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<SEC-DOCUMENT>0000891092-08-003333.txt : 20080701
<SEC-HEADER>0000891092-08-003333.hdr.sgml : 20080701
<ACCEPTANCE-DATETIME>20080630195457
ACCESSION NUMBER:		0000891092-08-003333
CONFORMED SUBMISSION TYPE:	20-F
PUBLIC DOCUMENT COUNT:		7
CONFORMED PERIOD OF REPORT:	20071231
FILED AS OF DATE:		20080701
DATE AS OF CHANGE:		20080630

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			GROUP SIMEC SA DE CV
		CENTRAL INDEX KEY:			0000887153
		STANDARD INDUSTRIAL CLASSIFICATION:	STEEL WORKS, BLAST FURNACES  ROLLING MILLS (COKE OVENS) [3312]
		IRS NUMBER:				000000000
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		20-F
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	001-11176
		FILM NUMBER:		08927363

	BUSINESS ADDRESS:	
		STREET 1:		CALZADA LAZARO CARDENAS 601
		CITY:			44910 GUADALAJARA JA
		STATE:			O5
		ZIP:			10022

	MAIL ADDRESS:	
		STREET 1:		CALZADA LAZARO CARDENAS
		CITY:			GUADALAJARA JALISCO
		STATE:			O5
		ZIP:			999999999
</SEC-HEADER>
<DOCUMENT>
<TYPE>20-F
<SEQUENCE>1
<FILENAME>e32100_20f.htm
<DESCRIPTION>ANNUAL REPORT
<TEXT>
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   <TITLE></TITLE>
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<P align=center><B>UNITED STATES</B><BR>
  <B>SECURITIES AND EXCHANGE COMMISSION</B></P>
<hr width="20%" size="1" noshade>
<P align=center> <B>FORM 20-F</B></P>
<hr width="20%" size="1" noshade>
<P align=left> <B>(M</B><B>ark One)</B></P>
<P><B>|_| REGISTRATION STATEMENT PURSUANT TO SECTION
  12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934 OR</B></P>
<P><B>|X| ANNUAL REPORT PURSUANT TO SECTION 13 OR
  15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 </B></P>
<P align="center"><B>For the fiscal year ended December 31, 2007 </B></P>
<P align="center"><B>OR</B></P>
<P><B>|_| TRANSITION REPORT PURSUANT TO SECTION 13
  OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934</B></P>
<P align=center><B>Commission File Number 1-11176</B></P>
<hr width="40%" size="1" noshade>
<P align=center><B>GRUPO SIMEC, S.A.B. de C.V.</B><BR>
  (Exact name of Registrant as specified in its charter)</P>
<P align=center><B>GROUP SIMEC<br>
  </B>(Translation of Registrant&#146;s name into English)</P>
<hr width="40%" size="1" noshade>
<P align=center><B>UNITED MEXICAN STATES</B><BR>
  (Jurisdiction of incorporation or organization)</P>
<hr width="40%" size="1" noshade>
<P align=center><B>Calzada Lazaro Cardenas 601</B><BR>
  <B>Colonia La Nogalera, Guadalajara,</B><BR>
  <B>Jalisco, Mexico 44440<br>
  </B>(Address of principal executive offices)</P>
<P align=center><B>Jos&#233; Flores Flores, telephone number 011-52-33 3770-6700,
  e-mail jflores@gruposimec.com.mx<br>
  </B>(Name, Telephone, E-mail and/or Facsimile number and Address of Company
  Contact Person)</P>
<hr width="40%" size="1" noshade>
<P align=center>Securities registered or to be registered pursuant to Section
  12(b) of the Act.</P>
<TABLE width="100%" border=0 cellPadding=0 cellSpacing=0 style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'">
  <TR vAlign=bottom>
    <TD width="50%" align=center><B><U><FONT size=2>Title of Each Class</FONT></U></B>
    </TD>
    <TD align=center><B><U><FONT size=2>Name of Each Exchange on Which
      Registered</FONT></U></B> </TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=center><FONT size=2>American Depositary Shares</FONT>
    </TD>
    <TD align=center><FONT size=2>American Stock Exchange</FONT> </TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=center><FONT size=2>Series B Common Stock</FONT> </TD>
    <TD align=center><FONT size=2>American Stock Exchange*</FONT>
    </TD>
  </TR>
</TABLE>
<div align="center"><BR>
  <B>Securities registered or to be registered pursuant to Section 12(g) of the
  Act:</B><BR>
  None<br>
  <BR>
  <B>Securities for which there is a reporting obligation pursuant to Section
  15(d) of the Act.</B><BR>
  None </div>
<P align=center><B>Indicate the number of outstanding shares of each of the issuer&#146;s
  classes of common stock as of December 31, 2007 was:<br>
  </B>Series B Common Stock &#151; 474,621,611 shares </P>
<hr width="20%" size="1" noshade>
<P align=left>Indicate by check mark if the registrant is a well-known seasoned
  issuer, as defined in Rule 405 of the Securities Act. Yes<font face="Times New Roman, Times, serif">
  |_| No |X|</font></P>
<HR align=center width="100%" noshade SIZE=5>
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<P align=left>If this report is an annual or transition report, indicate by check
  mark<font face="Times New Roman, Times, serif"> </font><font face="Times New Roman, Times, serif">if
  the registrant is not required to file reports pursuant to Section 13
  or 15(d) of the Securities Exchange Act of 1934. Yes |_| No |X|</font></P>
<P align=left><font face="Times New Roman, Times, serif">Indicate by check mark
  whether the registrant (1) has filed all reports required to be filed by Section
  13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months
  (or for such shorter period that the registrant was required to
  file such reports), and (2) has been subject to such filing requirements for
  the past 90 days. Yes |X| No |_|</font></P>
<P align=left><font face="Times New Roman, Times, serif">Indicate by check mark
  whether the registrant is a large accelerated filer, an accelerated filer, or
  a non-accelerated filer. See definition of &#147;accelerated filer and large
  accelerated filer&#148; in Rule 12b-2 of the Exchange Act. (Check one):</font></P>
<P align=left><font face="Times New Roman, Times, serif">Large accelerated filer
  |_| Accelerated filer |X| Non-accelerated filer |_|</font></P>
<P align=left><font face="Times New Roman, Times, serif">Indicate by check mark
  which financial statement item the registrant has elected to follow. Item 17
  |_| Item 18 |X|</font></P>
<P align=left><font face="Times New Roman, Times, serif">If this is an annual
  report, indicate by check mark whether the registrant is a shell company (as
  defined in Rule 12b-2 of the Exchange Act). Yes |_| No |X|</font></P>


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<TABLE style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'" cellSpacing=0 cellPadding=0 border=0>
<TR>
     <TD vAlign=top nowrap>*&nbsp; &nbsp; &nbsp; </TD>
     <TD width="100%">Not for trading, but only in connection with the registration of American depositary shares. </TD></TR>
<TR>
     <TD colSpan=2>&nbsp;</TD></TR></TABLE>
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<P align="center">
<B>TABLE OF CONTENTS</B></P>
<TABLE border=0 width=100% cellspacing=0 cellpadding=5 style="font-family: 'Times New Roman';font-size: 10pt;">
<TR valign="bottom">
        <TD align=left width=8%>&nbsp;

        </TD>
        <TD width=2%>&nbsp;
  </TD>
        <TD align=left width=77%>&nbsp;

        </TD>
        <TD width=2%>&nbsp;
  </TD>
        <TD align=right width=10%>
<B><FONT size=2>Page</FONT></B>
        </TD>
</TR>
<TR valign="bottom">
        <TD align=center width=99% colspan=5>
<FONT size=2>PART I.</FONT>
        </TD>
</TR>
<TR valign="bottom">
        <TD align=left width=8%>
<FONT size=2>Item 1.</FONT>
        </TD>
        <TD width=2%>&nbsp;
  </TD>
        <TD align=left width=77%>
<FONT size=2>Identity of Directors, Senior Management and Advisers</FONT>
        </TD>
        <TD width=2%>&nbsp;
  </TD>
        <TD align=right width=10%>
<FONT size=2>2</FONT>
        </TD>
</TR>
<TR valign="bottom">
        <TD align=left width=8%>
<FONT size=2>Item 2.</FONT>
        </TD>
        <TD width=2%>&nbsp;
  </TD>
        <TD align=left width=77%>
<FONT size=2>Offer Statistics and Expected Timetable</FONT>
        </TD>
        <TD width=2%>&nbsp;
  </TD>
        <TD align=right width=10%>
<FONT size=2>2</FONT>
        </TD>
</TR>
<TR valign="bottom">
        <TD align=left width=8%>
<FONT size=2>Item 3.</FONT>
        </TD>
        <TD width=2%>&nbsp;
  </TD>
        <TD align=left width=77%>
<FONT size=2>Key Information</FONT>
        </TD>
        <TD width=2%>&nbsp;
  </TD>
        <TD align=right width=10%>
<FONT size=2>2</FONT>
        </TD>
</TR>
<TR valign="bottom">
        <TD align=left width=8%>
<FONT size=2>Item 4.</FONT>
        </TD>
        <TD width=2%>&nbsp;
  </TD>
        <TD align=left width=77%>
<FONT size=2>Information on the Company</FONT>
        </TD>
        <TD width=2%>&nbsp;
  </TD>
        <TD align=right width=10%>
<FONT size=2>17</FONT>
        </TD>
</TR>
<TR valign="bottom">
        <TD align=left width=8%>
<FONT size=2>Item 5.</FONT>
        </TD>
        <TD width=2%>&nbsp;
  </TD>
        <TD align=left width=77%>
<FONT size=2>Operating and Financial Review and Prospects</FONT>
        </TD>
        <TD width=2%>&nbsp;
  </TD>
        <TD align=right width=10%>
<FONT size=2>45</FONT>
        </TD>
</TR>
<TR valign="bottom">
        <TD align=left width=8%>
<FONT size=2>Item 6.</FONT>
        </TD>
        <TD width=2%>&nbsp;
  </TD>
        <TD align=left width=77%>
<FONT size=2>Directors, Senior Management and Employees</FONT>
        </TD>
        <TD width=2%>&nbsp;
  </TD>
        <TD align=right width=10%>
<FONT size=2>58</FONT>
        </TD>
</TR>
<TR valign="bottom">
        <TD align=left width=8%>
<FONT size=2>Item 7.</FONT>
        </TD>
        <TD width=2%>&nbsp;
  </TD>
        <TD align=left width=77%>
<FONT size=2>Major Shareholders and Related Party Transactions</FONT>
        </TD>
        <TD width=2%>&nbsp;
  </TD>
        <TD align=right width=10%>
<FONT size=2>64</FONT>
        </TD>
</TR>
<TR valign="bottom">
        <TD align=left width=8%>
<FONT size=2>Item 8.</FONT>
        </TD>
        <TD width=2%>&nbsp;
  </TD>
        <TD align=left width=77%>
<FONT size=2>Financial Information</FONT>
        </TD>
        <TD width=2%>&nbsp;
  </TD>
        <TD align=right width=10%>
<FONT size=2>66</FONT>
        </TD>
</TR>
<TR valign="bottom">
        <TD align=left width=8%>
<FONT size=2>Item 9.</FONT>
        </TD>
        <TD width=2%>&nbsp;
  </TD>
        <TD align=left width=77%>
<FONT size=2>The Offer and Listing</FONT>
        </TD>
        <TD width=2%>&nbsp;
  </TD>
        <TD align=right width=10%>
<FONT size=2>68</FONT>
        </TD>
</TR>
<TR valign="bottom">
        <TD align=left width=8%>
<FONT size=2>Item 10.</FONT>
        </TD>
        <TD width=2%>&nbsp;
  </TD>
        <TD align=left width=77%>
<FONT size=2>Additional Information</FONT>
        </TD>
        <TD width=2%>&nbsp;
  </TD>
        <TD align=right width=10%>
<FONT size=2>70</FONT>
        </TD>
</TR>
<TR valign="bottom">
        <TD align=left width=8%>
<FONT size=2>Item 11.</FONT>
        </TD>
        <TD width=2%>&nbsp;
  </TD>
        <TD align=left width=77%>
<FONT size=2>Quantitative and Qualitative Disclosures About Market Risk</FONT>
        </TD>
        <TD width=2%>&nbsp;
  </TD>
        <TD align=right width=10%>
<FONT size=2>85</FONT>
        </TD>
</TR>
<TR valign="bottom">
        <TD align=left width=8%>
<FONT size=2>Item 12.</FONT>
        </TD>
        <TD width=2%>&nbsp;
  </TD>
        <TD align=left width=77%>
<FONT size=2>Description of Securities Other than Equity Securities</FONT>
        </TD>
        <TD width=2%>&nbsp;
  </TD>

    <TD align=right width=10%>
<FONT size=2>87</FONT>
        </TD>
</TR>
<TR valign="bottom">
        <TD align=center width=99% colspan=5>
<FONT size=2>PART II.</FONT>
        </TD>
</TR>
<TR valign="bottom">
        <TD align=left width=8%>
<FONT size=2>Item 13.</FONT>
        </TD>
        <TD width=2%>&nbsp;
  </TD>
        <TD align=left width=77%>
<FONT size=2>Defaults, Dividends Arrearages and Delinquencies</FONT>
        </TD>
        <TD width=2%>&nbsp;
  </TD>
        <TD align=right width=10%>
<FONT size=2>86</FONT>
        </TD>
</TR>
<TR valign="bottom">
        <TD align=left width=8%>
<FONT size=2>Item 14.</FONT>
        </TD>
        <TD width=2%>&nbsp;
  </TD>
        <TD align=left width=77%>
<FONT size=2>Material Modifications to the Rights of Security Holders and Use of Proceeds</FONT>
        </TD>
        <TD width=2%>&nbsp;
  </TD>
        <TD align=right width=10%>
<FONT size=2>86</FONT>
        </TD>
</TR>
<TR valign="bottom">
        <TD align=left width=8%>
<FONT size=2>Item 15.</FONT>
        </TD>
        <TD width=2%>&nbsp;
  </TD>
        <TD align=left width=77%>
<FONT size=2>Controls and Procedures</FONT>
        </TD>
        <TD width=2%>&nbsp;
  </TD>
        <TD align=right width=10%>
<FONT size=2>86</FONT>
        </TD>
</TR>
<TR valign="bottom">
        <TD align=left width=8%>
<FONT size=2>Item 16.</FONT>
        </TD>
        <TD width=2%>&nbsp;
  </TD>
        <TD align=left width=77%>
<FONT size=2>[Reserved]</FONT>
        </TD>
        <TD width=2%>&nbsp;
  </TD>
        <TD align=right width=10%>
<FONT size=2>87</FONT>
        </TD>
</TR>
<TR valign="bottom">
        <TD align=center width=99% colspan=5>
<FONT size=2>PART III.</FONT>
        </TD>
</TR>
<TR valign="bottom">
        <TD align=left width=8%>
<FONT size=2>Item 17.</FONT>
        </TD>
        <TD width=2%>&nbsp;
  </TD>
        <TD align=left width=77%>
<FONT size=2>Financial Statements</FONT>
        </TD>
        <TD width=2%>&nbsp;
  </TD>
        <TD align=right width=10%>
<FONT size=2>89</FONT>
        </TD>
</TR>
<TR valign="bottom">
        <TD align=left width=8%>
<FONT size=2>Item 18.</FONT>
        </TD>
        <TD width=2%>&nbsp;
  </TD>
        <TD align=left width=77%>
<FONT size=2>Financial Statements</FONT>
        </TD>
        <TD width=2%>&nbsp;
  </TD>
        <TD align=right width=10%>
<FONT size=2>89</FONT>
        </TD>
</TR>
<TR valign="bottom">
        <TD align=left width=8%>
<FONT size=2>Item 19.</FONT>
        </TD>
        <TD width=2%>&nbsp;
  </TD>
        <TD align=left width=77%>
<FONT size=2>Exhibits</FONT>
        </TD>
        <TD width=2%>&nbsp;
  </TD>
        <TD align=right width=10%>
<FONT size=2>89</FONT>
        </TD>
</TR>
</TABLE><BR>
<P align="center"> -i-</P>

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<P align="center">
<B>CERTAIN TERMS</B></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Grupo Simec, S.A.B. de C.V. is a corporation (<I>sociedad an&oacute;nima bursatil de capital variable</I>) organized under the laws of the United Mexican States. Unless the context requires otherwise, when used in this
annual report, the terms &#147;we&#148;, &#147;our&#148; &#147;our company&#148; and &#147;us&#148; refer to Grupo Simec, S.A.B. de C.V., together with its consolidated subsidiaries. Prior to October 24, 2006, our name was Grupo Simec, S.A. de C.V.
(<I>sociedad an&oacute;nima de capital variable</I>). Our name change resulted from the recent amendment to our by-laws incorporating the provisions required by the Mexican Securities Market Law.</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;References in this annual report to &#147;dollars&#148;, &#147;U.S. dollars&#148;, &#147;&#36;&#148; or &#147;U.S.&#36;&#148; are to the lawful currency of the United States. References in this annual report to
&#147;pesos&#148;, &#147;Pesos&#148; or &#147;Ps.&#148; are to the lawful currency of Mexico. References to &#147;tons&#148; in this annual report refer to metric tons; a metric ton equals 1,000 kilograms or 2,204 pounds. We publish our financial
statements in Pesos.</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The terms &#147;special bar quality steel&#148; or &#147;SBQ steel&#148; refer to steel that is hot rolled or cold finished round square and hexagonal steel bars that generally contain higher proportions of alloys than
lower quality grades of steel. SBQ steel is produced with precise chemical specifications and generally is made to order following client specifications.</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This annual report contains translations of certain peso amounts to U.S. dollars at specified rates solely for your convenience. These translations do not mean that the peso amounts actually represent such dollar
amounts or could be converted into U.S. dollars at the rate indicated. Unless otherwise indicated, we have translated these U.S. dollar amounts from pesos at the exchange rate of Ps. 10.8662 per U.S.&#36;1.00, the interbank transactions rate in
effect on December 31, 2007. On June 25, 2008, the interbank transactions rate for the Peso was Ps. 10.2895 per U.S.&#36;1.00.</P>
<P align="center">
<B>FORWARD LOOKING STATEMENTS</B></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This annual report contains certain statements regarding our business that may constitute &#147;forward looking statements&#148; within the meaning of the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995. When used in this annual report, the words &#147;anticipates&#148;, &#147;plans&#148;, &#147;believes&#148;, &#147;estimates&#148;, &#147;intends&#148;, &#147;expects&#148;, &#147;projects&#148; and similar expressions are
intended to identify forward looking statements, although not all forward looking statements contain those words. These statements, including but not limited to our statements regarding our strategy for raw material acquisition, products and
markets, production processes and facilities, sales and distribution and exports, growth and other trends in the steel industry and various markets, operations and liquidity and capital resources are based on management&#146;s beliefs, as well as on
assumptions made by, and information currently available to, management, and involve various risks and uncertainties, some of which are beyond our control. Our actual results could differ materially from those expressed in any forward looking
statement. In light of these risks and uncertainties, there can be no assurance that forward looking statements will prove to be accurate. Factors that might cause actual results to differ materially from forward looking statements include, but are
not limited to,</P>
<UL>
  <LI>
    <p> factors relating to the steel industry (including the cyclicality of the
      industry, finished product prices, worldwide production capacity, the high
      degree of competition from Mexican and foreign producers and the price of
      ferrous scrap, iron ore and other raw materials);</p>
  </LI>
  <LI>
    <p> our ability to operate at high capacity levels;</p>
  </LI>
  <LI>
    <p> the costs of compliance with U.S. and Mexican environmental laws;</p>
  </LI>
</UL>
<P align="center"> 1</P>

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<UL>
  <LI>
    <p> the integration of our 2008 acquisition in Mexico of Corporaci&oacute;n
      Aceros DM, S.A. de C.V. and certain of its affiliates;</p>
  </LI>
  <LI>
    <p> future capital expenditures and acquisitions;</p>
  </LI>
  <LI>
    <p> future devaluations of the peso;</p>
  </LI>
  <LI>
    <p> the imposition by Mexico of foreign exchange controls and price controls;</p>
  </LI>
  <LI>
    <p> the influence of economic and market conditions in other countries on
      Mexican securities; and</p>
  </LI>
  <LI>
    <p> the factors discussed in &#147;Risk Factors&#148; below.</p>
  </LI>
</UL>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Forward looking statements speak only as of the date they were made, and we undertake no obligation to update publicly or to revise any forward looking statements after the date of this annual report because of new
information, future events or other factors. In light of the risks and uncertainties described above, the forward looking events and circumstances discussed in this annual report might not occur.</P>
<P align="center"> <B>PART I.</B></P>
<P align="left">
<B>Item 1. Identity of Directors, Senior Management and Advisers</B></P>
<P align="left"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Not applicable.</P>
<P align="left">
<B>Item 2. Offer Statistics and Expected Timetable</B></P>
<P align="left"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Not applicable.</P>
<P align="left">
<B>Item 3. Key Information</B></P>
<P align="left">
<B>A. Selected Financial Data</B></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This annual report includes our consolidated financial statements as of December 31, 2007 and 2006 and for each of the three years ended December 31, 2007, 2006 and 2005. We have prepared our financial statements in
conformity with Mexican Financial Reporting Standards (&#147;MFRS&#148; or &#147;Mexican GAAP&#148;) which include Bulletins and Circulars issued by the Accounting Principles Commission (&#147;CPC&#148;) of the Mexican Institute of Public
Accountants (IMCP) which have not been amended, replaced or abrogated by MFRS issued by the Mexican Financial Reporting Standards Research and Development Board (<I>Consejo Mexicano para la Investigaci&oacute;n y Desarrollo de Normas de
Informaci&oacute;n Financiera, A.C. </I>(&#147;CINIF&#148;). We have adjusted the financial statements of our non-Mexican subsidiaries to conform to MFRS, and we have translated them to Mexican pesos. See Note 2(d) to our consolidated financial
statements included elsewhere herein.</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;MFRS differs in certain significant respects from Generally Accepted Accounting Principles in the United States (&#147;U.S. GAAP&#148;). Note 18 to our consolidated financial statements included elsewhere herein
provides a description of the principal differences between MFRS and U.S. GAAP, as they relate to us, a reconciliation to U.S. GAAP of net income, total stockholders&#146; equity and a statement of cash flows under U.S. GAAP.</P>
<P align="center"> 2</P>

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<A name="page_6"></A>
<P align=left>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant to MFRS, in our consolidated financial statements and the selected financial information set forth below:</P>
<UL>
  <LI>
    <p>nonmonetary assets (including plant, property and equipment of Mexican
      origin) and stockholders&#146; equity are restated for inflation based on
      the Mexican National Consumer Price Index; plant, property and equipment
      of non-Mexican origin are restated based on the rate of inflation in the
      country of origin and converted into Mexican pesos using the prevailing
      exchange rate at the balance sheet date; and </p>
  <LI>
    <p>gains and losses in purchasing power from holding monetary liabilities
      or assets are recognized in income; and all financial statements are restated
      in constant pesos as of December 31, 2007. </p>
  </LI>
</UL>
<P align=left>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Certain of the financial information set forth below is presented in accordance with U.S. GAAP. The effect of inflation accounting under MFRS has not been reversed in the reconciliation to U.S. GAAP of net income and total stockholders&#146; equity, except with respect to some information included in the cash flow statement. See Note 18 to our consolidated financial statements included elsewhere herein.</P>
<P align=left>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following tables present the selected consolidated financial information for our
company as of and for the years ended December 31, 2003, 2004, 2005, 2006 and 2007. The selected financial and operating information
as of and for the years ended December 31, 2005, 2006 and 2007 set forth below has been derived in part from our consolidated financial
statements, which have been reported on by Mancera S.C., a member practice of Ernst &amp; Young Global, an independent, registered public accounting firm. In so doing, Mancera, S.C. has relied on the audited consolidated financial statements of our subsidiary SimRep Corporation (&#147;SimRep&#148;) and its subsidiaries, reported on by BDO Hern&#225;ndez Marr&#243;n y C&#237;a., S.C., a member firm of BDO International for the year ended December 31, 2005. The selected financial and operating information as of and for the years ended December 31, 2003 and 2004 set forth below has been derived in part from our
consolidated financial statements, which have been reported by KPMG, an independent, registered public accounting firm. The selected financial and operating information should be read in conjunction with, and is qualified in its entirety by reference to our consolidated financial statements included elsewhere herein.</P>
<TABLE width="100%" border=0 cellPadding=0 cellSpacing=0 style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'">
  <TR vAlign=bottom>
    <TD width="38%" align=center>&nbsp; </TD>
    <TD width="8%" align=center>&nbsp; </TD>
    <TD width="2%" align=center>&nbsp; </TD>
    <TD align=center colSpan=5><B><FONT size=2>Year Ended December
      31,</FONT></B></TD>
    <TD width="1%" align=center>&nbsp; </TD>
    <TD width="7%" align=center>&nbsp; </TD>
    <TD width="2%" align=center>&nbsp;</TD>
    <TD width="10%" align=center>&nbsp; </TD>
  </TR>
  <TR>
    <TD align=center>&nbsp; </TD>
    <TD colspan="11" align=center> <HR noshade SIZE=1> </TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=center>&nbsp; </TD>
    <TD align=center><B><FONT size=2>2003</FONT></B></TD>
    <TD align=center>&nbsp; </TD>
    <TD width="8%" align=center><B><FONT size=2>2004</FONT></B></TD>
    <TD width="2%" align=center>&nbsp; </TD>
    <TD width="10%" align=center><B><FONT size=2>2005</FONT></B></TD>
    <TD width="2%" align=center>&nbsp; </TD>
    <TD width="10%" align=center><B><FONT size=2>2006</FONT></B></TD>
    <TD align=center>&nbsp; </TD>
    <TD align=center><B><FONT size=2>2007</FONT></B></TD>
    <TD align=center>&nbsp;&nbsp;&nbsp;&nbsp;</TD>
    <TD align=center><B><FONT size=2>2007</FONT><sup><font size=2>(1)</font></sup></B></TD>
  </TR>
  <TR>
    <TD align=center>&nbsp; </TD>
    <TD align=center> <HR noshade SIZE=1> </TD>
    <TD align=center>&nbsp; </TD>
    <TD align=center> <HR noshade SIZE=1> </TD>
    <TD align=center>&nbsp; </TD>
    <TD align=center> <HR noshade SIZE=1> </TD>
    <TD align=center>&nbsp; </TD>
    <TD align=center> <HR noshade SIZE=1> </TD>
    <TD align=center>&nbsp; </TD>
    <TD align=center> <HR noshade SIZE=1> </TD>
    <TD align=center>&nbsp;</TD>
    <TD align=center> <HR noshade SIZE=1> </TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=center>&nbsp; </TD>
    <TD align=center colSpan=7><FONT size=2>(Millions of constant
      December 31, 2007 pesos)</FONT></TD>
    <TD align=center>&nbsp; </TD>
    <TD align=center>&nbsp; </TD>
    <TD align=center rowSpan=2>&nbsp;</TD>
    <TD align=center rowSpan=2><FONT size=2>(Millions</FONT><BR> <FONT size=2>of
      dollars)</FONT></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=center>&nbsp; </TD>
    <TD align=center>&nbsp; </TD>
    <TD align=center>&nbsp; </TD>
    <TD align=center>&nbsp; </TD>
    <TD align=center>&nbsp; </TD>
    <TD align=center>&nbsp; </TD>
    <TD align=center>&nbsp; </TD>
    <TD align=center>&nbsp; </TD>
    <TD align=center>&nbsp; </TD>
    <TD align=center>&nbsp; </TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=center>&nbsp; </TD>
    <TD align=center>&nbsp; </TD>
    <TD align=center>&nbsp; </TD>
    <TD align=center colSpan=7><FONT size=2>(except per share and
      per ADS data)</FONT></TD>
    <TD align=center>&nbsp;</TD>
    <TD align=center>&nbsp; </TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left><B><FONT size=2>Income Statement Data:</FONT></B>
    </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left><I><FONT size=2>Mexican GAAP:</FONT></I> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR>
    <TD colSpan=12>&nbsp; </TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<FONT size=2>Net
      sales</FONT> </TD>
    <TD align=right><FONT size=2>3,265</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right><FONT size=2>6,333</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right><FONT size=2>13,893</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right><FONT size=2>23,515</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right><FONT size=2>24,106</FONT> </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>2,218</FONT> </TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<FONT size=2>Direct
      cost of sales</FONT> </TD>
    <TD align=right><FONT size=2>2,145</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right><FONT size=2>3,681</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right><FONT size=2>11,112</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right><FONT size=2>19,132</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right><FONT size=2>20,499</FONT> </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>1,886</FONT> </TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<FONT size=2>Gross
      profit</FONT> </TD>
    <TD align=right><FONT size=2>1,120</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right><FONT size=2>2,652</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right><FONT size=2>2,781</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right><FONT size=2>4,383</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right><FONT size=2>3,607</FONT> </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>332</FONT> </TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<FONT size=2>Indirect
      manufacturing, selling,</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;
      &nbsp;<FONT size=2>general and administrative</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;
      &nbsp;<FONT size=2>expenses</FONT> </TD>
    <TD align=right><FONT size=2>330</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right><FONT size=2>397</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right><FONT size=2>742</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right><FONT size=2>902</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right><FONT size=2>874</FONT> </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>80</FONT> </TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<FONT size=2>Depreciation
      and amortization</FONT> </TD>
    <TD align=right><FONT size=2>213</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right><FONT size=2>238</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right><FONT size=2>349</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right><FONT size=2>450</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right><FONT size=2>549</FONT> </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>51</FONT> </TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<FONT size=2>Operating
      income</FONT> </TD>
    <TD align=right><FONT size=2>577</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right><FONT size=2>2,016</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right><FONT size=2>1,690</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right><FONT size=2>3,031</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right><FONT size=2>2,184</FONT> </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>201</FONT> </TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<FONT size=2>Financial
      (expense) income</FONT> </TD>
    <TD align=right><FONT size=2>(29</FONT> </TD>
    <TD align=left><FONT size=2>)</FONT> </TD>
    <TD align=right><FONT size=2>(40</FONT> </TD>
    <TD align=left><FONT size=2>)</FONT> </TD>
    <TD align=right><FONT size=2>(155</FONT> </TD>
    <TD align=left><FONT size=2>)</FONT> </TD>
    <TD align=right><FONT size=2>(63</FONT> </TD>
    <TD align=left><FONT size=2>)</FONT> </TD>
    <TD align=right><FONT size=2>41</FONT> </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>4</FONT> </TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<FONT size=2>Other
      (expense) income, net</FONT> </TD>
    <TD align=right><FONT size=2>(35</FONT> </TD>
    <TD align=left><FONT size=2>)</FONT> </TD>
    <TD align=right><FONT size=2>(41</FONT> </TD>
    <TD align=left><FONT size=2>)</FONT> </TD>
    <TD align=right><FONT size=2>(12</FONT> </TD>
    <TD align=left><FONT size=2>)</FONT> </TD>
    <TD align=right><FONT size=2>39</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right><FONT size=2>21</FONT> </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>2</FONT> </TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<FONT size=2>Income
      before taxes, employee profit</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;
      &nbsp;<FONT size=2>sharing and minority interest</FONT> </TD>
    <TD align=right><FONT size=2>513</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right><FONT size=2>1,935</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right><FONT size=2>1,523</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right><FONT size=2>3,007</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right><FONT size=2>2,246</FONT> </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>207</FONT> </TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<FONT size=2>Income
      tax expense and employee</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;
      &nbsp;<FONT size=2>profit sharing</FONT> </TD>
    <TD align=right><FONT size=2>170</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right><FONT size=2>368</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right><FONT size=2>133</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right><FONT size=2>609</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right><FONT size=2>621</FONT> </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>57</FONT> </TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<FONT size=2>Net
      income</FONT> </TD>
    <TD align=right><FONT size=2>343</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right><FONT size=2>1,567</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right><FONT size=2>1,390</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right><FONT size=2>2,398</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right><FONT size=2>1,625</FONT> </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>150</FONT> </TD>
  </TR>
</TABLE>
<BR>
<P align=center>3</P>
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<table width="100%" border=0 cellpadding=0 cellspacing=0 style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'">
  <tr valign=bottom>
    <td align=center>&nbsp; </td>
    <td align=center>&nbsp; </td>
    <td align=center>&nbsp; </td>
    <td align=center colspan=5><b><font size=2>Year Ended December
      31,</font></b></td>
    <td align=center>&nbsp; </td>
    <td align=center>&nbsp; </td>
    <td align=center>&nbsp; </td>
    <td align=center>&nbsp; </td>
    <td align=center>&nbsp; </td>
  </tr>
  <tr>
    <td align=center>&nbsp; </td>
    <td colspan="12" align=center>
      <hr noshade size=1>
       </td>
  </tr>
  <tr valign=bottom>
    <td align=center>&nbsp; </td>
    <td align=center><b><font size=2>2003</font></b></td>
    <td align=center>&nbsp; </td>
    <td align=center><b><font size=2>2004</font></b></td>
    <td align=center>&nbsp; </td>
    <td align=center><b><font size=2>2005</font></b></td>
    <td align=center>&nbsp; </td>
    <td align=center><b><font size=2>2006</font></b></td>
    <td align=center>&nbsp; </td>
    <td align=center><b><font size=2>2007</font></b></td>
    <td align=center>&nbsp; </td>
    <td align=center><b><font size=2>2007</font><sup><font size=2>(1)</font></sup></b></td>
    <td align=center><b><sup></sup></b></td>
  </tr>
  <tr>
    <td align=center>&nbsp; </td>
    <td align=center>
      <hr noshade size=1>
       </td>
    <td align=center>&nbsp; </td>
    <td align=center>
      <hr noshade size=1>
       </td>
    <td align=center>&nbsp; </td>
    <td align=center>
      <hr noshade size=1>
       </td>
    <td align=center>&nbsp; </td>
    <td align=center>
      <hr noshade size=1>
       </td>
    <td align=center>&nbsp; </td>
    <td align=center>
      <hr noshade size=1>
       </td>
    <td align=center>&nbsp; </td>
    <td align=center>
      <hr noshade size=1>
       </td>
    <td align=center>&nbsp; </td>
  </tr>
  <tr valign=bottom>
    <td align=center>&nbsp; </td>
    <td align=center colspan=7><font size=2>(Millions of constant
      December 31, 2007 pesos)</font></td>
    <td align=center>&nbsp; </td>
    <td align=center>&nbsp; </td>
    <td align=center>&nbsp; </td>
    <td align=center rowspan=2><font size=2>(Millions</font><br>
       <font size=2>of
      dollars)</font></td>
    <td align=center>&nbsp; </td>
  </tr>
  <tr valign=bottom>
    <td align=center>&nbsp; </td>
    <td align=center>&nbsp; </td>
    <td align=center>&nbsp; </td>
    <td align=center>&nbsp; </td>
    <td align=center>&nbsp; </td>
    <td align=center>&nbsp; </td>
    <td align=center>&nbsp; </td>
    <td align=center>&nbsp; </td>
    <td align=center>&nbsp; </td>
    <td align=center>&nbsp; </td>
    <td align=center>&nbsp; </td>
    <td align=center>&nbsp; </td>
  </tr>
  <tr valign=bottom>
    <td align=center>&nbsp; </td>
    <td align=center>&nbsp; </td>
    <td align=center>&nbsp; </td>
    <td align=center colspan=7><font size=2>(except per share and
      per ADS data)</font></td>
    <td align=center>&nbsp; </td>
    <td align=center>&nbsp; </td>
    <td align=center>&nbsp; </td>
  </tr>
  <tr valign=bottom>
    <td align=left>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<font size=2>Minority
      interest</font> </td>
    <td align=right><font size=2>0</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>0</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>19</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>220</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>96</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>9</font> </td>
    <td align=left>&nbsp; </td>
  </tr>
  <tr valign=bottom>
    <td align=left>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<font size=2>Majority
      interest</font> </td>
    <td align=right><font size=2>343</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>1,567</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>1,371</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>2,178</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>1,529</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>141</font> </td>
    <td align=left>&nbsp; </td>
  </tr>
  <tr valign=bottom>
    <td align=left>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<font size=2>Net
      income per share</font> </td>
    <td align=right><font size=2>0.96</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>3.93</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>3.31</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>5.18</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>3.27</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>0.30</font> </td>
    <td align=left>&nbsp; </td>
  </tr>
  <tr valign=bottom>
    <td align=left>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<font size=2>Net
      income per ADS </font><sup><font size=2>(2)</font></sup> </td>
    <td align=right><font size=2>2.88</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>11.78</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>9.94</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>15.54</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>9.82</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>0.91</font> </td>
    <td align=left>&nbsp; </td>
  </tr>
  <tr valign=bottom>
    <td align=left>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<font size=2>Weighted
      average shares outstanding</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
  </tr>
  <tr valign=bottom>
    <td align=left>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;
      &nbsp;<font size=2>(thousands)</font><sup><font size=2>(5)</font></sup>
    </td>
    <td align=right><font size=2>357,159</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>398,916</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>413,790</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>420,340</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>468,228</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>468,228</font> </td>
    <td align=left>&nbsp; </td>
  </tr>
  <tr valign=bottom>
    <td align=left>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<font size=2>Weighted
      average ADSs outstanding</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
  </tr>
  <tr valign=bottom>
    <td align=left>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;
      &nbsp;<font size=2>(thousands)</font> </td>
    <td align=right><font size=2>119,053</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>132,972</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>137,930</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>140,113</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>155,743</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>155,743</font> </td>
    <td align=left>&nbsp; </td>
  </tr>
  <tr valign=bottom>
    <td align=left><i><font size=2>U.S. GAAP including effects of
      inflation:</font></i> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
  </tr>
  <tr valign=bottom>
    <td align=left>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<font size=2>Net
      sales</font> </td>
    <td align=right><font size=2>3,265</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>6,333</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>13,893</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>23,515</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>24,106</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>2,218</font> </td>
    <td align=left>&nbsp; </td>
  </tr>
  <tr valign=bottom>
    <td align=left>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<font size=2>Cost
      of sales</font> </td>
    <td align=right><font size=2>2,150</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>3,674</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>11,116</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>19,059</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>20,422</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>1,879</font> </td>
    <td align=left>&nbsp; </td>
  </tr>
  <tr valign=bottom>
    <td align=left>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<font size=2>Gross
      profit</font> </td>
    <td align=right><font size=2>1,115</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>2,659</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>2,777</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>4,456</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>3,684</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>339</font> </td>
    <td align=left>&nbsp; </td>
  </tr>
  <tr valign=bottom>
    <td align=left>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<font size=2>Operating
      income</font><sup><font size=2>(4)</font></sup> </td>
    <td align=right><font size=2>583</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>1,998</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>1,654</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>3,144</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>2,310</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>212</font> </td>
    <td align=left>&nbsp; </td>
  </tr>
  <tr valign=bottom>
    <td align=left>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<font size=2>Financial
      (expense) income</font> </td>
    <td align=right><font size=2>(29</font> </td>
    <td align=left><font size=2>)</font> </td>
    <td align=right><font size=2>(40</font> </td>
    <td align=left><font size=2>)</font> </td>
    <td align=right><font size=2>(155</font> </td>
    <td align=left><font size=2>)</font> </td>
    <td align=right><font size=2>(63</font> </td>
    <td align=left><font size=2>)</font> </td>
    <td align=right><font size=2>41</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>4</font> </td>
    <td align=left>&nbsp; </td>
  </tr>
  <tr valign=bottom>
    <td align=left>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<font size=2>Other
      (expense) income, net</font> </td>
    <td align=right><font size=2>(35</font> </td>
    <td align=left><font size=2>)</font> </td>
    <td align=right><font size=2>(4</font> </td>
    <td align=left><font size=2>)</font> </td>
    <td align=right><font size=2>29</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>24</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>12</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>1</font> </td>
    <td align=left>&nbsp; </td>
  </tr>
  <tr valign=bottom>
    <td align=left>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<font size=2>Income
      before taxes, employee profit</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
  </tr>
  <tr valign=bottom>
    <td align=left>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;
      &nbsp;<font size=2>sharing and minority interest</font> </td>
    <td align=right><font size=2>519</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>1,954</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>1,528</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>3,105</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>2,363</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>217</font> </td>
    <td align=left>&nbsp; </td>
  </tr>
  <tr valign=bottom>
    <td align=left>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<font size=2>Income
      tax expense</font> </td>
    <td align=right><font size=2>222</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>417</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>140</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>636</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>653</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>60</font> </td>
    <td align=left>&nbsp; </td>
  </tr>
  <tr valign=bottom>
    <td align=left>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<font size=2>Income
      before minority interest</font> </td>
    <td align=right><font size=2>297</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>1,537</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>1,388</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>2,469</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>1,709</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>157</font> </td>
    <td align=left>&nbsp; </td>
  </tr>
  <tr valign=bottom>
    <td align=left>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<font size=2>Minority
      interest</font> </td>
    <td align=right><font size=2>0</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>0</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>18</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>220</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>122</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>11</font> </td>
    <td align=left>&nbsp; </td>
  </tr>
  <tr valign=bottom>
    <td align=left>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<font size=2>U.S.
      GAAP adjustment on minority</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
  </tr>
  <tr valign=bottom>
    <td align=left>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;
      &nbsp;<font size=2>interest</font> </td>
    <td align=right><font size=2>0</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>0</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>0</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>25</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>25</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>2</font> </td>
    <td align=left>&nbsp; </td>
  </tr>
  <tr valign=bottom>
    <td align=left>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<font size=2>Net
      income</font> </td>
    <td align=right><font size=2>297</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>1,537</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>1,370</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>2,224</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>1,587</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>146</font> </td>
    <td align=left>&nbsp; </td>
  </tr>
  <tr valign=bottom>
    <td align=left>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<font size=2>Net
      income per share </font><sup><font size=2>(5)</font></sup> </td>
    <td align=right><font size=2>0.83</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>3.85</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>3.31</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>5.29</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>3.39</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>0.31</font> </td>
    <td align=left>&nbsp; </td>
  </tr>
  <tr valign=bottom>
    <td align=left>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<font size=2>Net
      income per ADS</font> </td>
    <td align=right><font size=2>2.49</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>11.56</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>9.93</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>15.87</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>10.19</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>0.94</font> </td>
    <td align=left>&nbsp; </td>
  </tr>
  <tr>
    <td colspan=13>&nbsp; </td>
  </tr>
  <tr>
    <td colspan=13>&nbsp; </td>
  </tr>
  <tr valign=bottom>
    <td align=left><b><font size=2>Balance Sheet Data:</font></b>
    </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
  </tr>
  <tr valign=bottom>
    <td align=left><i><font size=2>Mexican GAAP:</font></i> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
  </tr>
  <tr valign=bottom>
    <td align=left>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<font size=2>Total
      assets</font> </td>
    <td align=right><font size=2>7,039</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>9,971</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>15,630</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>18,043</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>22,841</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>2,102</font> </td>
    <td align=left>&nbsp; </td>
  </tr>
  <tr valign=bottom>
    <td align=left>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<font size=2>Total
      long-term liabilities</font><sup><font size=2>(3)</font></sup> </td>
    <td align=right><font size=2>1,236</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>1,621</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>2,405</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>2,175</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>2,729</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>251</font> </td>
    <td align=left>&nbsp; </td>
  </tr>
  <tr valign=bottom>
    <td align=left>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<font size=2>Total
      stockholders&#146; equity</font> </td>
    <td align=right><font size=2>5,423</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>7,337</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>10,316</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>12,960</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>17,252</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>1,588</font> </td>
    <td align=left>&nbsp; </td>
  </tr>
  <tr>
    <td colspan=13>&nbsp; </td>
  </tr>
  <tr valign=bottom>
    <td align=left><i><font size=2>U.S. GAAP including effects of
      inflation:</font></i> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
  </tr>
  <tr valign=bottom>
    <td align=left>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<font size=2>Total
      assets</font> </td>
    <td align=right><font size=2>6,960</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>9,828</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>15,852</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>18,205</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>22,849</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>2,103</font> </td>
    <td align=left>&nbsp; </td>
  </tr>
  <tr valign=bottom>
    <td align=left>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<font size=2>Total
      long-term liabilities</font><sup><font size=2>(3)</font></sup> </td>
    <td align=right><font size=2>1,176</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>1,581</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>2,467</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>2,220</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>2,731</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>251</font> </td>
    <td align=left>&nbsp; </td>
  </tr>
  <tr valign=bottom>
    <td align=left>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<font size=2>Total
      stockholders&#146; equity</font> </td>
    <td align=right><font size=2>5,405</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>7,234</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>8,539</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>10,801</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>14,813</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>1,366</font> </td>
    <td align=left>&nbsp; </td>
  </tr>
  <tr>
    <td colspan=13>&nbsp; </td>
  </tr>
  <tr valign=bottom>
    <td align=left><b><font size=2>Cash Flow Data:</font></b> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
  </tr>
  <tr valign=bottom>
    <td align=left><i><font size=2>Mexican GAAP:</font></i> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
  </tr>
  <tr valign=bottom>
    <td align=left>&nbsp; &nbsp; &nbsp; &nbsp;<font size=2>Cash provided
      by operating activities</font> </td>
    <td align=right><font size=2>467</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>981</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>1,996</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>2,384</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>2,352</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>216</font> </td>
    <td align=left>&nbsp; </td>
  </tr>
  <tr valign=bottom>
    <td align=left>&nbsp; &nbsp; &nbsp; &nbsp;<font size=2>Cash provided
      by (used in) financing</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
  </tr>
  <tr valign=bottom>
    <td align=left>&nbsp; &nbsp; &nbsp; &nbsp;<font size=2>activities</font>
    </td>
    <td align=right><font size=2>34</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>433</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>(260</font> </td>
    <td align=left><font size=2>)</font> </td>
    <td align=right><font size=2>(417</font> </td>
    <td align=left><font size=2>)</font> </td>
    <td align=right><font size=2>2,324</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>214</font> </td>
    <td align=left>&nbsp; </td>
  </tr>
  <tr valign=bottom>
    <td align=left>&nbsp; &nbsp; &nbsp; &nbsp;<font size=2>Cash (used
      in) provided investing</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
  </tr>
  <tr valign=bottom>
    <td align=left>&nbsp; &nbsp; &nbsp; &nbsp;<font size=2>activities</font>
    </td>
    <td align=right><font size=2>(28</font> </td>
    <td align=left><font size=2>)</font> </td>
    <td align=right><font size=2>(1,454</font> </td>
    <td align=left><font size=2>)</font> </td>
    <td align=right><font size=2>(2,076</font> </td>
    <td align=left><font size=2>)</font> </td>
    <td align=right><font size=2>13</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>(484</font> </td>
    <td align=left><font size=2>)</font> </td>
    <td align=right><font size=2>(45</font> </td>
    <td align=left><font size=2>)</font> </td>
  </tr>
  <tr>
    <td colspan=13>&nbsp; </td>
  </tr>
  <tr valign=bottom>
    <td align=left><b><font size=2>Other Data:</font></b> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
  </tr>
  <tr valign=bottom>
    <td align=left><i><font size=2>Mexican GAAP:</font></i> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
  </tr>
  <tr valign=bottom>
    <td align=left>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<font size=2>Capital
      expenditures</font> </td>
    <td align=right><font size=2>69</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>1,377</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>539</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>417</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>486</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>45</font> </td>
    <td align=left>&nbsp; </td>
  </tr>
  <tr valign=bottom>
    <td align=left>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<font size=2></font><font size=2>Adjusted
      EBITDA</font><sup><font size=2>(6)</font></sup> </td>
    <td align=right><font size=2>790</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>2,254</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>2,039</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>3,481</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>2,733</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>252</font> </td>
    <td align=left>&nbsp; </td>
  </tr>
</table>
<BR>
<P align=center>4</P>
<HR align=center width="100%" noshade SIZE=5>


