nite useful lives are not to be amortized, but rather evaluated annually for impairment.but rather evaluated annually for impairment.

n) Impairment of assetsEffective January 1, 2004, the Company adopted the provisions of Mexican accounting Bulletin C-15, Accounting for the Impair-Effective January 1, 2004, the Company adopted the provisions of Mexican accounting Bulletin C-15, Accounting for the Impair-ment or Disposal of Long-lived Assets, issued by the Mexican Institute of Public Accountants.ment or Disposal of Long-lived Assets, issued by the Mexican Institute of Public Accountants.

Bulletin C-15 establishes that if there are any indications of impairment in the value of long-lived assets, the related loss Bulletin C-15 establishes that if there are any indications of impairment in the value of long-lived assets, the related loss should be determined based on the recovery value of the related asset, which is defi ned as the difference between the asset’s should be determined based on the recovery value of the related asset, which is defi ned as the difference between the asset’s net selling price and its carrying amount. An impairment loss is recognized if the net carrying amount of the asset exceeds the net selling price and its carrying amount. An impairment loss is recognized if the net carrying amount of the asset exceeds the recovery value.recovery value.

o) Exchange differencesTransactions in foreign currency are recorded at the prevailing exchange rate on the day of the related transactions. Exchange Transactions in foreign currency are recorded at the prevailing exchange rate on the day of the related transactions. Exchange differences determined from such date to the time foreign currency denominated assets and liabilities are settled or translated differences determined from such date to the time foreign currency denominated assets and liabilities are settled or translated at the balance sheet date are charged or credited to income.at the balance sheet date are charged or credited to income.

p) Labor obligationsUnder Mexican labor law, the Company is liable for certain benefi ts accruing to workers who leave or are dismissed in certain Under Mexican labor law, the Company is liable for certain benefi ts accruing to workers who leave or are dismissed in certain circumstances. The Company recognizes seniority premiums periodically based on independent actuarial computations using circumstances. The Company recognizes seniority premiums periodically based on independent actuarial computations using the projected unit-credit method based on fi nancial hypotheses net of infl ation. Effective January 1, 2005, the Company also the projected unit-credit method based on fi nancial hypotheses net of infl ation. Effective January 1, 2005, the Company also adopted the requirements of revised Mexican accounting Bulletin D-3, Labor Obligations, related to the presentation and dis-adopted the requirements of revised Mexican accounting Bulletin D-3, Labor Obligations, related to the presentation and dis-closure of so-called “other post-retirement benefi ts and the reduction and early extinguishment of such benefi ts”, which are closure of so-called “other post-retirement benefi ts and the reduction and early extinguishment of such benefi ts”, which are now recognized using the projected unit-credit method. Through December 31, 2004, termination payments were charged to now recognized using the projected unit-credit method. Through December 31, 2004, termination payments were charged to results of operations, if and when the expense was incurred.results of operations, if and when the expense was incurred.

q) Income tax, asset tax and employee profi t sharingDeferred taxes are recognized on basically all temporary differences in balance sheet accounts for fi nancial and tax reporting Deferred taxes are recognized on basically all temporary differences in balance sheet accounts for fi nancial and tax reporting purposes, using the enacted income tax rate at the balance sheet date. purposes, using the enacted income tax rate at the balance sheet date.

Current year income tax is charged to results of operations and represents a liability due and payable in less than a year.Current year income tax is charged to results of operations and represents a liability due and payable in less than a year.

The Company evaluates periodically the possibility of recovering deferred tax assets and, if necessary, adjusts the related re-The Company evaluates periodically the possibility of recovering deferred tax assets and, if necessary, adjusts the related re-serve.serve.

Deferred employee profi t sharing is recognized only on temporary differences determined in the reconciliation of current year Deferred employee profi t sharing is recognized only on temporary differences determined in the reconciliation of current year net income for fi nancial and tax reporting purposes, provided there is no indication that the related liability or asset will not be net income for fi nancial and tax reporting purposes, provided there is no indication that the related liability or asset will not be realized in the future.realized in the future.

Current year employee profi t sharing should be charged to results of operations and represents a liability due and payable in a Current year employee profi t sharing should be charged to results of operations and represents a liability due and payable in a period of less than one year.period of less than one year.

37

r) Recognition of revenuesRevenues from sales of cement are recognized at the time the product is shipped and billed to the client. Revenue from concrete Revenues from sales of cement are recognized at the time the product is shipped and billed to the client. Revenue from concrete sales is recognized at the time it is delivered at the place where it will be used. Revenue from land sales is recognized at the sales is recognized at the time it is delivered at the place where it will be used. Revenue from land sales is recognized at the time real estate risks and benefi ts are transferred to customers acquiring the property. time real estate risks and benefi ts are transferred to customers acquiring the property.

s) Earnings per shareEarnings per share of common stock are computed based on the average weighted number of shares of common stock out-Earnings per share of common stock are computed based on the average weighted number of shares of common stock out-standing.standing.

t) Comprehensive incomeComprehensive income consists of the net income or loss for the year plus, if applicable, those items that are refl ected directly Comprehensive income consists of the net income or loss for the year plus, if applicable, those items that are refl ected directly in stockholders’ equity and that do not constitute capital contributions, reductions or distributions.in stockholders’ equity and that do not constitute capital contributions, reductions or distributions.

u) Operations cycleThe Company has a one-year operations cycle, except for the subsidiary Materiales Industriales de Chihuahua, S.A. de C.V., who The Company has a one-year operations cycle, except for the subsidiary Materiales Industriales de Chihuahua, S.A. de C.V., who has an operations cycle of more than one year due to its line of business.has an operations cycle of more than one year due to its line of business.

v) Reclassifi cationsCertain amounts shown in the 2004 consolidated fi nancial statements as originally issued have been reclassifi ed for uniformity Certain amounts shown in the 2004 consolidated fi nancial statements as originally issued have been reclassifi ed for uniformity of presentation with the 2005 consolidated fi nancial statements.of presentation with the 2005 consolidated fi nancial statements.

2. Related partiesIn the years ended December 31, 2005 and 2004, the Company had no transactions with related parties.In the years ended December 31, 2005 and 2004, the Company had no transactions with related parties.

3. InventoriesAn analysis of this caption at December 31, 2005 and 2004 is as follows:An analysis of this caption at December 31, 2005 and 2004 is as follows:

2005 2004Finished products Ps. 124,139 Ps. 99,878 Ps. 99,878 Ps. 99,878Work in process Work in process Work in process 37,189 33,197 33,197 33,197Raw materials and supplies Raw materials and supplies Raw materials and supplies Raw materials and supplies 284,347 215,629 215,629 215,629Land held for sale Land held for sale Land held for sale Land held for sale 340,367 235,685 235,685 235,685

Ps. 786,042 Ps. 584,389

4. Equity investmentsThe Company’s equity investments at December 31, 2005 and 2004 are as follows:The Company’s equity investments at December 31, 2005 and 2004 are as follows:

% Participation 2005 2004Affi liated company:

Promotora de Hospitales Mexicanos, S.A. de C.V. 52.46 Ps. 55,559 Ps. 52,243 52,243Long-term investments:

Promotora de Infraestructura de México, S.A. de C.V. 27.40 77 77 77 77Servicios de Previsión Integral, S.A. de C.V. 33.34 6,205 7,693 7,693 7,693Other Other Other Other 11,749 10,307 10,307 10,307 Ps. 73,590 Ps. 70,320

3838

5. Property, plant and equipmentAn analysis of this caption at December 31, 2005 and 2004 is as follows:An analysis of this caption at December 31, 2005 and 2004 is as follows:

Estimated remaining useful lives 2005 2004

Buildings 28 years Buildings 28 years Buildings 28 years Ps. 2,370,086 Ps. 2,148,474 Ps. 2,148,474 Ps. 2,148,474Machinery and equipment 14 years Machinery and equipment 14 years Machinery and equipment 14 years 7,497,841 6,559,101 6,559,101 6,559,101Automotive equipment 7 years Automotive equipment 7 years Automotive equipment 7 years Automotive equipment 7 years 787,051 575,494 575,494 575,494Furniture and fi xtures 4 years Furniture and fi xtures 4 years Furniture and fi xtures 4 years Furniture and fi xtures 4 years 213,317 156,596 156,596 156,596 10,868,295 9,439,665 9,439,665 9,439,665Accumulated depreciation Accumulated depreciation Accumulated depreciation Accumulated depreciation (4,913,359) (4,139,880) (4,139,880) (4,139,880)Net value Net value Net value Net value 5,954,936 5,299,785 5,299,785 5,299,785

Land Land Land Land 616,025 570,922 570,922 570,922Investment projects Investment projects Investment projects Investment projects 457,237 309,407 309,407 309,407Advances to suppliers Advances to suppliers Advances to suppliers Advances to suppliers 139,217 31,553 31,553 31,553 Ps. 7,167,415 Ps. 6,211,667

Investment projects correspond mainly to the construction of a cement plant located in Pueblo, Colorado in the U.S. with an Investment projects correspond mainly to the construction of a cement plant located in Pueblo, Colorado in the U.S. with an annual production capacity of 1,000,000 tons. The Company estimates that it will invest approximately Dls. 224 million. At annual production capacity of 1,000,000 tons. The Company estimates that it will invest approximately Dls. 224 million. At December 31, 2005, the project is in the development stage of engineering, infrastructure and contracting the manufacturing December 31, 2005, the project is in the development stage of engineering, infrastructure and contracting the manufacturing of machinery and equipment.of machinery and equipment.

The Company capitalized in machinery and equipment, the comprehensive fi nancing cost of Ps. 63,458 of prior years, which The Company capitalized in machinery and equipment, the comprehensive fi nancing cost of Ps. 63,458 of prior years, which will be amortized over the useful life of the related machinery and equipment, which is 14 years. At December 31, 2005, the will be amortized over the useful life of the related machinery and equipment, which is 14 years. At December 31, 2005, the net carrying value is Ps. 39,306.net carrying value is Ps. 39,306.

Depreciation and amortization expense for the years ended December 31, 2005 and 2004 was Ps. 393,600 and Ps. 350,457, Depreciation and amortization expense for the years ended December 31, 2005 and 2004 was Ps. 393,600 and Ps. 350,457, respectively.respectively.

The allowance for obsolete and slow-moving spare parts inventories in the warehouse at December 31, 2005 and 2004 isThe allowance for obsolete and slow-moving spare parts inventories in the warehouse at December 31, 2005 and 2004 isPs. 9,982 and Ps. 2,586, respectively. Such amounts have been included in machinery and equipment.Ps. 9,982 and Ps. 2,586, respectively. Such amounts have been included in machinery and equipment.

6. Other Intangible AssetsAn analysis of this caption at December 31, 2005 and 2004 is as follows:An analysis of this caption at December 31, 2005 and 2004 is as follows:

2005 2004Preoperating expenses and software licenses Ps. 1,281 Ps. 39,018 Ps. 39,018 Ps. 39,018Intangible assets from labor obligations Intangible assets from labor obligations Intangible assets from labor obligations Intangible assets from labor obligations 24,973 15,245 15,245 15,245Cross currency swap collateral guaranty deposits Cross currency swap collateral guaranty deposits Cross currency swap collateral guaranty deposits Cross currency swap collateral guaranty deposits 39,201 40,441 40,441 40,441Option hedge Option hedge Option hedge Option hedge 11,258 23,158 23,158 23,158Extraction rights Extraction rights Extraction rights Extraction rights 16,701 14,557 14,557 14,557Other assets Other assets Other assets Other assets 30,173 24,732 24,732 24,732

Ps. 123,587 Ps. 157,151

39

7. Bank loansAn analysis of bank loans and long-term debt at December 31, 2005 and 2004 is as follows:An analysis of bank loans and long-term debt at December 31, 2005 and 2004 is as follows:

2005 Maturities Current portion of Interest long-term Long termLoan Currency rate Amount debt debtExport credit agenciesBanco Santander Central Hispano, S.A. Dollar 5.86% 25,745 7,350 18,395Banco Santander Central Hispano, S.A. Dollar 5.42% 3,296 3,296 -Banco Santander Central Hispano, S.A. Dollar Libor + 0.70% 2,438 696 1,742Unsecured loans and others Banco Bisa, S.A. Various Various 27,552 19,111 8,441Banco Bisa Leasing, S.A. Dollar Various 506 - 506Banco Santa Cruz, S.A. Various Various 7,194 7,194 -Banco Mercantil, S.A. Dollar Various 27,634 8,370 19,264Banco Nacional de Bolivia, S.A. Dollar Various 26,221 9,477 16,744Banco Ganadero, S.A. Dollar Various 17,736 2,956 14,780SOBOCE bonds Dollar Various 213,983 15,438 198,545Title securities Dollar Various 28,140 16,536 11,604Trading desk promissory notes Dollar Various 22,793 22,793 -FANCESA bonds Dollar Various 35,472 10,135 25,337Banco de Crédito Dollar Various 13,476 13,476 -Securities loansPublic investors Peso 11.5% 1,200,000 - 1,200,000 Ps. 1,652,186 Ps. 136,828 Ps. 1,515,358

2004 Maturities Current portion of Interest long-term Long termLoan Currency rate Amount debt debtExport credit agenciesThe Chase Manhattan Bank, N.A. Dollar Libor+0.375% Ps. 14,312 Ps. 14,312 Ps. -Chase Bank, A.G. Dollar Libor+0.75% 2,826 2,826 -Banco Santander Central Hispano, S.A. Dollar 5.86% 35,329 7,852 27,477Banco Santander Central Hispano, S.A. Dollar 5.42% 7,023 3,510 3,513Banco Santander Central Hispano, S.A. Dollar Libor + 0.70% 3,346 744 2,602Securities loansPublic investors Peso 11.5% 1,200,000 - 1,200,000 Ps. 1,262,836 Ps. 29,244 Ps. 1,233,592

Maturities on the long-term debt at December 31, 2005 are as follows:Maturities on the long-term debt at December 31, 2005 are as follows:

Year ending December 31 Amount maturing2006 Ps. 136,8282007 69,3332008 40,685Thereafter 1,268,512

Ps. 1,515,358

4040

a) On August 31, 2004, Grupo Cementos de Chihuahua, S.A. de C.V. repaid early the syndicated loan of Dls. 80 million. The a) On August 31, 2004, Grupo Cementos de Chihuahua, S.A. de C.V. repaid early the syndicated loan of Dls. 80 million. The original loan was for Dls. 100 million. original loan was for Dls. 100 million.