<!-- MARKER PAGE="sheet: 1; page: 1" -->
<A name="page_8"></A>
<table border=0 cellpadding=0 cellspacing=0 style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'" width="100%">
  <tr valign=bottom>
    <td align=center width="43%">&nbsp; </td>
    <td align=center colspan="12"> <b><font size=2>Year Ended December
      31,</font></b>  </td>
  </tr>
  <tr>
    <td align=center width="43%">&nbsp; </td>
    <td colspan="12" align=center>
      <hr noshade size=1>
       </td>
  </tr>
  <tr valign=bottom>
    <td align=center width="43%">&nbsp; </td>
    <td align=center width="8%"><b><font size=2>2003</font></b></td>
    <td align=center width="1%">&nbsp;&nbsp;&nbsp;</td>
    <td align=center width="8%"><b><font size=2>2004</font></b></td>
    <td align=center width="2%">&nbsp;&nbsp;&nbsp;</td>
    <td align=center width="7%"><b><font size=2>2005</font></b></td>
    <td align=center width="2%">&nbsp;&nbsp;&nbsp;</td>
    <td align=center width="7%"><b><font size=2>2006</font></b></td>
    <td align=center width="1%">&nbsp;&nbsp;&nbsp;</td>
    <td align=center width="8%"><b><font size=2>2007</font></b></td>
    <td align=center width="1%">&nbsp;&nbsp;&nbsp;</td>
    <td align=center width="10%"><b><font size=2>2007</font><sup><font size=2>(1)</font></sup></b></td>
    <td align=center width="2%">&nbsp;&nbsp;</td>
  </tr>
  <tr>
    <td align=center width="43%">&nbsp; </td>
    <td align=center width="8%">
      <hr noshade size=1>
       </td>
    <td align=center width="1%">&nbsp;</td>
    <td align=center width="8%">
      <hr noshade size=1>
       </td>
    <td align=center width="2%">&nbsp;</td>
    <td align=center width="7%">
      <hr noshade size=1>
       </td>
    <td align=center width="2%">&nbsp;</td>
    <td align=center width="7%">
      <hr noshade size=1>
       </td>
    <td align=center width="1%">&nbsp;</td>
    <td align=center width="8%">
      <hr noshade size=1>
       </td>
    <td align=center width="1%">&nbsp;</td>
    <td align=center width="10%">
      <hr noshade size=1>
       </td>
    <td align=center width="2%">&nbsp;</td>
  </tr>
  <tr valign=bottom>
    <td align=center width="43%">&nbsp; </td>
    <td align=center colspan=8><font size=2>(Millions of constant
      December 31, 2007 pesos)</font></td>
    <td align=center width="8%">&nbsp; </td>
    <td align=center width="1%">&nbsp;</td>
    <td align=center rowspan=2 width="10%"><font size=2>(Millions</font><br>
       <font size=2>of
      dollars)</font></td>
    <td align=center rowspan=2 width="2%">&nbsp;</td>
  </tr>
  <tr valign=bottom>
    <td align=center width="43%">&nbsp; </td>
    <td align=center width="8%">&nbsp; </td>
    <td align=center width="1%">&nbsp;</td>
    <td align=center width="8%">&nbsp; </td>
    <td align=center width="2%">&nbsp;</td>
    <td align=center width="7%">&nbsp; </td>
    <td align=center width="2%">&nbsp;</td>
    <td align=center width="7%">&nbsp; </td>
    <td align=center width="1%">&nbsp;</td>
    <td align=center width="8%">&nbsp; </td>
    <td align=center width="1%">&nbsp;</td>
  </tr>
  <tr valign=bottom>
    <td align=center width="43%">&nbsp; </td>
    <td align=center width="8%">&nbsp; </td>
    <td align=center width="1%">&nbsp;</td>
    <td align=center colspan=8><font size=2>(except per share and
      per ADS data)</font></td>
    <td align=center width="10%">&nbsp; </td>
    <td align=center width="2%">&nbsp;</td>
  </tr>
  <tr valign=bottom>
    <td align=left width="43%">&nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<font size=2>Depreciation
      and amortization from</font> </td>
    <td align=left width="8%">&nbsp; </td>
    <td align=left width="1%">&nbsp;</td>
    <td align=left width="8%">&nbsp; </td>
    <td align=left width="2%">&nbsp;</td>
    <td align=left width="7%">&nbsp; </td>
    <td align=left width="2%">&nbsp;</td>
    <td align=left width="7%">&nbsp; </td>
    <td align=left width="1%">&nbsp;</td>
    <td align=left width="8%">&nbsp; </td>
    <td align=left width="1%">&nbsp;</td>
    <td align=left width="10%">&nbsp; </td>
    <td align=left width="2%">&nbsp;</td>
  </tr>
  <tr valign=bottom>
    <td align=left width="43%"><font size=2>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<font size=2></font>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;continuing
      operations</font> </td>
    <td align=right width="8%"><font size=2>213</font> </td>
    <td align=right width="1%">&nbsp;</td>
    <td align=right width="8%"><font size=2>238</font> </td>
    <td align=right width="2%">&nbsp;</td>
    <td align=right width="7%"><font size=2>349</font> </td>
    <td align=right width="2%">&nbsp;</td>
    <td align=right width="7%"><font size=2>450</font> </td>
    <td align=right width="1%">&nbsp;</td>
    <td align=right width="8%"><font size=2>549</font> </td>
    <td align=right width="1%">&nbsp;</td>
    <td align=right width="10%"><font size=2>51</font> </td>
    <td align=right width="2%">&nbsp;</td>
  </tr>
  <tr valign=bottom>
    <td align=left width="43%">&nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<font size=2>Working
      capital </font><sup><font size=2>(7)</font></sup> </td>
    <td align=right width="8%"><font size=2>1,097</font> </td>
    <td align=right width="1%">&nbsp;</td>
    <td align=right width="8%"><font size=2>2,108</font> </td>
    <td align=right width="2%">&nbsp;</td>
    <td align=right width="7%"><font size=2>4,353</font> </td>
    <td align=right width="2%">&nbsp;</td>
    <td align=right width="7%"><font size=2>6,964</font> </td>
    <td align=right width="1%">&nbsp;</td>
    <td align=right width="8%"><font size=2>11,594</font> </td>
    <td align=right width="1%">&nbsp;</td>
    <td align=right width="10%"><font size=2>1,067</font> </td>
    <td align=right width="2%">&nbsp;</td>
  </tr>
  <tr valign=bottom>
    <td align=left width="43%">&nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<font size=2>Dividends
      declared</font> </td>
    <td align=right width="8%"><font size=2>0</font> </td>
    <td align=right width="1%">&nbsp;</td>
    <td align=right width="8%"><font size=2>0</font> </td>
    <td align=right width="2%">&nbsp;</td>
    <td align=right width="7%"><font size=2>0</font> </td>
    <td align=right width="2%">&nbsp;</td>
    <td align=right width="7%"><font size=2>0</font> </td>
    <td align=right width="1%">&nbsp;</td>
    <td align=right width="8%"><font size=2>0</font> </td>
    <td align=right width="1%">&nbsp;</td>
    <td align=right width="10%"><font size=2>0</font> </td>
    <td align=right width="2%">&nbsp;</td>
  </tr>
  <tr valign=bottom>
    <td align=left width="43%">&nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<font size=2>Dividends
      declared per share</font> </td>
    <td align=right width="8%"><font size=2>0</font> </td>
    <td align=right width="1%">&nbsp;</td>
    <td align=right width="8%"><font size=2>0</font> </td>
    <td align=right width="2%">&nbsp;</td>
    <td align=right width="7%"><font size=2>0</font> </td>
    <td align=right width="2%">&nbsp;</td>
    <td align=right width="7%"><font size=2>0</font> </td>
    <td align=right width="1%">&nbsp;</td>
    <td align=right width="8%"><font size=2>0</font> </td>
    <td align=right width="1%">&nbsp;</td>
    <td align=right width="10%"><font size=2>0</font> </td>
    <td align=right width="2%">&nbsp;</td>
  </tr>
  <tr valign=bottom>
    <td align=left width="43%">&nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<font size=2>Dividends
      declared per ADS</font> </td>
    <td align=right width="8%"><font size=2>0</font> </td>
    <td align=right width="1%">&nbsp;</td>
    <td align=right width="8%"><font size=2>0</font> </td>
    <td align=right width="2%">&nbsp;</td>
    <td align=right width="7%"><font size=2>0</font> </td>
    <td align=right width="2%">&nbsp;</td>
    <td align=right width="7%"><font size=2>0</font> </td>
    <td align=right width="1%">&nbsp;</td>
    <td align=right width="8%"><font size=2>0</font> </td>
    <td align=right width="1%">&nbsp;</td>
    <td align=right width="10%"><font size=2>0</font> </td>
    <td align=right width="2%">&nbsp;</td>
  </tr>
  <tr>
    <td colspan=13>&nbsp; </td>
  </tr>
  <tr valign=bottom>
    <td align=left width="43%"><b><font size=2>Operational information:</font></b>
    </td>
    <td align=left width="8%">&nbsp; </td>
    <td align=left width="1%">&nbsp;</td>
    <td align=left width="8%">&nbsp; </td>
    <td align=left width="2%">&nbsp;</td>
    <td align=left width="7%">&nbsp; </td>
    <td align=left width="2%">&nbsp;</td>
    <td align=left width="7%">&nbsp; </td>
    <td align=left width="1%">&nbsp;</td>
    <td align=left width="8%">&nbsp; </td>
    <td align=left width="1%">&nbsp;</td>
    <td align=left width="10%">&nbsp; </td>
    <td align=left width="2%">&nbsp;</td>
  </tr>
  <tr valign=bottom>
    <td align=left width="43%">&nbsp; &nbsp;<font size=2>Annual installed capacity</font>
    </td>
    <td align=left width="8%">&nbsp; </td>
    <td align=left width="1%">&nbsp;</td>
    <td align=left width="8%">&nbsp; </td>
    <td align=left width="2%">&nbsp;</td>
    <td align=left width="7%">&nbsp; </td>
    <td align=left width="2%">&nbsp;</td>
    <td align=left width="7%">&nbsp; </td>
    <td align=left width="1%">&nbsp;</td>
    <td align=left width="8%">&nbsp; </td>
    <td align=left width="1%">&nbsp;</td>
    <td align=left width="10%">&nbsp; </td>
    <td align=left width="2%">&nbsp;</td>
  </tr>
  <tr valign=bottom>
    <td align=left width="43%">&nbsp; &nbsp; &nbsp;<font size=2>(thousands of
      tons)</font> </td>
    <td align=right width="8%"><font size=2>730</font> </td>
    <td align=right width="1%">&nbsp;</td>
    <td align=right width="8%"><font size=2>1,210</font> </td>
    <td align=right width="2%">&nbsp;</td>
    <td align=right width="7%"><font size=2>2,847</font> </td>
    <td align=right width="2%">&nbsp;</td>
    <td align=right width="7%"><font size=2>2,902</font> </td>
    <td align=right width="1%">&nbsp;</td>
    <td align=right width="8%"><font size=2>2,902</font> </td>
    <td align=right width="1%">&nbsp;</td>
    <td align=left width="10%">&nbsp; </td>
    <td align=left width="2%">&nbsp;</td>
  </tr>
  <tr valign=bottom>
    <td align=left width="43%">&nbsp; &nbsp;<font size=2>Tons shipped</font> </td>
    <td align=right width="8%"><font size=2>628</font> </td>
    <td align=right width="1%">&nbsp;</td>
    <td align=right width="8%"><font size=2>773</font> </td>
    <td align=right width="2%">&nbsp;</td>
    <td align=right width="7%"><font size=2>1,708</font> </td>
    <td align=right width="2%">&nbsp;</td>
    <td align=right width="7%"><font size=2>2,676</font> </td>
    <td align=right width="1%">&nbsp;</td>
    <td align=right width="8%"><font size=2>2,691</font> </td>
    <td align=right width="1%">&nbsp;</td>
    <td align=left width="10%">&nbsp; </td>
    <td align=left width="2%">&nbsp;</td>
  </tr>
  <tr valign=bottom>
    <td align=left width="43%">&nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<font size=2>Mexico</font>
    </td>
    <td align=right width="8%"><font size=2>547</font> </td>
    <td align=right width="1%">&nbsp;</td>
    <td align=right width="8%"><font size=2>676</font> </td>
    <td align=right width="2%">&nbsp;</td>
    <td align=right width="7%"><font size=2>899</font> </td>
    <td align=right width="2%">&nbsp;</td>
    <td align=right width="7%"><font size=2>945</font> </td>
    <td align=right width="1%">&nbsp;</td>
    <td align=right width="8%"><font size=2>900</font> </td>
    <td align=right width="1%">&nbsp;</td>
    <td align=left width="10%">&nbsp; </td>
    <td align=left width="2%">&nbsp;</td>
  </tr>
  <tr valign=bottom>
    <td align=left width="43%">&nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<font size=2>United
      States, Canada and others</font> </td>
    <td align=right width="8%"><font size=2>81</font> </td>
    <td align=right width="1%">&nbsp;</td>
    <td align=right width="8%"><font size=2>97</font> </td>
    <td align=right width="2%">&nbsp;</td>
    <td align=right width="7%"><font size=2>809</font> </td>
    <td align=right width="2%">&nbsp;</td>
    <td align=right width="7%"><font size=2>1,731</font> </td>
    <td align=right width="1%">&nbsp;</td>
    <td align=right width="8%"><font size=2>1,791</font> </td>
    <td align=right width="1%">&nbsp;</td>
    <td align=left width="10%">&nbsp; </td>
    <td align=left width="2%">&nbsp;</td>
  </tr>
  <tr valign=bottom>
    <td align=left width="43%">&nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<font size=2>SBQ
      steel</font> </td>
    <td align=right width="8%"><font size=2>63</font> </td>
    <td align=right width="1%">&nbsp;</td>
    <td align=right width="8%"><font size=2>168</font> </td>
    <td align=right width="2%">&nbsp;</td>
    <td align=right width="7%"><font size=2>923</font> </td>
    <td align=right width="2%">&nbsp;</td>
    <td align=right width="7%"><font size=2>1,918</font> </td>
    <td align=right width="1%">&nbsp;</td>
    <td align=right width="8%"><font size=2>1,951</font> </td>
    <td align=right width="1%">&nbsp;</td>
    <td align=left width="10%">&nbsp; </td>
    <td align=left width="2%">&nbsp;</td>
  </tr>
  <tr valign=bottom>
    <td align=left width="43%">&nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<font size=2>Structural
      and other steel products</font> </td>
    <td align=right width="8%"><font size=2>565</font> </td>
    <td align=right width="1%">&nbsp;</td>
    <td align=right width="8%"><font size=2>605</font> </td>
    <td align=right width="2%">&nbsp;</td>
    <td align=right width="7%"><font size=2>785</font> </td>
    <td align=right width="2%">&nbsp;</td>
    <td align=right width="7%"><font size=2>758</font> </td>
    <td align=right width="1%">&nbsp;</td>
    <td align=right width="8%"><font size=2>740</font> </td>
    <td align=right width="1%">&nbsp;</td>
    <td align=left width="10%">&nbsp; </td>
    <td align=left width="2%">&nbsp;</td>
  </tr>
  <tr valign=bottom>
    <td align=left width="43%">&nbsp; &nbsp;<font size=2>Per ton:</font> </td>
    <td align=left width="8%">&nbsp; </td>
    <td align=left width="1%">&nbsp;</td>
    <td align=left width="8%">&nbsp; </td>
    <td align=left width="2%">&nbsp;</td>
    <td align=left width="7%">&nbsp; </td>
    <td align=left width="2%">&nbsp;</td>
    <td align=left width="7%">&nbsp; </td>
    <td align=left width="1%">&nbsp;</td>
    <td align=left width="8%">&nbsp; </td>
    <td align=left width="1%">&nbsp;</td>
    <td align=left width="10%">&nbsp; </td>
    <td align=left width="2%">&nbsp;</td>
  </tr>
  <tr valign=bottom>
    <td align=left width="43%">&nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<font size=2>Net
      sales per ton</font> </td>
    <td align=right width="8%"><font size=2>5,197</font> </td>
    <td align=right width="1%">&nbsp;</td>
    <td align=right width="8%"><font size=2>8,190</font> </td>
    <td align=right width="2%">&nbsp;</td>
    <td align=right width="7%"><font size=2>8,133</font> </td>
    <td align=right width="2%">&nbsp;</td>
    <td align=right width="7%"><font size=2>8,787</font> </td>
    <td align=right width="1%">&nbsp;</td>
    <td align=right width="8%"><font size=2>8,958</font> </td>
    <td align=right width="1%">&nbsp;</td>
    <td align=right width="10%"><font size=2>824</font> </td>
    <td align=right width="2%">&nbsp;</td>
  </tr>
  <tr valign=bottom>
    <td align=left width="43%">&nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<font size=2>Cost
      of sales per ton</font> </td>
    <td align=right width="8%"><font size=2>3,414</font> </td>
    <td align=right width="1%">&nbsp;</td>
    <td align=right width="8%"><font size=2>4,760</font> </td>
    <td align=right width="2%">&nbsp;</td>
    <td align=right width="7%"><font size=2>6,505</font> </td>
    <td align=right width="2%">&nbsp;</td>
    <td align=right width="7%"><font size=2>7,149</font> </td>
    <td align=right width="1%">&nbsp;</td>
    <td align=right width="8%"><font size=2>7,617</font> </td>
    <td align=right width="1%">&nbsp;</td>
    <td align=right width="10%"><font size=2>701</font> </td>
    <td align=right width="2%">&nbsp;</td>
  </tr>
  <tr valign=bottom>
    <td align=left width="43%">&nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<font size=2>Operating
      income per ton</font> </td>
    <td align=right width="8%"><font size=2>918</font> </td>
    <td align=right width="1%">&nbsp;</td>
    <td align=right width="8%"><font size=2>2,608</font> </td>
    <td align=right width="2%">&nbsp;</td>
    <td align=right width="7%"><font size=2>989</font> </td>
    <td align=right width="2%">&nbsp;</td>
    <td align=right width="7%"><font size=2>1,133</font> </td>
    <td align=right width="1%">&nbsp;</td>
    <td align=right width="8%"><font size=2>812</font> </td>
    <td align=right width="1%">&nbsp;</td>
    <td align=right width="10%"><font size=2>75</font> </td>
    <td align=right width="2%">&nbsp;</td>
  </tr>
  <tr valign=bottom>
    <td align=left width="43%">&nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<font size=2>Adjusted
      EBITDA per ton</font> </td>
    <td align=right width="8%"><font size=2>1,258</font> </td>
    <td align=right width="1%">&nbsp;</td>
    <td align=right width="8%"><font size=2>2,916</font> </td>
    <td align=right width="2%">&nbsp;</td>
    <td align=right width="7%"><font size=2>1,194</font> </td>
    <td align=right width="2%">&nbsp;</td>
    <td align=right width="7%"><font size=2>1,301</font> </td>
    <td align=right width="1%">&nbsp;</td>
    <td align=right width="8%"><font size=2>1,016</font> </td>
    <td align=right width="1%">&nbsp;</td>
    <td align=right width="10%"><font size=2>94</font> </td>
    <td align=right width="2%">&nbsp;</td>
  </tr>
  <tr valign=bottom>
    <td align=left width="43%"><font size=2>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<font size=2></font>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Number
      of employees</font> </td>
    <td align=right width="8%"><font size=2>1,288</font> </td>
    <td align=right width="1%">&nbsp;</td>
    <td align=right width="8%"><font size=2>2,018</font> </td>
    <td align=right width="2%">&nbsp;</td>
    <td align=right width="7%"><font size=2>4,360</font> </td>
    <td align=right width="2%">&nbsp;</td>
    <td align=right width="7%"><font size=2>4,053</font> </td>
    <td align=right width="1%">&nbsp;</td>
    <td align=right width="8%"><font size=2>4,437</font> </td>
    <td align=right width="1%">&nbsp;</td>
    <td align=left width="10%">&nbsp; </td>
    <td align=left width="2%">&nbsp;</td>
  </tr>
</table>
<BR>
<hr align="left" width="150" size="1" noshade>
<TABLE style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'" cellSpacing=0 cellPadding=0 border=0>
<TR>
     <TD vAlign=top nowrap>(1)&nbsp; &nbsp; &nbsp; </TD>
     <TD width="100%">Peso amounts have been translated into U.S. dollars solely for the convenience of the reader, at the rate of Ps. 10.8662 per $1.00, the interbank transactions rate in effect on December 31, 2007. </TD></TR>
<TR>
     <TD colSpan=2>&nbsp;</TD></TR>
<TR>
     <TD vAlign=top nowrap>(2)&nbsp; &nbsp; &nbsp; </TD>
     <TD width="100%">Following our stock split effective May 30, 2006, one American depositary share, or &#147;ADS&#148;, represents three series B shares; previously one ADS represented one series B share. </TD></TR>
<TR>
     <TD colSpan=2>&nbsp;</TD></TR>
<TR>
     <TD vAlign=top nowrap>(3)&nbsp; &nbsp; &nbsp; </TD>
     <TD width="100%">Total long-term liabilities include amounts relating to deferred taxes. </TD></TR>
<TR>
     <TD colSpan=2>&nbsp;</TD></TR>
<TR>
     <TD vAlign=top nowrap>(4)&nbsp; &nbsp; &nbsp; </TD>

    <TD width="100%">In 2007 we recorded Ps. 17 million of gain on derivative instruments in other income and an expense of Ps. 8 million for fiscal amnesty offered by the Mexican Government in other expense, which were reclassified to operating expenses for U.S. GAAP purposes. In 2006 we recorded Ps. 15 million for the cancellation of the provision of labor obligations assumed in the acquisition of Atlax in other income which was reclassified to operating expenses for U.S. GAAP purposes. Reflects a reclassification in 2005 from other expenses under Mexican GAAP to operating expenses under U.S. GAAP of Ps. 39 million due to the cancellation of technical assistance and in 2004 reflects several entries recorded in other expenses under Mexican GAAP, which amount to approximately Ps. 36 million and according to U.S. GAAP, should be presented as operating expenses. </TD>
  </TR>
<TR>
     <TD colSpan=2>&nbsp;</TD></TR>
<TR>
     <TD vAlign=top nowrap>(5)&nbsp; &nbsp; &nbsp; </TD>
     <TD width="100%">For U.S. GAAP and Mexican GAAP purposes, the weighted average shares outstanding were calculated to give effect to the stock split described in Note 13(a) to our audited consolidated financial statements included elsewhere herein. </TD></TR>
<TR>
     <TD colSpan=2>&nbsp;</TD></TR>
<TR>
     <TD vAlign=top nowrap>(6)&nbsp; &nbsp; &nbsp; </TD>
     <TD width="100%">Adjusted EBITDA is not a financial measure computed under Mexican or U.S. GAAP. Adjusted EBITDA derived from our Mexican GAAP financial information means Mexican GAAP net income excluding (i) depreciation and amortization, (ii) financial income (expense), net (which is composed of net interest expense, foreign exchange gain or loss and monetary position gain or loss), (iii) other income (expense) and (iv) income tax expense and employee statutory profit-sharing expense. </TD></TR>
<TR>
     <TD colSpan=2>&nbsp;</TD></TR>
<TR>
     <TD>&nbsp;</TD>
     <TD width="100%">Adjusted EBITDA does not represent, and should not be considered as, an alternative to net income, as an indicator of our operating performance, or as an alternative to cash flow as an indicator of liquidity. In making such comparisons, however, you should bear in mind that adjusted EBITDA is not defined and is not a recognized financial measure under Mexican GAAP or U.S. GAAP and that it may be calculated differently by different companies and must be read in conjunction with the explanations that accompany it. Adjusted EBITDA as presented in this table does not take into account our working capital requirements, debt service requirements and other commitments. </TD></TR>
<TR>
     <TD colSpan=2>&nbsp;</TD></TR>
<TR>
     <TD>&nbsp;</TD>
     <TD width="100%">We believe that adjusted EBITDA can be useful to facilitate comparisons of operating performance between periods and with other companies in our industry because it excludes the effect of (i) depreciation and amortization, which represents a non-cash charge to earnings, (ii) certain financing costs, which are significantly affected by external factors, including interest rates, foreign currency exchange rates, and inflation rates, which have little or no bearing on our operating performance, (iii) other income (expense) that are not constant operations and (iv) income tax expense and employee statutory profit-sharing expense. However, adjusted EBITDA has certain material limitations, including that: </TD></TR>
<TR>
     <TD colSpan=2>&nbsp;</TD></TR></TABLE>
<blockquote>

  <ul>
    <li type="disc">
      <p>it does not include taxes, which are a necessary and recurring part of
      our operations; </p>
    </li>
    <li type="disc">
      <p>it does not include depreciation and amortization, which, because we must
      utilize property, equipment and other assets in order to generate revenues
      in our operations, is a necessary and recurring part of our costs; </p>
    </li>
    <li type="disc">
      <p>it does not include comprehensive cost of financing, which reflects our
      cost of capital structure and assisted us in generating revenue; and </p>
    </li>
  </ul>

</blockquote>
<P align=center>5</P>
<HR align=center width="100%" noshade SIZE=5>


<!-- MARKER PAGE="sheet: 1; page: 1" -->
<A name="page_9"></A>
<blockquote>

  <ul>
    <li type="disc">it does not include other income and expenses that are part of our net income. Therefore, any measure that excludes any or all of taxes, depreciation and amortization, comprehensive cost of financing and other income and expenses has material limitations. </li>
  </ul>
</blockquote>
<TABLE style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'" cellSpacing=0 cellPadding=0 border=0>

  <TR>

    <TD vAlign=top nowrap>(7)&nbsp; &nbsp; &nbsp; </TD>
    <TD width="100%">Working capital is defined as excess of current assets over current liabilities. </TD>
  </TR>

</TABLE>
<P align=left>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Adjusted EBITDA should not be considered in isolation or as a substitute for net income, net cash flow from operating activities or net cash flow from investing and financing activities. Reconciliation of net income to adjusted EBITDA is as follows:</P>
<table border=0 cellpadding=0 cellspacing=0 style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'" align="center" width="100%">
  <tr valign=bottom>
    <td align=center>&nbsp; </td>
    <td align=center colspan="11">    <b><font size=2>Year Ended December
      31,</font></b>   </td>
  </tr>
  <tr>
    <td align=center>&nbsp; </td>
    <td colspan="11" align=center>
      <hr noshade size=1>
       </td>
  </tr>
  <tr valign=bottom>
    <td align=center>&nbsp; </td>
    <td align=center><b><font size=2>2003</font></b></td>
    <td align=center>&nbsp;&nbsp;&nbsp;</td>
    <td align=center><b><font size=2>2004</font></b></td>
    <td align=center>&nbsp;&nbsp;&nbsp;</td>
    <td align=center><b><font size=2>2005</font></b></td>
    <td align=center>&nbsp;&nbsp;&nbsp;</td>
    <td align=center><b><font size=2>2006</font></b></td>
    <td align=center>&nbsp;&nbsp;&nbsp;</td>
    <td align=center><b><font size=2>2007</font></b></td>
    <td align=center>&nbsp;&nbsp;&nbsp;</td>
    <td align=center><b><font size=2>2007</font><sup><font size=2>(1)</font></sup></b></td>
  </tr>
  <tr>
    <td align=center>&nbsp; </td>
    <td align=center>
      <hr noshade size=1>
       </td>
    <td align=center>&nbsp; </td>
    <td align=center>
      <hr noshade size=1>
       </td>
    <td align=center>&nbsp; </td>
    <td align=center>
      <hr noshade size=1>
       </td>
    <td align=center>&nbsp; </td>
    <td align=center>
      <hr noshade size=1>
       </td>
    <td align=center>&nbsp; </td>
    <td align=center>
      <hr noshade size=1>
       </td>
    <td align=center>&nbsp;</td>
    <td align=center>
      <hr noshade size=1>
       </td>
  </tr>
  <tr valign=bottom>
    <td align=center>&nbsp; </td>
    <td align=center colspan="10" valign="top"><font size=2>(Millions of constant
      December 31, 2006 pesos)</font>  </td>
    <td align=center><font size=2>(Millions</font><br>
       <font size=2>of
      dollars)</font></td>
  </tr>

  <tr>
    <td colspan=12>&nbsp; </td>
  </tr>
  <tr valign=bottom>
    <td align=left><i><font size=2>Mexican GAAP:</font></i> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
  </tr>
  <tr valign=bottom>
    <td align=left>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<font size=2>Net
      income</font> </td>
    <td align=right><font size=2>343</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>1,567</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>1,390</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>2,398</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>1,625</font> </td>
    <td align=right>&nbsp;</td>
    <td align=right><font size=2>150</font> </td>
  </tr>
  <tr valign=bottom>
    <td align=left>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<font size=2>Depreciation
      and amortization</font> </td>
    <td align=right><font size=2>213</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>238</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>349</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>450</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>549</font> </td>
    <td align=right>&nbsp;</td>
    <td align=right><font size=2>51</font> </td>
  </tr>
  <tr valign=bottom>
    <td align=left>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<font size=2>Financial
      income (expense)</font> </td>
    <td align=right><font size=2>(29</font> </td>
    <td align=left><font size=2>)</font> </td>
    <td align=right><font size=2>(40</font> </td>
    <td align=left><font size=2>)</font> </td>
    <td align=right><font size=2>(155</font> </td>
    <td align=left><font size=2>)</font> </td>
    <td align=right><font size=2>(63</font> </td>
    <td align=left><font size=2>)</font> </td>
    <td align=right><font size=2>41</font> </td>
    <td align=right>&nbsp;</td>
    <td align=right><font size=2>4</font> </td>
  </tr>
  <tr valign=bottom>
    <td align=left>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<font size=2>Income
      tax expense and employee profit sharing</font> </td>
    <td align=right><font size=2>170</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>368</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>133</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>609</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>621</font> </td>
    <td align=right>&nbsp;</td>
    <td align=right><font size=2>57</font> </td>
  </tr>
  <tr valign=bottom>
    <td align=left>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<font size=2>Other
      income (expense)</font> </td>
    <td align=right><font size=2>(35</font> </td>
    <td align=left><font size=2>)</font> </td>
    <td align=right><font size=2>(41</font> </td>
    <td align=left><font size=2>)</font> </td>
    <td align=right><font size=2>(12</font> </td>
    <td align=left><font size=2>)</font> </td>
    <td align=right><font size=2>39</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>21</font> </td>
    <td align=right>&nbsp;</td>
    <td align=right><font size=2>2</font> </td>
  </tr>
  <tr valign=bottom>
    <td align=left>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<font size=2>Adjusted
      EBITDA</font> </td>
    <td align=right><font size=2>790</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>2,254</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>2,039</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>3,481</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>2,733</font> </td>
    <td align=right>&nbsp;</td>
    <td align=right><font size=2>252</font> </td>
  </tr>
</table>
<BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth, for the periods
indicated, the high, low, average and period-end free-market exchange rate expressed
in pesos per U.S. dollar. The average annual rates presented in the following
table were calculated by using the average of the exchange rates on the last day
of each month during the relevant period. The data provided in this table is based
on noon buying rates published by the Federal Reserve Bank of New York for cable
transfers in Mexican pesos. We have not restated the rates in constant currency
units. All amounts are stated in pesos. We make no representation that the Mexican
peso amounts referred to in this annual report could have been or could be converted
into U.S. dollars at any particular rate or at all. <br>
<br>
<TABLE style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'" cellSpacing=0 cellPadding=0 width="100%" border=0>