Also, the subsidiaries GCC Cemento, S.A. de C.V. and GCC Concreto, S.A. de C.V. repaid early their simple loans with Banamex, Also, the subsidiaries GCC Cemento, S.A. de C.V. and GCC Concreto, S.A. de C.V. repaid early their simple loans with Banamex, S.A. in amounts of Ps. 77 million and Ps. 24 million, respectively, on original principals of Ps. 209 million and Ps. 52 million, S.A. in amounts of Ps. 77 million and Ps. 24 million, respectively, on original principals of Ps. 209 million and Ps. 52 million, respectively.respectively.

b) On December 14, 2001, Grupo Cementos de Chihuahua, S.A. de C.V. issued through the Mexican Stock Exchange bonds b) On December 14, 2001, Grupo Cementos de Chihuahua, S.A. de C.V. issued through the Mexican Stock Exchange bonds for a total of Ps. 1,200,000 (12,000,000 bonds with a face value of Ps. 100 each). The specifi ed annual interest rate is 11.5%, for a total of Ps. 1,200,000 (12,000,000 bonds with a face value of Ps. 100 each). The specifi ed annual interest rate is 11.5%, which shall remain fi xed over the term of the issue. Interest is payable semiannually, starting on June 14, 2002. The principal which shall remain fi xed over the term of the issue. Interest is payable semiannually, starting on June 14, 2002. The principal amount is to be repaid in a bullet payment on December 14, 2006 (the maturity date of the issue). The resources obtained from amount is to be repaid in a bullet payment on December 14, 2006 (the maturity date of the issue). The resources obtained from the issuance were used to repay the debt contracted to acquire the assets of Dacotah Cement. The bonds are unsecured and the issuance were used to repay the debt contracted to acquire the assets of Dacotah Cement. The bonds are unsecured and are guaranteed by Cementos de Chihuahua, S.A. de C.V. and GCC Cemento, S.A. de C.V. are guaranteed by Cementos de Chihuahua, S.A. de C.V. and GCC Cemento, S.A. de C.V.

The Company has a line of credit engaged with a bank for up to Dls. 280 million to refi nance stock certifi cates and to fi nance The Company has a line of credit engaged with a bank for up to Dls. 280 million to refi nance stock certifi cates and to fi nance capital investments for the Pueblo Project. Drawdowns are for terms of up to 7 years and interest is determined based on the capital investments for the Pueblo Project. Drawdowns are for terms of up to 7 years and interest is determined based on the Company’s debt to operating cash fl ow ratio and the Libor + 40 - 65 base points. Company’s debt to operating cash fl ow ratio and the Libor + 40 - 65 base points.

In 2001, the Company also entered into cross currency swap agreements, whereby the Company exchanged the interest rate In 2001, the Company also entered into cross currency swap agreements, whereby the Company exchanged the interest rate and the currency originally contracted over the original debt of Ps. 1,200,000. During the term of the agreement, cash fl ows and the currency originally contracted over the original debt of Ps. 1,200,000. During the term of the agreement, cash fl ows from the exchange of rates coincide on dates and terms with the payments of interest generated by the underlying liabilities. from the exchange of rates coincide on dates and terms with the payments of interest generated by the underlying liabilities. The aforementioned was carried out as a strategy to reduce the Company’s fi nancing cost and balance out the currency in which The aforementioned was carried out as a strategy to reduce the Company’s fi nancing cost and balance out the currency in which the fi nancial liabilities are denominated with those of the country in which cash fl ows are generated.the fi nancial liabilities are denominated with those of the country in which cash fl ows are generated.

c) On March 22, 2004, SOBOCE issued bonds for a total of Dls. 35 million to restructure liabilities. The balance at December 31, c) On March 22, 2004, SOBOCE issued bonds for a total of Dls. 35 million to restructure liabilities. The balance at December 31, 2005 amounts to Dls. 19.9 million.2005 amounts to Dls. 19.9 million.

d) FANCESA approved a program to issue a public offering of securities called “FANCESA Bonds” for up to Dls. 36 million. The d) FANCESA approved a program to issue a public offering of securities called “FANCESA Bonds” for up to Dls. 36 million. The balance at December 31, 2005 amounts to Dls. 3.2 million.balance at December 31, 2005 amounts to Dls. 3.2 million.

Certain SOBOCE loans are secured by real estate, machinery and mining concessions.Certain SOBOCE loans are secured by real estate, machinery and mining concessions.

Certain long-term debt agreements contain restrictive covenants and others establish fi nancial ratio limits which, if not observed Certain long-term debt agreements contain restrictive covenants and others establish fi nancial ratio limits which, if not observed or corrected within a given period of time to the creditors’ satisfaction, could give rise to the creditors demanding the early or corrected within a given period of time to the creditors’ satisfaction, could give rise to the creditors demanding the early repayment of the loans. At December 31, 2005 and 2004, the Company has observed all fi nancial ratios and the terms of the repayment of the loans. At December 31, 2005 and 2004, the Company has observed all fi nancial ratios and the terms of the restrictive covenants.restrictive covenants.

8. Foreign currency positionThe Company has the following U.S. dollar denominated assets and liabilities at December 31, 2005 and 2004:The Company has the following U.S. dollar denominated assets and liabilities at December 31, 2005 and 2004:

2005 2004Current assets Dlls. 133,811 Dlls. 81,918 Dlls. 81,918 Dlls. 81,918Current liabilities Current liabilities Current liabilities Current liabilities (49,292) (14,536) (14,536) (14,536)Long-term liabilities Long-term liabilities Long-term liabilities Long-term liabilities (191,519) (180,237) (180,237) (180,237)Net short position Dlls. (107,000) Dlls. (112,855)

The exchange rates used to translate the U.S. dollar denominated assets and liabilities to Mexican pesos at December 31, 2005 The exchange rates used to translate the U.S. dollar denominated assets and liabilities to Mexican pesos at December 31, 2005 and 2004 were Ps. 10.7777 and Ps. 11.15, respectively. The exchange rate at February 17, 2006 is Ps.10.5175. Machinery and and 2004 were Ps. 10.7777 and Ps. 11.15, respectively. The exchange rate at February 17, 2006 is Ps.10.5175. Machinery and equipment is mostly imported. An analysis is as follows:equipment is mostly imported. An analysis is as follows:

41

2005 2004 Amount in Amount in foreign foreignCurrency currency Exchange rate currency Exchange rateU.S. dollar 355,365 Ps. 10.7777 332,939 Ps. 11.15 332,939 Ps. 11.15 332,939 Ps. 11.15

During the periods ended December 31, 2005 and 2004, export sales, principally made by GCC Cemento, S.A. de C.V., totaled During the periods ended December 31, 2005 and 2004, export sales, principally made by GCC Cemento, S.A. de C.V., totaled Dls. 31,958 and Dls. 14,376, respectively.Dls. 31,958 and Dls. 14,376, respectively.

9. Labor obligationsThe Company has a defi ned-benefi ts employee pension and seniority premium plan that covers all of its employees of the The Company has a defi ned-benefi ts employee pension and seniority premium plan that covers all of its employees of the subsidiaries in Mexico. Pensions are determined based on the salary of workers in their fi nal year of service, the number of years subsidiaries in Mexico. Pensions are determined based on the salary of workers in their fi nal year of service, the number of years worked and their age at retirement Seniority premiums are paid to employees as required under Mexican labor law.worked and their age at retirement Seniority premiums are paid to employees as required under Mexican labor law.

At December 31, 2005 and 2004, the net period cost of pensions and seniority premiums charged to results of operations ag-At December 31, 2005 and 2004, the net period cost of pensions and seniority premiums charged to results of operations ag-gregated Ps. 17,931 and Ps. 13,632, respectively. An analysis of the net period cost and the reserve for pensions and seniority gregated Ps. 17,931 and Ps. 13,632, respectively. An analysis of the net period cost and the reserve for pensions and seniority premiums, together with the basic actuarial assumptions considered in the computation of labor obligations, is as follows:premiums, together with the basic actuarial assumptions considered in the computation of labor obligations, is as follows:

The net period cost and the components of the reserve for pensions and seniority premiums at December 31, 2005 and 2004 The net period cost and the components of the reserve for pensions and seniority premiums at December 31, 2005 and 2004 are as follows:are as follows:

2005 2004Labor cost Ps. (7,198) Ps. (5,156) Ps. (5,156) Ps. (5,156)Financial cost Financial cost Financial cost Financial cost (4,507) (4,403) (4,403) (4,403)Expected return on plan assets Expected return on plan assets Expected return on plan assets Expected return on plan assets 29 25 25Amortization of past services Amortization of past services Amortization of past services Amortization of past services (6,255) (4,098) (4,098) (4,098)

Net period cost Ps. (17,931) Ps. (13,632) Ps. (13,632) Ps. (13,632) Reserve for pensions and seniority premiums

Projected benefi t obligations (PBO) Ps. (112,296) Ps. (82,213) Ps. (82,213) Ps. (82,213)Plan assets Plan assets Plan assets Plan assets 346 454 454 454Transition liability Transition liability Transition liability Transition liability 19,810 11,890 11,890 11,890Unrecognized plan improvements Unrecognized plan improvements Unrecognized plan improvements Unrecognized plan improvements 5,778 3,391 3,391 3,391Unamortized variances in assumptions and

experience adjustments experience adjustments experience adjustments experience adjustments 43,917 38,370 38,370 38,370Additional liability Additional liability Additional liability Additional liability (55,072) (39,076) (39,076) (39,076)

Labor obligations in Mexico Ps. (97,517) Ps. (67,184) Ps. (67,184) Ps. (67,184)Ps. 97,093 Ps. 68,777

The unamortized items will be amortized over a period of 20 years.The unamortized items will be amortized over a period of 20 years.

The most signifi cant assumptions used in determining the net period cost of the plan are as follows:The most signifi cant assumptions used in determining the net period cost of the plan are as follows:

Real rates Real rates 2005 2004Discount rate 5.00% 5.00% 5.00% 5.00%Salary increase rates 1.50% 1.50% 1.50% 1.50%

b) The affi liate Sociedad Boliviana de Cemento, S.A. and Subsidiaries constitute a provision for termination payments for Com-b) The affi liate Sociedad Boliviana de Cemento, S.A. and Subsidiaries constitute a provision for termination payments for Com-pany employees for total liabilities accrued at year-end closing. Liabilities at December 31, 2005 are Ps. 37,143. In conformity pany employees for total liabilities accrued at year-end closing. Liabilities at December 31, 2005 are Ps. 37,143. In conformity with current legal provisions in Bolivia, after fi ve years of service, personnel are entitled to termination pay equal to one-month with current legal provisions in Bolivia, after fi ve years of service, personnel are entitled to termination pay equal to one-month salary for each year of service, including voluntary retirement.salary for each year of service, including voluntary retirement.

4242

c) The subsidiaries GCC Rio Grande, Inc. (GCCRG) and GCC Dacotah, Inc.(Dacotah) have established the following pension and c) The subsidiaries GCC Rio Grande, Inc. (GCCRG) and GCC Dacotah, Inc.(Dacotah) have established the following pension and benefi t plans:benefi t plans:

GCCRG and Dacotah have established a pension plan that consists of contributing the amounts necessary to cover future em-GCCRG and Dacotah have established a pension plan that consists of contributing the amounts necessary to cover future em-ployee pensions in accordance with an actuarial study. GCCRG and Dacotah employees must have fi ve and three years of ser-ployee pensions in accordance with an actuarial study. GCCRG and Dacotah employees must have fi ve and three years of ser-vice, respectively, to be entitled to this plan. After such term is met, employees become full benefi ciaries of the pension plan. vice, respectively, to be entitled to this plan. After such term is met, employees become full benefi ciaries of the pension plan.

An analysis of the pension plan and amounts recognized in the consolidated fi nancial statements at December 31, 2005 and An analysis of the pension plan and amounts recognized in the consolidated fi nancial statements at December 31, 2005 and 2004 is as follows:2004 is as follows:

2005 2004Plan provisions:Projected obligations Ps. 107,951 Ps. 88,901 Ps. 88,901 Ps. 88,901Market value of plan assets Market value of plan assets Market value of plan assets Market value of plan assets (90,285) (80,011) (80,011) (80,011)Unrecognized loss Unrecognized loss Unrecognized loss Unrecognized loss (19,181) (11,375) (11,375) (11,375)

Ps. (1,615) Ps. (2,485) Ps. (2,485) Ps. (2,485)Net period cost Ps. 12,289 Ps. 12,789

GCCRG has established a benefi t plan that qualifi es as a 401(k) plan. Such plan covers substantially all Company employees. GCCRG has established a benefi t plan that qualifi es as a 401(k) plan. Such plan covers substantially all Company employees.

Dacotah has a post-retirement benefi t plan that covers all employees. Such plan pays employees up to 25% of the unused Dacotah has a post-retirement benefi t plan that covers all employees. Such plan pays employees up to 25% of the unused medical insurance at a current rate not in excess of 550 hours.medical insurance at a current rate not in excess of 550 hours.

10. Stockholders’ equitya) Capital stock is variable, with a fi xed minimum of Ps.134,960, represented by 337,400,000 shares with no par value.a) Capital stock is variable, with a fi xed minimum of Ps.134,960, represented by 337,400,000 shares with no par value.

b) At a regular stockholders’ meeting held on April 27, 2005, the stockholders declared a cash dividend of Ps. 108,889b) At a regular stockholders’ meeting held on April 27, 2005, the stockholders declared a cash dividend of Ps. 108,889(Ps. 110,793 in constant pesos), equal to $ 0.33 pesos per share.(Ps. 110,793 in constant pesos), equal to $ 0.33 pesos per share.

c) At a regular stockholders’ meeting held on April 27, 2004, the stockholders declared a cash dividend of Ps. 85,930c) At a regular stockholders’ meeting held on April 27, 2004, the stockholders declared a cash dividend of Ps. 85,930(Ps. 91,990 in constant pesos), equal to $ 0.26 pesos per share.(Ps. 91,990 in constant pesos), equal to $ 0.26 pesos per share.

d) During the year, the Company repurchased 2,910,400 shares, paying a premium of Ps. 10,066. At December 31, 2005, d) During the year, the Company repurchased 2,910,400 shares, paying a premium of Ps. 10,066. At December 31, 2005, the Company held 6,105,802 of its own treasury shares for a total of Ps. 148,482, which represent 1.8% of the Company’s the Company held 6,105,802 of its own treasury shares for a total of Ps. 148,482, which represent 1.8% of the Company’s outstanding shares. At December 31, 2005, the Company has 331,294,198 outstanding shares. The balance available for the outstanding shares. At December 31, 2005, the Company has 331,294,198 outstanding shares. The balance available for the repurchase of the Company’s own shares is Ps. 107,031.repurchase of the Company’s own shares is Ps. 107,031.

e) In conformity with the Mexican Corporations Act, the Company is required to appropriate at least 5% of the net income of e) In conformity with the Mexican Corporations Act, the Company is required to appropriate at least 5% of the net income of each year to increase the legal reserve. This practice must be continued until the legal reserve reaches 20% of capital stock, each year to increase the legal reserve. This practice must be continued until the legal reserve reaches 20% of capital stock, issued and outstanding.issued and outstanding.

f) Dividends paid from the consolidated net tax profi t account (CUFIN) are not subject to payment of income tax. However, f) Dividends paid from the consolidated net tax profi t account (CUFIN) are not subject to payment of income tax. However, earnings may be distributed from the CUFIN only after the consolidated reinvested net tax profi t account (CUFINRE) has been earnings may be distributed from the CUFIN only after the consolidated reinvested net tax profi t account (CUFINRE) has been exhausted.exhausted.