<TR vAlign=bottom>
     <TD align=center width="98%" colSpan=5><B><FONT size=2>Exchange Rates</FONT></B> </TD></TR>
<TR>
     <TD width="98%" colSpan=5>
<HR noshade SIZE=1>
</TD></TR>
<TR vAlign=bottom>
     <TD align=left width="33%"><B><FONT size=2>Year Ended December 31</FONT></B> </TD>
     <TD align=center width="18%"><B><FONT size=2>High</FONT></B> </TD>
     <TD align=center width="15%"><B><FONT size=2>Low</FONT></B> </TD>
     <TD align=center width="18%"><B><FONT size=2>Average </FONT></B><B><SUP><FONT size=2>(1)</FONT></SUP></B> </TD>
     <TD align=center width="14%"><B><FONT size=2>Period End</FONT></B> </TD></TR>
<TR>
     <TD width="33%">
<HR align="left" width="95%" SIZE=1 noshade>
</TD>
     <TD width="18%">
<HR width="95%" SIZE=1 noshade>
</TD>
     <TD width="15%">
<HR noshade SIZE=1>
</TD>

    <TD width="18%"> <HR width="95%" SIZE=1 noshade> </TD>
    <TD width="14%"> <HR width="95%" SIZE=1 noshade> </TD>
  </TR>
<TR vAlign=bottom>
     <TD align=left width="33%"><FONT size=2>2003</FONT> </TD>
     <TD align=center width="18%"><FONT size=2>11.41</FONT> </TD>
     <TD align=center width="15%"><FONT size=2>10.11</FONT> </TD>
     <TD align=center width="18%"><FONT size=2>10.79</FONT> </TD>
     <TD align=center width="14%"><FONT size=2>11.24</FONT> </TD></TR>
<TR vAlign=bottom>
     <TD align=left width="33%"><FONT size=2>2004</FONT> </TD>
     <TD align=center width="18%"><FONT size=2>11.64</FONT> </TD>
     <TD align=center width="15%"><FONT size=2>10.81</FONT> </TD>
     <TD align=center width="18%"><FONT size=2>11.29</FONT> </TD>
     <TD align=center width="14%"><FONT size=2>11.15</FONT> </TD></TR>
<TR vAlign=bottom>
     <TD align=left width="33%"><FONT size=2>2005</FONT> </TD>
     <TD align=center width="18%"><FONT size=2>11.41</FONT> </TD>
     <TD align=center width="15%"><FONT size=2>10.41</FONT> </TD>
     <TD align=center width="18%"><FONT size=2>10.89</FONT> </TD>
     <TD align=center width="14%"><FONT size=2>10.63</FONT> </TD></TR>
<TR vAlign=bottom>
     <TD align=left width="33%"><FONT size=2>2006</FONT> </TD>
     <TD align=center width="18%"><FONT size=2>11.46</FONT> </TD>
     <TD align=center width="15%"><FONT size=2>10.43</FONT> </TD>
     <TD align=center width="18%"><FONT size=2>10.91</FONT> </TD>
     <TD align=center width="14%"><FONT size=2>10.80</FONT> </TD></TR>
<TR vAlign=bottom>
     <TD align=left width="33%"><FONT size=2>2007</FONT> </TD>
     <TD align=center width="18%"><FONT size=2>11.27</FONT> </TD>
     <TD align=center width="15%"><FONT size=2>10.67</FONT> </TD>
     <TD align=center width="18%"><FONT size=2>10.93</FONT> </TD>
     <TD align=center width="14%"><FONT size=2>10.92</FONT> </TD></TR>
<TR>
     <TD width="98%" colSpan=5>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD align=left width="33%"><B><FONT size=2>Month</FONT></B> </TD>
     <TD align=center width="18%"><B><FONT size=2>High</FONT></B> </TD>
     <TD align=center width="15%"><B><FONT size=2>Low</FONT></B> </TD>
     <TD align=center width="18%"><B><FONT size=2>Average </FONT></B><B><SUP><FONT size=2>(1)</FONT></SUP></B> </TD>
     <TD align=center width="14%"><B><FONT size=2>Period End</FONT></B> </TD></TR>
<TR>

    <TD width="33%"> <HR align="left" width="95%" SIZE=1 noshade> </TD>

    <TD width="18%"> <HR width="95%" SIZE=1 noshade> </TD>

    <TD width="15%"> <HR width="95%" SIZE=1 noshade> </TD>

    <TD width="18%"> <HR width="95%" SIZE=1 noshade> </TD>

    <TD width="14%"> <HR width="95%" SIZE=1 noshade> </TD>
  </TR>
<TR vAlign=bottom>
     <TD align=left width="33%"><FONT size=2>December 2007</FONT> </TD>
     <TD align=center width="18%"><FONT size=2>10.92</FONT> </TD>
     <TD align=center width="15%"><FONT size=2>10.80</FONT> </TD>
     <TD align=center width="18%"><FONT size=2>10.85</FONT> </TD>
     <TD align=center width="14%"><FONT size=2>10.92</FONT> </TD></TR>
<TR vAlign=bottom>
     <TD align=left width="33%"><FONT size=2>January 2008</FONT> </TD>
     <TD align=center width="18%"><FONT size=2>10.97</FONT> </TD>
     <TD align=center width="15%"><FONT size=2>10.82</FONT> </TD>
     <TD align=center width="18%"><FONT size=2>10.91</FONT> </TD>
     <TD align=center width="14%"><FONT size=2>10.82</FONT> </TD></TR>
<TR vAlign=bottom>
     <TD align=left width="33%"><FONT size=2>February 2008</FONT> </TD>
     <TD align=center width="18%"><FONT size=2>10.82</FONT> </TD>
     <TD align=center width="15%"><FONT size=2>10.67</FONT> </TD>
     <TD align=center width="18%"><FONT size=2>10.77</FONT> </TD>
     <TD align=center width="14%"><FONT size=2>10.73</FONT> </TD></TR>
<TR vAlign=bottom>
     <TD align=left width="33%"><FONT size=2>March 2008</FONT> </TD>
     <TD align=center width="18%"><FONT size=2>10.85</FONT> </TD>
     <TD align=center width="15%"><FONT size=2>10.63</FONT> </TD>
     <TD align=center width="18%"><FONT size=2>10.73</FONT> </TD>
     <TD align=center width="14%"><FONT size=2>10.63</FONT> </TD></TR>
<TR vAlign=bottom>
     <TD align=left width="33%"><FONT size=2>April 2008</FONT> </TD>
     <TD align=center width="18%"><FONT size=2>10.60</FONT> </TD>
     <TD align=center width="15%"><FONT size=2>10.44</FONT> </TD>
     <TD align=center width="18%"><FONT size=2>10.51</FONT> </TD>
     <TD align=center width="14%"><FONT size=2>10.51</FONT> </TD></TR>
<TR vAlign=bottom>
     <TD align=left width="33%"><FONT size=2>May 2008</FONT> </TD>

    <TD align=center width="18%">10.57 </TD>
    <TD align=center width="15%">10.31 </TD>
    <TD align=center width="18%">10.44 </TD>
    <TD align=center width="14%">10.33 </TD>
  </TR></TABLE><BR>
<hr align="left" width="150" size="1" noshade>
<TABLE style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'" cellSpacing=0 cellPadding=0 border=0>

  <TR>

    <TD vAlign=top nowrap>(1)&nbsp; &nbsp; &nbsp; </TD>
    <TD width="100%">Average of month-end or period-end rates or daily rates, as applicable. </TD>
  </TR>

</TABLE>
<P align=left>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Except for the period from September through December 1982, during a liquidity crisis, the Mexican Central Bank has consistently made foreign currency available to Mexican private-sector entities (such as us) to meet their foreign currency obligations. Nevertheless, in the event of renewed shortages of foreign currency, there can be no assurance that foreign currency would continue to be available to private-sector companies or that foreign currency needed by us to service foreign currency obligations or to import goods could be purchased in the open market without substantial additional cost.</P>
<P align=center>6</P>
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<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Fluctuations in the exchange rate between the peso and the U.S. dollar will affect the U.S. dollar value of securities traded on the Mexican Stock Exchange, including the series B shares and, as a result, will likely
affect the market price on the American Stock Exchange of the American depositary shares, or &#147;ADSs&#148;, that represent the series B shares. Such fluctuations will also affect the U.S. dollar conversion by the depositary of any cash dividends
paid in pesos on series B shares represented by ADSs.</P>
<P align="left"> <B>B. Capitalization and Indebtedness</B><BR>
  <BR>
  &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Not applicable.<BR>
  <BR>
  <B>C. Reasons for the Offer and Use of Proceeds</B><BR>
  <BR>
  &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Not applicable.<BR>
  <BR>
  <B>D. Risk Factors</B></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Investing in the series B shares and the ADSs involves a high degree of risk. You should consider carefully the following risks, as well as all the other information presented in this annual report, before making an
investment decision. Any of the following risks, if they were to occur, could materially and adversely affect our business, results of operations, prospects and financial condition. Additional risks and uncertainties not currently known to us or
that we currently deem immaterial may also materially and adversely affect our business, results of operations, prospects and financial condition. In either event, the market price of our series B shares and ADSs could decline, and you could lose
all or substantially all of your investment.</P>
<P align="left">
<B>Risks Related to Our Business</B></P>
<P align="left">
<B><I>We may not be able to pass along price increases for raw materials to our customers to compensate for fluctuations in price and supply.</I></B></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Prices for raw materials necessary for production have fluctuated significantly in the past and significant increases could adversely affect our margins. During periods when prices for scrap metal, iron ore, alloys,
coke and other important raw materials have increased, our industry historically has sought to maintain profit margins and pass along increased raw materials costs to customers by means of price increases.</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We may not be able to pass along these and other possible cost increases in the future and, therefore, our margins and profitability may be adversely affected. Even when we can successfully apply surcharges, interim
reductions in profit margins frequently occur due to a time lag between the increase in raw material prices and the market acceptance of higher selling prices for finished steel products. We cannot assure you that any of our future customers will
agree to pay increased prices based on surcharges or that any of our current customers will continue to pay such surcharges.</P>


<P align="center"> 7</P>

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<P align="left">
<B><I>Implementing our growth strategy, which may include additional acquisitions, may adversely affect our operations.</I></B></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As part of our growth strategy, we may need to expand our existing facilities, build additional plants, acquire other steel assets, enter into joint ventures or form strategic alliances that we expect will expand or
complement our existing business. If any of these transactions occur, they will likely involve some or all of the following risks:</P>


<UL>
  <LI>
    <p> disruption of our ongoing business;</p>
  </LI>
  <LI>
    <p> diversion of our resources and of management&#146;s time;</p>
  </LI>
  <LI>
    <p> decreased ability to maintain uniform standards, controls, procedures
      and policies;</p>
  </LI>
  <LI>
    <p> difficulty managing the operations of a larger company;</p>
  </LI>
  <LI>
    <p> increased likelihood of involvement in labor, commercial or regulatory
      disputes or litigation related to the new enterprise;</p>
  </LI>
  <LI>
    <p> potential liability to joint venture participants or to third parties;</p>
  </LI>
  <LI>
    <p> difficulty competing for acquisitions and other growth opportunities with
      companies having greater financial resources; and</p>
  </LI>
  <LI>
    <p> difficulty integrating the acquired operations and personnel into our
      existing business.</p>
  </LI>
</UL>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our operations are capital intensive. We require capital for, among other purposes, acquiring new equipment, maintaining existing equipment and complying with environmental laws and regulations. We may not be able to
fund our capital expenditures from operating cash flow or from borrowings. If we are unable to fund our capital requirements we may not be able to implement our business plan.</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We intend to continue to pursue a growth strategy, the success of which will depend in part on our ability to acquire and integrate additional facilities. Some of these acquisitions may be outside of Mexico.
Acquisitions involve a number of special risks that could adversely affect our business, financial condition and results of operations, including the diversion of management&#146;s attention, the assimilation of the operations and personnel of the
acquired facilities, the assumption of legacy liabilities and the potential loss of key employees. We cannot assure you that any acquisition we make will not materially and adversely affect us or that any such acquisition will enhance our business.
We are unable to predict the likelihood of any additional acquisitions being proposed or completed in the near future or the terms of any such acquisitions. If we determine to make any significant acquisition, we may be required to sell additional
equity or debt securities or obtain additional credit facilities, which could result in additional dilution to our stockholders. There can be no assurance that adequate equity or debt financing would be available to us for any such
acquisitions.</P>
<P align="left">
<B><I>We may not be able to integrate successfully our recently acquired steel facilities into our operations.</I></B></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In July 2005, we and our controlling shareholder, Industrias CH, S.A.B. de C.V., or &#147;Industrias CH&#148;, acquired 100% of the stock of PAV Republic, Inc., or &#147;Republic&#148;, a U.S. producer of SBQ steel. We
acquired 50.2% of Republic&#146;s stock through our majority owned subsidiary, SimRep, and Industrias CH purchased the remaining 49.8% through SimRep. On February 21, 2008, we entered into an agreement to acquire 100% of the shares of
Corporaci&oacute;n Aceros DM, S.A. de C.V. and certain of its affiliates (&#147;Grupo San&#148;), and on May 30, 2008 such acquisition was consummated. Grupo San is a long products steel mini-mill and the second-largest corrugated rebar producer in
Mexico. Grupo San&#146;s operations are based in San Luis Potos&iacute;, Mexico. Its plants and 1,450 employees produce 700,000 tons of finished products annually. Our future success will depend in part on our ability to integrate the operations of
Republic and Grupo San successfully into our historic operations. Furthermore, while we have not yet encountered any material problems related to the assets acquired, there can be no assurance that problems will not arise in the future and that the
costs associated with those problems, should they arise, will not be significant.</P>
<P align="center"> 8</P>

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<P align="left">
<B><I>We face significant price and industry competition from other steel producers, which may adversely affect our profitability and market share.</I></B></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Competition in the steel industry is significant. Continuous advances in materials sciences and resulting technologies have given rise to products such as plastics, aluminum, ceramics and glass, all of which compete
with steel products. Competition in the steel industry exerts a downward pressure on prices, and, due to high start-up costs, the economics of operating a steel mill on a continuous basis may encourage mill operators to establish and maintain high
levels of output even in times of low demand, which further decreases prices and profit margins. The recent trend of consolidation in the global steel industry may increase competitive pressures on independent producers of our size if large steel
producers formed through consolidations adopt predatory pricing strategies that decrease prices and profit margins even further. If we are unable to remain competitive with these producers, our market share and financial performance would likely be
materially and adversely affected.</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Since most of our sales are in the United States and Canada, we also face strong competition from other steel producers in the United States and Canada. Approximately 34% of our sales in 2007 were in Mexico (which
include 3% of exports) where we face strong competition from other Mexican steel producers. A number of our competitors in the United States, Canada and Mexico have undertaken modernization and expansion plans, including the installation of
production facilities and manufacturing capacity for certain products that will compete with our products. As these producers become more efficient, we will face increased competition from them and may experience a loss of market share. In each of
the United States, Canada and Mexico we also face competition from international steel producers. Increased international competition, especially when combined with excess production capacity, would likely force us to lower our prices or to offer
increased services at a higher cost to us, which could materially reduce our gross margins and net income.</P>
<P align="left">
<B><I>We depend on distributions from our Mexican operating subsidiaries to finance our operations.</I></B></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We need to receive sufficient funds from our Mexican subsidiaries for a substantial portion of our internal cash flow, including cash flow to fund any future investment plans and to service our future financial
obligations. As a result, our cash flow will be materially and adversely affected if we do not receive dividends and other income from our subsidiaries. The ability of most of our subsidiaries to pay dividends and make other transfers to us may be
restricted by any indebtedness that we may incur or by Mexican law. Any such reduction in cash flow could materially adversely affect us.</P>
<P align="left">
<B><I>The operation of our facilities depends on good labor relations with our employees.</I></B></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At December 31, 2007, approximately 82% of our non-Mexican and 59% of our Mexican employees were members of unions. Collective bargaining agreements are typically negotiated on a facility by facility basis for our
Mexican facilities. The compensation terms of our labor contracts are adjusted on an annual basis, and all other terms of the labor contracts are renegotiated every two years. Any failure to reach an agreement on new labor contracts or to negotiate
these labor contracts could result in strikes, boycotts or other labor disruptions. These potential labor disruptions could have a material and adverse effect on our results of operations and financial condition. Labor disruptions, strikes or
significant negotiated wage increases could reduce our sales or increase our cost, and accordingly could have a material adverse effect on our business.</P>
<P align="center">
9</P>

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<P align="left">
<B><I>Operations at our Lackawanna, New York facility depend on our continuing right to use certain property and assets of an adjoining facility that the Mittal Steel Company N.V. (&#147;Mittal Steel&#148;) owns, and the termination of any such
rights could interrupt our operations and have a material adverse effect on our results of operations and financial condition.</I></B></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The operations at our Lackawanna facility depend on certain easements and other recorded agreements that the International Steel Group Inc. made in our favor relating to, among other things, use of certain oxygen
pipelines, engine rooms, water pipelines, natural gas and compressed air distribution systems and electrical equipment. Currently we and Mittal Steel are negotiating to extend these services and utility arrangements for a period of three years. Our
respective rights under these agreements may be terminated under certain circumstances including in the event of force majeure or plant closures by either party. In the event that a plant closure occurs and affects the supply of utilities or
services, either party, upon notice, has the right of ingress, egress and regress to enter the other party&#146;s premises for the sole purpose of continuing the supply of the utility affected. All of these rights are assignable in the event of a
sale of either of the parties. These rights are essential to the use and operation of the Lackawanna facility. In the event of a termination of any of these rights, we could be required to cease some or all of our operations at the Lackawanna
facility. Because we produced certain types of products in our Lackawanna facility that we do not produce in our other facilities, an interruption of production at our Lackawanna facility would result in a substantial loss of revenue and could
damage our relationships with customers.</P>
<P align="left">
<B><I>Our sales in the U.S. are concentrated and could be significantly reduced if one of our major customers reduced its purchases of our products or was unable to fulfill its financial obligations to us.</I></B></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our sales in the U.S. are concentrated among a relatively small number of customers. Any of our major customers can stop purchasing our products or significantly reduce their purchases at any time. For the year ended
December 31, 2007, direct sales of our products to one of our customers, United States Steel Corporation (&#147;U.S. Steel&#148;) accounted for approximately 10% of our revenues in the U.S. and 7% of our consolidated revenues for such year. During
the year ended December 31, 2007, sales to our ten largest customers in the U.S. accounted for approximately 45% of our consolidated revenues in the U.S. for such year and approximately 30% of our total consolidated revenues for such year. A
disruption in sales to one or more of our largest customers would adversely affect our cash flow and results of operations.</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;There can be no assurance that we will be able to maintain our current level of sales to our largest customers or that we will be able to sell our products to other customers on terms that will be favorable. The loss
of, or substantial decrease in the amount of purchases by, or a write-off of any significant receivables from, any of our major customers would materially and adversely affect our business, results of operations, liquidity and financial
condition.</P>
<P align="left">
<B><I>Unanticipated problems with our manufacturing equipment and facilities could have an adverse impact on our business.</I></B></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our capacity to manufacture steel products depends on the suitable operation of our manufacturing equipment, including blast furnaces, electric arc furnaces, continuous casters, reheating furnaces and rolling mills.
Breakdowns requiring significant time and/or resources to repair, as well as the occurrence of adverse events such as fires, explosions or adverse meteorological conditions, could cause production interruptions that could adversely affect our
results of operations.</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have not obtained insurance against all risks, and do not maintain insurance covering losses resulting from catastrophes or business interruptions. In the event we are not able to quickly and cost-effectively remedy
problems creating any significant interruption of our manufacturing capabilities, our</P>
<P align="center">
10</P>

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<P align="left">
operations could be adversely affected. In addition, in the event any of our plants were destroyed or significantly damaged or its production capabilities otherwise significantly decreased, we would likely suffer significant losses, and capital
investments necessary to repair any destroyed or damaged facilities or machinery would adversely affect our cash flows and our profitability.</P>
<P align="left">
<B><I>Because a significant portion of our sales are to the automotive industry, a decrease in automotive manufacturing could reduce our cash flows and adversely affect our results of operations.</I></B></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Direct sales of products to automotive assemblers and manufacturers accounted for approximately 30% of our total net sales in 2007. Demand for our products is affected by, among other things, the relative strength or
weakness of the U.S. automotive industry. U.S. automotive manufacturers have experienced significant reductions in market share to mostly Asian companies and have announced planned reduction in working capacity. Many large original equipment
manufacturers such as Dana Corporation, Delphi Corporation (&#147;Delphi&#148;) and others, have sought bankruptcy protection. A reduction in vehicles manufactured in North America, the principal market for Republic&#146;s SBQ steel products, would
have an adverse effect on our results of operations. In addition, the U.S. automotive industry is significantly unionized and subject to unanticipated and extended work slowdowns and stoppages resulting from labor disputes. We also sell to
independent forgers, components suppliers and steel service centers, all of which sell to the automotive market as well as other markets. Developments affecting the U.S. automotive industry may adversely affect us.</P>
<P align="left">
<B><I>If we are unable to obtain or maintain quality and environmental management certifications for our facilities, we may lose existing customers and fail to attract new customers.</I></B></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Most of our automotive parts customers in Mexico and the United States require that we have ISO 9001 and 14001 certification. All of the U.S. and Mexican facilities that sell to automotive parts customers are currently certified, as required. If the foregoing certifications are canceled, if approvals are withdrawn or if necessary additional standards are not obtained in a timely fashion, our ability to continue to serve our targeted
market, retain our customers or attract new customers may be impaired. For example, our failure to maintain these certifications could cause customers to refuse shipments which could materially and adversely affect our revenues and results of
operations. We cannot assure you of our future compliance.</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In the SBQ market, all participants must satisfy quality audits and obtain certifications in order to obtain the status of &#147;approved supplier.&#148; The automotive industry has put these stringent conditions in
place for the production of auto parts to assure a vehicle&#146;s quality and safety. We currently are an approved supplier for our automotive parts customers. Maintaining these certifications is crucial in preserving our market share, because they
can be a barrier to entry in the SBQ market, and we cannot assure you that we will do so.</P>
<P align="left">
<B><I>In the event of environmental violations at our facilities we may incur significant liabilities.</I></B></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our operations are subject to a broad range of environmental laws and regulations regulating our impact on air, water, soil and groundwater and exposure to hazardous substances. We cannot assure you that we will at all
times operate in compliance with environmental laws and regulations. If we fail to comply with these laws and regulations, we may be assessed fines or penalties, be required to make large expenditures to comply with such laws and regulations and/or
be forced to shut down noncompliant operations. You should also consider that environmental laws and regulations are becoming increasingly stringent and it is possible that future laws and regulations may require us to incur material environmental
compliance liabilities and costs. In addition, we need to maintain existing and obtain future environmental permits in order to operate our facilities. The failure to obtain necessary permits or</P>
<P align="center">
11</P>

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<P align="left">
consents or the loss of any permits could result in significant fines or penalties or prevent us from operating our facilities. We may also be subject, from time to time, to legal proceedings brought by private parties or governmental agencies with
respect to environmental matters, including matters involving alleged property damage or personal injury that could result in significant liability. Certain of our facilities in the United States have been the subject of administrative action by
state and local environmental authorities. See &#147;Business&#151;Legal Matters and Regulations&#151;Legal Proceedings&#151;Environmental Claims.&#148;</P>
<P align="left">
<B><I>If we are required to remediate contamination at our facilities we may incur significant liabilities.</I></B></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We may be required to remediate contamination at certain of our facilities and have established a reserve to deal with such liabilities. However, we cannot assure you that our environmental reserves will be adequate to
cover such liabilities or that our environmental expenditures will not differ significantly from our estimates or materially increase in the future. Failure to comply with any legal obligations requiring remediation of contamination could result in
liabilities, imposition of cleanup liens and fines, and we could incur large expenditures to bring our facilities into compliance.</P>
<P align="left">
<B><I>We could incur losses due to product liability claims and may be unable to maintain product liability insurance on acceptable terms, if at all.</I></B></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We could experience losses from defects or alleged defects in our steel products that subject us to claims for monetary damages. For example, many of our products are used in automobiles and light trucks and it is
possible that a defect in one of these vehicles would result in product liability claims against us. In accordance with normal commercial sales, some of our products include implied warranties that they are free from defects, are suitable for their
intended purposes and meet certain agreed upon manufacturing specifications. We cannot assure you that future product liability claims will not be brought against us, that we will not incur liability in excess of our insurance coverage, or that we
will be able to maintain product liability insurance with adequate coverage levels and on acceptable terms, if at all.</P>
<P align="left">
<B><I>Our controlling shareholder, Industrias CH, is able to exert significant influence on our business and policies and its interests may differ from those of other shareholders.</I></B></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of December 31, 2007, Industrias CH, which the chairman of our board of directors, Rufino Vigil Gonz&aacute;lez, controls, owned approximately 84% of our shares. Industrias CH nominated and elected all of the current
members of our board of directors, and Industrias CH continues and, will continue to be in a position to elect our future directors and to exercise substantial influence and control over our business and policies, including the timing and payment of
dividends. The interests of Industrias CH may differ significantly from those of other shareholders. Furthermore, as a result of the significant equity position of Industrias CH, there is currently limited liquidity in our series B shares and
ADSs.</P>
<P align="left">
<B><I>We have had a number of transactions with our affiliates.</I></B></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Historically, we have engaged a number and variety of transactions on market terms with affiliates, including entities that Industrias CH owns or controls. We expect that in the future we will continue to enter into
transactions with our affiliates, and some of these transactions may be significant.</P>
<P align="center">
12</P>

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<P align="left">
<B><I>We depend on our senior management and their unique knowledge of our business and of the SBQ industry, and we may not be able to replace key executives if they leave.</I></B></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We depend on the performance of our executive officers and key employees. Our senior management has significant experience in the steel industry, and the loss of any member of senior management or our inability to
attract and retain additional senior management could materially and adversely affect our business, results of operations, prospects and financial condition. We believe that the SBQ steel market is a niche market where specific industry experience
is key to success. We depend on the knowledge of our business and the SBQ industry of our senior management team, including Luis Garcia Limon, our chief executive officer. In addition, we attribute much of the success of our growth strategy to our
ability to retain most of the key senior management personnel of the companies and businesses that we have acquired. Competition for qualified personnel is significant, and we may not be able to find replacements with sufficient knowledge of, and
experience in, the SBQ industry for our existing senior management or any of these individuals if their services are no longer available. Our business could be adversely affected if we cannot attract or retain senior management or other necessary
personnel.</P>
<P align="left">
<B><I>Our tax liability may increase if the tax laws and regulations in countries in which we operate change or become subject to adverse interpretations.</I></B></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Taxes payable by companies in the countries in which we operate are substantial and include income tax, value-added tax, excise duties, profit taxes, payroll related taxes, property taxes and other taxes. Tax laws and
regulations in some of these countries may be subject to change, varying interpretation and inconsistent enforcement. Ineffective tax collection systems and continuing budget requirements may increase the likelihood of the imposition of onerous
taxes and penalties which could have a material adverse effect on our financial condition and results of operations. In addition to the usual tax burden imposed on taxpayers, these conditions create uncertainty as to the tax implications of various
business decisions. This uncertainty could expose us to significant fines and penalties and to enforcement measures despite its best efforts at compliance, and could result in a greater than expected tax burden. In addition, many of the
jurisdictions in which we operate have adopted transfer pricing legislation. If tax authorities impose significant additional tax liabilities as a result of transfer pricing adjustments, it could have a material adverse effect on our financial
condition and results of operations. It is possible that tax authorities in the countries in which we operate will introduce additional revenue raising measures. The introduction of any such provisions may affect our overall tax efficiency and may
result in significant additional taxes becoming payable. Any such additional tax exposure could have a material adverse effect on its financial condition and results of operations.</P>
<P align="left">
<B>Risks Related to the Steel Industry</B></P>
<P align="left">
<B><I>Our results of operations are significantly influenced by the cyclical nature of steel industry.</I></B></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The steel industry is cyclical in nature and sensitive to national and international macroeconomic conditions. Global demand for steel as well as overall supply levels significantly influence prices for our products.
Changes in these two factors likely will impact our operating results. Although global steel prices increased significantly during 2004, they fell in 2005 over 2004 levels, increasing again in first three quarters of 2006, but weakening in the last
quarter of 2006. In 2007, steel prices remained similar to prices in 2006. We cannot predict or give you any assurances as to prices of steel in the future.</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The costs of ferrous scrap and iron ore, the principal raw materials used in our steel operations, are subject to price fluctuations. Although our wholly-owned scrap collection and processing operations furnish a
material portion of our scrap requirements, we must acquire the remainder of our scrap from</P>
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other sources. Because increases in the prices we are able to charge for our finished steel products may lag increases in ferrous scrap prices, such increases in scrap prices can adversely affect our operating results. In 2004, the price of scrap
increased significantly. However, scrap prices decreased significantly in 2005 over 2004 levels. In 2006, scrap prices remained similar to 2005 levels. Scrap prices increased in 2007. There can be no assurance that scrap prices will not increase
and, if so, there can be no assurance that we will be able to pass all or a portion of these increases on through higher finished product prices.</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We purchase 98% of our iron ore pellet and 82% of our coke requirement on the open market. In 2004, U.S. Steel supplied essentially all of Republic&#146;s iron ore and coke requirements under terms of a supply agreement
that was beneficial to us. In 2005, the prices of these materials increased when we negotiated new contracts with U.S. Steel, and purchased more of the material in the open market. In 2006, iron ore and coke prices decreased from 2005 levels. Iron
ore and pellet prices increased in 2007. We cannot give you any assurance that we will be able to continue to find suppliers of these raw materials in the open market, that the prices of these materials will not increase or that the quality will
remain the same. Moreover, we cannot give you any assurance that we will be able to pass all or a portion of higher raw material prices on through finished product prices.</P>
<P align="left">
<B><I>The energy costs involved in our production processes are subject to fluctuations that are beyond our control and could significantly increase our costs of production.</I></B></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Energy costs constitute a significant and increasing component of our costs of operations. Energy cost as a percentage of direct cost was 12.1% for the year ended December 31, 2007, and is likely to increase in 2008.
Our manufacturing processes are dependent on adequate supplies of electricity and natural gas. A substantial increase in the cost of natural gas or electricity could have a material adverse effect on our margins. In addition, a disruption or
curtailment in supply could have a material adverse effect on our production and sales levels.</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Mexican government is currently the only supplier of energy in Mexico and has, in some cases, increased prices above international levels. We, like all other high volume users of electricity in Mexico, pay special
rates to the Mexican federal electricity commission (<I>Comisi&oacute;n Federal de Electricidad </I>or &#147;CFE&#148;) for electricity. We also pay special rates to Pemex, Gas y Petroqu&iacute;mica B&aacute;sica, (&#147;PEMEX&#148;), the national
oil company, for gas used at the Guadalajara facility. There can be no assurance these special rates will continue to be available to us or that these rates may not increase significantly in the future. We enter into futures contracts to fix and
reduce volatility of natural gas prices. We have not always been able to pass the effect of these increases on to our customers and there is no assurance that we will be able to pass the effect of these increases on to our customers in the future or
to maintain futures contracts to reduce volatility in natural gas prices. Changes in the price or supply of natural gas would materially and adversely affect our business and results of operations. As of December 31, 2007, as a result of the
evaluation of the market conditions of the natural gas in the Mexican operations, we decided not to continue natural gas hedging for our facilities in Mexico.</P>
<P align="left">
<B><I>Competition from other materials could significantly reduce market prices and demand for steel products and thereby reduce our cash flow and profitability.</I></B></P>


<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In many applications, steel competes with other materials that may be used as steel substitutes, such as aluminum (particularly in the automobile industry), cement, composites, glass, plastic and wood. Additional
substitutes for steel products could significantly reduce market prices and demand for steel products and thereby reduce our cash flow and profitability.</P>