Dividends paid from the CUFINRE are subject to 5% income tax for earnings distributed from income of 2001 and 2000 and Dividends paid from the CUFINRE are subject to 5% income tax for earnings distributed from income of 2001 and 2000 and 3% for dividends paid from 1999 income. Any distribution of earnings in excess of the net tax profi t account (CUFIN) balance 3% for dividends paid from 1999 income. Any distribution of earnings in excess of the net tax profi t account (CUFIN) balance will be subject to corporate income tax, payable by the Company, at the enacted income tax rate at that time.will be subject to corporate income tax, payable by the Company, at the enacted income tax rate at that time.

43

11. Comprehensive fi nancing incomeAn analysis of comprehensive fi nancing income is as follows at December 31:An analysis of comprehensive fi nancing income is as follows at December 31:

2005 2004Interest income Ps. 87,575 Ps. 96,753 Ps. 96,753 Ps. 96,753Interest expense Interest expense Interest expense (84,204) (82,831) (82,831) (82,831)Exchange loss, net Exchange loss, net Exchange loss, net Exchange loss, net 74,950 (1,984) (1,984) (1,984)Net monetary effect Net monetary effect Net monetary effect Net monetary effect 24,611 32,508 32,508 32,508

Ps. 102,932 Ps. 44,446

12. Segment informationThe Company is a Mexican corporation that operates in only one segment, which is the production and marketing of hydraulic The Company is a Mexican corporation that operates in only one segment, which is the production and marketing of hydraulic cement and ready-mix concrete.cement and ready-mix concrete.

The Company’s operations in the United States are carried out by three wholly owned subsidiaries.The Company’s operations in the United States are carried out by three wholly owned subsidiaries.

The Company’s operations in Bolivia are carried out mainly by two 47.02% owned subsidiaries.The Company’s operations in Bolivia are carried out mainly by two 47.02% owned subsidiaries.

In the following list, the column on Mexico includes all of the domestic transactions:In the following list, the column on Mexico includes all of the domestic transactions:

2005 Eliminations and other Mexico Bolivia United States adjustements ConsolidatedNet sales:

Unaffi liated customers Ps. 2,292,187 Ps. 171,160 Ps. 2,259,573 Ps. - Ps. 4,722,920Intercompany transfers 2,657,791 - 65,078 (2,722,869) -

Ps. 4,949,978 Ps. 171,160 Ps. 2,324,651 Ps. (2,722,869) Ps. 4,722,920

Pretax income Ps. 743,153 Ps. 42,144 Ps. 421,311 Ps. (2,524) Ps. 1,204,084Depreciation and amortization Ps. 256,554 Ps. 6,807 Ps. 130,239 Ps. - Ps. 393,600Total assets Ps. 5,787,986 Ps. 1,074,957 Ps. 4,201,316 Ps. (2,524) Ps. 11,061,735

2004 Eliminations Eliminations and other and other Mexico United States adjustements Consolidated Mexico United States adjustements ConsolidatedNet sales:

Unaffi liated customers Ps. 2,204,519 Ps. 1,868,200 Ps. - Ps. 4,072,719Intercompany transfers 2,156,379 (2,156,379) -

Ps. 4,360,898 Ps. 1,868,200 Ps. (2,156,379) Ps. 4,072,719

Pretax income Ps. 585,334 Ps. 240,642 Ps. (7,634) Ps. 818,342Depreciation and amortization Ps. 244,116 Ps. 106,341 Ps. - Ps. 350,457Total assets Ps. 4,969,241 Ps. 4,861,257 Ps. (7,634) Ps. 9,822,864

4444

13. Income tax, asset tax and employee profi t sharinga) Companies in Mexico are subject to payment of the higher of either corporate income tax or asset tax. The Company and its a) Companies in Mexico are subject to payment of the higher of either corporate income tax or asset tax. The Company and its subsidiaries determine corporate income tax and asset tax on a consolidated basis. Income tax was determined at the 30% and subsidiaries determine corporate income tax and asset tax on a consolidated basis. Income tax was determined at the 30% and 33% income tax rate in 2005 and 2004, respectively.33% income tax rate in 2005 and 2004, respectively.

b) An analysis of income tax charged to results of operations for the years ended December 31, 2005 and 2004 is as follows:b) An analysis of income tax charged to results of operations for the years ended December 31, 2005 and 2004 is as follows:

2005 2004Current year income tax Ps. 226,378 Ps. 113,245 Ps. 113,245 Ps. 113,245Deferred income tax Deferred income tax Deferred income tax Deferred income tax (27,956) (97,577) (97,577) (97,577)Total income tax Ps. 198,422 Ps. 15,668

Since current tax legislation recognizes partially the effects of infl ation on certain items that give rise to deferred taxes, the cur-Since current tax legislation recognizes partially the effects of infl ation on certain items that give rise to deferred taxes, the cur-rent year net monetary effect on such items of Ps. 21,623 has been reclassifi ed from the current year monetary position result rent year net monetary effect on such items of Ps. 21,623 has been reclassifi ed from the current year monetary position result to current year deferred income tax. Also, the current year result from holding non-monetary assets of Ps. 35,843 has been to current year deferred income tax. Also, the current year result from holding non-monetary assets of Ps. 35,843 has been reclassifi ed to current year deferred income tax.reclassifi ed to current year deferred income tax.

c) An analysis of the major temporary differences that gave rise to deferred tax assets (liabilities), in conformity with Bulletin c) An analysis of the major temporary differences that gave rise to deferred tax assets (liabilities), in conformity with Bulletin D-4, is as follows:D-4, is as follows:

December 31 December 31 2005 2004Deferred tax asset:

Liability provisions Ps. 51,693 Ps. 62,728 Ps. 62,728 Ps. 62,728Advances from customers Advances from customers Advances from customers Advances from customers 17,422 41,243 41,243 41,243Asset tax paid in prior year Asset tax paid in prior year Asset tax paid in prior year Asset tax paid in prior year 38,977 36,872 36,872 36,872

Tax loss from prior years Tax loss from prior years Tax loss from prior years Tax loss from prior years 612,228 325,027 325,027 325,027 720,320 465,870 465,870 465,870Valuation allowance Valuation allowance Valuation allowance Valuation allowance (527,229) (309,111) (309,111) (309,111) 193,091 156,759 156,759 156,759Deferred tax liability:

Fixed assets Fixed assets Fixed assets Fixed assets 865,483 953,539 953,539 953,539Inventories Inventories Inventories Inventories 139,840 177,664 177,664 177,664Effect of foreign subsidiaries, prepaid expenses and others Effect of foreign subsidiaries, prepaid expenses and others Effect of foreign subsidiaries, prepaid expenses and others Effect of foreign subsidiaries, prepaid expenses and others 142,567 81,366 81,366 81,366

1,147,890 1,212,569 1,212,569 1,212,569Deferred income tax, net Ps. 954,799 Ps. 1,055,810

d) The major items that gave rise to a difference between the total amount of current year income tax and the current year d) The major items that gave rise to a difference between the total amount of current year income tax and the current year deferred tax determined at the statutory rate are as follows:deferred tax determined at the statutory rate are as follows: 2005 2004Tax on pretax income (30% in 2005 and 33% in 2004) Ps. 361,225 Ps. 270,052 Ps. 270,052 Ps. 270,052Permanent items:

Non-deductible expenses Non-deductible expenses Non-deductible expenses Non-deductible expenses 2,450 1,630 1,630 1,630Infl ation adjustments, net of monetary position result Infl ation adjustments, net of monetary position result Infl ation adjustments, net of monetary position result 6,257 (2,415) (2,415) (2,415)Effect from translation of exchange differences Effect from translation of exchange differences Effect from translation of exchange differences Effect from translation of exchange differences 14,535 238 238 238Release of valuation allowance Release of valuation allowance Release of valuation allowance Release of valuation allowance (86,802) (83,627) (83,627) (83,627)