<P align="center">
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<P align="left">
<B>Risks Related to Mexico</B></P>
<P align="left">
<B><I>Mexican governmental, political and economic factors may adversely impact our business.</I></B></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Mexican government has exercised, and continues to exercise, significant influence over the Mexican economy. Accordingly, Mexican governmental actions concerning the economy and state-owned enterprises could have a
significant impact on Mexican private sector entities in general and us, in particular, and on market conditions, prices and returns on Mexican securities, including ours.</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our financial condition, results of operations and prospects may also be adversely affected by currency fluctuations, inflation, interest rates, regulation, taxation, social instability and other political, social and
economic developments in or affecting Mexico. There can be no assurance that future developments in the Mexican political, economic or social environment, over which we have no control, will not have a material adverse effect on our business,
results of operations, financial condition or prospects or adversely affect the market price of the ADSs and the series B shares.</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Mexican economy has in the past experienced balance of payment deficits and shortages in foreign exchange reserves. While the Mexican government does not currently restrict the ability of Mexican or foreign persons
or entities to convert pesos to foreign currencies generally, and to U.S. dollars in particular, it has done so in the past and no assurance can be given that the Mexican government will not institute a restrictive exchange control policy in the
future. The effect of any exchange control measures adopted by the Mexican government on the Mexican economy cannot be predicted.</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In the Mexican national elections held on July 2, 2000, Vicente Fox of the <I>Partido Accion Nacional </I>(the National Action Party) or PAN, won the presidency. His victory ended more than 70 years of presidential rule
by the <I>Partido Revolucionario Institucional </I>(the Institutional Revolutionary Party) or PRI. Neither the PRI nor the PAN succeeded in securing a majority in either house of the Mexican Congress. Further, elections held in 2003 and 2004,
resulted in a reduction in the number of seats held by the PAN in the Mexican Congress and state governorships. The resulting gridlock impeded the progress of structural reforms in Mexico.</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On July 2, 2006, Mexico held presidential and federal congressional elections, and Felipe Calder&oacute;n Hinojosa, the PAN candidate, won by a very narrow margin. However, the <I>Partido de la Revoluci&oacute;n
Democr&aacute;tica </I>(the Revolutionary Democratic Party or PRD), the leading opposition party, has contested the results of the election. On September 6, 2006, the Tribunal <I>Electoral del Poder Judicial de la Federaci&oacute;n </I>(the Federal
Electoral Chamber) unanimously declared Mr. Calder&oacute;n to be the president-elect whose term as president will run from December 1, 2006 until November 30, 2012. We cannot predict whether the PRD will continue to generate political unrest in the
country or whether any such unrest would affect our financial condition results of operations or prospects.</P>
<P align="left">
<B><I>High levels of inflation and interest rates in Mexico, and weakness in the Mexican economy, could adversely impact our financial condition and results of operation.</I></B></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In the past, Mexico has experienced high levels of inflation and high domestic interest rates. If the Mexican economy falls into a recession, or if inflation and interest rates increase, consumer purchasing power may
decrease, and as a result, demand for steel products may decrease. In addition, a</P>
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recession could affect our operations to the extent we are unable to reduce our costs and expenses in response to falling demand. Furthermore, our growth strategy of acquiring other companies and assets may be impaired in the future if interest
rates increase, and we are not able to obtain acquisition financing on favorable terms. These events could materially and adversely affect our business, results of operations, financial condition or prospects.</P>
<P align="left">
<B><I>Devaluation or depreciation of the peso against the U.S. dollar may adversely affect the dollar value of an investment in the ADSs and the series B shares, as well as the dollar value of any dividend or other distributions that we may
make.</I></B></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Fluctuations in the exchange rate between the peso and the U.S. dollar, particularly peso depreciations, may adversely affect the U.S. dollar equivalent of the peso price of the Series B shares on the Mexican Stock
Exchange. As a result, such peso depreciations will likely affect our revenues and earnings in U.S. dollar terms and the market price of the ADSs. Exchange rate fluctuations could also affect the depositary&#146;s ability to convert into U.S.
dollars, and make timely payment of, any peso cash dividends and other distributions paid in respect of the Series B shares.</P>
<P align="left">
<B><I>Our financial statements are prepared in accordance with MFRS and therefore are not comparable to financial statements of other companies prepared under U.S. GAAP or other accounting principles.</I></B></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All Mexican companies must prepare their financial statements in accordance with MFRS which differs in certain significant respects from U.S. GAAP. Among other differences, Mexican companies are required to incorporate
the effects of inflation directly in their accounting records and in their published financial statements. Accordingly, Mexican financial statements and reported earnings are likely to differ from those of companies in other countries in this and
other respects. See Note 18 to our consolidated financial statements included elsewhere herein for a description of certain principal differences between MFRS and U.S. GAAP as they relate to us.</P>
<P align="left">
<B><I>Tariffs, anti-dumping and countervailing duty claims imposed in the future could harm our ability to export our products.</I></B></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A substantial part of our operations are outside the United States, and we export products from those facilities to the United States. In recent years, the U.S. government has imposed anti-dumping and countervailing
duties against Mexican and other foreign steel producers, but has not imposed any such penalties against us or our products. In the first quarter of 2002, the U.S. government imposed tariffs of 15% on rebar and 30% on hot rolled bar and cold finish
bar against imports of steel from all the countries with the exception of Mexico, Canada, Argentina, Thailand and Turkey; in the first quarter of 2003, the tariffs were reduced to 12% on rebar and 24% on hot rolled bar and cold finish bar, and these
tariffs were eliminated in late 2003, prior to their originally scheduled termination date. There can be no assurance that anti-dumping or countervailing duties suits will not be initiated against us or that the U.S. government will not impose
tariffs on steel imports from Mexico or that existing tariffs on U.S. steel imports from other countries, will not be lifted in the future.</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In September 2001, the Mexican government imposed tariffs of 25% against imports for all products that we produce from all countries with the exception of those which have a free trade agreement with Mexico, which
includes the United States. In April 2002, the Mexican government increased these tariffs to 35%. These tariffs have subsequently been reduced over time and are currently 7% for steel products. There can be no assurances that these tariffs will not
be further reduced or that countries seeking to export steel products to Mexico will not impose similar tariffs on Mexican exports to those countries.</P>
<P align="center">
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<P align="left">
<B><I>We are subject to different corporate disclosure and accounting standards than U.S. companies.</I></B></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A principal objective of the securities laws of the United States, Mexico and other countries is to promote full and fair disclosure of all material corporate information. However, there may be less publicly available
information about non-U.S. issuers of securities listed in the United States than is regularly published by or about U.S. issuers of listed securities. </P>
<P align="left">
<B>Item 4. Information on the Company</B><BR>
<BR>
<B>A. History and Development of the Company</B><BR>
<BR>
<B>Overview of Our Company</B></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are a diversified manufacturer, processor and distributor of SBQ steel and structural steel products with production and commercial operations in the United States, Mexico and Canada. We believe that we are the
leading producer of SBQ products in both the United States and Mexico, in each sale in terms of sales volume, and that we offer the broadest SBQ product range in those markets today. We also believe that we are the leading producer of structural and
light structural steel products in Mexico in terms of sales volume and have an increasing presence in the U.S. market for such products.</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our SBQ products are used across a broad range of highly engineered end-user applications, including axles, hubs and crankshafts for automobiles and light trucks, machine tools and off-highway equipment. Our structural
steel products are mainly used in the non-residential construction market and other construction applications.</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We focus on the Mexican and U.S. specialty steel markets by providing high value added products and services from our strategically located plants. The quality of our products and services, together with the cost
advantage generated by our facility locations has allowed us to develop long standing relationships with many of our SBQ clients, which include U.S. and Mexico based automotive and industrial equipment manufacturers and their suppliers. In addition,
our facilities located in the North West and Central parts of Mexico allow us to serve the structural steel and construction markets in those regions and South West California with a significant advantage in the cost of freight.</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our legal name is Grupo Simec, S.A.B. de C.V. and our commercial name for advertising and publicity purposes is Simec. We are organized under the laws of the United Mexican States.</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are domiciled in the city of Guadalajara, Jalisco, and our principal administrative office is located at Calzada L&aacute;zaro C&aacute;rdenas 601, Guadalajara, Jalisco, Mexico 44440. Our telephone number is
011-52-33-3770-6700.</P>
<P align="left">
<B>Our History</B></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our steel operations commenced in 1969 when a group of families from Guadalajara, Jalisco, formed Compa&ntilde;&iacute;a Sider&#250;rgica de Guadalajara, S.A. de C.V. (&#147;CSG&#148;), a mini-mill steel company. In
1980, Grupo Sidek, S.A. de C.V. (&#147;Sidek&#148;), our former parent, was incorporated and became the holding company of CSG. In 1990, Sidek consolidated its steel and aluminum operations into a separate subsidiary, Grupo Simec, S.A. de C.V., a
Mexican corporation with limited liability, organized under the laws of the United Mexican States.</P>
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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In March 2001, Sidek consummated the sale of its entire approximate 62% controlling interest in our company to Industrias CH. In June 2001, Industrias CH increased its interest in us to 82.5% by acquiring additional
shares from certain of our bank creditors that had converted approximately &#36;95.4 million of our debt (&#36;90.2 million of principal and &#36;5.2 million of interest) into our common shares. Industrias CH subsequently increased its equity
position in us through various conversions of debt to equity and capital contributions to an 84% interest.</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In August 2004, we acquired the property, plant and equipment and the inventories, and assumed liabilities associated with the seniority premiums of employees, of the Mexican steel-making facilities of Industrias
Ferricas del Norte S.A. (Corporacion Sidenor of Spain, or &#147;Grupo Sidenor&#148;) located in Apizaco, Tlaxcala and Cholula, Puebla. We refer to this acquisition as the &#147;Atlax Acquisition.&#148; Our total net investment in this transaction
was approximately U.S.&#36;122 million (excluding value added tax of approximately &#36;16 million paid in 2004 and recouped from the Mexican government in 2005), funded with cash from operations, and a &#36;19 million capital contribution from
Industrias CH. We began to operate the plants in Apizaco and Cholula on August 1, 2004, and, as a result, the operations of both plants are reflected in our financial results since that date.</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In July 2005, we and Industrias CH acquired 100% of the stock of Republic, a U.S. producer of SBQ steel. We acquired 50.2% of Republic&#146;s stock through our majority owned subsidiary, SimRep, and Industrias CH
purchased the remaining 49.8% through SimRep. We financed our portion of the U.S.&#36;245 million purchase price principally through a loan we received from Industrias CH that we have repaid in full.</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On October 9, 2006 the Company sold its total share ownership in Administradora de Cartera de Occidente, S.A. de C.V. (ACOSA). ACOSA engages in the recovery of non-performing loans acquired pursuant to a public bidding
process conducted by the Instituto de Protecci&oacute;n al Ahorro Bancario in Mexico. </P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On November 24, 2007 the company purchased 99.95% of the shares of three subsidiaries of Grupo TMM S.A de C.V. These three subsidiaries were TMM Am&eacute;rica, S.A. de C.V., TMM Continental, S.A. de C.V. and Mutimodal
Dom&eacute;stica, S.A. de C.V. Following the purchase, these companies have engaged in marketing steel. In February 2008, the names of these three companies were changed to CSG Comercial, S.A. de C.V., Comercializadora de Productos de Acero de
Tlaxcala, S.A. de C.V. and Sider&#250;rgica de Baja California, S.A. de C.V.</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In 2007, the board of directors of Compa&ntilde;&iacute;a Sider&#250;rgica de Guadalajara, S.A. de C.V. (CSG) decided to spin-off the company. CSG conveyed 87.4% of the companies&#146; stockholders equity to Tenedora
CSG, S.A. de C.V, as the spun-off company. This corporate restructuring did not have a material effect on our consolidated financial statements.</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On February 21, 2008, we entered into an agreement to acquire 100% of the shares of Grupo San, and on May 30, 2008 such acquisition was consummated. Grupo San is a long products steel mini-mill and the second-largest
corrugated rebar producer in Mexico. Grupo San&#146;s operations are based in San Luis Potos&iacute;, Mexico. Its plants and 1,450 employees produce 700 thousand tons of finished products annually.</P>
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<P align="left">
<B>B. Business Overview</B></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In the United States and Mexico, we own and operate ten state-of-the-art steel making, processing and/or finishing facilities with a combined annual crude steel installed production capacity of 3.8 million tons and a
combined annual installed rolling capacity of 2.9 million tons. We operate both mini-mill and integrated steel making facilities, which give us the flexibility to optimize our production and reduce production costs based on the relative prices of
raw materials (e.g., scrap for mini-mills and iron ore for blast furnace).</P>
<P align="left"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We currently own and operate:</P>
<UL>
  <LI>
    <p> Mexico&#146;s largest non-flat structural steel mini-mill, located in
      Guadalajara, Jalisco;</p>
  </LI>
  <LI>
    <p> a mini-mill in Mexicali, Baja California Norte;</p>
  </LI>
  <LI>
    <p> a mini-mill in Apizaco, Tlaxcala;</p>
  </LI>
  <LI>
    <p> a cold finishing facility in Cholula, Puebla; all of these facilities
      are owned through our indirect wholly-owned subsidiaries, Simec International,
      S.A. de C.V. (&#147;SI&#148;), Controladora Simec S.A. de C.V. and Tenedora
      CSG, S.A. de C.V.; and</p>
  </LI>
  <LI>
    <p> a mini mill in Canton, Ohio, an integrated facility in Lorain, Ohio and
      value-added rolling and finishing facilities in Canton, Lorain and Massillon,
      Ohio; Lackawanna, New York; Gary, Indiana; and Hamilton, Ontario, all of
      which we own through our majority- owned subsidiary, Republic.</p>
  </LI>
</UL>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In 2007, we had net sales of Ps. 24.1 billion, gross profit of Ps. 3.6 billion and net income attributable to majority interest of Ps. 1.5 billion. In 2007, 66% of our consolidated sales were in the United States and
Canada, 31% were in Mexico, and 3% were exports to other markets outside North America.</P>
<P align="left">
<B>Competitive Strengths</B></P>
<P align="left"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We believe the following factors
  contribute to our success in the North American steel industry:</P>
<P align="left">
<I>Higher value-added product mix.</I></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;To maximize operating margins, we focus our production on higher value-added SBQ products, which represented approximately 73% of our total sales in 2007.</P>
<P align="left">
<I>Long-standing customer relationships.</I></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our SBQ products are highly engineered and tailored to specific client needs. We continuously work with our clients on design engineering and new product development to meet the requirements of their evolving platforms.
We believe that the quality of our products and services has allowed us to develop direct relationships with many large end-users of SBQ products in North America which we believe improves our competitive position.</P>
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<P align="left">
<I>Reduced price volatility.</I></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The quality requirements of the majority of our SBQ clients and the nature of our relationships have allowed us to implement favorable pricing policies that include annual price revisions and price adjustments based on
the price of key inputs such as scrap, iron ore, energy, alloys and other key raw materials. These have enhanced our ability to maintain stable operating margins notwithstanding raw material price fluctuations.</P>
<P align="left">
<I>Competitive cost structure.</I></P>
<P align="left"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We believe our cost structure is
  favorable due to our:</P>
<UL>
  <LI>
    <p><I>Competitive cost of raw materials. </I>We believe our centralized purchasing
      strategy and strong financial position allow us to obtain favorable terms
      from our raw materials suppliers.</p>
  </LI>
  <LI>
    <p><I>Low freight expenses. </I>We believe the strategic location of our facilities
      allows us to serve our SBQ steel and other clients with lower distribution
      and freight costs than many of our competitors.</p>
  </LI>
  <LI>
    <p><I>Relatively low cost of labor in Mexico. </I>Our Mexican operations benefit
      from the relatively lower cost of labor in the Mexican market compared to
      the United States. In addition, our Mexican, U.S. and Canadian operations
      do not currently have any significant legacy liabilities or their associated
      costs.</p>
  </LI>
  <LI>
    <p><I>Favorable labor agreement in the United States. </I>The labor agreement
      in place in our U.S. operations has eliminated legacy costs and enhances
      our ability to maximize workforce flexibility, allowing us to reduce production
      costs.</p>
  </LI>
  <LI>
    <p><I>Lean operational structure and overhead cost. </I>We maintain non-operating
      costs at low levels by relying on a lean and cost efficient overhead structure.</p>
  </LI>
</UL>
<P align="left">
<I>State-of-the-art production facilities.</I></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have recently completed the revamping of our mini-mill steel-making facility in Canton, Ohio including the installation of a new continuous caster. We believe that our remaining steel making and processing facilities
in Mexico and the United States are among the most modern and well maintained in North America.</P>
<P align="left">
<I>Significant organic growth opportunities.</I></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our liquid steel making capacity exceeds our rolling and finished steel capacity, which allows us to continue increasing our finished product capacity through comparatively low levels of capital investments. We also
intend to explore expanding our liquid steel-making facilities in Lorain, Ohio by bringing an existing second blast furnace online at a cost that we currently expect to be lower than that of purchasing a new blast furnace with the same
capacity.</P>
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<P align="left">
<I>Solid financial position.</I></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We seek to maintain a conservative capital structure and prudent leverage levels. We currently have no significant financial debt or significant legacy liabilities. We believe that these factors provide us with the
financial flexibility and resources to continue to pursue growth enhancing initiatives.</P>
<P align="left">
<I>Experienced and committed management team.</I></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our management team has extensive experience in, and knowledge of, the North American steel industry and in evaluating, pursuing and completing both strategic and organic growth opportunities as well as a track-record
of increasing productivity and reducing costs.</P>
<P align="left">
<B>Business Strategy</B></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We intend to further consolidate our position as a leading producer, processor and distributor of SBQ steel in North America and structural steel in Mexico. We also intend to expand our presence in the steel industry by
identifying and pursuing growth opportunities and value enhancing initiatives. Our strategy includes:</P>
<P align="left">
<I>Further integrating our operations.</I></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We intend to continue the integration of our Mexican, U.S. and Canadian operations to capitalize on the commercial and cost related synergies contemplated at the time of the Atlax Acquisition in 2004 and of the
acquisition of Republic in 2005.</P>
<P align="left">
<I>Improving our cost structure.</I></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are continuing working to reduce our operating cost and non-operating expenses and plan to continue to do so by reducing overhead expenses and operating costs through sharing best practices among our operating
facilities and maintaining a conservative capital structure.</P>
<P align="left">
<I>Focusing on high margin and value-added products.</I></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We prioritize the production of high margin steel products over volume and utilization levels. We plan to continue to base our production decisions on achieving relatively high margins.</P>
<P align="left">
<I>Building on our strong customer relationships.</I></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We intend to strengthen our long-standing customer relationships by maintaining strong customer service and proactively responding to changing customer needs.</P>
<P align="left">
<I>Pursuing strategic growth opportunities.</I></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have successfully grown our business by acquiring, integrating and improving under-performing operations. In addition, we intend to continue in pursuit of acquisition opportunities that will allow for disciplined
growth of our business and value creation for our shareholders. We also intend to pursue organic growth by reinvesting the cash generated by our operating activities to expand the capacity and increase the efficiency of our existing facilities.</P>
<P align="center">
21</P>

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<P align="left">
<B>Our Products</B></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We produce a wide range of value-added SBQ steel, long steel and medium-sized structural steel products. In our Mexican facilities, we produce I-beams, channels, structural and commercial angles, hot rolled bars (round,
square and hexagonals), flat bars, rebars, and cold finished bars. In our U.S. facilities, we produce hot rolled bars, cold finished bars, semi-finished tube rounds and other semi-finished trade products. The following is a description of these
products and their main uses:</P>
<UL>
  <LI>
    <p> I-beams. I-beams, also known as standard beams, are &#147;I&#148; form
      steel structural sections with two equal parallel sides joined together
      by the center with a transversal section, forming 90&ordm; angles. We produce
      I-beams in our Mexican facilities and they are mainly used by the industrial
      construction as structure supports.</p>
  </LI>
  <LI>
    <p> Channels. Channels, also known as U-Beams because of their &#147;U&#148;
      form, are steel structural sections with two equal parallel sides joined
      together by its ends with a transversal section, forming 90&ordm; angles.
      We produce channels in our Mexican facilities and they are mainly used by
      industrial construction as structure supports and for stocking systems.</p>
  </LI>
  <LI>
    <p> Angles. Angles are two equal sided sections joined by their ends with
      a 90&ordm; angle, forming an &#147;L&#148; form. We produce angles in our
      Mexican facilities and they are used mainly by the construction and furniture
      industries as joist structures and framing systems.</p>
  </LI>
  <LI>
    <p> Hot rolled bars. Hot rolled bars are round, square and hexagonal steel
      bars that can be made of special or commodity steel. The construction, autopart
      and furniture industries mainly use the round and square bars. The hexagonal
      bars are made of special steel and are mainly used by the hand tool industry.
      We produce the steel sections in our Mexican and U.S. facilities.</p>
  </LI>
  <LI>
    <p> Flat bars. Flat bars are rectangular steel sections that can be made of
      special or commodity steel. We produce flat bars in our Mexican facilities.
      The auto part industry mainly uses special steel as springs, and the construction
      industry uses the commodity steel flat bars as supports.</p>
  </LI>
  <LI>
    <p> Rebar. Rebar is reinforced, corrugated round steel bars with sections
      from 0.375 to 1.5 inches in diameter, and we produced rebar our Mexican
      facilities. Rebar is only used by the construction sector to reinforce concrete.
      Rebar is considered a commodity product due to general acceptance by most
      costumers of standard industry specifications.</p>
  </LI>
  <LI>
    <p> Cold-finished bars. Cold-finished bars are round and hexagonal SBQ steel
      bars transformed through a diameter reduction process. This process consists
      of (1) reducing the cross sectional area of a bar by drawing the material
      through a die without any pre- heating or (2) turning or &#147;peeling&#148;
      the surface of the bar. The process changes the mechanical properties of
      the steel, and the finished product is accurate to size, free from scale
      with a bright surface finish. We produce these bars in our Mexican, U.S.
      and Canadian facilities, and mainly the auto part industry uses them.</p>
  </LI>
  <LI>
     Semi-finished tube rounds. These are wide round bars used as raw material
      for the production of seamless pipe. The semi-finished tube rounds are made
      of SBQ steel, and we produce them in our U.S. facilities. Seamless pipe manufacturers
    use them to produce pipes used in the oil extraction and construction industry.</LI>
</UL>
<P align="center"> 22</P>

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<P align=left>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth, for the periods indicated, our sales volume for basic steel products. These figures reflect the sales of products manufactured at the Apizaco and Cholula facilities as of August 1, 2004 and sales of products manufactured at the U.S. and Canadian facilities as of July 22, 2005.</P>
<P align=center><B>Steel Product Sales Volume</B></P>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'" cellspacing=4 cellpadding=0 width="100%" border=0>
  <tr valign=bottom>
    <td align=center width="58%">&nbsp; </td>
    <td align=center width="10%">&nbsp; </td>
    <td align=center colspan=2><b><font size=2>Years ended December
      31,</font></b></td>
    <td align=center width="10%">&nbsp; </td>
  </tr>
  <tr>
    <td align=center width="58%">&nbsp; </td>
    <td colspan="4" align=center>
      <hr noshade size=1>
       </td>
  </tr>
  <tr valign=bottom>
    <td align=center width="58%">&nbsp; </td>
    <td align=center width="10%"><b><font size=2>2004</font></b></td>
    <td align=center width="12%"><b><font size=2>2005</font></b></td>
    <td align=center width="10%"><b><font size=2>2006</font></b></td>
    <td align=center width="10%"><b><font size=2>2007</font></b></td>
  </tr>
  <tr>
    <td align=center width="58%">&nbsp; </td>
    <td align=center width="10%">
      <hr noshade size=1>
       </td>
    <td align=center width="12%">
      <hr noshade size=1>
       </td>
    <td align=center width="10%">
      <hr noshade size=1>
       </td>
    <td align=center width="10%">
      <hr noshade size=1>
       </td>
  </tr>
  <tr valign=bottom>
    <td align=center width="58%" height="12">&nbsp; </td>
    <td align=center width="10%" height="12">&nbsp; </td>
    <td align=center colspan=2 height="12" valign="top"><font size=2>(Thousands of tons)</font></td>
    <td align=center width="10%" height="12">&nbsp; </td>
  </tr>
  <tr valign=bottom>
    <td align=left width="58%"><font size=2>I-Beams</font> </td>
    <td align=right width="10%"><font size=2>76.1</font> </td>
    <td align=right width="12%"><font size=2>82.2</font> </td>
    <td align=right width="10%"><font size=2>75.7</font> </td>
    <td align=right width="10%"><font size=2>74.5</font> </td>
  </tr>
  <tr valign=bottom>
    <td align=left width="58%"><font size=2>Channels</font> </td>
    <td align=right width="10%"><font size=2>58.9</font> </td>
    <td align=right width="12%"><font size=2>59.7</font> </td>
    <td align=right width="10%"><font size=2>70.3</font> </td>
    <td align=right width="10%"><font size=2>79.5</font> </td>
  </tr>
  <tr valign=bottom>
    <td align=left width="58%"><font size=2>Angles</font><sup><font size=2>(1)</font></sup>
    </td>
    <td align=right width="10%"><font size=2>135.7</font> </td>
    <td align=right width="12%"><font size=2>222.6</font> </td>
    <td align=right width="10%"><font size=2>231.2</font> </td>
    <td align=right width="10%"><font size=2>145.2</font> </td>
  </tr>
  <tr valign=bottom>
    <td align=left width="58%"><font size=2>Hot-rolled bars (round, square and
      hexagonal rods)</font> </td>
    <td align=right width="10%"><font size=2>189.0</font> </td>
    <td align=right width="12%"><font size=2>600.0</font> </td>
    <td align=right width="10%"><font size=2>1,141.9</font> </td>
    <td align=right width="10%"><font size=2>1,189.0</font> </td>
  </tr>
  <tr valign=bottom>
    <td align=left width="58%"><font size=2>Flat bar</font> </td>
    <td align=right width="10%"><font size=2>91.7</font> </td>
    <td align=right width="12%"><font size=2>188.5</font> </td>
    <td align=right width="10%"><font size=2>154.4</font> </td>
    <td align=right width="10%"><font size=2>182.9</font> </td>
  </tr>
  <tr valign=bottom>
    <td align=left width="58%"><font size=2>Rebar</font> </td>
    <td align=right width="10%"><font size=2>191.9</font> </td>
    <td align=right width="12%"><font size=2>239.1</font> </td>
    <td align=right width="10%"><font size=2>265.2</font> </td>
    <td align=right width="10%"><font size=2>250.8</font> </td>
  </tr>
  <tr valign=bottom>
    <td align=left width="58%"><font size=2>Cold finished bars</font> </td>
    <td align=right width="10%"><font size=2>15.7</font> </td>
    <td align=right width="12%"><font size=2>105.6</font> </td>
    <td align=right width="10%"><font size=2>201.0</font> </td>
    <td align=right width="10%"><font size=2>216.2</font> </td>
  </tr>
  <tr valign=bottom>
    <td align=left width="58%"><font size=2>Semi-finished tube rounds</font> </td>
    <td align=right width="10%"><font size=2>0.00</font> </td>
    <td align=right width="12%"><font size=2>165.2</font> </td>
    <td align=right width="10%"><font size=2>352.8</font> </td>
    <td align=right width="10%"><font size=2>216.2</font> </td>
  </tr>
  <tr valign=bottom>
    <td align=left width="58%"><font size=2>Other semi-finished trade products</font><sup><font size=2>(2)</font></sup>
    </td>
    <td align=right width="10%"><font size=2>0.00</font> </td>
    <td align=right width="12%"><font size=2>43.3</font> </td>
    <td align=right width="10%"><font size=2>174.0</font> </td>
    <td align=right width="10%"><font size=2>326.4</font> </td>
  </tr>
  <tr valign=bottom>
    <td align=left width="58%"><font size=2>Other</font> </td>
    <td align=right width="10%"><font size=2>14.3</font> </td>
    <td align=right width="12%"><font size=2>1.9</font> </td>
    <td align=right width="10%"><font size=2>9.6</font> </td>
    <td align=right width="10%"><font size=2>10.4</font> </td>
  </tr>
  <tr>
    <td width="58%">&nbsp; </td>
    <td width="10%">
      <hr noshade size=1>
       </td>
    <td width="12%">
      <hr noshade size=1>
       </td>
    <td width="10%">
      <hr noshade size=1>
       </td>
    <td width="10%">
      <hr noshade size=1>
       </td>
  </tr>
  <tr valign=bottom>
    <td align=left width="58%">&nbsp; &nbsp; &nbsp; &nbsp;<font size=2>Total steel
      sales</font> </td>
    <td align=right width="10%"><font size=2>773.3</font> </td>
    <td align=right width="12%"><font size=2>1,708.1</font> </td>
    <td align=right width="10%"><font size=2>2,676.1</font> </td>
    <td align=right width="10%"><font size=2>2,691.1</font> </td>
  </tr>
  <tr>
    <td width="58%">&nbsp; </td>
    <td width="10%">
      <hr noshade size=1>
       </td>
    <td width="12%">
      <hr noshade size=1>
       </td>
    <td width="10%">
      <hr noshade size=1>
       </td>
    <td width="10%">
      <hr noshade size=1>
       </td>
  </tr>
</table>
<BR>
<hr align="left" width="150" size="1" noshade>
<TABLE style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'" cellSpacing=0 cellPadding=0 border=0>
<TR>
     <TD vAlign=top nowrap>(1)&nbsp; &nbsp; &nbsp; </TD>
     <TD width="100%">Angles include structural angles and commercial angles. </TD></TR>
<TR>
     <TD colSpan=2>&nbsp;</TD></TR>
<TR>
     <TD vAlign=top nowrap>(2)&nbsp; &nbsp; &nbsp; </TD>
     <TD width="100%">Includes billets and blooms (wide section square and round bars). </TD></TR>
<TR>
     <TD colSpan=2>&nbsp;</TD></TR></TABLE>
<P align=left><B>Our Operations and Production Facilities</B></P>
<P align=left>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We conduct our operations at ten facilities throughout North America. At December 31, 2007, our crude steel production capacity was 3.8 million tons, of which 1.2 million tons were based on an integrated blast furnace technology, and 2.6 million were based on electric arc furnace, or mini-mill, technology. Our Mexican facilities have 1.2 million tons of crude steel production capacity, operating three mini-mill facilities. Our U.S. operations have 2.6 million tons of crude steel production capacity. In addition, we have 2.9 million tons of rolling and finishing capacity, of which 1.2 million are located in Mexico, and 1.7 million are located in the United States and Canada.</P>
<P align=left>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We operate four mini-mills, three in Mexico and one in the United States. The Mexican mini-mills are located in Guadalajara, Jalisco; Apizaco, Tlaxcala and Mexicali, Baja California. Our mini-mill in the United States is located in Canton, Ohio, and we have recently completed a revamping process that has increased capacity of the mill to 1.3 million tons of steel billet. We also operate an integrated blast furnace in Lorain, Ohio. We operate rolling and finishing facility in each of our mill facilities in Cholula and in the United States and Canada.</P>
<P align=left>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Because we operate both mini-mill and integrated blast furnace production facilities, we can allocate production between each type of facility based on efficiency and cost. In addition, as long as our facilities are not operating at full capacity, we can allocate production based on the relative cost of basic inputs (iron ore, coke, scrap and electricity) to the facility where production costs would be the lowest. Our production facilities are designed to permit the rapid changeover from one product to another. This flexibility permits us to efficiently produce small volume orders to meet customer needs and to produce</P>
<P align=center>23</P>
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<P align=left>varying quantities of standard product. Production runs, or campaigns, occur on four to eight weeks cycles, minimizing customer waiting time for both standard and specialized products.</P>
<P align=left>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We use ferrous scrap and iron ore to produce our finished steel products. We produce molten steel using both an electric arc furnace and integrated blast furnace technology, alloying elements and carbon are added, and which then is transported to continuous casters for solidification. The continuous casters produce long, square strands of steel that are cut into billet and transferred to the rolling mills for further processing or, in some cases, sold to other steel producers. In the rolling mills, the billet is reheated in a walking beam furnace with preheating burners, passed through a rolling mill for size reduction and conformed into final sections and sizes. The shapes are then cut into a variety of lengths. In addition, to producing billet, our Canton, Ohio facility also produces blooms.</P>
<P align=left>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our mini-mill plants use an electric arc furnace to melt ferrous scrap and other metallic
components, which are then cast into long, square bars called billet in a continuous casting process, all of which occurs in a melt
shop. The billet is then transferred to a rolling mill, reheated and rolled into finished product. In contrast, an integrated steel
mill heats iron pellets and other primary materials in a blast furnace to first produce pig iron, that must be refined in a basic oxygen furnace to liquid steel, and then cast to billet and finished product. Mini-mill plants typically produce certain steel products more efficiently because of the lower energy requirements resulting from their smaller size and because of their use of ferrous scrap. Mini-mills are designed to provide shorter production runs with relatively fast product changeover times. Integrated steel mills are more efficient in producing longer runs and are able to produce certain steel
products that a mini-mill cannot.</P>
<P align=left>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The production levels and capacity utilization rates for our melt shops and rolling mills for the periods indicated are presented below. These figures reflect the sales of products manufactured at the Apizaco and Cholula facilities starting from August 1, 2004. These figures reflect the sales of the products manufactured at the Republic facilities starting from July 22, 2005.</P>
<P align=center><B>Production Volume and Capacity Utilization</B></P>
<TABLE width="100%" border=0 cellPadding=0 cellSpacing=0 style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'">
<TR vAlign=bottom>
     <TD align=center>&nbsp; </TD>
     <TD align=center colSpan=7><B><FONT size=2>Years ended December 31,</FONT></B></TD>
     <TD align=center>&nbsp; </TD></TR>
<TR>
     <TD align=center>&nbsp; </TD>
     <TD align=center colSpan=7>
<HR noshade SIZE=1>
</TD>
     <TD align=center>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD align=center>&nbsp; </TD>
     <TD align=center><B><FONT size=2>2004</FONT></B></TD>
     <TD align=center>&nbsp; </TD>
     <TD align=center><B><FONT size=2>2005</FONT></B></TD>
     <TD align=center>&nbsp; </TD>
     <TD align=center><B><FONT size=2>2006</FONT></B></TD>
     <TD align=center>&nbsp; </TD>
     <TD align=center><B><FONT size=2>2007</FONT></B></TD>
     <TD align=center>&nbsp; </TD></TR>
<TR>
     <TD align=center>&nbsp; </TD>
     <TD align=center>
<HR noshade SIZE=1>
</TD>
     <TD align=center>&nbsp; </TD>
     <TD align=center>
<HR noshade SIZE=1>
</TD>
     <TD align=center>&nbsp; </TD>
     <TD align=center>
<HR noshade SIZE=1>
</TD>
     <TD align=center>&nbsp; </TD>
     <TD align=center>
<HR noshade SIZE=1>
</TD>
     <TD align=center>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD align=center>&nbsp; </TD>
     <TD align=center>&nbsp; </TD>
     <TD align=center>&nbsp; </TD>
     <TD align=center colSpan=3><FONT size=2>(Tons in thousands)</FONT></TD>
     <TD align=center>&nbsp; </TD>
     <TD align=center>&nbsp; </TD>
     <TD align=center>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD align=left><B><FONT size=2>Melt shops</FONT></B> </TD>
     <TD align=left>&nbsp; </TD>
     <TD align=left>&nbsp; </TD>
     <TD align=left>&nbsp; </TD>
     <TD align=left>&nbsp; </TD>
     <TD align=left>&nbsp; </TD>
     <TD align=left>&nbsp; </TD>
     <TD align=left>&nbsp; </TD>
     <TD align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD align=left>&nbsp; &nbsp; &nbsp; &nbsp;<FONT size=2>Steel billet production</FONT> </TD>
     <TD align=right><FONT size=2>877.5</FONT> </TD>
     <TD align=left>&nbsp; </TD>
     <TD align=right><FONT size=2>1,748.2</FONT> </TD>
     <TD align=left>&nbsp; </TD>
     <TD align=right><FONT size=2>2,985.6</FONT> </TD>
     <TD align=left>&nbsp; </TD>
     <TD align=right><FONT size=2>2,899.2</FONT> </TD>
     <TD align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD align=left>&nbsp; &nbsp; &nbsp; &nbsp;<FONT size=2>Annual installed capacity</FONT><SUP><FONT size=2>(1)</FONT></SUP> </TD>
     <TD align=right><FONT size=2>1,160.0</FONT> </TD>
     <TD align=left>&nbsp; </TD>
     <TD align=right><FONT size=2>3,115.9</FONT> </TD>
     <TD align=left>&nbsp; </TD>
     <TD align=right><FONT size=2>3,763.7</FONT> </TD>
     <TD align=left>&nbsp; </TD>
     <TD align=right><FONT size=2>3,827.2</FONT> </TD>
     <TD align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD align=left>&nbsp; &nbsp; &nbsp; &nbsp;<FONT size=2>Effective capacity utilization</FONT> </TD>
     <TD align=right><FONT size=2>93.5</FONT> </TD>
     <TD align=left><FONT size=2>%</FONT> </TD>
     <TD align=right><FONT size=2>89.6</FONT> </TD>
     <TD align=left><FONT size=2>%</FONT> </TD>
     <TD align=right><FONT size=2>79.3</FONT> </TD>
     <TD align=left><FONT size=2>%</FONT> </TD>
     <TD align=right><FONT size=2>75.7</FONT> </TD>
     <TD align=left><FONT size=2>%</FONT> </TD></TR>
<TR vAlign=bottom>
     <TD align=left><B><FONT size=2>Rolling mills</FONT></B> </TD>
     <TD align=left>&nbsp; </TD>
     <TD align=left>&nbsp; </TD>
     <TD align=left>&nbsp; </TD>
     <TD align=left>&nbsp; </TD>
     <TD align=left>&nbsp; </TD>
     <TD align=left>&nbsp; </TD>
     <TD align=left>&nbsp; </TD>
     <TD align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD align=left>&nbsp; &nbsp; &nbsp; &nbsp;<FONT size=2>Total production</FONT> </TD>
     <TD align=right><FONT size=2>766.0</FONT> </TD>
     <TD align=left>&nbsp; </TD>
     <TD align=right><FONT size=2>1,544.0</FONT> </TD>
     <TD align=left>&nbsp; </TD>
     <TD align=right><FONT size=2>2,386.0</FONT> </TD>
     <TD align=left>&nbsp; </TD>
     <TD align=right><FONT size=2>2,384.6</FONT> </TD>
     <TD align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD align=left>&nbsp; &nbsp; &nbsp; &nbsp;<FONT size=2>Annual installed capacity</FONT><SUP><FONT size=2>(1)</FONT></SUP> </TD>
     <TD align=right><FONT size=2>1,210.0</FONT> </TD>
     <TD align=left>&nbsp; </TD>
     <TD align=right><FONT size=2>2,847.5</FONT> </TD>
     <TD align=left>&nbsp; </TD>
     <TD align=right><FONT size=2>2,901.9</FONT> </TD>
     <TD align=left>&nbsp; </TD>

    <TD align=right><FONT size=2>2,901.9</FONT> </TD>
    <TD align=left>&nbsp; </TD>
  </TR>
<TR vAlign=bottom>
     <TD align=left>&nbsp; &nbsp; &nbsp; &nbsp;<FONT size=2>Effective capacity utilization</FONT> </TD>
     <TD align=right><FONT size=2>82.4</FONT> </TD>
     <TD align=left><FONT size=2>%</FONT> </TD>
     <TD align=right><FONT size=2>81.6</FONT> </TD>
     <TD align=left><FONT size=2>%</FONT> </TD>
     <TD align=right><FONT size=2>82.2</FONT> </TD>
     <TD align=left><FONT size=2>%</FONT> </TD>
     <TD align=right><FONT size=2>82.2</FONT> </TD>
     <TD align=left><FONT size=2>%</FONT> </TD></TR></TABLE><BR>
<hr align="left" width="150" size="1" noshade>
<TABLE style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'" cellSpacing=0 cellPadding=0 border=0>
<TR>
     <TD vAlign=top nowrap>(1)&nbsp; &nbsp; &nbsp; </TD>
     <TD width="100%">Annual installed capacity is determined based on the assumption that billet of various specified diameters, width and length is produced at the melt shops or that a specified mix of rolled products are produced in the rolling mills on a continuous basis throughout the year except for periods during which operations are discontinued for routine maintenance, repairs and improvements. Amounts presented represent annual installed capacity as at December 31 for each year. The percentage of effective capacity utilization for 2004 is determined in the case of the Apizaco and Cholula facilities based on utilization over the period from August 1 to December 31, 2004. The percentage of effective capacity utilization for 2005 is determined in the case of Republic facilities based on utilization over the period from July 22 to December 31, 2005. </TD></TR>
<TR>
     <TD colSpan=2>&nbsp;</TD></TR></TABLE>
<P align=center>24</P>
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<A name="page_28"></A>
<P align=left><I>Mexican Operations and Facilities</I></P>
<P align=left>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table presents production by product at each of our Mexican facilities as a percentage of total production at that facility for the year ended December 31, 2007.</P>
<P align=center><B>Mexican Production per Facility by Product</B></P>
<table border=0 cellpadding=0 cellspacing=0 style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'" width="700" align="center">
  <tr valign=bottom>
    <td align=center>&nbsp; </td>
    <td align=center colspan="8">  <b><font size=2>Location</font></b>
      <hr noshade size=1>
        </td>
  </tr>

  <tr valign=bottom>
    <td align=left><b><font size=2>Product</font></b>
      <hr align="left" width="98%" size=1 noshade>
    </td>
    <td align=center colspan="2"><b><font size=2>Guadalajara</font></b>
      <hr noshade size=1 width="98%">
    </td>
    <td align=center colspan="2"><b><font size=2>Mexicali</font></b>
      <hr noshade size=1 width="98%">
     </td>
    <td align=center colspan="2"><b><font size=2>Apizaco/Cholula</font></b>
      <hr noshade size=1 width="98%">
     </td>
    <td align=center colspan="2"><b><font size=2>Total</font></b>
      <hr noshade size=1 width="98%">
     </td>
  </tr>

  <tr valign=bottom>
    <td align=center>&nbsp; </td>
    <td align=center>&nbsp; </td>
    <td align=center>&nbsp; </td>
    <td align=center colspan=3><font size=2>(Production %)</font></td>
    <td align=center>&nbsp; </td>
    <td align=center>&nbsp; </td>
    <td align=center>&nbsp; </td>
  </tr>
  <tr valign=bottom>
    <td align=left><font size=2>I Beams</font> </td>
    <td align=right><font size=2>18.0</font> </td>
    <td align=left><font size=2>%</font> </td>
    <td align=right><font size=2>0.0</font> </td>
    <td align=left><font size=2>%</font> </td>
    <td align=right><font size=2>0</font> </td>
    <td align=left><font size=2>%</font> </td>
    <td align=right><font size=2>6.9</font> </td>
    <td align=left><font size=2>%</font> </td>
  </tr>
  <tr valign=bottom>
    <td align=left><font size=2>Channels</font> </td>
    <td align=right><font size=2>12.7</font> </td>
    <td align=left><font size=2>%</font> </td>
    <td align=right><font size=2>12.7</font> </td>
    <td align=left><font size=2>%</font> </td>
    <td align=right><font size=2>0</font> </td>
    <td align=left><font size=2>%</font> </td>
    <td align=right><font size=2>7.4</font> </td>
    <td align=left><font size=2>%</font> </td>
  </tr>
  <tr valign=bottom>
    <td align=left><font size=2>Angles</font> </td>
    <td align=right><font size=2>27.2</font> </td>
    <td align=left><font size=2>%</font> </td>
    <td align=right><font size=2>15.0</font> </td>
    <td align=left><font size=2>%</font> </td>
    <td align=right><font size=2>0</font> </td>
    <td align=left><font size=2>%</font> </td>
    <td align=right><font size=2>13.5</font> </td>
    <td align=left><font size=2>%</font> </td>
  </tr>
  <tr valign=bottom>
    <td align=left><font size=2>Hot rolled bars (round,</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
  </tr>
  <tr valign=bottom>
    <td align=left>&nbsp; &nbsp;<font size=2>square and hexagonal
      rods)</font> </td>
    <td align=right><font size=2>23.4</font> </td>
    <td align=left><font size=2>%</font> </td>
    <td align=right><font size=2>9.3</font> </td>
    <td align=left><font size=2>%</font> </td>
    <td align=right><font size=2>34.6</font> </td>
    <td align=left><font size=2>%</font> </td>
    <td align=right><font size=2>24.9</font> </td>
    <td align=left><font size=2>%</font> </td>
  </tr>
  <tr valign=bottom>
    <td align=left><font size=2>Rebar</font> </td>
    <td align=right><font size=2>6.2</font> </td>
    <td align=left><font size=2>%</font> </td>
    <td align=right><font size=2>58.6</font> </td>
    <td align=left><font size=2>%</font> </td>
    <td align=right><font size=2>20.6</font> </td>
    <td align=left><font size=2>%</font> </td>
    <td align=right><font size=2>23.2</font> </td>
    <td align=left><font size=2>%</font> </td>
  </tr>
  <tr valign=bottom>
    <td align=left><font size=2>Flat bars</font> </td>
    <td align=right><font size=2>7.9</font> </td>
    <td align=left><font size=2>%</font> </td>
    <td align=right><font size=2>2.6</font> </td>
    <td align=left><font size=2>%</font> </td>
    <td align=right><font size=2>32.3</font> </td>
    <td align=left><font size=2>%</font> </td>
    <td align=right><font size=2>16.9</font> </td>
    <td align=left><font size=2>%</font> </td>
  </tr>
  <tr valign=bottom>
    <td align=left><font size=2>Cold finished bars</font> </td>
    <td align=right><font size=2>3.5</font> </td>
    <td align=left><font size=2>%</font> </td>
    <td align=right><font size=2>0</font> </td>
    <td align=left><font size=2>%</font> </td>
    <td align=right><font size=2>11.8</font> </td>
    <td align=left><font size=2>%</font> </td>
    <td align=right><font size=2>6.2</font> </td>
    <td align=left><font size=2>%</font> </td>
  </tr>
  <tr valign=bottom>
    <td align=left><font size=2>Other</font> </td>
    <td align=right><font size=2>1.1</font> </td>
    <td align=left><font size=2>%</font> </td>
    <td align=right><font size=2>1.8</font> </td>
    <td align=left><font size=2>%</font> </td>
    <td align=right><font size=2>0.7</font> </td>
    <td align=left><font size=2>%</font> </td>
    <td align=right><font size=2>1.0</font> </td>
    <td align=left><font size=2>%</font> </td>
  </tr>
  <tr valign=bottom>
    <td align=left>&nbsp; &nbsp; &nbsp;<font size=2>Total</font> </td>
    <td align=right><font size=2>100</font> </td>
    <td align=left><font size=2>%</font> </td>
    <td align=right><font size=2>100</font> </td>
    <td align=left><font size=2>%</font> </td>
    <td align=right><font size=2>100</font> </td>
    <td align=left><font size=2>%</font> </td>
    <td align=right><font size=2>100</font> </td>
    <td align=left><font size=2>%</font> </td>
  </tr>
</table>
<BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Guadalajara</I>. Our Guadalajara mini-mill facility
is located in central western Mexico in Guadalajara, Jalisco which is Mexico&#146;s
second largest city. Our Guadalajara facilities and equipment include one improved
electric arc furnace utilizing water-cooled sidewalls and roof, one four-strand
continuous caster, five reheating furnaces and three rolling mills. The Guadalajara
mini-mill has an annual installed capacity of 350,000 tons of billet and an annual
installed capacity of finished product of 480,000 tons. In 2007, the Guadalajara
mini-mill produced 281,816 tons of steel billet and 402,615 tons of finished product
operating at 81% capacity for billet production and 84% capacity for finished
product production. The Guadalajara rolling facilities process billet production
from our Mexicali and Apizaco mills. Our Guadalajara facility is 336 miles from
Mexico D.F. Our Guadalajara facility mainly produces structurals, SBQ steel, light
structurals and rebars.
<P align=center><B>Guadalajara Mini-Mill</B></P>
<table border=0 cellpadding=0 cellspacing=0 style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'" width="100%">
  <tr valign=bottom>
    <td align=center>&nbsp; </td>
    <td align=center>&nbsp; </td>
    <td align=center colspan=4><b><font size=2>Years ended December
      31,</font></b></td>
    <td align=center>&nbsp;</td>
    <td align=center>&nbsp; </td>
  </tr>
  <tr>
    <td align=center>&nbsp; </td>
    <td colspan="7" align=center>
      <hr noshade size=1>
       </td>
  </tr>
  <tr valign=bottom>
    <td align=center>&nbsp; </td>
    <td align=center><b><font size=2>2004</font></b></td>
    <td align=center>&nbsp;&nbsp;&nbsp;</td>
    <td align=center><b><font size=2>2005</font></b></td>
    <td align=center>&nbsp;&nbsp;&nbsp;</td>
    <td align=center><b><font size=2>2006</font></b></td>
    <td align=center>&nbsp;&nbsp;&nbsp;&nbsp;</td>
    <td align=center><b><font size=2>2007</font></b></td>
  </tr>
  <tr>
    <td align=center>&nbsp; </td>
    <td align=center>
      <hr noshade size=1>
       </td>
    <td align=center>&nbsp;</td>
    <td align=center>
      <hr noshade size=1>
       </td>
    <td align=center>&nbsp;</td>
    <td align=center>
      <hr noshade size=1>
       </td>
    <td align=center>&nbsp;</td>
    <td align=center>
      <hr noshade size=1>
       </td>
  </tr>
  <tr valign=bottom>
    <td align=left><font size=2>Steel sales (thousands of tons)</font>
    </td>
    <td align=right><font size=2>430</font> </td>
    <td align=right>&nbsp;</td>
    <td align=right><font size=2>407</font> </td>
    <td align=right>&nbsp;</td>
    <td align=right><font size=2>407</font> </td>
    <td align=right>&nbsp;</td>
    <td align=right><font size=2>405</font> </td>
  </tr>
  <tr valign=bottom>
    <td align=left><font size=2>Average finished product price per
      ton</font> </td>
    <td align=right><font size=2>Ps. 7,902</font> </td>
    <td align=right>&nbsp;</td>
    <td align=right><font size=2>Ps. 7,024</font> </td>
    <td align=right>&nbsp;</td>
    <td align=right><font size=2>Ps. 7,762</font> </td>
    <td align=right>&nbsp;</td>
    <td align=right><font size=2>Ps. 7,832</font> </td>
  </tr>
  <tr valign=bottom>
    <td align=left><font size=2>Average scrap cost per ton</font>
    </td>
    <td align=right><font size=2>2,972</font> </td>
    <td align=right>&nbsp;</td>
    <td align=right><font size=2>2,510</font> </td>
    <td align=right>&nbsp;</td>
    <td align=right><font size=2>2,520</font> </td>
    <td align=right>&nbsp;</td>
    <td align=right><font size=2>2,831</font> </td>
  </tr>
  <tr valign=bottom>
    <td align=left><font size=2>Average manufacturing conversion cost
      per ton of</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
  </tr>
  <tr valign=bottom>
    <td align=left><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;finished product</font> </td>
    <td align=right><font size=2>1,486</font> </td>
    <td align=right>&nbsp;</td>
    <td align=right><font size=2>1,763</font> </td>
    <td align=right>&nbsp;</td>
    <td align=right><font size=2>1,809</font> </td>
    <td align=right>&nbsp;</td>
    <td align=right><font size=2>2,141</font> </td>
  </tr>
  <tr valign=bottom>
    <td align=left><font size=2>Average manufacturing conversion cost
      per ton of billet</font> </td>
    <td align=right><font size=2>1,029</font> </td>
    <td align=right>&nbsp;</td>
    <td align=right><font size=2>1,125</font> </td>
    <td align=right>&nbsp;</td>
    <td align=right><font size=2>1,203</font> </td>
    <td align=right>&nbsp;</td>
    <td align=right><font size=2>1,349</font> </td>
  </tr>
</table>
<BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Mexicali</I>. In 1993, we began operations at
our mini-mill located in Mexicali, Baja California. The mini-mill is strategically
located approximately 22 miles south of the California border and approximately
220 miles from Los Angeles.
<P align=left>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our Mexicali facilities and equipment include one electric arc furnace utilizing water-cooled sidewalls and roof, one four-strand continuous caster, one walking beam reheating furnace, one SACK rolling mill, a Linde oxygen plant and a water treatment plant. This facility has an annual installed capacity of 430,000 tons of steel billet and an annual installed capacity of finished product of 250,000</P>
<P align=center>25</P>
<HR align=center width="100%" noshade SIZE=5>


<!-- MARKER PAGE="sheet: 1; page: 1" -->
<A name="page_29"></A>
<P align=left>tons. Excess billet produced at the Mexicali facility is used primarily by the Guadalajara facility. This allows us to
increase the utilization of the Guadalajara facility&#146;s finishing capacity, which exceeds its production capacity. In 2007, the
Mexicali mini-mill produced approximately 407,107 tons of billet, of which the Guadalajara mini-mill used 150,238 tons, the Apizaco
mini-mill used 43,353 tons, and we sold 2,588 tons to third parties. In 2007, the Mexicali mini-mill produced 194,914 tons of finished product. In 2007 we operated the Mexicali mini-mill at 95% capacity for billet production and at 78% capacity for finished product production. Our facility is strategically located and has access to key markets in Mexico and the United States, stable sources of scrap, electricity, a highly skilled workforce and other raw materials. The Mexicali mini-mill also is situated near major highways and a railroad linking the Mexicali and Guadalajara mini-mills, allowing for coordinated
production at the two facilities. Our Mexicali facility mainly produces structurals, light structurals and rebar. In 2007, 59% of the products produced at the Mexicali mini-mill were rebar, 15% were angles, 9% were hot rolled bars (round, square and hexagonal rods) and the remaining 17% were other products, principally channels and flat bars.</P>
<P align=center><B>Mexicali Mini-Mill</B></P>
<TABLE width="100%" border=0 cellPadding=0 cellSpacing=0 style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'">
  <TR vAlign=bottom>
    <TD align=center>&nbsp; </TD>
    <TD align=center colSpan=7><B><FONT size=2>Years ended December 31,</FONT></B>
    </TD>
  </TR>
  <TR>
    <TD align=center>&nbsp; </TD>
    <TD align=center colSpan=7> <HR noshade SIZE=1> </TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=center>&nbsp; </TD>
    <TD align=center><B><FONT size=2>2004</FONT></B></TD>
    <TD align=center>&nbsp;</TD>
    <TD align=center><B><FONT size=2>2005</FONT></B></TD>
    <TD align=center>&nbsp;</TD>
    <TD align=center><B><FONT size=2>2006</FONT></B></TD>
    <TD align=center>&nbsp;</TD>
    <TD align=center><B><FONT size=2>2007</FONT></B></TD>
  </TR>
  <TR>
    <TD align=center>&nbsp; </TD>
    <TD align=center> <HR noshade SIZE=1> </TD>
    <TD align=center>&nbsp;</TD>
    <TD align=center> <HR noshade SIZE=1> </TD>
    <TD align=center>&nbsp;</TD>
    <TD align=center> <HR noshade SIZE=1> </TD>
    <TD align=center>&nbsp;</TD>
    <TD align=center> <HR noshade SIZE=1> </TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left><FONT size=2>Steel sales (thousands of tons)</FONT>
    </TD>
    <TD align=right><FONT size=2>187</FONT> </TD>
    <TD align=right>&nbsp;&nbsp;</TD>
    <TD align=right><FONT size=2>210</FONT> </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>224</FONT> </TD>
    <TD align=right>&nbsp;&nbsp;</TD>
    <TD align=right><FONT size=2>227</FONT> </TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left><FONT size=2>Average finished product price per
      ton</FONT> </TD>
    <TD align=right><FONT size=2>Ps. 7,534</FONT> </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>Ps. 6,086</FONT> </TD>
    <TD align=right>&nbsp;&nbsp;</TD>
    <TD align=right><FONT size=2>Ps. 7,188</FONT> </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>Ps. 7,282</FONT> </TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left><FONT size=2>Average scrap cost per ton</FONT>
    </TD>
    <TD align=right><FONT size=2>2,192</FONT> </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>2,179</FONT> </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>2,155</FONT> </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>2,757</FONT> </TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left><FONT size=2>Average manufacturing conversion cost
      per ton of</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp; &nbsp; &nbsp;<FONT size=2>finished product</FONT>
    </TD>
    <TD align=right><FONT size=2>1,528</FONT> </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>1,624</FONT> </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>1,700</FONT> </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>1,690</FONT> </TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left><FONT size=2>Average manufacturing conversion cost
      per ton of billet.</FONT> </TD>
    <TD align=right><FONT size=2>918</FONT> </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>973</FONT> </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>1,020</FONT> </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>1,083</FONT> </TD>
  </TR>
</TABLE>
<BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Apizaco mini-mill and Cholula facility</I>. We
have operated the Apizaco mini-mill and Cholula facility since August 1, 2004.
The mini-mill is located in central Mexico in Apizaco, Tlaxcala. Our Apizaco facilities
and equipment include one EBT Danieli electric arc furnace utilizing water-cooled
sidewalls and roof, two ladle stations (one Danieli and the other Daido), one
Daido degasification station, one Danieli four-strand continuous caster, two walking
beam reheating furnaces and two rolling mills (one Danieli and the other Pomini).
This facility has an annual installed capacity of 400,000 tons of steel billet
and an annual installed capacity of finished product of 432,000 tons. In 2007,
the Apizaco mini-mill produced 398,610 tons of steel billet, of which the Guadalajara
mini-mill used 2,024 tons, and 427,166 tons of finished products. Our Apizaco
facility is 1,112 miles from Mexicali and less than 124 miles from Mexico D.F.
Our Apizaco facility mainly produces SBQ steel, light structurals and rebar. Our
Cholula facility is approximately 25 miles from our Apizaco facility, which allows
the integrated operations of the Apizaco mini-mill and Cholula facility. Our Cholula
facilities and equipment include cold drawing and turning machines for peeling
bars. This facility has an annual installed capacity of finished product of 55,000
tons. In 2007, the Cholula facility produced 50,766 tons of finished product,
at 92% capacity. Our Cholula facility mainly produces cold finished SBQ steel.
<P align=left>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In 2007, 21% of the products we produced
  at the Apizaco and Cholula facilities were rebar, 35% were hot rolled bars (round,
  square and hexagonals) and the remaining 44% were other products, flat merchant
  bar and cold finished products.</P>
<P align=center>26</P>
<HR align=center width="100%" noshade SIZE=5>
<!-- MARKER PAGE="sheet: 1; page: 1" -->
<A name="page_30"></A>
<P align=center><B>Apizaco Mini-Mill and Cholula Facility</B></P>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'" cellspacing=0 cellpadding=0 border=0 width="740" align="center">
  <tr valign=bottom>
    <td align=center>&nbsp;</td>
    <td align=center colspan="2"><b><font size=2>August 1 &#150; </font></b> <b><font size=2><br>
      December 31 </font></b></td>
    <td colspan="5" align=center><b><font size=2>Years ended December 31,</font></b>
    </td>
  </tr>
  <tr valign=bottom>
    <td align=center>&nbsp;</td>
    <td align=center>
      <hr noshade size=1>
    </td>
    <td align=center>&nbsp;</td>
    <td colspan="5" align=center>
      <hr noshade size=1>
    </td>
  </tr>
  <tr valign=bottom>
    <td align=center>&nbsp; </td>
    <td align=center colspan="2"><b><font size=2>2004</font></b></td>
    <td align=center><b><font size=2>2005</font></b></td>
    <td align=center>&nbsp;</td>
    <td align=center><b><font size=2>2006</font></b></td>
    <td align=center>&nbsp;</td>
    <td align=center><b><font size=2>2007</font></b></td>
  </tr>
  <tr>
    <td align=center>&nbsp; </td>
    <td align=center>
      <hr noshade size=1>
       </td>
    <td align=center>&nbsp;</td>
    <td align=center>
      <hr noshade size=1>
       </td>
    <td align=center>&nbsp;</td>
    <td align=center>
      <hr noshade size=1>
       </td>
    <td align=center>&nbsp;</td>
    <td align=center>
      <hr noshade size=1>
       </td>
  </tr>
  <tr valign=bottom>
    <td align=left><font size=2>Steel sales (thousands of tons)</font>
    </td>
    <td align=right><font size=2>156</font> </td>
    <td align=right>&nbsp;&nbsp;</td>
    <td align=right><font size=2>416</font> </td>
    <td align=right>&nbsp;&nbsp;&nbsp;</td>
    <td align=right><font size=2>425</font> </td>
    <td align=right>&nbsp;&nbsp;</td>
    <td align=right><font size=2>448</font> </td>
  </tr>
  <tr valign=bottom>
    <td align=left><font size=2>Average finished product price per
      ton</font> </td>
    <td align=right><font size=2>Ps. 8,381</font> </td>
    <td align=right>&nbsp;</td>
    <td align=right><font size=2>Ps. 7,105</font> </td>
    <td align=right>&nbsp;</td>
    <td align=right><font size=2>Ps. 7,560</font> </td>
    <td align=right>&nbsp;</td>
    <td align=right><font size=2>Ps. 7,866</font> </td>
  </tr>
  <tr valign=bottom>
    <td align=left><font size=2>Average scrap cost per ton</font>
    </td>
    <td align=right><font size=2>3,335</font> </td>
    <td align=right>&nbsp;</td>
    <td align=right><font size=2>2,942</font> </td>
    <td align=right>&nbsp;</td>
    <td align=right><font size=2>2,852</font> </td>
    <td align=right>&nbsp;</td>
    <td align=right><font size=2>3,035</font> </td>
  </tr>
  <tr valign=bottom>
    <td align=left><font size=2>Average manufacturing conversion cost
      per ton of</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
  </tr>
  <tr valign=bottom>
    <td align=left>&nbsp; &nbsp; &nbsp;<font size=2>finished product</font>
    </td>
    <td align=right><font size=2>2,287</font> </td>
    <td align=right>&nbsp;</td>
    <td align=right><font size=2>2,241</font> </td>
    <td align=right>&nbsp;</td>
    <td align=right><font size=2>2,447</font> </td>
    <td align=right>&nbsp;</td>
    <td align=right><font size=2>2,749</font> </td>
  </tr>
  <tr valign=bottom>
    <td align=left><font size=2>Average manufacturing conversion cost
      per ton of</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
  </tr>
  <tr valign=bottom>
    <td align=left>&nbsp; &nbsp; &nbsp;<font size=2>billet</font>
    </td>
    <td align=right><font size=2>1,530</font> </td>
    <td align=right>&nbsp;</td>
    <td align=right><font size=2>1,517</font> </td>
    <td align=right>&nbsp;</td>
    <td align=right><font size=2>1,496</font> </td>
    <td align=right>&nbsp;</td>
    <td align=right><font size=2>1,521</font> </td>
  </tr>
</table>
<BR>
<I>U.S. and Canada Operations and Facilities</I>
<P align=left>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have operated our Republic facilities (in Ohio, New York, Indiana and Canada) since
we acquired them from Republic on July 22, 2005. As of December 31, 2007, these facilities had an annual installed capacity of
2,647,000 tons of billet and 1,692,000 tons of finished product. In 2007, the Republic facilities produced 1,811,000 tons of steel
billet, of which 216,150 tons were sold as semi-finished tube rounds and 326,430 were sold as other semi-finished trade products. The remainder went to the Lorain, Ohio and Lackawanna, New York facilities for further processing. For the same period, the Republic facilities produced 1,138,000 tons of hot-rolled bar, of which 144,800 tons were used by the cold finish facilities. The Republic facilities produced 171,000 tons of cold finish bars. During this period, 59% of the products produced at the Republic facilities were hot-rolled bars, 9% were cold-finished bars, 13% were semi-finished tube rounds, and 19% were other
semi-finished trade products.</P>
<P align=left>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth, for the periods indicated, selected operating data for our Republic facilities.</P>
<TABLE width="100%" border=0 cellPadding=0 cellSpacing=0 style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'">
  <TR>
    <TD width="54%" align=center>&nbsp;</TD>
    <TD width="14%" align=center><font size=2><strong>July 22 &#150;</strong></font><strong><br>
      <font size=2>December 31,</font></strong></TD>
    <TD width="6%" align=center>&nbsp;</TD>
    <TD colspan="3" align=center><font size=2><strong>Year ended December 31,</strong></font></TD>
  </TR>
  <TR>
    <TD align=center>&nbsp; </TD>
    <TD align=center>
      <HR noshade SIZE=1>
       </TD>
    <TD align=center>&nbsp;&nbsp;</TD>
    <TD colspan="3" align=center>
      <HR noshade SIZE=1>
       </TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=center>&nbsp; </TD>
    <TD align=center><B><FONT size=2>2005</FONT></B></TD>
    <TD align=center>&nbsp;</TD>
    <TD width="9%" align=center><B><FONT size=2>2006</FONT></B></TD>
    <TD width="7%" align=center>&nbsp;</TD>
    <TD width="10%" align=center><B><FONT size=2>2007</FONT></B></TD>
  </TR>
  <TR>
    <TD align=center>&nbsp; </TD>
    <TD align=center>
      <HR noshade SIZE=1>
       </TD>
    <TD align=center>&nbsp;</TD>
    <TD align=center>
      <HR noshade SIZE=1>
       </TD>
    <TD align=center>&nbsp;</TD>
    <TD align=center>
      <HR noshade SIZE=1>
       </TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left><FONT size=2>Steel sales (thousands of tons)</FONT>
    </TD>
    <TD align=right><FONT size=2>675</FONT> </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>1,620</FONT> </TD>
    <TD align=right>&nbsp;&nbsp;</TD>
    <TD align=right><FONT size=2>1,611</FONT> </TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left><FONT size=2>Average finished product price per
      ton</FONT> </TD>
    <TD align=right><FONT size=2>Ps. 8,891</FONT> </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>Ps. 8,571</FONT> </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>Ps. 9,566</FONT> </TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left><FONT size=2>Average scrap cost per ton</FONT>
    </TD>
    <TD align=right><FONT size=2>1,941</FONT> </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>2,301</FONT> </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>2,785</FONT> </TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left><FONT size=2>Average iron ore pellet cost per ton</FONT>
    </TD>
    <TD align=right><FONT size=2>697</FONT> </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>677</FONT> </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>892</FONT> </TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left><FONT size=2>Average manufacturing conversion cost
      per</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp; &nbsp; &nbsp; &nbsp;<FONT size=2>ton of
      finished product</FONT><SUP><FONT size=2>(1)</FONT></SUP> </TD>
    <TD align=right><FONT size=2>5,428</FONT> </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>4,771</FONT> </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>5,724</FONT> </TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left><FONT size=2>Average manufacturing conversion cost
      per</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
  </TR>

  <TR vAlign=bottom>
    <TD align=left>&nbsp; &nbsp; &nbsp; &nbsp;<FONT size=2>ton of</FONT>  <FONT size=2>billet</FONT><SUP><FONT size=2>(1)</FONT></SUP>
    </TD>
    <TD align=right><FONT size=2>4,021</FONT> </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>3,530</FONT> </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>4,370</FONT> </TD>
  </TR>
</TABLE>
<BR>
<hr align="left" width="150" size="1" noshade>
<TABLE style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'" cellSpacing=0 cellPadding=0 border=0>
  <TR>
     <TD vAlign=top nowrap>(1)&nbsp; &nbsp; &nbsp; </TD>
     <TD width="100%">Manufacturing conversion cost is defined as all production costs excluding the cost of scrap and related yield loss. </TD></TR>
<TR>
     <TD colSpan=2>&nbsp;</TD></TR></TABLE>
<P align=left>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Lorain, Ohio</I>. The Lorain facility
  mainly produces SBQ steel and operates an integrated steel mill. We operate
  one blast furnace, two 220-ton basic oxygen furnaces, two ladle metallurgy facilities,
  a vacuum degasser, a five-strand continuous bloom caster, a six-strand billet
  caster, a billet rolling mill and two bar rolling mills.</P>
<P align=left>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our Lorain facility had, at December 31, 2007, an annual installed capacity of 1,264,000 tons of steel billet and 838,000 tons of finished product. During 2007, the Lorain facility, was operated at 85.6% capacity for steel billet and for finished product, 71.2% for 9-10&#148; rolling mill and 83.4% for 20&#148; mill finishing and shipping production, and it produced 1,082,000 tons of billets and 643,294 tons of finished products.</P>
<P align=center>27</P>
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<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Canton, Ohio</I>. Our Canton facility mainly produces SBQ steel and includes two 200-ton top charge electric arc furnaces, a 5-strand bloom/billet caster, two ladle metallurgical furnaces, two vacuum degassers and
two slag rakes. This facility also includes a combination Caster rolling facility that continuously casts blooms in a 4-strand caster, heats the blooms to rolling temperature in a walking beam furnace, then rolls billets through an 8-stand rolling
mill in an inline operation. We installed and commissioned the electric arc furnace, the bloom/billet caster, ladle metallurgical furnace and vacuum degasser in 2005. Other Canton equipment includes a Mecana billet inspection line, four stationary
billet grinders, a saw line and a quality verification line (or &#147;QVL line&#148;).</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Canton produces blooms and billets for the three rolling mills in the Republic facilities and for trade customers. We use the QVL inspection line to inspect finished bar produced in Lackawanna and Lorain. As of December
2007, the Canton facility had annual installed capacity of 1,383,000 tons of steel billet. In 2007, this facility produced 729,389 tons of blooms, billets and other semi-finished trade product and was operated at 52.7% capacity of steel billet.</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Lackawanna, New York</I>. Our Lackawanna facility mainly produces SBQ steel and includes a three-zone walking beam billet reheat furnace, a recently upgraded 22 stand rolling mill capable of producing rounds,
squares, and hexagons in both cut length and coils. This facility produces hot rolled bar sizes that range from .562" to 3.250" with coil weights up to 6000 lb. Our Lackawanna facility&#146;s finishing equipment includes a QVL inspection line and
three saw lines. We sell a portion of the hot rolled bars produced at our Lackawanna facility to trade customers, and we also ship a portion of the finished bars to our cold finishing operations for further processing. As of December 31, 2007, the
Lackawanna facility had annual installed capacity of 599,000 tons of hot rolled bars. In 2007, this facility produced 494,352 tons of hot rolled bars and was operated at 82.6% capacity of finished product.</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Massillon, Ohio</I>. Our Massillon facility mainly produces SBQ steel and contains a cold finishing facility which includes the machinery and equipment to clean, draw, turn, chamfer, anneal, grind, straighten and saw
bars. Our Massillon facility had, at December 31, 2007, an annual installed capacity of 125,000 tons of finished product. During 2007, the Massillon facility was operated at 80% capacity of finished product and produced 100,096 tons of cold finished
bars.</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Gary, Indiana</I>. Our Gary facility mainly produces SBQ steel and has a cold finishing facility which includes the machinery and equipment to clean, draw, turn, chamfer, anneal, grind, straighten and saw bars. As of
December 31, 2007, the Gary facility had annual installed capacity of 71,000 tons of cold finished bars. In 2007, this facility produced 36,338 tons of cold finished bars and was operated at 51.4% capacity of finished product.</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Hamilton, Ontario, Canada</I>. Our Hamilton facility mainly produces SBQ steel and has a cold finishing facility which includes the machinery and equipment to clean, draw, turn, chamfer, anneal, grind, straighten and
saw bars. As of December 31, 2007, the Hamilton facility had annual installed capacity of 59,000 tons of cold finished bars. In 2007, this facility produced 35,010 tons of cold finished bars and was operated at 59.4% capacity of finished
product.</P>
<P align="center">
28</P>

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<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table shows the products that we produce, the equipment that we use and the volume that we produce in each of our separate production facilities:</P>


<P align=center><B>Production per Facility by Product, Equipment and Volume</B></P>
<TABLE width="100%" border=0 cellPadding=0 cellSpacing=0 style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'">
  <TR vAlign=bottom>
    <TD width="20%" align=left>&nbsp; </TD>
    <TD width="20%" align=left>&nbsp; </TD>
    <TD width="20%" align=left>&nbsp; </TD>
    <TD width="20%" align=left>&nbsp; </TD>
    <TD width="20%" rowSpan=4 align=left><B><FONT size=2>Finished Product</FONT></B><BR> <B><FONT size=2>Annual</FONT></B><BR>
      <B><FONT size=2>Installed</FONT></B><BR> <B><FONT size=2>Capacity (tons)</FONT></B><B><SUP><FONT size=2>(1)</FONT></SUP></B></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left rowSpan=3><B><FONT size=2>2007 Annual</FONT></B><BR> <B><FONT size=2>Production</FONT></B><BR>
      <B><FONT size=2>Volume (tons)</FONT></B></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left><B><FONT size=2>Location</FONT></B></TD>
    <TD align=left><B><FONT size=2>Product (%)</FONT></B></TD>
    <TD align=left><B><FONT size=2>Equipment</FONT></B></TD>
  </TR>
  <TR>
    <TD align=center> <HR align="left" width="95%" SIZE=1 noshade> </TD>
    <TD align=center> <HR align="left" width="95%" SIZE=1 noshade> </TD>
    <TD align=center> <HR align="left" width="95%" SIZE=1 noshade> </TD>
    <TD align=center> <HR align="left" width="95%" SIZE=1 noshade> </TD>
    <TD align=center> <HR align="left" width="95%" SIZE=1 noshade> </TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left><FONT size=2>Guadalajara</FONT> </TD>
    <TD align=left><FONT size=2>Structurals (46%); Light</FONT> </TD>
    <TD align=left><FONT size=2>electric arc furnace</FONT> </TD>
    <TD align=left><FONT size=2>402,615</FONT> </TD>
    <TD align=left><FONT size=2>480,000</FONT> </TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp; </TD>
    <TD align=left><FONT size=2>structurals (30%);</FONT> </TD>
    <TD align=left><FONT size=2>with continuous caster,</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp; </TD>
    <TD align=left><FONT size=2>SBQ (18%), Rebar (6%)</FONT> </TD>
    <TD align=left><FONT size=2>rolling mill and bar</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left><FONT size=2>processing lines</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left><FONT size=2>Mexicali</FONT> </TD>
    <TD align=left><FONT size=2>Structurals (18%); Rebar</FONT> </TD>
    <TD align=left><FONT size=2>electric arc furnace</FONT> </TD>
    <TD align=left><FONT size=2>194,914</FONT> </TD>
    <TD align=left><FONT size=2>250,000</FONT> </TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp; </TD>
    <TD align=left><FONT size=2>(59%); Light structurals</FONT> </TD>
    <TD align=left><FONT size=2>with continuous caster</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp; </TD>
    <TD align=left><FONT size=2>(23%)</FONT> </TD>
    <TD align=left><FONT size=2>and bar rolling mills</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left><FONT size=2>Apizaco and Cholula</FONT> </TD>
    <TD align=left><FONT size=2>SBQ (59%); Rebar</FONT> </TD>
    <TD align=left><FONT size=2>electric arc furnace</FONT> </TD>
    <TD align=left><FONT size=2>477,932</FONT> </TD>
    <TD align=left><FONT size=2>480,000</FONT> </TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp; </TD>
    <TD align=left><FONT size=2>(21%); Light structurals</FONT> </TD>
    <TD align=left><FONT size=2>with vacuum tank</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp; </TD>
    <TD align=left><FONT size=2>(20%)</FONT> </TD>
    <TD align=left><FONT size=2>degasser, continuous</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left><FONT size=2>caster, bar rolling</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left><FONT size=2>mills, cold drawn and</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left><FONT size=2>bar turning equipment</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR>
    <TD colSpan=5>&nbsp; </TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left><FONT size=2>Lorain</FONT><SUP><FONT size=2>(2)</FONT></SUP>
    </TD>
    <TD align=left><FONT size=2>SBQ (100%)</FONT> </TD>
    <TD align=left><FONT size=2>blast furnace, vacuum</FONT> </TD>
    <TD align=left><FONT size=2>643,294</FONT> </TD>
    <TD align=left><FONT size=2>838,000</FONT> </TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left><FONT size=2>tank degasser,</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left><FONT size=2>continuous caster, bar</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left><FONT size=2>and wire rod rolling</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left><FONT size=2>mills</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left><FONT size=2>Canton</FONT><SUP><FONT size=2>(3)</FONT></SUP>
    </TD>
    <TD align=left><FONT size=2>SBQ (100%)</FONT> </TD>
    <TD align=left><FONT size=2>electric arc furnace,</FONT> </TD>
    <TD align=left><FONT size=2>729,389</FONT> </TD>
    <TD align=left><FONT size=2>1,383,000</FONT> </TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left><FONT size=2>vacuum tank degasser,</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left><font size=2>continuous caster,</font> </TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left><font size=2>rolling mills</font> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left><FONT size=2>Lackawanna</FONT> </TD>
    <TD align=left><FONT size=2>SBQ (100%)</FONT> </TD>
    <TD align=left><FONT size=2>reheat furnace, bar and</FONT> </TD>
    <TD align=left><FONT size=2>494,352</FONT> </TD>
    <TD align=left><FONT size=2>599,000</FONT> </TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left><FONT size=2>wire rod rolling mills</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left><FONT size=2>Massillon</FONT> </TD>
    <TD align=left><FONT size=2>SBQ (100%)</FONT> </TD>
    <TD align=left><FONT size=2>cold drawn bar turning</FONT> </TD>
    <TD align=left><FONT size=2>100,096</FONT> </TD>
    <TD align=left><FONT size=2>125,000</FONT> </TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left><font size=2>and heat treating</font> </TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left><font size=2>equipment</font> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left><FONT size=2>Gary</FONT> </TD>
    <TD align=left><FONT size=2>SBQ (100%)</FONT> </TD>
    <TD align=left><FONT size=2>cold drawn bar turning</FONT> </TD>
    <TD align=left><FONT size=2>36,338</FONT> </TD>
    <TD align=left><FONT size=2>71,000</FONT> </TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left><font size=2>and heat treating</font> </TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left><font size=2>equipment</font> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left><FONT size=2>Hamilton</FONT> </TD>
    <TD align=left><FONT size=2>SBQ (100%)</FONT> </TD>
    <TD align=left><FONT size=2>cold drawn bar turning</FONT> </TD>
    <TD align=left><FONT size=2>35,010</FONT> </TD>
    <TD align=left><FONT size=2>59,000</FONT> </TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left><font size=2>and heat treating</font></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left><font size=2>equipment</font> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
  </TR>
</TABLE>
<BR>
<hr align="left" width="150" size="1" noshade>
<TABLE style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'" cellSpacing=0 cellPadding=0 border=0>
<TR>
     <TD vAlign=top nowrap>(1)&nbsp; &nbsp; &nbsp; </TD>
     <TD width="100%">At December 31, 2007. </TD></TR>
<TR>
     <TD colSpan=2>&nbsp;</TD></TR>
<TR>
     <TD vAlign=top nowrap>(2)&nbsp; &nbsp; &nbsp; </TD>
     <TD width="100%">Production capacity are for rolling only. </TD></TR>
<TR>
     <TD colSpan=2>&nbsp;</TD></TR>
<TR>
     <TD vAlign=top nowrap>(3)&nbsp; &nbsp; &nbsp; </TD>
     <TD width="100%">Production capacity are for billets only. </TD></TR>
<TR>
     <TD colSpan=2>&nbsp;</TD></TR></TABLE>
<P align=center>29</P>
<HR align=center width="100%" noshade SIZE=5>