Effect of restatement of other items Effect of restatement of other items Effect of restatement of other items Effect of restatement of other items (103,752) (65,998) (65,998) (65,998)Income tax expense for the year Income tax expense for the year Income tax expense for the year Income tax expense for the year 193,913 119,880 119,880 119,880

Effect of change in tax rate Effect of change in tax rate Effect of change in tax rate Effect of change in tax rate 4,509 (104,212) (104,212) (104,212)Income tax expense, net Ps. 198,422 15,668 15,668 15,668Effective tax rate Effective tax rate Effective tax rate Effective tax rate 16% 14.6%

45

As of January 1, 2005, an annual one-percentage point reduction in the statutory corporate income tax rate was approved, As of January 1, 2005, an annual one-percentage point reduction in the statutory corporate income tax rate was approved, until the rate reaches 28% in 2007.until the rate reaches 28% in 2007.

e) An analysis through 2005 of the available asset tax refund that may be requested, restated for infl ation, in future years e) An analysis through 2005 of the available asset tax refund that may be requested, restated for infl ation, in future years whenever income tax exceeds asset tax payable is as follows:whenever income tax exceeds asset tax payable is as follows:

Year in which Restated amount at asset tax was paid December 31, 2005 Year of expiration 1999 Ps. 417 2009 2009 2000 2000 2,263 2010 2010 2001 2001 4,442 2011 2011 2002 2002 4,897 2012 2012 2003 2003 5,168 2013 2013 2004 2004 9,059 2014 2014 2005 2005 12,731 2015 2015 Ps. 38,977

f) At December 31, 2005, Grupo Cementos de Chihuahua, S.A. de C.V. and some of its subsidiaries have operating tax losses of f) At December 31, 2005, Grupo Cementos de Chihuahua, S.A. de C.V. and some of its subsidiaries have operating tax losses of approximately Ps. 2,186,530 that may be carried forward against taxable income of future years. An analysis is as follows:approximately Ps. 2,186,530 that may be carried forward against taxable income of future years. An analysis is as follows:

Effect on Year in which Year in which Restated amount at deferred loss was incurred carryforward expires December 31, 2005 income tax 1993 2007 Ps. 15,092 Ps. 4,226 1994 2008 1994 2008 112,203 31,417 1995 2009 1995 2009 345,593 96,766 1996 2010 1996 2010 367,396 102,871 1997 2011 1997 2011 218,362 61,141 1997 2007 1997 2007 53,231 14,904 1998 2008 1998 2008 142,693 39,954 1998 2012 1998 2012 316,925 88,739 1999 2009 1999 2009 421,014 117,884 1999 2013 1999 2013 44,741 12,528 2001 2011 2001 2011 9,336 2,614 2002 2012 36,583 10,243 2003 2013 2003 2013 16,075 4,501 2004 2014 2004 2014 16,417 4,597 2005 2015 2005 2015 70,869 19,843 Ps. 2,186,530 Ps. 612,228

g) At December 31, 2005, the balance of the restated contributed capital account (CUCA), net tax profi t account (CUFIN) and g) At December 31, 2005, the balance of the restated contributed capital account (CUCA), net tax profi t account (CUFIN) and the net reinvested tax profi t account (CUFINRE) was Ps. 5,834,719, Ps. 692,340 and Ps. 249,634, respectively.the net reinvested tax profi t account (CUFINRE) was Ps. 5,834,719, Ps. 692,340 and Ps. 249,634, respectively.

h) Employee profi t sharing is determined basically on tax results, excluding the infl ation adjustment and the restatement of h) Employee profi t sharing is determined basically on tax results, excluding the infl ation adjustment and the restatement of depreciation expense.depreciation expense.

14. Anti-dumping dutiesIn 1990, the United States Department of Commerce (DOC) imposed an anti-dumping duty order on imports of Gray Portland In 1990, the United States Department of Commerce (DOC) imposed an anti-dumping duty order on imports of Gray Portland Cement and Clinker from Mexico. As a result, beginning September 1994, RGPC has been subject to the payment of estimated Cement and Clinker from Mexico. As a result, beginning September 1994, RGPC has been subject to the payment of estimated anti-dumping duty deposits (which are expensed as incurred) on imports of Gray Portland Cement and Clinker from Mexico.anti-dumping duty deposits (which are expensed as incurred) on imports of Gray Portland Cement and Clinker from Mexico.

4646

The Mexican Government initiated a formal complaint against the United States Government under the General Agreement on The Mexican Government initiated a formal complaint against the United States Government under the General Agreement on Tariffs and Trade (GATT) for alleged violations of GATT obligations in the anti-dumping case. On July 9, 1992, a dispute settle-Tariffs and Trade (GATT) for alleged violations of GATT obligations in the anti-dumping case. On July 9, 1992, a dispute settle-ment panel formed under the auspices of the GATT determined that the United States violated the GATT anti-dumping code and ment panel formed under the auspices of the GATT determined that the United States violated the GATT anti-dumping code and its own anti-dumping law, by imposing anti-dumping duties on Mexican cement. The panel stated that the United States must its own anti-dumping law, by imposing anti-dumping duties on Mexican cement. The panel stated that the United States must revoke the anti-dumping order and refund all anti-dumping duties that have been paid. Although this GATT panel decision is not revoke the anti-dumping order and refund all anti-dumping duties that have been paid. Although this GATT panel decision is not independently enforceable under United States law, since November 1992, the United States and Mexican Governments have independently enforceable under United States law, since November 1992, the United States and Mexican Governments have been engaged in consultations seeking a settlement that would include implementation of the GATT panel recommendations.been engaged in consultations seeking a settlement that would include implementation of the GATT panel recommendations.

With respect to the anti-dumping deposits made in each review period, should the actual margin determined by the different With respect to the anti-dumping deposits made in each review period, should the actual margin determined by the different administrative reviews be less than the amount of anti-dumping duties already deposited with the U.S. Customs Service, the administrative reviews be less than the amount of anti-dumping duties already deposited with the U.S. Customs Service, the difference, together with interest, will be refunded to GCCRG. Should the actual margin be determined to be greater than the difference, together with interest, will be refunded to GCCRG. Should the actual margin be determined to be greater than the amount deposited, then additional payments, including interest, will be required from GCCRG.amount deposited, then additional payments, including interest, will be required from GCCRG.