<!-- MARKER PAGE="sheet: 1; page: 1" -->
<A name="page_33"></A>
<P align=left><B>Sales and Distribution</B></P>
<P align=left>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We sell and distribute our steel products
throughout North America. We also export steel products from Mexico to Central and South
America and Europe. In 2007, approximately 73% of our steel product sales represented SBQ
steel products, of which we sold 30% to the auto part industry, 27% to service centers,
12% for energy related products, 3% for hand tools, 2% for mining equipment and the remaining 26% to other industries.</P>
<P align=left>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth, for the periods
indicated, our Mexico, U.S. and Canada product sales as a percentage of our total product
sales. These figures reflect the sales of products manufactured at the Apizaco and Cholula
facilities starting since August 1, 2004 and the sales of products manufactured at our U.S. facilities starting since July 22, 2005.</P>
<P align=center><B>Steel Product Sales By Region</B></P>
<table width="100%" border=0 cellpadding=0 cellspacing=0 style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'">
  <tr valign=bottom>
    <td align=center>&nbsp; </td>
    <td align=center colspan="7">  <b><font size=2>Mexico</font></b>  </td>
    <td align=center>&nbsp; </td>
    <td align=center colspan="8">  <b><font size=2>U.S. and Canada</font></b><b><sup><font size=2>(1)</font></sup></b>   </td>
  </tr>
  <tr>
    <td align=center>&nbsp; </td>
    <td colspan="7" align=center>
      <hr noshade size=1>
       </td>
    <td align=center>&nbsp; </td>
    <td colspan="7" align=center>
      <hr noshade size=1>
       </td>
    <td align=center>&nbsp; </td>
  </tr>
  <tr valign=bottom>
    <td align=center>&nbsp; </td>
    <td align=center colspan="16">    <b><font size=2>Years ended December 31,</font></b>     </td>
  </tr>
  <tr>
    <td align=center>&nbsp; </td>
    <td colspan="15" align=center>
      <hr noshade size=1>
       </td>
    <td align=center>&nbsp; </td>
  </tr>
  <tr valign=bottom>
    <td align=center>&nbsp; </td>
    <td align=center><b><font size=2>2004</font></b></td>
    <td align=center>&nbsp; </td>
    <td align=center><b><font size=2>2005</font></b></td>
    <td align=center>&nbsp; </td>
    <td align=center><b><font size=2>2006</font></b></td>
    <td align=center>&nbsp; </td>
    <td align=center><b><font size=2>2007</font></b></td>
    <td align=center>&nbsp; </td>
    <td align=center><b><font size=2>2004</font></b></td>
    <td align=center>&nbsp; </td>
    <td align=center><b><font size=2>2005</font></b></td>
    <td align=center>&nbsp; </td>
    <td align=center><b><font size=2>2006</font></b></td>
    <td align=center>&nbsp; </td>
    <td align=center><b><font size=2>2007</font></b></td>
    <td align=center>&nbsp; </td>
  </tr>
  <tr>
    <td align=center>&nbsp; </td>
    <td align=center>
      <hr noshade size=1>
       </td>
    <td align=center>&nbsp; </td>
    <td align=center>
      <hr noshade size=1>
       </td>
    <td align=center>&nbsp; </td>
    <td align=center>
      <hr noshade size=1>
       </td>
    <td align=center>&nbsp; </td>
    <td align=center>
      <hr noshade size=1>
       </td>
    <td align=center>&nbsp; </td>
    <td align=center>
      <hr noshade size=1>
       </td>
    <td align=center>&nbsp; </td>
    <td align=center>
      <hr noshade size=1>
       </td>
    <td align=center>&nbsp; </td>
    <td align=center>
      <hr noshade size=1>
       </td>
    <td align=center>&nbsp; </td>
    <td align=center>
      <hr noshade size=1>
       </td>
    <td align=center>&nbsp; </td>
  </tr>
  <tr valign=bottom>
    <td align=left><font size=2>I-Beams</font> </td>
    <td align=right><font size=2>100</font> </td>
    <td align=left><font size=2>%</font> </td>
    <td align=right><font size=2>99</font> </td>
    <td align=left><font size=2>%</font> </td>
    <td align=right><font size=2>96</font> </td>
    <td align=left><font size=2>%</font> </td>
    <td align=right><font size=2>97</font> </td>
    <td align=left><font size=2>%</font> </td>
    <td align=right><font size=2>0</font> </td>
    <td align=left><font size=2>%</font> </td>
    <td align=right><font size=2>1</font> </td>
    <td align=left><font size=2>%</font> </td>
    <td align=right><font size=2>4</font> </td>
    <td align=left><font size=2>%</font> </td>
    <td align=right><font size=2>3</font> </td>
    <td align=left><font size=2>%</font> </td>
  </tr>
  <tr valign=bottom>
    <td align=left><font size=2>Channels</font> </td>
    <td align=right><font size=2>80</font> </td>
    <td align=left><font size=2>%</font> </td>
    <td align=right><font size=2>81</font> </td>
    <td align=left><font size=2>%</font> </td>
    <td align=right><font size=2>66</font> </td>
    <td align=left><font size=2>%</font> </td>
    <td align=right><font size=2>67</font> </td>
    <td align=left><font size=2>%</font> </td>
    <td align=right><font size=2>20</font> </td>
    <td align=left><font size=2>%</font> </td>
    <td align=right><font size=2>19</font> </td>
    <td align=left><font size=2>%</font> </td>
    <td align=right><font size=2>34</font> </td>
    <td align=left><font size=2>%</font> </td>
    <td align=right><font size=2>33</font> </td>
    <td align=left><font size=2>%</font> </td>
  </tr>
  <tr valign=bottom>
    <td align=left><font size=2>Angles</font> </td>
    <td align=right><font size=2>95</font> </td>
    <td align=left><font size=2>%</font> </td>
    <td align=right><font size=2>94</font> </td>
    <td align=left><font size=2>%</font> </td>
    <td align=right><font size=2>92</font> </td>
    <td align=left><font size=2>%</font> </td>
    <td align=right><font size=2>81</font> </td>
    <td align=left><font size=2>%</font> </td>
    <td align=right><font size=2>5</font> </td>
    <td align=left><font size=2>%</font> </td>
    <td align=right><font size=2>6</font> </td>
    <td align=left><font size=2>%</font> </td>
    <td align=right><font size=2>8</font> </td>
    <td align=left><font size=2>%</font> </td>
    <td align=right><font size=2>19</font> </td>
    <td align=left><font size=2>%</font> </td>
  </tr>
  <tr valign=bottom>
    <td align=left><font size=2>Hot-rolled bars(round, square</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
  </tr>
  <tr valign=bottom>
    <td align=center><font size=2>and hexagonal rods)</font> </td>
    <td align=right><font size=2>91</font> </td>
    <td align=left><font size=2>%</font> </td>
    <td align=right><font size=2>10</font> </td>
    <td align=left><font size=2>%</font> </td>
    <td align=right><font size=2>15</font> </td>
    <td align=left><font size=2>%</font> </td>
    <td align=right><font size=2>21</font> </td>
    <td align=left><font size=2>%</font> </td>
    <td align=right><font size=2>9</font> </td>
    <td align=left><font size=2>%</font> </td>
    <td align=right><font size=2>90</font> </td>
    <td align=left><font size=2>%</font> </td>
    <td align=right><font size=2>85</font> </td>
    <td align=left><font size=2>%</font> </td>
    <td align=right><font size=2>79</font> </td>
    <td align=left><font size=2>%</font> </td>
  </tr>
  <tr valign=bottom>
    <td align=left><font size=2>Rebar</font> </td>
    <td align=right><font size=2>71</font> </td>
    <td align=left><font size=2>%</font> </td>
    <td align=right><font size=2>66</font> </td>
    <td align=left><font size=2>%</font> </td>
    <td align=right><font size=2>88</font> </td>
    <td align=left><font size=2>%</font> </td>
    <td align=right><font size=2>67</font> </td>
    <td align=left><font size=2>%</font> </td>
    <td align=right><font size=2>29</font> </td>
    <td align=left><font size=2>%</font> </td>
    <td align=right><font size=2>34</font> </td>
    <td align=left><font size=2>%</font> </td>
    <td align=right><font size=2>12</font> </td>
    <td align=left><font size=2>%</font> </td>
    <td align=right><font size=2>33</font> </td>
    <td align=left><font size=2>%</font> </td>
  </tr>
  <tr valign=bottom>
    <td align=left><font size=2>Flat bar</font> </td>
    <td align=right><font size=2>95</font> </td>
    <td align=left><font size=2>%</font> </td>
    <td align=right><font size=2>98</font> </td>
    <td align=left><font size=2>%</font> </td>
    <td align=right><font size=2>97</font> </td>
    <td align=left><font size=2>%</font> </td>
    <td align=right><font size=2>97</font> </td>
    <td align=left><font size=2>%</font> </td>
    <td align=right><font size=2>5</font> </td>
    <td align=left><font size=2>%</font> </td>
    <td align=right><font size=2>2</font> </td>
    <td align=left><font size=2>%</font> </td>
    <td align=right><font size=2>3</font> </td>
    <td align=left><font size=2>%</font> </td>
    <td align=right><font size=2>3</font> </td>
    <td align=left><font size=2>%</font> </td>
  </tr>
  <tr valign=bottom>
    <td align=left><font size=2>Cold drawn finished bars</font> </td>
    <td align=right><font size=2>95</font> </td>
    <td align=left><font size=2>%</font> </td>
    <td align=right><font size=2>40</font> </td>
    <td align=left><font size=2>%</font> </td>
    <td align=right><font size=2>26</font> </td>
    <td align=left><font size=2>%</font> </td>
    <td align=right><font size=2>26</font> </td>
    <td align=left><font size=2>%</font> </td>
    <td align=right><font size=2>5</font> </td>
    <td align=left><font size=2>%</font> </td>
    <td align=right><font size=2>60</font> </td>
    <td align=left><font size=2>%</font> </td>
    <td align=right><font size=2>74</font> </td>
    <td align=left><font size=2>%</font> </td>
    <td align=right><font size=2>74</font> </td>
    <td align=left><font size=2>%</font> </td>
  </tr>
  <tr valign=bottom>
    <td align=left><font size=2>Semi-finished tube rounds</font> </td>
    <td align=right><font size=2>0</font> </td>
    <td align=left><font size=2>%</font> </td>
    <td align=right><font size=2>0</font> </td>
    <td align=left><font size=2>%</font> </td>
    <td align=right><font size=2>0</font> </td>
    <td align=left><font size=2>%</font> </td>
    <td align=right><font size=2>0</font> </td>
    <td align=left><font size=2>%</font> </td>
    <td align=right><font size=2>0</font> </td>
    <td align=left><font size=2>%</font> </td>
    <td align=right><font size=2>100</font> </td>
    <td align=left><font size=2>%</font> </td>
    <td align=right><font size=2>100</font> </td>
    <td align=left><font size=2>%</font> </td>
    <td align=right><font size=2>100</font> </td>
    <td align=left><font size=2>%</font> </td>
  </tr>
  <tr valign=bottom>
    <td align=left><font size=2>Other semi-finished trade</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
  </tr>
  <tr valign=bottom>
    <td align=left>&nbsp; &nbsp; &nbsp;<font size=2>products</font> </td>
    <td align=right><font size=2>0</font> </td>
    <td align=left><font size=2>%</font> </td>
    <td align=right><font size=2>0</font> </td>
    <td align=left><font size=2>%</font> </td>
    <td align=right><font size=2>0</font> </td>
    <td align=left><font size=2>%</font> </td>
    <td align=right><font size=2>0</font> </td>
    <td align=left><font size=2>%</font> </td>
    <td align=right><font size=2>0</font> </td>
    <td align=left><font size=2>%</font> </td>
    <td align=right><font size=2>100</font> </td>
    <td align=left><font size=2>%</font> </td>
    <td align=right><font size=2>100</font> </td>
    <td align=left><font size=2>%</font> </td>
    <td align=right><font size=2>100</font> </td>
    <td align=left><font size=2>%</font> </td>
  </tr>
  <tr valign=bottom>
    <td align=left><font size=2>Other</font> </td>
    <td align=right><font size=2>100</font> </td>
    <td align=left><font size=2>%</font> </td>
    <td align=right><font size=2>100</font> </td>
    <td align=left><font size=2>%</font> </td>
    <td align=right><font size=2>100</font> </td>
    <td align=left><font size=2>%</font> </td>
    <td align=right><font size=2>99</font> </td>
    <td align=left><font size=2>%</font> </td>
    <td align=right><font size=2>0</font> </td>
    <td align=left><font size=2>%</font> </td>
    <td align=right><font size=2>0</font> </td>
    <td align=left><font size=2>%</font> </td>
    <td align=right><font size=2>0</font> </td>
    <td align=left><font size=2>%</font> </td>
    <td align=right><font size=2>1</font> </td>
    <td align=left><font size=2>%</font> </td>
  </tr>
  <tr>
    <td>&nbsp; </td>
    <td>
      <hr noshade size=1>
       </td>
    <td>&nbsp;

       </td>
    <td>
      <hr noshade size=1>
       </td>
    <td>&nbsp;

       </td>
    <td>
      <hr noshade size=1>
       </td>
    <td>&nbsp;

       </td>
    <td>
      <hr noshade size=1>
       </td>
    <td>&nbsp;

       </td>
    <td>
      <hr noshade size=1>
       </td>
    <td>&nbsp;

       </td>
    <td>
      <hr noshade size=1>
       </td>
    <td>&nbsp;

       </td>
    <td>
      <hr noshade size=1>
       </td>
    <td>&nbsp;

       </td>
    <td>
      <hr noshade size=1>
       </td>
    <td>&nbsp;

       </td>
  </tr>
  <tr valign=bottom>
    <td align=left>&nbsp; &nbsp; &nbsp; &nbsp;<font size=2>Total (weighted average)</font>
    </td>
    <td align=right><font size=2>87</font> </td>
    <td align=left><font size=2>%</font> </td>
    <td align=right><font size=2>53</font> </td>
    <td align=left><font size=2>%</font> </td>
    <td align=right><font size=2>35</font> </td>
    <td align=left><font size=2>%</font> </td>
    <td align=right><font size=2>33</font> </td>
    <td align=left><font size=2>%</font> </td>
    <td align=right><font size=2>13</font> </td>
    <td align=left><font size=2>%</font> </td>
    <td align=right><font size=2>47</font> </td>
    <td align=left><font size=2>%</font> </td>
    <td align=right><font size=2>65</font> </td>
    <td align=left><font size=2>%</font> </td>
    <td align=right><font size=2>67</font> </td>
    <td align=left><font size=2>%</font> </td>
  </tr>
  <tr>
    <td>&nbsp; </td>
    <td>
      <hr noshade size=1>
       </td>
    <td>&nbsp;

       </td>
    <td>
      <hr noshade size=1>
       </td>
    <td>&nbsp;

       </td>
    <td>
      <hr noshade size=1>
       </td>
    <td>&nbsp;

       </td>
    <td>
      <hr noshade size=1>
       </td>
    <td>&nbsp;

       </td>
    <td>
      <hr noshade size=1>
       </td>
    <td>&nbsp;

       </td>
    <td>
      <hr noshade size=1>
       </td>
    <td>&nbsp;

       </td>
    <td>
      <hr noshade size=1>
       </td>
    <td>&nbsp;

       </td>
    <td>
      <hr noshade size=1>
       </td>
    <td>&nbsp;

       </td>
  </tr>
</table>
<BR>
<hr align="left" width="150" size="1" noshade>
<TABLE style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'" cellSpacing=0 cellPadding=0 border=0>
<TR>
     <TD vAlign=top nowrap>(1)&nbsp; &nbsp; &nbsp; </TD>
     <TD width="100%">Includes sales principally into the United States and Canada. </TD></TR>
<TR>
     <TD colSpan=2>&nbsp;</TD></TR></TABLE>
<P align=left>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During the year ended December 31, 2007, approximately 60% of our sales by volume came from the U.S. market, with almost 100% of such sales representing SBQ products. The Mexican market represents approximately 33% of our sales by volume, with SBQ products representing approximately 13% of such sales and the remainder representing commercial steel products. Approximately 80% of our sales in the United States and Canadian markets come from contractual long-term agreements that establish minimum quantities and prices, which are adjustable based on fluctuations of key production materials. The remainder of our sales in the United States and Canadian markets are spot sales either directly to end customers through our sales force or through independent distributors.</P>
<P align=left>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We sell to the Mexican market through a group of approximately 100 independent distributors, who also carry other steel companies&#146; product lines, and through our wholly owned distribution center in Guadalajara. Our sales force and distribution center are an important source of information concerning customer needs and market developments. By working through our distributors, we believe that we have established and can maintain market leadership with small and mid-market end-users throughout Mexico. We believe that our domestic customers are highly service-conscious.</P>
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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We sell to customers in the U.S. and Canadian markets through a staff of professional sales representatives and sales technicians located in the major manufacturing centers of the Midwest, Great Lakes and Southeast
regions of the United States.</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We distribute our exports outside North America primarily through independent distributors who also carry other product lines. In addition, we have three full-time employees in Mexico dedicated exclusively to
exports.</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During 2007 and 2006, we received orders for our products in our Mexican facilities on average approximately two weeks before producing those products. We generally fill orders for our U.S. and Canadian SBQ steel
products within one to 12 weeks of the order depending on the product, customer needs and other production requirements. Customer orders are generally cancelable without penalty prior to finish size rolling and depend on customers&#146; changing
production schedules. Accordingly, we do not believe that backlog is a significant factor in our business. A substantial portion of our production is ordered by our customers prior to production. There can be no assurance that significant levels of
preproduction sales orders will continue.</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In our Republic plants, we have long term relationships with most of our major customers, in some cases for 10 to 20 years or longer. Our major direct and indirect costumers include leading automotive and industrial
equipment manufacturers General Motors Corporation, Ford Motor Company, Chrysler LLC, Honda of America MFG, Inc. and Caterpillar Inc., first tier suppliers to automotive and industrial equipment manufacturers such as American Axle &amp;
Manufacturing Holdings, Inc., ArvinMeritor, Inc., Delphi, NTN Driveshaft, Inc., TRW Automotive Holdings Corp., and Visteon Corporation; forger Jernberg Industries, Inc.; service centers which include AM Castle &amp; Co., Earle M. Jorgensen Co., and
Eaton Steel Bar Company; and tubular product manufacturer, U.S. Steel. In 2002 we entered into a long term supply contract with U.S. Steel, which we have extended several times. On September 22, 2006, we renewed our long term supply contract with
U.S. Steel through September 30, 2008.</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our U.S. and Canadian facilities are strategically located to serve the majority of consumers of SBQ products in the United States. Our U.S. and Canadian facilities ship products between their mills and finished
products to customers by rail and truck. Customer needs and location dictate the type of transportation used for deliveries. The proximity of our rolling mills and cold finishing plants to our U.S. customers allows us to provide competitive rail and
truck freight rates and flexible deliveries in order to satisfy just-in-time and other customer manufacturing requirements. We believe that the ability to meet the product delivery requirements of our customers in a timely and flexible fashion is a
key to attracting and retaining customers as more SBQ product consumers reduce their in-plant raw material inventory. We optimize freight costs by using our significantly greater scale of operations to maintain favorable transportation arrangements,
continuing to combine orders in shipments whenever possible and &#147;backhauling&#148; scrap and other raw materials.</P>
<P align="left">
<B>Competition</B></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Competition in the steel industry is significant. Continuous advances in materials sciences and resulting technologies have given rise to products such as plastics, aluminum, ceramics and glass, all of which compete
with steel products. Competition in the steel industry exerts a downward pressure on prices, and, due to high start-up costs, the economics of operating a steel mill on a continuous basis may encourage mill operators to establish and maintain high
levels of output even in times of low demand, which further decreases prices and profit margins. The recent trend of consolidation in the global steel industry may increase competitive pressures on independent producers of our size if large steel
producers formed through consolidations adopt predatory pricing strategies that decrease prices and profit margins</P>
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even further. If we are unable to remain competitive with these producers, our market share and financial performance would likely be materially and adversely affected.</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Since most of our sales are in the United States and Canada, we face strong competition from other steel producers in the United States and Canada. Approximately 31% of our sales in 2007 were in Mexico where we face
strong competition from other Mexican steel producers. A number of our competitors in the United States, Canada and Mexico have undertaken modernization and expansion plans, including the installation of production facilities and manufacturing
capacity for certain products that will compete with our products. As these producers become more efficient, we will face increased competition from them and may experience a loss of market share. In each of the United States, Canada and Mexico we
also face competition from international steel producers. Increased international competition, especially when combined with excess production capacity, would likely force us to lower our prices or to offer increased services at a higher cost to us,
which could materially reduce our gross margins and net income.</P>
<P align="left">
<I>Mexico</I></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We compete in the Mexican domestic market and in its export markets for non-flat steel products primarily on the basis of price and product quality. In addition, we compete in the domestic market based upon our
responsiveness to customer delivery requirements. We believe that we are one of the lowest cost producers of non-flat steel products in Mexico. We endeavor to enhance our competitive position in Mexico by working closely with our clients and
distributors and adjusting our production schedule to meet customer requirements. The flexibility of our production facilities, allows us to respond quickly to the demand for our products. We also believe that the geographic locations of our various
facilities throughout Mexico and large variety of products help us to maintain our competitive market position in Mexico and in the southwestern United States. We believe that our Mexicali mini-mill, one of the closest mini-mills to the southern
California market, provides a production and transportation cost advantage in northwestern Mexico and southern California.</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We believe that our competitors&#146; closest plants to the southern California market are: Nucor Steel, located in Plymouth, Utah, Schnitzer Steel (Cascade), located in McMimville, Oregon, Oregon Steel (Rocky Mountain
Steel Mills), located in Pueblo, Colorado, Tamco Steel, located in Rancho Cucamanga, California and Grupo Villacero (Border Steel), located in El Paso, Texas. We believe that in addition to our advantage in terms of lower transportation cost, we
also believe that we have an advantage in lower labor cost in our Mexican operations. We believe our transportation costs in northwestern Mexico compare favorably to other local producers, including Grupo Villacero (SICARTSA), located in Lazaro
Cardenas, Michoacan; Ternium (Hylsa), located in Apodaca, Nuevo Leon and DeAcero, located in Saltillo, Coahuila.</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We estimate, based on information compiled by Mexico&#146;s National Steel and Iron Industry Chamber (<I>C&aacute;mara Nacional de la Industria del Hierro y del Acero</I>, or &#147;CANACERO&#148;), that we are the sole
Mexican producer of 5 inch, 6 inch and 200 mm I-beams and that there is one other small producer of 4-inch I-beams. These products accounted for approximately 71,827 tons, or 3%, and approximately 70,924 tons, or 3%, of our total finished product
sales in 2007 and 2006, respectively. The revenue that we derived from I-beam products represented 3% and 3% of our net sales in 2006 and 2007, respectively. Total imports of these products, which come mainly from Spain and the United States,
represent approximately 11% of the Mexican market.</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In 2007, we sold approximately 227,970 tons of I-beams, channels and angles at least three inches in width (including the 71,827 tons of I-beams described above) which represented approximately 8% of our total finished
product sales for the year. In 2006, we sold approximately 204,000 tons of I-beams,</P>
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channels and angles at least three inches in width (including the 70,924 tons of I-beams described above) which represented approximately 8% of our total finished product sales for the year. We believe that the domestic competitors in the Mexican
market for structural steel are Altos Hornos de Mexico, S.A. de C.V. (&#147;Ahmsa&#148;), Sider&#250;rgica del Golfo, S.A. de C.V. (a wholly-owned subsidiary of Industrias CH), Aceros Corsa, S.A. de C.V. (&#147;Corsa&#148;) and Gerd&atilde;o, S.A.
We estimate that our share of Mexican production of structural steel was 59% in 2007 and 54% in 2006.</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In 2007, we sold approximately 1,404,256 tons of hot rolled and cold finished steel bar, compared to 1,339,000 tons in 2006. We estimate, based on information compiled by CANACERO, that our share of domestic production
of steel bar was 58% in 2007 and 41% in 2006. Our other major product lines are rebar and light structural steel (angles less than three inches in width and flat bar), for which our share of domestic production was 7% and 56%, respectively, in 2007
compared to 8% and 74%, respectively, in 2006. Rebar and light structural steel together accounted for approximately 516,168 tons, or 19%, of our total production of finished steel products in Mexico and the United States in 2007, compared to
approximately 606,000 tons, or 23%, in 2006. We compete in the Mexican market with a number of producers of these products, including Ahmsa, Hylsamex, S.A. de C.V., Sicartsa, S.A. de C.V., Corsa, Aceros Tultitl&aacute;n, S.A. de C.V., Commercial
Metals Inc., Belgo Mineira Aceralia Perfiles Bergara, S.A., Chaparral Steel Company, Aceros San Luis, S.A. de C.V., Deacero, S.A. de C.V., Talleres y Acero, Nucor Corporation and Bayou Steel Corporation.</P>
<P align="left"> &nbsp;&nbsp;&nbsp;&nbsp;We distributed our sales of SBQ steel
  in Mexico as of December 31, 2007 as follows:</P>
<UL>
  <LI>
    <p> auto parts industry, 55%,</p>
  </LI>
  <LI>
    <p> service centers, 18%,</p>
  </LI>
  <LI>
    <p> mining equipment, 8%,</p>
  </LI>
  <LI>
    <p> hand tools, 17%, and</p>
  </LI>
  <LI>
    <p> bar processing industry, 2%.</p>
  </LI>
</UL>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have been able to maintain our domestic market share and profitable pricing levels in Mexico in part because the central Mexico sites of the Guadalajara, Apizaco and Cholula facilities afford us cost advantages
relative to U.S. producers when shipping to customers in central and southern Mexico, and our flexible production facility has given us the ability to ship specialty products in relatively small quantities with short lead times. The Mexicali
mini-mill has helped to increase sales in northwestern Mexico and the southwestern United States because its proximity to these areas reduces our freight costs.</P>
<P align="left">
<I>United States and Canada</I></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In the United States and Canada, we compete primarily with both domestic SBQ steel producers and importers. Our U.S. domestic competition for hot-rolled engineered bar products is both large U.S. domestic steelmakers
and specialized mini-mills. Non-U.S. competition may impact segments of the SBQ market, particularly where certifications are not required, and during periods when the U.S. dollar is strong as compared with foreign currencies.</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The principal areas of competition in our markets are product quality and range, delivery reliability, service and price. Special chemistry and precise processing requirements characterize SBQ steel products.
Maintaining high standards of product quality, while keeping production costs low, is essential to our ability to compete in our markets. We believe that we have the widest selection of</P>
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product grades and sizes in our industry and in many cases provide &#147;niche&#148; products to our customer base that our U.S. competitors cannot provide; for example we are the sole U.S. producer of long lead steel. The ability of a manufacturer
to respond quickly to customer orders currently is, and is expected to remain, important as customers continue to reduce their in-plant raw material inventory.</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We believe our principal competitors in the U.S. market, depending on the product, include Nucor Corporation, Niagara LaSalle, Mittal Steel, Charter Steel, Steel Dynamics, Inc., The Timken Company and QUANEX
Corporation.</P>
<P align="left">
<B>Certifications</B></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;ISO is a worldwide federation of national standards bodies which have united to develop internationally accepted standards so that customers and manufacturers have a system in place to provide a product of known quality
and standards. The standards set by ISO cover every facet of quality from management responsibility to service and delivery. We believe that adhering to the stringent ISO procedures not only creates efficiency in manufacturing operations, but also
positions us to meet the strict standards that our customers require. We are engaged in a total quality program designed to improve customer service, overall personnel qualifications and team work. The facilities at Apizaco and Cholula have received
ISO 9001:2000 certification from International Quality Certifications covering the period January 19, 2007 to January 18, 2010 and is in the process to obtain the ISO/TS 16949 certification.</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our U.S. operations are currently ISO/TS 16949:2002 certified. The ISO/TS 16949:2002 standard, developed by the International Automotive Task Force, is the result of the harmonization of the supplier quality
requirements of vehicle manufacturers worldwide and provides for a single quality management system of continuous improvement, defect prevention and reduction of variation and waste in the supply chain. It places greater emphasis on
management&#146;s commitment to quality and customer focus.</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our Republic facilities are currently ISO 14001 certified. This certification is a voluntary international standard that defines the organizational structure, responsibilities, procedures, processes and resources for
implementing environmental management systems (&#147;EMS&#148;). It also requires the development of an environmental policy statement which includes commitments to prevention of pollution, continual improvement of the EMS leading to improvements in
overall environmental performance and compliance with applicable statutory and regulatory compliance. Most of the automotive customers of our Republic facilities require this certification. The certification is effective until November 2008.</P>
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<P align="left">
<B>Raw Materials</B></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Prices for raw materials necessary for production have fluctuated significantly in the past and significant increases could adversely affect our margins. During periods when prices for scrap metal, iron ore, alloys,
coke and other important raw materials have increased, our industry historically has sought to maintain profit margins and pass along increased raw materials costs to customers by means of price increases. We may not be able to pass along these and
other possible cost increases in the future and, therefore, our margins and profitability may be adversely affected. Even when we can successfully apply surcharges, interim reductions in profit margins frequently occur due to a time lag between the
increase in raw material prices and the market acceptance of higher selling prices for finished steel products. We cannot assure you that any of our future customers will agree to pay increased prices based on surcharges or that any of our current
customers will continue to pay such surcharges.</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In 2007, our cost of sales in Mexico, as a percentage of sales in Mexico, was 68% compared to our U.S. operations where our cost of sales, as a percentage of sale in the U.S., was 94%, and our consolidated cost of
sales, as a percentage of consolidated sales, was 85%.</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Ferrous scrap, electricity, iron ore coke, ferroalloys, electrodes and refractory products are the principal materials that we use to manufacture our steel products.</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Scrap</I>. Ferrous scrap is among the most important components for our steel production and accounted for approximately 34% of our consolidated direct cost of sales in 2007 (49% of the direct cost in our Mexico
operations and 19% of the direct cost in our U.S. operations) and 33% of our direct cost of sales in 2006 (54% of the direct cost in our Mexico operations and 21% of the direct cost in our U.S. operations). Ferrous scrap is principally generated
from automobile, industrial, naval and railroad industries. The market for ferrous scrap is influenced by availability, freight costs, speculation by scrap brokers and other conditions largely beyond our control. Fluctuations in scrap costs directly
influence the cost of sales of finished goods.</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We purchase raw scrap from dealers in Mexico and the San Diego area, and processes the raw scrap into refined ferrous scrap at our Guadalajara, Mexicali and Apizaco facilities. We meet our refined ferrous scrap
requirements through three sources: (i) our wholly owned scrap processing facilities, which in the aggregate provided us with approximately 6% and 3% of our refined scrap tonnage in 2007 and 2006, respectively, and (ii) purchases from third party
scrap processors in Mexico and the southwestern United States, which, in the aggregate, provided us with approximately 89% and 5%, respectively, in 2007 and approximately 85% and 12%, respectively, in 2006 of our refined ferrous scrap requirements.
We are a dominant scrap collector in the Mexicali, Tijuana and Hermosillo regions, and, by primarily dealing directly with small Mexican scrap collectors, we believe we have been able to purchase scrap at prices lower than those in the international
and Mexican markets. We purchase scrap on the open market through a number of brokers or directly from scrap dealers for our U.S. and Canadian facilities. We do not depend on any single scrap supplier to meet our scrap requirements.</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Iron Ore Pellets and Coke</I>. Our U.S. and Canadian facilities purchase iron ore pellets and coke. These are the principal raw materials used in our blast furnaces. Iron ore pellets and coke accounted for
approximately 21.6% of our U.S. and Canadian facilities&#146; direct costs for the year ended December 31, 2007. The iron ore pellets and coke made up 9.8% and 11.8%, respectively, of the direct costs of sales in this period. We purchase 98% of our
iron ore pellet and 82% of our coke requirement on the open market. Our Mexican facilities do not use iron ore pellets or coke.</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Ferroalloys, Electrodes and Refractory Products</I>. In our Mexican operations, ferroalloys, electrodes and refractory products collectively accounted for approximately 11% of our direct cost of</P>
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sales in 2007 and 12% in 2006, and they accounted for 23.5% of our direct cost of sales for the year ended December 31, 2007 in our U.S. and Canadian facilities. Ferroalloys are essential for the production of steel and are added to the steel during
manufacturing process to reduce undesirable elements and to enhance its hardness, durability and resistance to friction and abrasion. For our Mexican operations, we buy most of our manganese ferroalloys from Compa&ntilde;&iacute;a Minera
Autl&aacute;n, S.A., and the remainder from Electrometal&#250;rgica de Veracruz, S.A. de C.V., Manuchar Internacional, S.A. de C.V. and Industria Nacional de la Fundici&oacute;n, S.A. de C.V.</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We obtain electrodes used to melt raw materials from Ucar Carbon Mexicana, S.A. de C.V., Graphite Electrode Sales and SGL Carbon, LLC.</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Refractory products include firebricks, which line and insulate furnaces, ladles and other transfer vessels. We purchase our refractory products from RHI Refmex, S.A. de C.V., LWB de M&eacute;xico, S.A. de C.V., Fedmet
Resources Corp., Vesivius de M&eacute;xico, S.A. de C.V., Mayerton Refractories and Tecnolog&iacute;as Minerales de M&eacute;xico, S.A. de C.V. Our U.S. and Canadian facilities purchase most of their ferroalloys from International Nickel, Climax
Molybdenum Co., Considar Inc., Minerais U.S. LLC and Glencore LTD. The direct cost for the ferroalloys represents 14% of our consolidated costs, 7% of the direct costs incurred at our Mexican operations and 17% of the direct costs incurred at our
U.S. operations.</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Electricity</I>. As of December 31, 2007, electricity accounted for approximately 5% of our consolidated direct cost of sales for the period (10% of the direct cost of our Mexican operations and 3.8% of the direct
cost of our U.S. operations). Electricity accounted for 10% of our direct cost of sales in 2007 and 11% of direct cost of sales in 2006 in our Mexico facilities and is supplied by the <I>Comisi&oacute;n Federal de Electricidad </I>(&#147;CFE&#148;).
It accounted for 3.8% of direct costs of sales in 2007 in our U.S. and Canadian operations and is supplied by American Electric Power Company and Ohio Edison. We, like all other high volume users of electricity in Mexico, pay special rates to CFE
for electricity. Energy prices in Mexico have historically been very volatile and subject to dramatic price increases in short periods of time. In the late 1990s, the CFE began to charge for electricity usage based on the time of use during the day
and the season (summer or winter). As a result, we have modified our production schedule in order to reduce electricity costs by limiting production during periods when peak rates are in effect. There can be no assurance that any future cost
increases will not have a material adverse effect on our business. From May through October 2005 and August through October 2004, the Mexicali facility acquired electricity from Sempra Energy Solutions (&#147;Sempra&#148;), a company based in San
Diego, California. The <I>Comisi&oacute;n Reguladora de Energ&iacute;a </I>of the Mexican Secretary of Energy authorized this agreement for peak hours in the period; the rates were less expensive than the rates of CFE in the same period. In 2006 and
2007, the Mexicali facility entered into a new contract with Sempra for the period May through October 2006 and May to October 2007, respectively.</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Natural Gas</I>. Natural gas (including &#147;combustoleo&#148; which is an oil derivative that is less refined than gasoline and diesel fuel oil that can be used instead of gasoline in our Mexicali plant) consisted
of approximately 6% of our consolidated direct cost of sales (4% of the direct cost of our Mexican operations and 6.2% of the direct cost of our U.S. operations) in 2007. We use natural gas cash-flow exchange contracts or swaps where we receive a
floating price and pay a fixed price to hedge our risk of from fluctuations in natural gas prices. Fluctuations in natural gas prices from volume consumed are recognized as part of our operating costs. As applicable, we recognized the fair value of
instruments either as liabilities or assets. Such fair value and thus, the value of these assets or liabilities were restated at each month&#146;s-end. As indicated in Note 2(g) to our consolidated financial statements, derivative financial
instruments are recognized in the balance sheet at fair value, which is initially represented by the amount of consideration agreed on. Such fair value is restated at the end of each month based on the new estimate. We periodically evaluate the
changes in the cash flows of derivative instruments to analyze if</P>
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the swaps are highly effective for mitigating the exposure to natural gas price fluctuations. In 2007, 2006 and 2005, the fair value of derivatives not qualifying as accounting hedging instruments was recorded currently against results of operations in the year. In
the case of instruments qualifying as derivative accounting hedging instruments of the cash flow type, the fair value and subsequent changes were recorded under stockholders&#146; equity as Comprehensive income, net of the deferred tax effect. As of
December 31, 2007, as a result of the evaluation of the market conditions of the natural gas in the Mexican operations, we decided not to enter into natural gas hedging arrangements for our facilities in Mexico.</P>
<P align="left"> &nbsp;&nbsp;&nbsp;&nbsp;Our contracts are forwards with a minimum
  volume required to purchase.</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We do not enter into contracts for the purpose of speculation. We account for these derivative instruments in accordance with Statement of Financial Accounting Standards No. 133, <I>&#147;Accounting for Derivative
Instruments and Hedging Activities&#148; </I>and with Mexican GAAP relating to Bulletin C-10 <I>&#147;Derivative Financial Instruments and Hedging.&#148; </I>At December 31, 2007, we held derivatives that were not qualified for special hedge
accounting and the changes in fair values were adjusted through earnings.</P>
<P align="left">
<B>Regulation</B></P>
<P align="left">
<I>U.S. and Canadian Operations</I></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are subject to U.S. federal, state and local environmental laws and administrative regulations concerning, among other things, hazardous materials disposal. Our U.S. operations have been the subject of administrative
action by state and local environmental authorities. The resolution of any of these claims may result in significant liabilities. See &#147;Risk Factors&#151;Risk Factors Related to our Business&#151;In the event of environmental violations at our
facilities we may incur significant liabilities&#148; and &#147;Legal Proceedings&#151;Environmental Claims.&#148;</P>
<P align="left"> <I>&nbsp;&nbsp;&nbsp;&nbsp;Environmental Matters</I></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are subject to a broad range of environmental laws and regulations, including those governing the following:</P>
<UL>
  <LI>
    <p> discharges to the air, water and soil;</p>
  </LI>
  <LI>
    <p> the handling and disposal of solid and hazardous wastes;</p>
  </LI>
  <LI>
    <p> the release of petroleum products, hazardous substances, hazardous wastes,
      or toxic substances to the environment; and</p>
  </LI>
  <LI>
    <p> the investigation and remediation of contaminated soil and groundwater.</p>
  </LI>
</UL>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We monitor our compliance with these laws and regulations through our environmental management system, and believe that we currently are in substantial compliance with them, although we cannot assure you that we will at
all times operate in compliance with all such laws and regulations. If we fail to comply with these laws and regulations, we may be assessed fines or penalties which could have a material effect on us.</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Future changes in the applicable environmental laws and regulations, or changes in the regulating agencies' approach to enforcement or interpretation of their regulations, could cause us to make additional capital
expenditures beyond what we currently anticipate. We do not believe that any of our facilities are subject to the Maximum Achievable Control Technology standard for Iron &amp; Steel Manufacturers, or the</P>
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Maximum Achievable Control Technology standard for Industrial, Commercial and Institutional Boilers and Process Heaters, because they do not emit hazardous air pollutants above the regulatory threshold. However, it is possible that in the future the
regulatory agency could disagree with our determination or that operations at one or more of our facilities will change such that the applicability threshold is exceeded. In that event, or under similar circumstances, we could incur additional costs
of compliance.</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Various federal, state and local laws, regulations and ordinances govern the removal, encapsulation or disturbance of asbestos-containing materials (&#147;ACMs&#148;). These laws and regulations may impose liability for
the release of ACMs and may permit third parties to seek recovery from owners or operators of facilities at which ACMs were or are located for personal injury associated with exposure to ACMs. We are aware of the presence of ACMs at our facilities,
but we believe that such materials are being properly managed and contained at this time.</P>
<P align="left">
<I>Mexican Operations</I></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are subject to Mexican federal, state and municipal laws, administrative regulations and Mexican Official Rules (<I>Normas Oficiales Mexicanas) </I>relating to a variety of environmental matters, anti-trust matters,
trade regulations, and tax and employee matters.</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Among other matters, Mexican tax returns are open for review generally for a period of five years, and, according to Mexican tax law, the purchaser of a business may become jointly and severally liable for unpaid tax
liabilities of the business prior to its acquisition, which may have an impact on the liabilities and contingencies derived from any such acquisitions. Although we believe that we are in compliance with all material Mexican federal, state and
municipal laws, administrative regulations and Mexican Official Rules, we cannot assure you that the interpretation of the Mexican authorities of the laws and regulations affecting our business or the enforcement thereof will not change in a manner
that could increase our costs of doing business or could have a material adverse effect on our business, results of operations, financial condition or prospects.</P>
<P align="left"> <I>&nbsp;&nbsp;&nbsp;&nbsp;Environmental Matters</I></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are subject to various Mexican federal, state and municipal laws, administrative regulations and Mexican Official Rules (<I>Normas Oficiales Mexicanas) </I>relating to the protection of human health, the environment
and natural resources.</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The major federal environmental laws applicable to our operations are: (i) the General Law of Ecological Balance and Environmental Protection (<I>Ley General del Equilibrio Ecol&oacute;gico y la Protecci&oacute;n al
Ambiente </I>or &#147;LGEEPA&#148;) and its regulations, which are administered and overseen by the Ministry of the Environment and Natural Resources (<I>Secretar&iacute;a de Medio Ambiente y Recursos Naturales </I>or &#147;SEMARNAT&#148;) and
enforced by the Ministry&#146;s enforcement branch, the Federal Attorney&#146;s Office for the Protection of the Environment (<I>Procuradur&iacute;a Federal de Protecci&oacute;n al Ambiente </I>or <I>&#147;</I>PROFEPA&#148;); (ii) the General Law
for the Prevention and Integral Management of Waste (<I>Ley General para la Prevenci&oacute;n y Gesti&oacute;n Integral de los Residuos </I>or the &#147;Law on Wastes&#148;), which is also administered by SEMARNAT and enforced by PROFEPA; and (iii)
the National Waters Law (<I>Ley de Aguas Nacionales</I>) and its regulations, which are administered and enforced by the National Waters Commission (<I>Comisi&oacute;n Nacional de Agua</I>), also a branch of SEMARNAT.</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition to the foregoing, Mexican Official Rules, which are technical standards issued by applicable regulatory authorities pursuant to the General Normalization Law (<I>Ley General de Metrolog&iacute;a y
Normalizaci&oacute;n</I>) and to other laws that include the environmental laws described above, establish standards relating to air emissions, waste water discharges, the generation, handling and disposal of</P>
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hazardous wastes and noise control, among others. Mexican Official Rules regarding soil contamination and waste management were enacted in order to protect this potential contingencies. Although not enforceable, the internal administrative criteria
on soil contamination established by PROFEPA are widely used as guidance in cases where soil remediation, restoration or clean-up is required.</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;LGEEPA sets forth the legal framework applicable to the generation and handling of hazardous wastes and materials, the release of contaminants into the air, soil and water, as well as the environmental impact assessment
of the construction, development and operation of different projects, sites, facilities and industrial plants similar to the ones owned and/or operated by us and our subsidiaries. In addition to LGEEPA, the Law on Wastes regulates the generation,
handling, transportation, storage and final disposal of hazardous waste.</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;LGEEPA also mandates that companies that contaminate soil be responsible for the clean-up. Furthermore, the Law on Wastes provides that owners and lessors of real property with soil contamination are jointly and
severally liable for the remediation of such contaminated sites, irrespective of any recourse or other actions such owners and lessors may have against the contaminating party, and aside from the criminal or administrative liability to which the
contaminating party may be subject. The Law on Wastes also restricts the transfer of contaminated sites.</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;PROFEPA can bring administrative, civil and criminal proceedings against companies that violate environmental laws, regulations and Mexican Official Rules, and has the power to impose a variety of sanctions. These
sanctions may include, among others, monetary fines, revocation of authorizations, concessions, licenses, permits or registries, administrative arrests, seizure of contaminating equipment, and in certain cases, temporary or permanent closure of
facilities.</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Additionally, as part of its inspection authority, PROFEPA is entitled to periodically visit the facilities of companies whose activities are regulated by Mexican environmental legislation, and verify compliance.
Similar rights are granted to state environmental authorities pursuant to applicable state environmental laws.</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Companies in Mexico are required to obtain proper authorizations, concessions, licenses, permits and registries from competent environmental authorities for the performance of activities that may have an impact on the
environment or may constitute a source of contamination. Such companies in Mexico are also required to comply with a variety of reporting obligations that include, among others, providing PROFEPA and SEMARNAT with periodic reports regarding
compliance with various environmental laws. Among other permits, the operations and related activities of the steel industry are subject to the prior obtainment of an environmental impact authorization granted by SEMARNAT.</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We believe that we have obtained all the necessary authorizations, concessions, general operating licenses, permits and registries from the applicable environmental authorities to duly operate our facilities, plants and
sites, and sell our products and that we are in material compliance with applicable environmental legislation. We, through our subsidiaries, have made significant capital investments to assure our production and operation facilities comply with
requirements of federal, state and municipal law and administrative regulation, and to remain in compliance with our current authorizations, concessions, licenses, permits and registries.</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We cannot assure you that in the future, we and our subsidiaries will not be subject to stricter Mexican federal, state or municipal environmental laws and administrative regulations, or more stringent interpretation or
enforcement of existing laws and administrative regulations. Mexican environmental laws and administrative regulations have become increasingly stringent over the last decade, and this trend is likely to continue, influenced recently by the North
American Agreement on Environmental</P>
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Cooperation entered into by Mexico, the United States and Canada in connection with the North American Free Trade Agreement or NAFTA. Further, we cannot assure you that we will not be required to devote significant expenditures to environmental
matters, including remediation-related matters. In this regard, any obligation to remedy environmental damages caused by us or any contaminated sites owned or leased by us could require significant unplanned capital expenditures and be materially
adverse to our financial condition and results of operations.</P>
<P align="left"> <I>&nbsp;&nbsp;&nbsp;&nbsp;Water</I></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In Mexico, the National Waters Law regulates water resources. In addition, the Mexican Official Rules govern the quality of water. A concession granted by the National Waters Commission is required for the use and
exploitation of national waters. All of our facilities have a five-year renewable concession to use and exploit underground waters from wells in order to meet the water requirements of our production processes. We pay the National Waters Commission
duties per cubic meter of water extracted under our concessions. We believe we are in substantial compliance with all the requirements imposed by each of the concessions we have obtained.</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant to the National Waters Law, companies that discharge waste into national water bodies must comply with certain requirements, including maximum permissible contaminant levels. Periodic reports on water quality
must be provided by dischargers to applicable authorities. Liability may result from the contamination of underground waters or recipient water bodies. We believe that we are in substantial compliance with all water and waste water legislation
applicable to us.</P>
<P align="left"> <I>&nbsp;&nbsp;&nbsp;&nbsp;Antitrust Matters</I></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are also subject to the Mexican Antitrust Law (<I>Ley Federal de Competencia Econ&oacute;mica</I>), which regulates monopolies and monopolistic practices in Mexico and requires Mexican government approval of certain
mergers, acquisitions and joint ventures. We believe that we are currently in compliance with the Mexican Antitrust Law. However, due to our growth strategy of acquiring new businesses and assets and because we are a large manufacturer with a
significant share of the markets in Mexico with respect to certain of our products, we may be subject to greater regulatory scrutiny in the future.</P>
<P align="left"> <I>&nbsp;&nbsp;&nbsp;&nbsp;Measurements Law</I></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Mexico&#146;s Ministry of Economy (<I>Secretar&iacute;a de Econom&iacute;a</I>), through the General Rules Department (<I>Direcci&oacute;n General de Normas </I>or &#147;DGN&#148;), promulgates regulations regarding
many products that we manufacture. Specifically, pursuant to the Measurements Law (<I>Ley Federal sobre Metrolog&iacute;a y Normalizaci&oacute;n</I>), the DGN issues specifications on the quality and safety standards for our product lines. We
believe that all of our products are in material compliance with all applicable DGN regulations.</P>
<P align="left"> <I>&nbsp;&nbsp;&nbsp;&nbsp;Trade Regulation Matters</I></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have experienced significant competition from imports into Mexico in the past as a result of excess worldwide steel production capacity, particularly in periods of economic slowdown, and as a consequence of the
Peso&#146;s appreciation, making imports cheaper and more competitive in Peso terms. In 2003, imports declined as international market conditions improved and the Peso weakened. Recently, the Mexican government, at the request of CANACERO, has taken
several measures to prevent unfair trade practices such as dumping the steel import market. The overall climate for imports in Mexico is influenced by the free trade agreements that Mexico has entered into with other countries, as well as the level
of tariffs and anti-dumping duties (some of which are described below).</P>
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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have benefited from the free trade agreements that Mexico has entered into. Specifically, we have directly benefited from our ability to export finished steel products directly to export markets and compete with
similar products manufactured in those markets. We have also indirectly benefited from increased demand from our domestic customers who similarly manufacture their products to foreign markets under free trade agreements. Nevertheless, we cannot
assure you that the trade agreements affecting our business or the enforcement thereof will not change in a manner that could have a material adverse effect on our business, results of operations, financial condition or prospects.</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>North American Free Trade Agreement</I>. NAFTA became effective on January 1, 1994. NAFTA provided for the progressive elimination over a period of ten years of the 10% duties formerly in effect on most steel
products imported into Mexico from the United States and Canada, including those that compete with our main product lines. The 1% duty on most steel imports into Mexico from the United States and Canada that remained in 2003 was eliminated in 2004.
There is currently no duty.</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Mexican-European Community Free Trade Agreement</I>. The Mexican-European Free Trade Agreement, or &#147;MEFTA&#148;, became effective on July 1, 2000. MEFTA provides for the progressive elimination of Mexican duties
for steel producers that are members of the European Union over a period of 6.5 years for finished steel products, including those that compete with our products. In July of 2000, European imports of steel products paid an initial duty of 8% when
importing into Mexico, which is scheduled to be reduced progressively until reaching zero in 2007. This agreement also provides an opportunity to increase our exports to the European countries that are parties to MEFTA since their duties on Mexican
steel products were reduced to 1.7% in July 2002 and eliminated in 2003. Since 2004, following the commitment of the G-7, the duties were established at a zero percent rate, giving us an opportunity to increase our sales to the United States.</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Mexico-Japan Economic Association (the &#147;Association&#148;)</I>. The governments of Mexico and Japan started negotiations to sign the Association in June 2001. The negotiations ended up until March 2004 where
after fourteen rounds of negotiations the Association was signed. After the approval from the legislative authorities of both countries, the Association was effective as of April 1, 2005.</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On January 1, 2004, Japan and the other members of the G-7, agreed to reduce the steel tariffs to zero percent, so Mexico has benefited from this rate since such date. However, Mexico is sensitive to the steel
exports coming from Japan, so the Association was negotiated in the following terms: (i) the specialized steel that is not produced in Mexico, and that is used to produce vehicles, spare parts, electronics, machinery and heavy equipment, was
released from any tariffs, as from the effective date of the Association, (ii) the Japanese steel that Mexico imports will be maintained without changes (13% and 18%) during the first five years as of the effective date (iii) the steel products
coming from Japan will start paying less taxes gradually as from January 1, 2010 until reaching a zero percent rate in 2015, (iv) the products to be imported from the Sectors Programs, will pay the tariffs pursuant to the fixed tariffs established
in such Sector Programs, so the electronic and vehicles industries will be exempted as of the effective date of the Association.</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Other Trade Agreements</I>. In the last several years, Mexico has signed other free trade agreements with Israel (2000), Iceland, Norway, Liechtenstein and Switzerland (2001), and with the following Latin American
countries: Chile (1992 and amended in 1999); Venezuela and Colombia (1995); Costa Rica (1995); Bolivia (1995); Nicaragua (1998); Honduras, El Salvador and Guatemala (2001); and Uruguay (2003). We do not anticipate any significant increase in
competition in the Mexican steel market as a result of these trade agreements due to their minimal steel production or, in the case of Venezuela and Chile, minimal share of the Mexican market.</P>
<P align="center">
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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Dumping and Countervailing Duties</I>. We are or have been a party to, or have been affected by, numerous steel dumping and countervailing duty claims. Many of these claims have been brought by Mexican steel
producers against international steel companies, while others have been brought against Mexican steel companies. In certain instances, such cases have resulted in duties being imposed on certain imported steel products and, in a few instances,
duties have been imposed on Mexican steel exports. In the aggregate, these duties have not had a material impact on our results of operations.</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>U.S. and Mexican Safeguard Tariffs on Steel Imports</I>. In September 2001, Mexico&#146;s Ministry of Economy announced a one-year increase in tariffs to 25% on 39 steel products imported into Mexico from countries
with which Mexico does not have a free trade agreement. On March 15, 2002, Mexico&#146;s Ministry of Economy announced an immediate increase of such tariffs to 35%. In September 2002, the average tariffs returned to 25% and remained at that level
for 12 months. From September 2003 to March 2003, tariffs were set at 18%, and in April 2004, they returned to their previous levels (18% for coated steel and 13% for the rest of the products).</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;From January to October 2002, imports of steel plaques coming from Romania, Russia and Ukraine increased. The Mexican authorities found sufficient elements to start an investigation in 2003, and in 2004, the government
announced a preliminary resolution imposing anti-dumping duties of 120.4% to the exports of steel plaques coming from Romania, 36.8% coming from Russia and 60.9% coming from Ukraine. On March 17, 2006 a final resolution was announced imposing final
anti-dumping duties of 67.6% to the exports of steel plaques coming from Romania, 36.8% coming from Russia and 60.1% from Ukraine.</P>
<P align="left">
<B>C. Organizational Structure</B></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The chart below sets forth a summary of our corporate structure:</P>
<div align="center"><IMG src="a32100x45x1.jpg" width="659" height="372" border=0>
  <BR>
</div>
<hr align="left" width="150" size="1" noshade>
<TABLE border=0 cellspacing=0 cellpadding=0 style="font-family: 'Times New Roman';font-size: 10pt;">
  <TR>

    <TD nowrap valign=top>
(1)&nbsp; &nbsp; &nbsp;         </TD>
    <TD width=100%>
Includes the following subsidiaries: Compa&ntilde;&iacute;a Sider&#250;rgica del Pac&iacute;fico, S.A. de C.V. (99.99%), Coordinadora de Servicios Sider&#250;rgicos de Calidad, S.A. de C.V. (100%), Comercializadora Simec, S.A. de C.V. (99.99%),
Industrias del Acero y del Alambre, S.A. de C.V. (99.99%), Procesadora Mexicali, S.A. de C.V. (99.99%), Servicios Simec, S.A. de C.V. (100%), Sistemas de Transporte de Baja California, S.A. de C.V. (100%), Operadora de Metales, S.A. de C.V. (100%),
Operadora de Servicios Sider&#250;rgicos de Tlaxcala, S.A. de C.V. (100%), Administradora de Servicios Sider&#250;rgicos de Tlaxcala, S.A. de C.V. (100%), Operadora de Servicios de la Industria Sider&#250;rgica ICH, S.A. de C.V. (100%), Arrendadora
Simec S.A. de C.V. (100%), Arrendadora Norte de Matamoros, S.A. de C.V. (100%), Tenedora CSG, S.A. de C.V. (100%), TMM America, S.A. de C.V. (99.95%), TMM Continental, S.A. de C.V. (99.95%), Multimodal Domestic, S.A. de C.V. (99.95%), Controladora Simec S.A. de C.V. (100%) and Compa&ntilde;&iacute;a Sider&#250;rgica de Guadalajara S.A. de C.V. (99.99%).        </TD>
  </TR>

  <TR>
    <TD colspan=2>&nbsp;</TD>
  </TR>
</TABLE>
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<TABLE style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'" cellSpacing=0 cellPadding=0 border=0>
<TR>
     <TD vAlign=top nowrap>(2)&nbsp; &nbsp; &nbsp; </TD>
     <TD width="100%">Our principal Mexican facilities consist of steel-making facilities in Guadalajara, Jalisco, Mexicali, Baja California, and Apizaco, Tlaxcala, and a cold finishing facility in Cholula, Puebla, all of which are owned directly by Simec International. </TD></TR>
<TR>
     <TD colSpan=2>&nbsp;</TD></TR>
<TR>
     <TD vAlign=top nowrap>(3)&nbsp; &nbsp; &nbsp; </TD>
     <TD width="100%">The remaining 49.8% of SimRep Corporation is owned by our controlling shareholder, Industrias CH, S.A.B. de C.V. </TD></TR>
<TR>
     <TD colSpan=2>&nbsp;</TD></TR>
<TR>
     <TD vAlign=top nowrap>(4)&nbsp; &nbsp; &nbsp; </TD>
     <TD width="100%">SimRep owns 100% of Republic. Our principal U.S. and Canadian facilities consist of a steel-making facility in Canton, Ohio, a steel- making and hot-rolling facility in Lorain, Ohio, a hot-rolling facility in Lackawanna, New York, and cold finishing facilities in Massillon, Ohio, Gary, Indiana, and Hamilton, Ontario, Canada, all of which are owned directly by Republic. </TD></TR>
<TR>
     <TD colSpan=2>&nbsp;</TD></TR></TABLE>
<P align=left>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table identifies each significant operating subsidiary of our company, including its country of incorporation and our company&#146;s percentage ownership thereof:</P>
<TABLE style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'" cellSpacing=0 cellPadding=0 width="100%" border=0>
  <TR vAlign=bottom>
    <TD align=left>
      <hr size="1" noshade>
    </TD>
    <TD align=left>
      <hr size="1" noshade>
    </TD>
    <TD align=left>
      <hr size="1" noshade>
    </TD>
  </TR>
  <TR vAlign=bottom bgcolor="#CCCCCC">
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD width="18%" align=left>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom bgcolor="#CCCCCC">
    <TD width="48%" align=left><strong><FONT color="#FFFFFF" size=2>Name of Subsidiary</FONT></strong></TD>
    <TD width="33%" align=left><strong><font color="#FFFFFF" size=2>Country of
      Incorporation</font> </strong></TD>
    <TD width="18%" align=left><font color="#FFFFFF"><strong><font size=2>Ownership</font>
      <font size=2>Interest (%)</font></strong></font></TD>
  </TR>
  <TR vAlign=bottom bgcolor="#CCCCCC">
    <TD width="48%" align=left>&nbsp; </TD>
    <TD width="33%" align=left>&nbsp;</TD>
    <TD width="18%" align=left>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>
      <hr size="1" noshade>
    </TD>
    <TD align=left>
      <hr size="1" noshade>
    </TD>
    <TD align=left>
      <hr size="1" noshade>
    </TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left width="48%"><FONT size=2>Simec International, S.A. DE C.V.</FONT>
    </TD>
    <TD align=left width="33%"><FONT size=2>Mexico</FONT> </TD>
    <TD align=left width="18%"><FONT size=2>99.99%</FONT> </TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left width="48%"><FONT size=2>Undershaft Investments, N.V.</FONT>
    </TD>
    <TD align=left width="33%"><FONT size=2>Netherlands Antillas</FONT> </TD>
    <TD align=left width="18%">&nbsp; </TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left width="48%"><FONT size=2>Pacific Steel, Inc.</FONT> </TD>
    <TD align=left width="33%"><FONT size=2>USA</FONT> </TD>
    <TD align=left width="18%"><FONT size=2>100%</FONT> </TD>
  </TR>
  <TR>
    <TD width="99%" colSpan=3>&nbsp; </TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left width="48%"><FONT size=2>SimRep Corporation</FONT> </TD>
    <TD align=left width="33%"><FONT size=2>USA</FONT> </TD>
    <TD align=left width="18%"><FONT size=2>50.22%</FONT> </TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left width="48%"><FONT size=2>Republic Engineered Products, Inc.:</FONT>
    </TD>
    <TD align=left width="33%"><FONT size=2>USA</FONT> </TD>
    <TD align=left width="18%"><FONT size=2>50.22%</FONT> </TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left width="48%"><FONT size=2>Compa&#241;&#237;a Sider&#250;rgica
      del Pac&#237;fico, S.A. de</FONT> </TD>
    <TD align=left width="33%"><FONT size=2>Mexico</FONT> </TD>
    <TD align=left width="18%"><FONT size=2>99.99%</FONT> </TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left width="48%"><FONT size=2>C.V.</FONT> </TD>
    <TD align=left width="33%">&nbsp; </TD>
    <TD align=left width="18%">&nbsp; </TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left width="48%"><FONT size=2>Coordinadora de Servicios Sider&#250;rgicos
      de</FONT> </TD>
    <TD align=left width="33%"><FONT size=2>Mexico</FONT> </TD>
    <TD align=left width="18%"><FONT size=2>100%</FONT> </TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left width="48%"><FONT size=2>Calidad, S.A. de C.V.</FONT> </TD>
    <TD align=left width="33%">&nbsp; </TD>
    <TD align=left width="18%">&nbsp; </TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left width="48%"><FONT size=2>Comercializadora Simec, S.A. de C.V.
      (since</FONT> </TD>
    <TD align=left width="33%"><FONT size=2>Mexico</FONT> </TD>
    <TD align=left width="18%"><FONT size=2>99.99%</FONT> </TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left width="48%"><FONT size=2>2007, before Administradora de Servicios
      de la</FONT> </TD>
    <TD align=left width="33%">&nbsp; </TD>
    <TD align=left width="18%">&nbsp; </TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left width="48%"><FONT size=2>Industria Sider&#250;rgica ICH, S.A.
      de C.V.)</FONT> </TD>
    <TD align=left width="33%">&nbsp; </TD>
    <TD align=left width="18%">&nbsp; </TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left width="48%"><FONT size=2>Industrias del Acero y del Alambre,
      S.A. de</FONT> </TD>
    <TD align=left width="33%"><FONT size=2>Mexico</FONT> </TD>
    <TD align=left width="18%"><FONT size=2>99.99%</FONT> </TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left width="48%"><FONT size=2>C.V.</FONT> </TD>
    <TD align=left width="33%">&nbsp; </TD>
    <TD align=left width="18%">&nbsp; </TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left width="48%"><FONT size=2>Procesadora Mexicali, S.A. de C.V.</FONT>
    </TD>
    <TD align=left width="33%"><FONT size=2>Mexico</FONT> </TD>
    <TD align=left width="18%"><FONT size=2>99.99%</FONT> </TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left width="48%"><FONT size=2>Servicios Simec, S.A. de C.V.</FONT>
    </TD>
    <TD align=left width="33%"><FONT size=2>Mexico</FONT> </TD>
    <TD align=left width="18%"><FONT size=2>100%</FONT> </TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left width="48%"><FONT size=2>Sistemas de Transporte de Baja California,</FONT>
    </TD>
    <TD align=left width="33%"><FONT size=2>Mexico</FONT> </TD>
    <TD align=left width="18%"><FONT size=2>100%</FONT> </TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left width="48%"><FONT size=2>S.A. de C.V.</FONT> </TD>
    <TD align=left width="33%">&nbsp; </TD>
    <TD align=left width="18%">&nbsp; </TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left width="48%"><FONT size=2>Operadora de Metales, S.A. de C.V.</FONT>
    </TD>
    <TD align=left width="33%"><FONT size=2>Mexico</FONT> </TD>
    <TD align=left width="18%"><FONT size=2>100%</FONT> </TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left width="48%"><FONT size=2>Operadora de Servicios Sider&#250;rgicos
      de</FONT> </TD>
    <TD align=left width="33%"><FONT size=2>Mexico</FONT> </TD>
    <TD align=left width="18%"><FONT size=2>100%</FONT> </TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left width="48%"><FONT size=2>Tlaxcala, S.A. de C.V.</FONT> </TD>
    <TD align=left width="33%">&nbsp; </TD>
    <TD align=left width="18%">&nbsp; </TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left width="48%"><FONT size=2>Administradora de Servicios Sider&#250;rgicos
      de</FONT> </TD>
    <TD align=left width="33%"><FONT size=2>Mexico</FONT><b> </b></TD>
    <TD align=left width="18%"><FONT size=2>100%</FONT> </TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left width="48%"><FONT size=2>Tlaxcala, S.A. de C.V.</FONT> </TD>
    <TD align=left width="33%">&nbsp; </TD>
    <TD align=left width="18%">&nbsp; </TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left width="48%"><FONT size=2>Operadora de Servicios de la Industria</FONT>
    </TD>
    <TD align=left width="33%"><FONT size=2>Mexico</FONT><b> </b></TD>
    <TD align=left width="18%"><FONT size=2>100%</FONT> </TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left width="48%"><FONT size=2>Sider&#250;rgica ICH, S.A. de C.V.</FONT>
    </TD>
    <TD align=left width="33%">&nbsp; </TD>
    <TD align=left width="18%">&nbsp; </TD>
  </TR>
</TABLE>
<BR>
<P align=center>43</P>
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<TABLE border=0 width=100% cellspacing=0 cellpadding=0 style="font-family: 'Times New Roman';font-size: 10pt;">
  <TR valign="bottom">
    <TD align=left width=49%> <FONT size=2>Arrendadora Simec S.A. de C.V.</FONT>
    </TD>
    <TD align=left width=26%> <FONT size=2>Mexico</FONT> </TD>
    <TD align=left width=23%> <FONT size=2>100%</FONT> </TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left width=49%> <FONT size=2>Controladora Simec S.A. de C.V.</FONT>
    </TD>
    <TD align=left width=26%> <FONT size=2>Mexico</FONT> </TD>
    <TD align=left width=23%> <FONT size=2>100%</FONT> </TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left width=49%> <FONT size=2>Compa&ntilde;&iacute;a Sider&#250;rgica
      de Guadalajara S.A. de</FONT> </TD>
    <TD align=left width=26%> <FONT size=2>Mexico</FONT> </TD>
    <TD align=left width=23%> <FONT size=2>99.99%</FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left width=49%> <FONT size=2>C.V.</FONT> </TD>
    <TD align=left width=26%>&nbsp; </TD>
    <TD align=left width=23%>&nbsp; </TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left width=49%> <FONT size=2>Arrendadora Norte de Matamoros, S.A.
      de</FONT> </TD>
    <TD align=left width=26%> <FONT size=2>Mexico</FONT> </TD>
    <TD align=left width=23%> <FONT size=2>100%</FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left width=49%> <FONT size=2>C.V. (since 2007)</FONT> </TD>
    <TD align=left width=26%>&nbsp; </TD>
    <TD align=left width=23%>&nbsp; </TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left width=49%> <FONT size=2>Tenedora CSG, S.A. de C.V. (since 2007)</FONT>
    </TD>
    <TD align=left width=26%> <FONT size=2>Mexico</FONT> </TD>
    <TD align=left width=23%> <FONT size=2>100%</FONT> </TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left width=49%> <FONT size=2>TMM America, S.A. de C.V. (since 2007)</FONT>
    </TD>
    <TD align=left width=26%> <FONT size=2>Mexico</FONT> </TD>
    <TD align=left width=23%> <FONT size=2>99.95%</FONT> </TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left width=49%> <FONT size=2>TMM Continental, S.A. de C.V. (since
      2007)</FONT> </TD>
    <TD align=left width=26%> <FONT size=2>Mexico</FONT> </TD>
    <TD align=left width=23%> <FONT size=2>99.95%</FONT> </TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left width=49%> <FONT size=2>Multimodal Domestic, S.A. de C.V. (since</FONT>
    </TD>
    <TD align=left width=26%> <FONT size=2>Mexico</FONT> </TD>
    <TD align=left width=23%> <FONT size=2>99.95%</FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left width=49%> <FONT size=2>2007)</FONT> </TD>
    <TD align=left width=26%>&nbsp; </TD>
    <TD align=left width=23%>&nbsp; </TD>
  </TR>
</TABLE>
<BR>
<B>Principal Capital Expenditures and Divestitures</B>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We continually seek to improve our operating efficiency and increase sales of our products through capital investments in new equipment and technology.</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We estimate capital expenditures for the year 2008 will be equal to &#36;31.8 million  (Ps. 346 million), consisting of &#36;29.5 million (Ps.321 million) of estimated capital expenditures in our Republic
facilities and &#36;2.3 million (Ps. 25 million) of capital expenditures in our facilities in Mexico.</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In 2007, we spent &#36;27 million (Ps. 293 million) on capital investments at our Republic facilities, including &#36;7.8 million (Ps. 85 million) at the Canton, Ohio facility, &#36;17.2 million (Ps. 187 million) at the
Lorain, Ohio facility, &#36;1.3 million (Ps. 14 million) at the Lackawanna, New York facility, &#36;0.2 million (Ps. 2 million) at the Massillon, Ohio facility, &#36;0.1 million (Ps. 1 million) at the Hamilton, Ontario, Canada facility, &#36;0.2
million (Ps. 2 million) at the Gary, Indiana facility and &#36;0.3 million (Ps. 3 million) at our corporate location in Fairlawn, Ohio. We spent &#36;18 million (Ps. 193 million) on capital improvements at our facilities in Mexico, including &#36;7
million (Ps. 77 million) at the Apizaco facility, &#36;8 million (Ps. 89 million) at the Mexicali facility and &#36;2 million (Ps. 17 million) at the Guadalajara facility and &#36;1 million (Ps. 10 million) in the acquisition of land in the state of
Tamaulipas, M&eacute;xico.</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In 2006, we spent &#36;30.3 million (Ps. 342 million) on capital investments at our Republic facilities, including &#36;13.5 million (Ps. 152 million) at the Canton, Ohio facility, &#36;15.7 million (Ps. 177 million) at
the Lorain, Ohio facility, &#36;0.6 million (Ps. 6.7 million) at the Lackawanna, New York facility, &#36;0.2 million (Ps. 2.3 million) at the Massillon, Ohio facility, &#36;0.1 million (Ps. 1.1 million) at the Hamilton, Ontario, Canada facility,
&#36;0.2 million (Ps. 2.3 million) at the Gary, Indiana facility and &#36;0.02 million (Ps. 0.2 million) at our corporate location in Fairlawn, Ohio. We spent &#36;6.7 million (Ps. 75 million) on capital improvements at our facilities in Mexico,
including &#36;5 million (Ps. 56 million) at the Apizaco facility, &#36;1.6 million (Ps. 18 million) at the Mexicali facility and &#36;0.1 million (Ps. 1 million) at the Guadalajara facility.</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In 2005, we spent &#36;46.4 million (Ps. 539 million) on capital investments in our Mexican and our U.S. operations. Projects at the Guadalajara facilities in 2005 included the addition of a railroad</P>
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<P align="left">
weighing-machine and improvements to the warehouse. Projects at the Mexicali facility in 2005 included the addition of a cooling bed for the rolling mill, special site for dust and a co-jet system for the melt shop in order to increase productivity
and reduce energy consumption. Projects at the Apizaco facility included the addition of a Straightening Line for the rolling mill and an inspection system for the rolling mill. From July 22, 2005 to December 31, 2005, capital investments in our
Republic facilities were &#36;34.4 million (Ps. 420 million), including &#36;17.8 million (Ps. 218 million) for the new five strand combined billet/bloom caster in our Canton, Ohio facility, and the remainder for the revamping of the Canton melt
shop, maintenance, general capital and infrastructure improvements and modernization.</P>
<P align="left">
<B>Item 4A.</B></P>
<P align="left">
<B>Unresolved Staff Comments</B></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;There are no unresolved written comments received from the staff of the Securities and Exchange Commission regarding our periodic reports under the United States Securities Exchange Act of 1934, as amended.</P>
<P align="left">
<B>Item 5. Operating and Financial Review and Prospects</B></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>The following discussion is derived from our audited financial statements, which are presented elsewhere in this annual report. This discussion does not include all of the information included in our financial
statements. You should read our financial statements to gain a better understanding of our business and our historical results of operations.</I></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>We have prepared our financial statements in accordance with MFRS, which differs in certain significant respects from U.S. GAAP. See Note 18 to our consolidated financial statements included elsewhere herein for the
years ended December 31, 2005, 2006 and 2007 for a summary of the principal differences between MFRS and U.S. GAAP as they relate to us and a reconciliation to U.S. GAAP of net income and stockholders&#146; equity, a statement of changes in
stockholders&#146; equity and a statement of cash flows under U.S. GAAP. Our consolidated financial statements and all other financial information contained herein with respect to the years ended December 31, 2005, 2006 and 2007 are presented in
constant pesos with purchasing power as of December 31, 2007, unless otherwise noted.</I></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Our financial statements and the corresponding discussion below includes the consolidation of Republic from July 22, 2005. Period to period comparison of our results of operations and financial condition may be
difficult as a result of the inclusion of the Republic financial information only from July 22, 2005.</I></P>
<P align="left">
<B>A. Operating Results</B></P>
<P align="left">
<B>Overview</B></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are producers of SBQ and structural steel products. Accordingly, our net sales and profitability are highly dependent on market conditions in the steel industry which is greatly influenced by general economic
conditions in North America and elsewhere. As a result of the significant competition in the steel industry and the commodity-like nature of some of our products, we have limited pricing power over many of our products. The North American and global
steel markets influence finished steel product prices. Nevertheless, the majority of our products are SBQ products for which competition is limited, therefore generating somewhat higher margins as compared with our more commoditized steel products.
We attempt to adjust the mix of our product output toward higher margin products to the extent that we are able to do so, and we also adjust our overall product levels based on the product demand and gross profitability of doing so.</P>
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<P align=left>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We focus on controlling our direct cost of sales as well as our indirect manufacturing,
selling, general and administrative expenses. Our direct cost of sales largely consist of the costs of acquiring the raw materials
necessary to manufacture steel, primarily scrap and iron ore. Market supply and demand generally determine scrap and iron ore prices,
and, as a result, we have limited ability to influence their cost or the costs of other raw materials, including energy costs.
There is a correlation between the prices of scrap and iron ore and finished product prices, although the degree and timing of this correlation varies from time to time, so we may not always be able to fully pass along scrap, iron ore and other raw material price increases to our customers. Therefore, our ability to decrease our direct cost of sales as a percentage of net sales is largely dependent on increasing our productivity. Our ability to control indirect manufacturing, selling,
general and administrative expenses, which do not correlate to net sales as closely as direct costs of sales do, is a key element of our profitability. Although our revenues and costs fluctuate from quarter to quarter, we do not experience large fluctuations due to seasonality.</P>
<P align=left>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Production costs at our U.S. facilities are higher than those in our facilities in Mexico principally due to the higher cost of labor and the higher cost of ferroalloys used to manufacture SBQ steel, which is the only steel product that we produce in the United States.</P>
<P align=center><B>Sales Volume, Price and Cost Data, 2005 - 2007</B></P>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'" cellspacing=0 cellpadding=0 border=0 width="740" align="center">
  <tr valign=bottom>
    <td align=center width="453">&nbsp; </td>
    <td align=center colspan=6><strong><font size=2>Year ended December 31,</font></strong>
    </td>
  </tr>
  <tr>
    <td align=center width="453">&nbsp; </td>
    <td align=center colspan=6>
      <hr noshade size=1>
       </td>
  </tr>
  <tr valign=bottom>
    <td align=center width="453">&nbsp; </td>
    <td align=center colspan="2"><strong><font size=2>2005</font></strong>&nbsp;&nbsp;
      <hr noshade size=1 width="90%">
    </td>
    <td align=center colspan="2"><strong><font size=2>2006</font></strong>&nbsp;&nbsp;
      <hr noshade size=1 width="90%">
    </td>
    <td align=center colspan="2"><strong><font size=2>2007</font></strong>
      <hr noshade size=1 width="90%">
    </td>
  </tr>