From October 1995 through December 2005, the DOC performed its Fifth, Sixth, Seventh, Eighth, Ninth, Tenth, Eleventh, From October 1995 through December 2005, the DOC performed its Fifth, Sixth, Seventh, Eighth, Ninth, Tenth, Eleventh, Twelfth, Thirteenth and Fourteenth Administrative Review, covering sales of imported Mexican cement made during the period Twelfth, Thirteenth and Fourteenth Administrative Review, covering sales of imported Mexican cement made during the period from August 1994 through July 2004. The DOC calculated a dumping margin rate in the fi nal determination for each review as from August 1994 through July 2004. The DOC calculated a dumping margin rate in the fi nal determination for each review as follows: 73.69% for the Fifth Administrative Review in April 1997; 37.49% for the Sixth Administrative Review in March 1998; follows: 73.69% for the Fifth Administrative Review in April 1997; 37.49% for the Sixth Administrative Review in March 1998; 49.58% for the Seventh Administrative Review in March 1999; 45.98% for the Eighth Administrative Review in March 2000; 49.58% for the Seventh Administrative Review in March 1999; 45.98% for the Eighth Administrative Review in March 2000; 39.34% was established in March 2001 and modifi ed in May 2001 to 38.65% for the Ninth Administrative Review; 55.98% 39.34% was established in March 2001 and modifi ed in May 2001 to 38.65% for the Ninth Administrative Review; 55.98% for the Tenth Administrative Review in March 2002; 73.74% for the Eleventh Administrative Review in January 2003; 80.75% for the Tenth Administrative Review in March 2002; 73.74% for the Eleventh Administrative Review in January 2003; 80.75% for the Twelfth Administrative Review in October 2003; 54.97% for the Thirteenth Administrative Review on December 29, 2004 for the Twelfth Administrative Review in October 2003; 54.97% for the Thirteenth Administrative Review on December 29, 2004 and 46.26% for the Fourteenth Administrative Review on January 18, 2006. In September 2005, the DOC initiated its Fifteenth and 46.26% for the Fourteenth Administrative Review on January 18, 2006. In September 2005, the DOC initiated its Fifteenth Administrative Review, covering sales of imported Mexican cement made during the period from August 2004 through July Administrative Review, covering sales of imported Mexican cement made during the period from August 2004 through July 2005. The DOC is expected to make its fi nal determination in September 2006.2005. The DOC is expected to make its fi nal determination in September 2006.

GCCRG requested a NAFTA Panel review of the DOC’s fi nal determination on the Sixth, Seventh, Eighth, Ninth, Tenth, Eleventh, GCCRG requested a NAFTA Panel review of the DOC’s fi nal determination on the Sixth, Seventh, Eighth, Ninth, Tenth, Eleventh, Twelfth, Thirteenth and Fourteenth Administrative ReviewTwelfth, Thirteenth and Fourteenth Administrative Review

The NAFTA Panel review of the fi nal determinations on the Fifth and Seventh Administrative Reviews have been completed.The NAFTA Panel review of the fi nal determinations on the Fifth and Seventh Administrative Reviews have been completed.

For the Fifth Administrative Review, the NAFTA binational panel decided in GCCRG’s favor in its decision issued in June 1999. For the Fifth Administrative Review, the NAFTA binational panel decided in GCCRG’s favor in its decision issued in June 1999. In November 1999, the DOC issued its amended fi nal results of the Fifth Administrative Review pursuant to the Panel’s instruc-In November 1999, the DOC issued its amended fi nal results of the Fifth Administrative Review pursuant to the Panel’s instruc-tions, calculating a dumping margin of 44.89% (a decrease from the original 73.69%). The U.S. Government requested a NAFTA tions, calculating a dumping margin of 44.89% (a decrease from the original 73.69%). The U.S. Government requested a NAFTA extraordinary challenge committee (ECC) to review the Panel’s decision. The NAFTA ECC issued its fi nal decision, upholding the extraordinary challenge committee (ECC) to review the Panel’s decision. The NAFTA ECC issued its fi nal decision, upholding the Panel’s decision in favor of GCCRG, on October 30, 2003. The DOC issued fi nal liquidation instructions to Customs on January Panel’s decision in favor of GCCRG, on October 30, 2003. The DOC issued fi nal liquidation instructions to Customs on January 12, 2004, with the dumping margin of 44.89% and a specifi c assessment rate for GCCRG of 10.41%. As a result of the liquida-12, 2004, with the dumping margin of 44.89% and a specifi c assessment rate for GCCRG of 10.41%. As a result of the liquida-tion instructions implementing the NAFTA Panel’s decision and the DOC’s fi nal calculations, GCCRG began to receive refunds of tion instructions implementing the NAFTA Panel’s decision and the DOC’s fi nal calculations, GCCRG began to receive refunds of the excess anti-dumping duty deposits paid on cement imported during the relevant period (August 1994 – July 1995).the excess anti-dumping duty deposits paid on cement imported during the relevant period (August 1994 – July 1995).

At December 31, 2004, GCCRG received anti-dumping deposit refunds related to the Fifth Administrative Review in the amount At December 31, 2004, GCCRG received anti-dumping deposit refunds related to the Fifth Administrative Review in the amount of Dls.1,464 with the related interest of Dls. 1,197.of Dls.1,464 with the related interest of Dls. 1,197.

For the Seventh Administrative Review, the NAFTA panel issued a decision in favor of GCCRG on September 4, 2003, and For the Seventh Administrative Review, the NAFTA panel issued a decision in favor of GCCRG on September 4, 2003, and remanded the case to DOC for further action. The DOC issued a Final Remand Redetermination, which was confi rmed by the remanded the case to DOC for further action. The DOC issued a Final Remand Redetermination, which was confi rmed by the NAFTA panel on January 22, 2004. As a result of the liquidation instructions implementing the NAFTA Panel’s decision and the NAFTA panel on January 22, 2004. As a result of the liquidation instructions implementing the NAFTA Panel’s decision and the DOC’s fi nal calculations, GCCRG began to receive refunds of the excess anti-dumping duty deposit paid on cement imported DOC’s fi nal calculations, GCCRG began to receive refunds of the excess anti-dumping duty deposit paid on cement imported during the relevant period (August 1996 – July 1997).during the relevant period (August 1996 – July 1997).

At December 31, 2004, GCCRG received anti-dumping deposit refunds related to the Seventh Administrative Review in the At December 31, 2004, GCCRG received anti-dumping deposit refunds related to the Seventh Administrative Review in the amount of Dls. 6,253 with the related interest of Dls. 3,630.amount of Dls. 6,253 with the related interest of Dls. 3,630.

The NAFTA Panel appeals for the remaining administrative reviews (the Sixth and Eighth through the Fourteenth Administrative The NAFTA Panel appeals for the remaining administrative reviews (the Sixth and Eighth through the Fourteenth Administrative Reviews) are pending. GCCRG cannot determine the fi nal liability contingencies that will result from such appeals.Reviews) are pending. GCCRG cannot determine the fi nal liability contingencies that will result from such appeals.

47

For the administrative reviews that are subject to NAFTA litigation or are pending before the DOC, GCCRG has estimated, to For the administrative reviews that are subject to NAFTA litigation or are pending before the DOC, GCCRG has estimated, to the best of its ability, the potential refunds or contingent liabilities. Based on such estimates, GCCRG has funded an irrevocable the best of its ability, the potential refunds or contingent liabilities. Based on such estimates, GCCRG has funded an irrevocable trust for Dls. 40,000 for estimated anti-dumping costs in excess of the deposit amounts paid to U.S. Customs. The purpose of trust for Dls. 40,000 for estimated anti-dumping costs in excess of the deposit amounts paid to U.S. Customs. The purpose of the trust is to pay estimated anti-dumping duty liabilities resulting from imported cement. As of December 31, 2005 and 2004, the trust is to pay estimated anti-dumping duty liabilities resulting from imported cement. As of December 31, 2005 and 2004, GCCRG has provided Dls. 29,390 and Dls. 43,778, respectively. These amounts are included in other long-term liabilities in the GCCRG has provided Dls. 29,390 and Dls. 43,778, respectively. These amounts are included in other long-term liabilities in the accompanying consolidated balance sheets.accompanying consolidated balance sheets.

On August 2, 1999, the DOC and the United States International Trade Commission (ITC) initiated the Sunset Review of the On August 2, 1999, the DOC and the United States International Trade Commission (ITC) initiated the Sunset Review of the anti-dumping order on Gray Portland Cement and Clinker from Mexico. The DOC reviewed the potential effect of revoking the anti-dumping order on Gray Portland Cement and Clinker from Mexico. The DOC reviewed the potential effect of revoking the order on the likelihood of dumping, and the ITC reviewed the potential effect of revoking the order on the United States cement order on the likelihood of dumping, and the ITC reviewed the potential effect of revoking the order on the United States cement industry. On July 3, 2000, the DOC issued a fi nding that revocation of the order would likely lead to continuation or recurrence industry. On July 3, 2000, the DOC issued a fi nding that revocation of the order would likely lead to continuation or recurrence of dumping. On October 9, 2000, the ITC voted not to revoke the order, and thus, the U.S. Customs Service continued collecting of dumping. On October 9, 2000, the ITC voted not to revoke the order, and thus, the U.S. Customs Service continued collecting anti-dumping deposits. The second Sunset review commenced on October 3, 2005. Both DOC as well as ITC are carrying out anti-dumping deposits. The second Sunset review commenced on October 3, 2005. Both DOC as well as ITC are carrying out a second Sunset review and plan to issue their decision in 2006. GCCRG appealed the DOC and ITC sunset determinations to a second Sunset review and plan to issue their decision in 2006. GCCRG appealed the DOC and ITC sunset determinations to NAFTA panels; such appeals are still pending.NAFTA panels; such appeals are still pending.

The Mexican government fi led a formal complaint with the World Trade Organization on July 29, 2003, regarding the DOC’s The Mexican government fi led a formal complaint with the World Trade Organization on July 29, 2003, regarding the DOC’s determinations in the Fifth through Eleventh Administrative Reviews, as well as the decisions of the DOC and the ITC in the fi ve-determinations in the Fifth through Eleventh Administrative Reviews, as well as the decisions of the DOC and the ITC in the fi ve-year reviews, and the ITC’s decision to not initiate a review due to changes in the circumstances of the case. The challenge is still year reviews, and the ITC’s decision to not initiate a review due to changes in the circumstances of the case. The challenge is still pending with a WTO panel. At the request of the Mexican government, the panel suspended the legal measures with the WTO pending with a WTO panel. At the request of the Mexican government, the panel suspended the legal measures with the WTO on January 17, 2006 to allow the U.S. and Mexican governments to fi nd a mutual solution regarding the cement dispute.on January 17, 2006 to allow the U.S. and Mexican governments to fi nd a mutual solution regarding the cement dispute.

On January 19, 2006, both the U.S. and Mexican Governments announced that an agreement had been reached to solve the On January 19, 2006, both the U.S. and Mexican Governments announced that an agreement had been reached to solve the dispute over cement sales. At date, both governments are working to fi nalize the agreement, which is expected to be effective dispute over cement sales. At date, both governments are working to fi nalize the agreement, which is expected to be effective on April 1, 2006.on April 1, 2006.

15. Commitments and contingenciesa) In 1996, the subsidiary GCC Rio Grande, Inc. submitted to the State of New Mexico a plan as required by the State Mining a) In 1996, the subsidiary GCC Rio Grande, Inc. submitted to the State of New Mexico a plan as required by the State Mining Act for the proposed use of the plant site and required reclamation of the land at the conclusion of operations. The estimated Act for the proposed use of the plant site and required reclamation of the land at the conclusion of operations. The estimated cost of the plan is Dls. 5,478. At December 31, 2005 and 2004, the liability provided for under the plan is Dls. 1,049 andcost of the plan is Dls. 5,478. At December 31, 2005 and 2004, the liability provided for under the plan is Dls. 1,049 andDls. 781, respectively. These amounts are included in other long-term liabilities in the accompanying consolidated balance Dls. 781, respectively. These amounts are included in other long-term liabilities in the accompanying consolidated balance sheets. During 2005 and 2004, the Company spent approximately Dls. 47 and Dls. 61, respectively, of costs to meet the recla-sheets. During 2005 and 2004, the Company spent approximately Dls. 47 and Dls. 61, respectively, of costs to meet the recla-mation requirements within the closeout plan.mation requirements within the closeout plan.

The State of New Mexico requested that GCCRG secure a form of bonding or surety related to the closeout measures. To comply The State of New Mexico requested that GCCRG secure a form of bonding or surety related to the closeout measures. To comply with the State’s request GCCRG has a bond for a total of Dls. 114 in favor of USDA Forest Service property and Dls. 867 in favor with the State’s request GCCRG has a bond for a total of Dls. 114 in favor of USDA Forest Service property and Dls. 867 in favor of the New Mexico Mining Department. Also, GCC has guaranteed Dls. 2,813 of assurance in the event that GCCRG fails to of the New Mexico Mining Department. Also, GCC has guaranteed Dls. 2,813 of assurance in the event that GCCRG fails to successfully complete the reclamation obligations.successfully complete the reclamation obligations.

b) GCC Rio Grande Inc., has committments to acquire machinery and equipment and construction work related to the construc-b) GCC Rio Grande Inc., has committments to acquire machinery and equipment and construction work related to the construc-tion project of a cement plant in Pueblo, Colorado in the U.S. with annual production capacity of 1,000,000 tons for a total tion project of a cement plant in Pueblo, Colorado in the U.S. with annual production capacity of 1,000,000 tons for a total amount of approximately Dls. 42,342.amount of approximately Dls. 42,342.

16. Derivative fi nancial instrumentsThe Company uses fi nancial instruments (derivatives) such as SWAPS and forward contracts to manage risks associated with The Company uses fi nancial instruments (derivatives) such as SWAPS and forward contracts to manage risks associated with the economic effect of the exchange of interest rates. Derivatives are not used for the purpose of speculation or for sale. The the economic effect of the exchange of interest rates. Derivatives are not used for the purpose of speculation or for sale. The related agreements are entered into with sound fi nancial institutions; consequently, the Company believes the risk of non-per-related agreements are entered into with sound fi nancial institutions; consequently, the Company believes the risk of non-per-formance of agreed obligation by the other parties to be minimal.formance of agreed obligation by the other parties to be minimal.

4848

Cross currency SWAPS:Cross currency SWAPS:

Interest rate Exchanged Estimated Maturity date covered interest rate market valueDollars for pesos Dls. 98.8 million December 2006 11.5% Libor + 65pb Ps. 2,675Dollars for pesos Dls. 31.4 million December 2006 11.5% Libor + 139pb Ps. 1,146

The periodic cash fl ows for the exchange of interest rates are recognized as part of the comprehensive fi nancing cost as the The periodic cash fl ows for the exchange of interest rates are recognized as part of the comprehensive fi nancing cost as the effective interest rate on the related liabilities.effective interest rate on the related liabilities.

17. Subsequent eventsa) On January 1, 2006, the requirements of the Mexican Financial Information Standards Research and Development Board a) On January 1, 2006, the requirements of the Mexican Financial Information Standards Research and Development Board (Consejo Mexicano para la Investigación y Desarrollo de Normas de Información Financiera, A.C. or CINIF) went into effect and (Consejo Mexicano para la Investigación y Desarrollo de Normas de Información Financiera, A.C. or CINIF) went into effect and replaced the standards previously issued by the Mexican Institute of Public Accountants. The adoption of these new rules will replaced the standards previously issued by the Mexican Institute of Public Accountants. The adoption of these new rules will give rise to no changes in the Company’s fi nancial structure or in the signifi cant disclosures in its fi nancial statements.give rise to no changes in the Company’s fi nancial structure or in the signifi cant disclosures in its fi nancial statements.

b) On January 3, 2006, CRM Acquisition, Inc. acquired the assets of several concrete plants in Midwest USA. The acquired as-b) On January 3, 2006, CRM Acquisition, Inc. acquired the assets of several concrete plants in Midwest USA. The acquired as-sets primarily consist of land, buildings, machinery, automotive equipment and inventories, valued at approximately Dls. 33.4 sets primarily consist of land, buildings, machinery, automotive equipment and inventories, valued at approximately Dls. 33.4 million.