  <tr valign=bottom>
    <td align=left width="453"><font size=2>Shipments (thousands of tons)</font>
    </td>
    <td align=right width="67"><font size=2>1,708</font> </td>
    <td align=right width="27">&nbsp;</td>
    <td align=right width="70"><font size=2>2,676</font> </td>
    <td align=right width="24">&nbsp;</td>
    <td align=right width="69"><font size=2>2,691</font> </td>
    <td align=right width="30">&nbsp;</td>
  </tr>
  <tr valign=bottom>
    <td align=left width="453">&nbsp; &nbsp; &nbsp; &nbsp;<font size=2>Guadalajara
      and Mexicali</font> </td>
    <td align=right width="67"><font size=2>617</font> </td>
    <td align=right width="27">&nbsp;</td>
    <td align=right width="70"><font size=2>631</font> </td>
    <td align=right width="24">&nbsp;</td>
    <td align=right width="69"><font size=2>632</font> </td>
    <td align=right width="30">&nbsp;</td>
  </tr>
  <tr valign=bottom>
    <td align=left width="453">&nbsp; &nbsp; &nbsp; &nbsp;<font size=2>Apizaco
      and Cholula</font> </td>
    <td align=right width="67"><font size=2>416</font> </td>
    <td align=right width="27">&nbsp;</td>
    <td align=right width="70"><font size=2>425</font> </td>
    <td align=right width="24">&nbsp;</td>
    <td align=right width="69"><font size=2>448</font> </td>
    <td align=right width="30">&nbsp;</td>
  </tr>
  <tr valign=bottom>
    <td align=left width="453">&nbsp; &nbsp; &nbsp; &nbsp;<font size=2>Republic
      facilities</font> </td>
    <td align=right width="67"><font size=2>675</font> </td>
    <td align=right width="27">&nbsp;</td>
    <td align=right width="70"><font size=2>1,620</font> </td>
    <td align=right width="24">&nbsp;</td>
    <td align=right width="69"><font size=2>1,611</font> </td>
    <td align=right width="30">&nbsp;</td>
  </tr>
  <tr>
    <td colspan=7>&nbsp; </td>
  </tr>
  <tr valign=bottom>
    <td align=left width="453"><font size=2>Net sales (Ps. millions)</font> </td>
    <td align=right width="67"><font size=2>13,893</font> </td>
    <td align=right width="27">&nbsp;</td>
    <td align=right width="70"><font size=2>23,515</font> </td>
    <td align=right width="24">&nbsp;</td>
    <td align=right width="69"><font size=2>24,106</font> </td>
    <td align=right width="30">&nbsp;</td>
  </tr>
  <tr valign=bottom>
    <td align=left width="453">&nbsp; &nbsp; &nbsp; &nbsp;<font size=2>Guadalajara
      and Mexicali</font> </td>
    <td align=right width="67"><font size=2>4,239</font> </td>
    <td align=right width="27">&nbsp;</td>
    <td align=right width="70"><font size=2>4,891</font> </td>
    <td align=right width="24">&nbsp;</td>
    <td align=right width="69"><font size=2>4,888</font> </td>
    <td align=right width="30">&nbsp;</td>
  </tr>
  <tr valign=bottom>
    <td align=left width="453">&nbsp; &nbsp; &nbsp; &nbsp;<font size=2>Apizaco
      and Cholula</font> </td>
    <td align=right width="67"><font size=2>2,946</font> </td>
    <td align=right width="27">&nbsp;</td>
    <td align=right width="70"><font size=2>3,129</font> </td>
    <td align=right width="24">&nbsp;</td>
    <td align=right width="69"><font size=2>3,519</font> </td>
    <td align=right width="30">&nbsp;</td>
  </tr>
  <tr valign=bottom>
    <td align=left width="453">&nbsp; &nbsp; &nbsp; &nbsp;<font size=2>Republic
      facilities</font> </td>
    <td align=right width="67"><font size=2>6,708</font> </td>
    <td align=right width="27">&nbsp;</td>
    <td align=right width="70"><font size=2>15,495</font> </td>
    <td align=right width="24">&nbsp;</td>
    <td align=right width="69"><font size=2>15,699</font> </td>
    <td align=right width="30">&nbsp;</td>
  </tr>
  <tr>
    <td colspan=7>&nbsp; </td>
  </tr>
  <tr valign=bottom>
    <td align=left width="453"><font size=2>Direct cost of sales (Ps. millions)</font>
    </td>
    <td align=right width="67"><font size=2>11,111</font> </td>
    <td align=right width="27">&nbsp;</td>
    <td align=right width="70"><font size=2>19,131</font> </td>
    <td align=right width="24">&nbsp;</td>
    <td align=right width="69"><font size=2>20,498</font> </td>
    <td align=right width="30">&nbsp;</td>
  </tr>
  <tr valign=bottom>
    <td align=left width="453">&nbsp; &nbsp; &nbsp; &nbsp;<font size=2>Guadalajara
      and Mexicali</font> </td>
    <td align=right width="67"><font size=2>2,616</font> </td>
    <td align=right width="27">&nbsp;</td>
    <td align=right width="70"><font size=2>2,747</font> </td>
    <td align=right width="24">&nbsp;</td>
    <td align=right width="69"><font size=2>3,123</font> </td>
    <td align=right width="30">&nbsp;</td>
  </tr>
  <tr valign=bottom>
    <td align=left width="453">&nbsp; &nbsp; &nbsp; &nbsp;<font size=2>Apizaco
      and Cholula</font> </td>
    <td align=right width="67"><font size=2>2,172</font> </td>
    <td align=right width="27">&nbsp;</td>
    <td align=right width="70"><font size=2>2,232</font> </td>
    <td align=right width="24">&nbsp;</td>
    <td align=right width="69"><font size=2>2,593</font> </td>
    <td align=right width="30">&nbsp;</td>
  </tr>
  <tr valign=bottom>
    <td align=left width="453">&nbsp; &nbsp; &nbsp; &nbsp;<font size=2>Republic
      facilities</font> </td>
    <td align=right width="67"><font size=2>6,323</font> </td>
    <td align=right width="27">&nbsp;</td>
    <td align=right width="70"><font size=2>14,152</font> </td>
    <td align=right width="24">&nbsp;</td>
    <td align=right width="69"><font size=2>14,782</font> </td>
    <td align=right width="30">&nbsp;</td>
  </tr>
  <tr>
    <td colspan=7>&nbsp; </td>
  </tr>
  <tr valign=bottom>
    <td align=left width="453"><font size=2>Average price per ton (Ps.)</font>
    </td>
    <td align=right width="67"><font size=2>8,134</font> </td>
    <td align=right width="27">&nbsp;</td>
    <td align=right width="70"><font size=2>8,787</font> </td>
    <td align=right width="24">&nbsp;</td>
    <td align=right width="69"><font size=2>8,958</font> </td>
    <td align=right width="30">&nbsp;</td>
  </tr>
  <tr valign=bottom>
    <td align=left width="453">&nbsp; &nbsp; &nbsp; &nbsp;<font size=2>Guadalajara
      and Mexicali</font> </td>
    <td align=right width="67"><font size=2>6,870</font> </td>
    <td align=right width="27">&nbsp;</td>
    <td align=right width="70"><font size=2>7,751</font> </td>
    <td align=right width="24">&nbsp;</td>
    <td align=right width="69"><font size=2>7,734</font> </td>
    <td align=right width="30">&nbsp;</td>
  </tr>
  <tr valign=bottom>
    <td align=left width="453">&nbsp; &nbsp; &nbsp; &nbsp;<font size=2>Apizaco
      and Cholula</font> </td>
    <td align=right width="67"><font size=2>7,082</font> </td>
    <td align=right width="27">&nbsp;</td>
    <td align=right width="70"><font size=2>7,362</font> </td>
    <td align=right width="24">&nbsp;</td>
    <td align=right width="69"><font size=2>7,855</font> </td>
    <td align=right width="30">&nbsp;</td>
  </tr>
  <tr valign=bottom>
    <td align=left width="453">&nbsp; &nbsp; &nbsp; &nbsp;<font size=2>Republic
      facilities</font> </td>
    <td align=right width="67"><font size=2>9,938</font> </td>
    <td align=right width="27">&nbsp;</td>
    <td align=right width="70"><font size=2>9,565</font> </td>
    <td align=right width="24">&nbsp;</td>
    <td align=right width="69"><font size=2>9,745</font> </td>
    <td align=right width="30">&nbsp;</td>
  </tr>
  <tr>
    <td colspan=7>&nbsp; </td>
  </tr>
  <tr valign=bottom>
    <td align=left width="453"><font size=2>Average cost per ton (Ps.)</font>
    </td>
    <td align=right width="67"><font size=2>6,505</font> </td>
    <td align=right width="27">&nbsp;</td>
    <td align=right width="70"><font size=2>7,149</font> </td>
    <td align=right width="24">&nbsp;</td>
    <td align=right width="69"><font size=2>7,617</font> </td>
    <td align=right width="30">&nbsp;</td>
  </tr>
  <tr valign=bottom>
    <td align=left width="453">&nbsp; &nbsp; &nbsp; &nbsp;<font size=2>Guadalajara
      and Mexicali</font> </td>
    <td align=right width="67"><font size=2>4,240</font> </td>
    <td align=right width="27">&nbsp;</td>
    <td align=right width="70"><font size=2>4,353</font> </td>
    <td align=right width="24">&nbsp;</td>
    <td align=right width="69"><font size=2>4,941</font> </td>
    <td align=right width="30">&nbsp;</td>
  </tr>
  <tr valign=bottom>
    <td align=left width="453">&nbsp; &nbsp; &nbsp; &nbsp;<font size=2>Apizaco
      and Cholula</font> </td>
    <td align=right width="67"><font size=2>5,221</font> </td>
    <td align=right width="27">&nbsp;</td>
    <td align=right width="70"><font size=2>5,252</font> </td>
    <td align=right width="24">&nbsp;</td>
    <td align=right width="69"><font size=2>5,788</font> </td>
    <td align=right width="30">&nbsp;</td>
  </tr>
  <tr valign=bottom>
    <td align=left width="453">&nbsp; &nbsp; &nbsp; &nbsp;<font size=2>Republic
      facilities</font> </td>
    <td align=right width="67"><font size=2>9,367</font> </td>
    <td align=right width="27">&nbsp;</td>
    <td align=right width="70"><font size=2>8,736</font> </td>
    <td align=right width="24">&nbsp;</td>
    <td align=right width="69"><font size=2>9,176</font> </td>
    <td align=right width="30">&nbsp;</td>
  </tr>
</table>
<BR>
<P align=left>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our results are affected by general global trends in the steel industry and by the economic conditions in the countries in which we operate and in other steel producing countries. Our results are also affected by the specific performance of the automotive, non-residential construction, industrial equipment, tooling equipment and other related industries. Our profitability is also impacted by events that affect the price and availability of raw materials and energy inputs needed for our operations. The variables and trends mentioned below could also affect our results and profitability. Also see &#147;Risk Factors.&#148;</P>
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<P align="left">
<I>Our primary source of revenue is the sale of SBQ steel and structural steel products.</I></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In August 2004, we completed the Atlax Acquisition. In July 2005, we and our controlling shareholder, Industrias CH, completed the acquisition of Republic. We believe that these acquisitions allowed us to become the
leading producer of SBQ steel in North America and the leading producer of structural and light structural steel in Mexico, in each sale in terms of sales volume. We expect the sale of SBQ steel, structural steel and other steel products to continue
to be our primary source of revenue. The markets for our products are highly competitive and highly dependent on developments in global markets for those products. The main competitive factors are price, product quality and customer relationships
and service.</P>
<P align="left">
<I>Our results are affected by economic activity, steel consumption and end-market demand for steel products.</I></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our results of operations depend largely on macroeconomic conditions in North America. Historically, there has been a strong correlation between the annual rate of steel consumption and the annual change in gross
domestic products (&#147;GDP&#148;) in the Mexican, U.S. and Canadian markets.</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We sell our steel products to the construction, automotive, manufacturing and other related industries. These industries are generally cyclical, and their demand for steel is impacted by the stage of their industry
market cycles and the country&#146;s economic performance. In 2007 and 2006, Mexico&#146;s GDP increased 3.3% and 4.8%, respectively. In 2007 and 2006, the U.S. GDP increased 2.2% and 2.9%, respectively. Recession or a deterioration in economic
conditions in the countries in which we operate is likely to adversely affect our results</P>
<P align="left">
<I>Our results are affected by international steel prices and trends in the global steel industry.</I></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Steel prices are generally set by reference to world steel prices, which are determined by global supply and demand trends. As a result of general excess capacity in the industry, the world steel industry was previously
subject to substantial downward pricing pressure, which negatively impacted the results of steel companies in the second half of 2000 and all of 2001. International steel prices generally improved beginning in 2003, driven by a strong increase in
global demand fostered by economic growth in Asia and an economic recovery in the United States, combined with increased rationalization of production capacity in the United States and elsewhere.</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;However, this new period of high prices for steel encouraged reactivation of investment in production capacity, and, consequently, an increase in the supply of steel products that contributed to a decline in steel
prices. Average steel prices in 2007 were above those of 2006 due to strong end-market demand fundamentals for a number of key steel-consuming industries, continued strong steel demand in China, India and other developing economies,
relatively high raw material and energy costs and reductions in U.S. production from some of the industry&#146;s largest producers and were higher than steel prices for the 2004 to 2002 period.</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In recent years, there has been a trend toward consolidation of the steel industry. For example, in 2006, Arcelor completed the acquisition of Dofasco in Canada, and Mittal Steel announced the acquisition of Arcelor,
forming the largest steel company in the world. Aceralia, Arbed and Usinor merged in February 2002 to create Arcelor, and LNM Holdings and Ispat International merged in October 2004 to create Mittal Steel, which subsequently acquired International
Steel Group. In addition, a number of other steel acquisition transactions have been announced, including the acquisition of Oregon Steel by Evraz and the acquisition of Corus by Tata Steel. Consolidation has enabled steel companies to lower their
production costs and allowed for more stringent supply-side discipline, including through selective</P>
<P align="center">
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capacity closures or idling, as the ones observed recently in the United States by Mittal Steel, U.S. Steel and others. Consolidation may result in increased competition and could adversely affect our results.</P>
<P align="left">
<I>Our results are affected by competition from imports.</I></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our ability to sell our products is influenced, to varying degrees, by global trade for steel products, particularly trends in imports of steel products into the Mexican and U.S. markets. In 2007 imports to Mexico
decreased as international market conditions improved. In 2006, imports to Mexico increased as international market conditions decreased. During 2005, the Mexican government, at the request of CANACERO, implemented several measures to prevent unfair
trade practices such as dumping in the steel import market. These measures include initiating anti-dumping and countervailing duty proceedings temporarily increasing import tariffs for countries with which Mexico does not have free trade agreements.
As a result, the competitive price pressure from dumping declined, contributing to a general upward trend in domestic Mexican steel prices.</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Steel imports to the United States accounted for an estimated 22% of the domestic steel market in 2007 and an estimated 29% in 2006. Foreign producers typically have lower labor costs, and are in some cases are owned,
controlled or subsidized by their governments, allowing production and pricing decisions to be influenced by political and economic policy considerations as well as prevailing market conditions. Increases in future levels of imported steel in the
United States could reduce future market prices and demand levels for steel in the United States. To this extent, the U.S. Department of Commerce and the U.S. International Trade Commission are currently conducting five year &#147;sunset&#148;
reviews of existing trade relief in several different steel products. Imports represent less of a threat to SBQ producers like us in the United States than to commodity steel producers because of the high quality requirements and standard required
by buyers of SBQ steel products.</P>
<P align="left">
<I>Our results are affected by the cost of raw materials and energy.</I></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We purchase substantial quantities of raw materials, including scrap, iron ore, coal and ferroalloys for use in the production of our steel products. The availability and price of these inputs vary according to general
market and economic conditions and thus are influenced by industry cycles. Since 2004, the general recovery of the North American economy, the significant increase in the demand for steel in China and shortage of shipping capacity has resulted in a
tight market and higher prices for these raw materials.</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition to raw materials, natural gas and electricity are both relevant components of our cost structure. We purchase natural gas and electricity at prevailing market prices in Mexico and the United States. These
prices are impacted by general demand and supply for energy in the United States and Mexico and have increased significantly in 2007 and 2006 as economic activity fueled energy demand and the supply and price of oil was impacted by geopolitical
events.</P>
<P align="left">
<B>Comparison of Years Ended December 31, 2007, 2006 and 2005</B></P>
<P align="left">
<I>Net Sales</I></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net sales increased 3% to Ps. 24,106 million in 2007 (including sales in Mexico of Ps. 8,407 million and net sales in our Republic facilities in the United States and Canada, that we acquired in July of 2005, or our
&#147;Republic facilities&#148;, of Ps. 15,699 million) compared to Ps. 23,515 million in 2006 (including sales in Mexico of Ps. 8,020 million and net sales in our Republic facilities in the United States and Canada, that we acquired in July of
2005, or our &#147;Republic facilities&#148;, of Ps. 15,495 million). Our net sales in 2006 increased 69% to Ps. 23,515 million (including sales in Mexico of Ps. 8,020 million and</P>
<P align="center">
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net sales in our Republic facilities in the United States and Canada, that we acquired in July of 2005, or our &#147;Republic facilities&#148;, of Ps. 15,495 million), compared to Ps. 13,893 million in 2005 (including the net sales of Ps. 2,946
million generated by the plants that we acquired in August 2004 in Apizaco and Cholula and of Ps. 6,708 million generated by the Republic facilities). The increase in sales can be explained by higher shipments during 2007, compared with 2006 (15,065
tons increase). The increase in tons shipped originated mainly in the plant of Apizaco and compensated for the two unexpected stoppages in the rolling lines of the plants in Guadalajara and Apizaco due during the periods July 5-8, July 10-13, and
September 10-15, as a result of the shortage of natural gas due to the explosions on the property of Petroleos Mexicanos. We attribute the increase in net sales in 2006 to sales from the Republic facilities and the increase in 2005 to the inclusion
for the full year 2005 of net sales of Ps. 2,946 million from the plants in Apizaco and Cholula as well as Ps. 6,708 million from Republic. Shipments of finished steel products increased 0.5% to 2,691,124 tons in 2007 compared to 2,676,059 tons in
2006. Sales in tons of basic steel products increased 56% to 2,676,059 metric tons in 2006 (including 1,620,076 metric tons generated by the Republic facilities) compared to 1,708,140 tons (including 413,925 metric tons generated by the plants in
Apizaco and Cholula and 674,957 metric tons generated by the Republic facilities) in 2005.</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Sales outside Mexico (including sales by our U.S. subsidiaries) of basic steel products increased 3% to 1,790,572 metric tons in 2007 compared to 1,731,879 metric tons in 2006, while total Mexican sales decreased 5%
from 944,180 tons in 2006 to 900,552 tons in 2007. Sales outside Mexico (including sales by our U.S. subsidiaries) of basic steel products increased 115% to 1,731,879 metric tons in 2006 (including 1,620,076 metric tons generated by the Republic
facilities) compared to 809,083 metric tons in 2005 (including 19,261 tons from our plants in Apizaco and Cholula and 674,957 metric tons from the Republic facilities).</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The average price of steel products increased 2% in real terms in 2007 compared to 2006. The average price of steel products (excluding the sales of Republic) increased 10% in real terms in 2006 compared to 2005 and
decreased 14% in real terms in 2005 compared to 2004. We attribute the 2006 increase to higher prices prevailing in the Mexican steel markets. We attribute the 2005 decrease to the global decrease of finished steel product prices reflecting higher
inventory levels worldwide.</P>
<P align="left">
<I>Direct Cost of Sales</I></P>
<P align="left">
Our Direct cost of sales increased 7% from Ps. 19,132 million in 2006 to Ps. 20,499 million in 2007. Our direct cost of sales in 2006 increased 72% to Ps. 19,132 million (including Ps. 14,152 million relating to our Republic facilities) compared to
Ps. 11,112 million in 2005. Direct cost of sales as a percentage of net sales represented 85% in 2007 compared to 81% in 2006. Direct cost of sales as a percentage of our net sales was 81% (62% excluding the cost of sales of Republic) in 2006
compared to 80% in 2005. The increase in the Direct Cost of Sales is attributable mainly to an increase of 6% in real terms in the average cost of raw materials used to produce steel products in 2007 versus 2006, primarily as a result of increases
in the price of scrap and certain other raw materials and an increase in the labor costs per ton sold, due to the three unexpected stoppages in the rolling lines of the plants in Guadalajara and Apizaco during the periods July 5-8, July 10-13, and
September 10-15, as a result from the shortage in natural gas due to the explosions on the property of Petroleos Mexicanos. We attribute the higher cost of sales in 2006 primarily to the cost of sales of the products that we produce in our Republic
facilities. The higher cost of sales of the Republic facilities is mainly a result of higher labor costs prevailing in our U.S. operations, and the higher cost of raw materials, which our U.S. operations use in the production of SBQ steel. Hourly
wages at our Mexican operations are approximately &#36;4 per hour on average compared to average hourly wages in our U.S. operations of an average of more than &#36;30 per hour. Although raw material</P>
<P align="center">
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costs are similar in the United States and Mexico, our U.S. operations produce only the more costly SBQ steel, which requires more expensive raw materials such as chromium, nickel, molybdenum and other alloys. Our Mexican operations require these
alloys to a lesser extent, because they produce commodity steel as well as SBQ steel. The average cost of raw materials that we used to produce steel products increased 7% in real terms in 2007 compared to 2006, primarily as a result of increase in
the price of scrap and certain other raw materials. The average cost of raw materials that we used to produce steel products (excluding the production of Republic) increased 3% in real terms in 2006 compared to 2005, primarily as a result of
increases in the price of scrap and certain other raw materials.</P>
<P align="left">
<I>Gross Profit</I></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our gross profit in 2007 decreased 18% to Ps. 3,607 million compared to Ps. 4,383 million (including Ps. 1,344 million relating to our Republic facilities) in 2006, our gross profit in 2006 increased 58% compared to Ps.
2,781 million (including Ps. 774 million relating to the plants in Apizaco and Cholula and Ps. 385 million relating to Republic facilities) in 2005. As a percentage of net sales, our gross profit was 15% in 2007 compared to 19% in 2006. The decline
in gross profit is due to the increase in cost of goods sold due to the reasons previously mentioned. As a percentage of net sales, our gross profit was 19% (38% excluding the gross profit of Republic) in 2006 compared to 20% in 2005. This decrease
is the result of the higher cost of sales prevailing at our Republic facilities. Our gross profit increase in 2006 is attributable to the increase in sales from the Republic facilities and to higher prices prevailing in the Mexican steel markets. In early April
2006, one of our competitors, Siderurgica Lazaro Cardenas Las Truchas, S.A. (&#147;SICARTSA&#148;), the principal producer of rebar in Mexico, stopped production because its employees went on strike until mid-August 2006. The strike generated a
shortage in the supply of rebar and light section structurals, which generated a price increase in those products compared to international prices because of an imbalance in the supply and demand in the Mexican market. </P>
<P align="left">
<I>Indirect Manufacturing, Selling, General and Administrative Expenses</I></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our indirect manufacturing, selling, general, and administrative expenses (including depreciation and amortization) in 2007 increased 5% to Ps. 1,423 million in 2007 from Ps. 1,352 million (including Ps. 585 million
relating to the Republic facilities) in 2006 and increased 24% from 1,091 million in 2005.</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Operating expenses increased 5% to Ps. 1,423 million in 2007 compared to Ps. 1,351 million in 2006 (depreciation and amortization increased Ps. 99 million in 2007 compared to 2006) but remained stable at 6% of net
sales. We attribute the increase in these expenses in 2006 and 2005 primarily to the additional operating expenses from our Republic facilities.</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We recorded an increase of Ps. 99 million, or 22%, in depreciation and amortization expense, which in 2007 was Ps. 549 million compared to Ps. 450 million in 2006.We recorded an increase of Ps. 101 million, or 29%, in
depreciation and amortization expense, which in 2006 was Ps. 450 million (including Ps. 179 million relating to the Republic facilities) compared to Ps. 349 million in 2005. We attribute the increases in 2006 and 2005 to the inclusion for the full year 2005
of the depreciation that the Apizaco and Cholula plants generated and the depreciation relating to the Republic facilities.</P>
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<P align="left">
<I>Operating Income</I></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our Operating income decreased 28% from Ps. 3,031 million in 2006 to Ps. 2,184 million in 2007. Our operating income in 2006 increased 79% to Ps. 3,031 million (including Ps. 759 million relating to the plants of
Republic) compared to Ps. 1,690 million in 2005. Operating income represented 9%, 13% and 12% of our net sales in 2007, 2006 and 2005, respectively. In 2007 we attribute the decrease in operating income due to the increase in cost of goods sold and
the increase in 2006 due to the consolidation of Republic&#146;s operating income with the operating income in our Mexican Facilities.</P>
<P align="left">
<I>Financial Income (Expense)</I></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We recorded financial income of Ps. 41 million in 2007 compared to financial expense of Ps. 63 million in 2006 which decreased 165% from Ps. 155 million in 2005. Financial income or expense reflects the sum of three
components: exchange gain or loss, net interest income or expense and gain or loss from monetary position. We recorded an exchange loss of approximately Ps. 37 million in 2007 compared to an exchange loss of approximately Ps. 37 million in 2006
compared to an exchange loss of Ps. 81 million in 2005. These exchange results reflect the 0.1% decrease in the value of the peso versus the dollar in 2007, 1% decrease in the value of the peso versus the dollar in 2006 and the 4.3% increase in the
value of the peso versus the dollar in 2005</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our net interest income was Ps. 273 million in 2007 compared to Ps. 47 million of net interest income in 2006. Our net interest income was Ps. 47 million in 2006 compared to Ps. 16 million of net interest expense in
2005. The increase in 2007 reflect larger cash balances during this year partly reflecting our recent capital stock increase in February 2007. The increase in 2006 reflected lower debt levels than in the prior year.</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We recorded a loss from monetary position of Ps. 195 million in 2007 compared to a loss from monetary position of Ps. 73 million in 2006, reflecting the domestic inflation rate of 3.6% for the year ended December 31,
2007 as compared to 4.0% for the year ended December 31, 2006. We attribute the increase to the higher levels of cash and cash equivalents in 2007. We recorded a loss from monetary position of Ps. 73 million in 2006 compared to a loss from monetary position of Ps. 58 million in 2005, reflecting the domestic inflation rate of 4.0%
for the year ended December 31, 2006 as compared to 3.3% for the year ended December 31, 2005 The increase in financial income in 2007 reflect larger cash balances during this year partly reflecting our recent capital increase in February 2007. In
2006 we attribute the decrease in financial expense to exchange gains due to a decrease in the value of the peso relative to the dollar and to higher interest net income due in part to our low levels of debt.</P>
<P align="left">
<I>Other Income (Expense), Net</I></P>
<P align="left"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We recorded other income, net,
  of Ps. 21 million in 2007. This amount reflected:</P>
<UL>
  <LI>
    <p> income of Ps. 17 million from gain in the derivative instruments;</p>
  </LI>
  <LI>
    <p> other expense of Ps. 8 million for fiscal amnesty offered by the Federal
      Government,</p>
  </LI>
  <LI>
    <p> gain of Ps. 9 million in the sale of shares; and</p>
  </LI>
  <LI>
    <p> other income, net, related to other financial operations of Ps. 3 million.</p>
  </LI>
</UL>
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<P align="left"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We recorded other income, net,
  of Ps. 39 million in 2006. This amount reflected:</P>
<UL>
  <LI>
    <p> income of Ps. 16 million for the cancellation of the provision of labor
      obligations assumed in the acquisition of Atlax;</p>
  </LI>
  <LI>
    <p> gain of Ps. 17 million in the sale of Acosa; and</p>
  </LI>
  <LI>
    <p> other expense, net, related to other financial operations of Ps. 6 million.</p>
  </LI>
</UL>
<P align="left"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We recorded other expense, net,
  of Ps. 12 million in 2005. This amount reflected:</P>
<UL>
  <LI>
    <p> expense for the cancellation of the technical assistance of Ps. 40 million;</p>
  </LI>
  <LI>
    <p> income from the recovery of a commission from Banco Nacional de Comercio
      Exterior for Ps. 8 million; and</p>
  </LI>
  <LI>
    <p> other income, net, related to other financial operations of Ps. 20 million.</p>
  </LI>
</UL>
<P align="left">
<I>Income Tax and Employee Profit Sharing</I></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For the years ended December 31, 2007, 2006 and 2005 we recorded an income tax provision of Ps. 621 million, Ps. 609 million and Ps. 133 million, respectively. These amounts included a provision for deferred income
taxes of Ps. 509 million in 2007, Ps. (19) million in 2006 and Ps. 48 million in 2005.</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our effective income tax rates for the fiscal years ended December 31, 2007, 2006 and 2005 were 27.6%, 20% and 8.7% respectively. The effective income tax rate in 2006 was less than the statutory rate of 29%, mainly
because we amortized all of our remaining deferred credit which is non-taxable income. The effective income tax rate during 2005 had a significant improvement which was the result of a corporate restructure.</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A new income tax law was enacted in Mexico on December 1, 2004, which established an income tax rate of 30% for 2005, 29% for 2006, and 28% for 2007 and subsequent years.</P>

<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Flat-Rate Business Tax (FRBT) law was published in the <i>Official Gazette</i> on October 1, 2007. This law will come into force as of January 1, 2008 and abolish the Asset Tax Law. Current year FRBT is computed by applying the 17.5% rate (16.5% for 2008 and 17% for 2009) to income determined on the basis of cash flows, net of authorized credits. FRBT shall be payable only to the extent it exceeds income tax for the same period. In other words, to determine FRBT payable, income tax paid in a given period shall first be subtracted from the FRBT of the same period and the difference shall be the FRBT payable. Based on financial projections for the next four years and retrospectively, on historical results, the company considers that it will essentially pay income tax in upcoming years. Therefore, at December 31, 2007, the company has computed its deferred taxes at December 31, 2007 based on the specific income tax rules, consistent with prior year.</P>

<P align="left">
<I>Net Income</I></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We recorded net income of Ps. 1,625 million, Ps. 2,398 million and Ps. 1,390 million in 2007, 2006 and 2005, respectively. We attribute the decrease in 2007 to an increase of 6% in real terms in the average cost of raw
materials used to produce steel products and the average price of steel products increased only 2% in real terms and we attribute the increase in 2006 to additional income for the Republic facilities, higher prices in the Mexican Steel Market and
less financial expense.</P>
<P align="left">
<B>Critical Accounting Policies</B></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The discussion in this section is based upon our financial statements, which have been prepared in accordance with MFRS. The preparation of these financial statements requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at year-end, and the reported amount of revenues and expenses during the year. Management regularly evaluates these
estimates, including those related to the carrying value of property, plant and equipment and other non-current assets, inventories and direct cost of sales, income taxes and employee profit sharing, foreign currency transactions and exchange
differences, valuation allowances for receivables, inventories and deferred income tax assets, liabilities for deferred income</P>
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taxes, valuation of financial instruments, obligations relating to employee benefits, potential tax deficiencies, environmental obligations, and potential litigation claims and settlements. Management estimates are based on historical experience and
various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.
Accordingly, actual results may differ materially from current expectations under different assumptions or conditions.</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Management believes that the critical accounting policy which requires the most significant judgments and estimates used in the preparation of the financial statements relates to deferred income taxes, the impairment of property, plant and
equipment and valuation allowance on accounts receivable. We evaluate the recoverability of deferred income tax assets considering the probability of not recovering all or a portion of the assets.  The final realization of deferred income tax assets depends on the generation of taxable profits in the periods when the temporary differences are deductible.  In conducting this evaluation, we consider the expected reversal of deferred income tax liabilities, projected taxable profits and planning strategies. We evaluate periodically the adjusted values of our property, plant and equipment, to determine whether there is an indication of potential impairment. Impairment exists when the carrying
amount of an asset exceeds net cash flow expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the asset
exceeds the fair value. Assets to be disposed of are reported at the lower of the carrying amount or realizable value. Significant judgment is involved in estimating future revenues and cash flows or realizable value, as
applicable, of our property, plant and equipment due to the characteristics of those assets. The class of our assets which most require complex determinations based upon assumptions and estimates relates to idle machinery.</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;With respect to valuation allowance on accounts receivable, on a periodic basis management analyzes the recoverability of accounts receivable in order to determine if, due to credit risk or other factors, some
receivables may not be collected. If management determines that such a situation exists, the book value of the non-recoverable assets is adjusted and charged to the income statement through an increase in the doubtful accounts allowance. This
determination requires substantial judgment by management. As a result, final losses from doubtful accounts could differ significantly from estimated allowances.</P>
<P align="left">
<B>New Accounting Pronouncements</B></P>
<P align="left"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The new accounting pronouncements
  that came into effect in 2007 are as follows:</P>
<blockquote>
  <p align="left"> <I>MFRS B-3 Statement of operations</I></p>
  <p align="left"> <I>MFRS B-13 Subsequent events to the date at the financial statements </I></p>
  <p align="left"><I> MFRS C-13 Related parties</I></p>
  <p align="left"><I> MFRS D-6 Capitalization
    of Comprehensive result of financing</I></p>
  <p align="left"> <I>MFRS Interpretation 4 Presentation of Employee Profit Sharing in the Statement of Income</I></p>
  <p align="left"> <I>MFRS Interpretation 8 Effects of the flat rate business tax (FRBT)</I></p>
</blockquote>
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<P align="left"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The new accounting pronouncements
  that come into effect on January 1, 2008, are as follows:</P>
<blockquote>
  <p align="left"> <I>MFRS B-2, Statement of cash flows</I></p>
</blockquote>


<blockquote>
  <p align="left"> <I>MFRS B-10, Effects of inflation</I></p>
  <p align="left"> <I>MFRS B-15, Foreign currency translation</I></p>
  <p align="left"><I>MFRS D-3, Employee Benefits </I></p>
  <p align="left"><I>MFRS D-4, Taxes on profits</I></p>
  <p align="left"> <I>MFRS Interpretation 5, Accounting recognition of the additional consideration agreed at the inception of a derivative to adjust the instrument to its fair value </I></p>
  <p align="left"> <I>MFRS Interpretation 6, When a hedge may be formally designated</I></p>
  <p align="left"> <I>MFRS Interpretation 7, Application of comprehensive income item generated by a cash flow hedge on a forecaster purchase of a non-financial asset </I></p>
</blockquote>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Please refer to note 2(x) to our consolidated financial statements included elsewhere herein for a description of the most significant changes established under these new standards. </P>
<P align="left">
<B>B. Liquidity and Capital Resources</B></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As a result of the economic crisis in Mexico arising from the devaluation of the peso versus the U.S. dollar in 1994, including the liquidity crisis which affected the Mexican banking system, the insolvency of our
former parent, Sidek, and our high levels of short-term indebtedness, we became unable to generate or borrow funds to refinance our debt or to support our operations and capital improvements. As of December 15, 1997, and immediately prior to the
consummation of the restructuring discussed below, we had total outstanding indebtedness of approximately &#36;322 million. Over half of our debt had matured and was unpaid and substantially all of the balance was subject to acceleration.</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In December 1997, we consummated a corporate reorganization and restructuring of our liabilities. As part of this restructuring, our wholly-owned subsidiary, CSG, incurred new bank debt and issued new debt securities
and paid limited amounts of accrued interest on certain outstanding debt in exchange for and in an aggregate amount approximately equal to our aggregate outstanding consolidated debt at the date of consummation of the restructuring. In exchange, CSG
received equity in all of our subsidiaries, and we eliminated the intercompany debt that CSG owed to us.</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The restructuring did not result in a reduction in the overall amount of our consolidated outstanding debt, and, accordingly, following the restructuring, through CSG, we continued be highly leveraged. In 2001,
subsequent to Industrias CH&#146;s acquisition of a controlling interest in us, CSG redeemed or repurchased all of the outstanding debt securities it had issued in connection with the restructuring, which it financed principally with borrowings from
Industrias CH. In 2001, we converted approximately &#36;90 million of bank debt to equity, which equity Industrias CH acquired. From 2001 through 2004, CSG continued to pay down its outstanding bank debt, making scheduled amortization payments as
well as additional principal payments which it financed primarily by capital contributions from Industrias CH or borrowings from Industrias CH which it later converted to equity. In March 2004, we prepaid &#36;1.7 million of the remainder of our
outstanding bank debt.</P>
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<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At December 31, 2007, our total consolidated debt consisted of U.S.&#36;302,000 of 8-7/8% medium-term notes due 1998 (the &#147;MTNs&#148;). Accrued interest on the MTNs at December 31, 2007 was U.S.&#36;363,703. We
conducted exchange offers for the MTNs in October 1997 and August of 1998. This amount reflects sums that we did not pay to holders that we could not identify at the time of the exchange offers. At December 31, 2006, our total consolidated debt
consisted of U.S.&#36;302,000 of 8-7/8 medium term notes due 1998 (accrued interest at December 31, 2006, was U.S.&#36;336,525).</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On September 6, 2006, Republic entered into a subordinated demand promissory note with Industrias CH. Interest accrues at a rate of 5.23% per annum. As of December 31, 2007 and 2006, Republic had &#36;4.2 and &#36;21.4
million, respectively, outstanding under this intercompany promissory note.</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At December 31, 2005, our total consolidated debt consisted of U.S.&#36;38 million (Ps. 442 million), of which U.S.&#36;33.4 million was debt held by GE Capital, U.S.&#36;4.3 million was held by the Ohio Department of
Development Loan, and U.S.&#36;302,000 was 8-7/8% medium-term notes due 1998 (accrued interest at December 31, 2005 was U.S.&#36;309,311). The U.S.&#36;302,000 reflects sums that we did not pay to holders that we could not identify at the time of
the exchange offers.</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On August 9, 2004, we acquired the property, plant and equipment and the inventories, and assumed liabilities associated with seniority premiums of employees, of the Mexican steel-making facilities of Grupo Sidenor
located in Apizaco and Cholula. Our total net investment in this transaction was approximately U.S.&#36;122 million ((Ps. 1,589 million) which amount excludes value added tax of &#36;16 million (Ps. 210 million)) which we paid in 2004 and recouped
from the Mexican government in 2005), funded with our internally generated resources and capital contributions from Industrias CH of U.S.&#36;19 million (Ps. 247 million) for capital stock to be issued in the second quarter of 2005. Approximately
&#36;107.5 million (Ps. 1,350 million) of our investment related to the acquisition of property, plant and equipment, approximately &#36;7 million (Ps. 92 million) related to a technical assistance contract with the seller and the balance relates to
inventories acquired.</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On July 22, 2005, we and our parent company Industrias CH acquired 100% of the stock of Republic. We acquired 50.2% of Republic&#146;s stock for U.S.&#36;123 million (Ps. 1,403 million) through our majority owned
subsidiary, SimRep, and Industrias CH purchased the remaining 49.8% through SimRep for U.S.&#36;122 million (Ps. 1,392 million). We financed our portion of the U.S.&#36;245 million (Ps. 2,795 million) purchase price principally from a loan received
through Industrias CH that has since been repaid in full. At December 31, 2005, the total amount of Republic&#146;s debt was U.S.&#36;37.7 million (Ps. 438 million), which debt has since been repaid in full.</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On May 30, 2008, we acquired 100% of the stock of Grupo San for approximately U.S.$850 million (Ps. 9248 million).  To finance the purchase price, on May 29, 2008, we accepted a loan from Banco Inbursa S.A. for U.S. $120 million (Ps. 1306 million) at Libor +1.45% that is due on May 29, 2009.  We also received U.S. $112.5 million (Ps. 1224 million) of contribution for future capital stock increases from Industrias CH that we expect to formalize by July 22, 2008.  We paid the remaining balance of the purchase price through our own cash reserves.</P>
<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We depend heavily on cash generated from operations as our principal source of liquidity. Other sources of liquidity have included financing made available to us by our parent Industrias CH (primarily in the form of
equity, or debt substantially all of which was subsequently converted to equity), most significantly for the purpose of repaying third party indebtedness, and limited amounts of vendor financing. We have had very limited access to and have not
borrowed any material amounts from unaffiliated third parties since consummation of the restructuring. On February 8, 2007, we completed a public offering of ADSs and series B shares and raised cash proceeds of approximately U.S.&#36;214 million. In
part due to this offering, as of December 31, 2007 we had on hand cash in the amount of approximately U.S.&#36;589 million. We believe that our existing cash, cash equivalents and cash generated from operations will be sufficient to satisfy our
currently anticipated cash requirements through the next 12 months, including our currently anticipated capital expenditures.</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Republic has a committed secured revolving line of credit from General Electric Capital Corporation (&#147;GE Capital&#148;) under which it can borrow up to U.S.&#36;150 million (the &#147;GE Facility&#148;), which
matures on May 20, 2009, extendible for one year at the option of Republic. This facility is secured by all</P>
<P align="center">
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<P align=left>of Republic&#146;s inventory and accounts receivable and bears interest based on one of the two following formulas, at Republic&#146;s discretion: (1) at an indexed rate equal to the highest prime rate published by the Wall Street Journal, plus the applicable margin, or the federal funds rate plus 50 base percentage points per year and the applicable margin, or (2) LIBOR plus the applicable margin. Margins were adjusted based on the available rate for the quarter on a base established in advance. Republic currently has no debt outstanding under this facility.</P>
<P align=left>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The GE Facility contains covenants including restrictions on engaging in any business
other than our current businesses or businesses reasonably related to our current businesses, sales of properties or other assets
(including the stock of any of our subsidiaries), and the amount of capital expenditures; for example, on a consolidated basis with our
subsidiaries, we are restricted from making unfinanced capital expenditures during any fiscal year that exceed U.S.$110 million in the aggregate. However, we may increase our unfinanced capital expenditures in any fiscal year by the lesser of (i) U.S.$ 7.5 million and (ii) the amount (if any) equal to U.S.$100 million minus the actual amount of unfinanced capital expenditures in the prior fiscal year. The GE Facility also restricts our ability to incur additional indebtedness. For example, during any fiscal quarter, we may not prepay more than U.S.$ 7.5 million in the aggregate of the senior secured promissory
notes due 2009. In addition, after prepayment, we must have on a consolidated basis with our subsidiaries a fixed charge coverage
ratio for the fiscal quarter most recently ended of not less than 1.1:1.0. The GE Facility also requires that on a consolidated basis with
our subsidiaries, we maintain a fixed charge coverage ratio of 1.00:1.0 for the 12-month period most recently ended if at any time 85% of the
book value of our eligible accounts plus the lesser of (i) 65% of the book value of our eligible inventory at the lower of cost or market, (ii) 85% of the net orderly liquidation percentage of eligible inventory and (iii) U.S.$ 150 million, minus the sum of the revolving loan and swing line loan then outstanding, is less than U.S.$ 30 million. In the GE Facility, the term &#147;fixed charge coverage ratio&#148; means the ratio of (i) EBITDA less direct proceeds of business interruption insurance solely to the extent attributable to claims arising as a consequence of events occurring prior to May
20, 2004 to (ii) the aggregate of all interest expense paid or accrued during that period, plus payments of principal with respect to indebtedness during that period plus unfinanced capital expenditures during that period plus income taxes paid or payable in cash with respect to that fiscal period (but excluding income taxes, if any on insurance proceeds) plus to the extent not otherwise deducted in the determination of EBITDA, restricted payments made during that period.</P>
<P align=left>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our principal use of cash has generally been to fund our operating activities, for debt repayments, to acquire businesses and, to a significantly lesser degree, capital expenditure programs. The following is a summary of cash flows for the three years ended December 31:</P>
<P align=center><B>Principal Cash Flows</B></P>
<TABLE width="100%" border=0 cellPadding=0 cellSpacing=0 style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'">
<TR vAlign=bottom>
     <TD align=center>&nbsp; </TD>
     <TD align=center colSpan=5><B><FONT size=2>Years ended December 31,</FONT></B></TD>
     <TD align=center>&nbsp; </TD></TR>
<TR>
     <TD align=center>&nbsp; </TD>
     <TD align=center colSpan=5>
<HR noshade SIZE=1>
</TD>
     <TD align=center>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD align=center>&nbsp; </TD>
     <TD align=center><B><FONT size=2>2005</FONT></B></TD>
     <TD align=center>&nbsp; </TD>
     <TD align=center><B><FONT size=2>2006</FONT></B></TD>
     <TD align=center>&nbsp; </TD>
     <TD align=center><B><FONT size=2>2007</FONT></B></TD>
     <TD align=center>&nbsp; </TD></TR>
<TR>
     <TD align=center>&nbsp; </TD>
     <TD align=center>
<HR noshade SIZE=1>
</TD>
     <TD align=center>&nbsp; </TD>
     <TD align=center>
<HR noshade SIZE=1>
</TD>
     <TD align=center>&nbsp; </TD>
     <TD align=center>
<HR noshade SIZE=1>
</TD>
     <TD align=center>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD align=left>&nbsp; </TD>
     <TD align=center colSpan=5><FONT size=2>(millions of constant December 31, 2007 Pesos)</FONT> </TD>
     <TD align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD align=left><FONT size=2>Funds provided by operating activities</FONT> </TD>
     <TD align=right><FONT size=2>1,996</FONT> </TD>
     <TD align=left>&nbsp; </TD>
     <TD align=right><FONT size=2>2,384</FONT> </TD>
     <TD align=left>&nbsp; </TD>
     <TD align=right><FONT size=2>2,352</FONT> </TD>
     <TD align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD align=left><FONT size=2>Funds (used in) provided by financing</FONT> </TD>
     <TD align=right><FONT size=2>(260</FONT> </TD>
     <TD align=left><FONT size=2>)</FONT> </TD>
     <TD align=right><FONT size=2>(417</FONT> </TD>
     <TD align=left><FONT size=2>)</FONT> </TD>
     <TD align=right><FONT size=2>2,324</FONT> </TD>
     <TD align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD align=left><FONT size=2>Funds (used in) provided by investing activities</FONT> </TD>
     <TD align=right><FONT size=2>(2,076</FONT> </TD>
     <TD align=left><FONT size=2>)</FONT> </TD>
     <TD align=right><FONT size=2>13</FONT> </TD>
     <TD align=left>&nbsp; </TD>
     <TD align=right><FONT size=2>(484</FONT> </TD>
     <TD align=left><FONT size=2>)</FONT> </TD></TR></TABLE><BR>
<P align=left>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our net funds provided by operations were Ps. 2,352 million in 2007, Ps. 2,384 million in 2006 and Ps. 1,996 million in 2005 and reflected the net income of the year.</P>
<P align=left>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our net funds provided by financing activities were Ps. 2,324 million (which amount includes the capital increase of Ps. 2,421 million in February 2007) in 2007 compared to Ps. 417 million of funds used in financing activities in 2006 (which amount includes the prepayment of Ps. 439 million (U.S.$37.7 million)</P>
<P align=center>56</P>
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<P align="left">
 of Republic&#146;s bank debt and a capital contribution of certain minority shareholders of Simec of Ps. 131 million). Our net funds used by financing activities were Ps. 417 million in 2006 compared to Ps. 260 million in 2005 (which amount includes the prepayment of Ps. 1,127 million of
bank debt of Republic and the loan from Industrias CH for Ps. 483 million.)</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We attribute our net funds used in investing activities primarily to the acquisition of property, plant and equipment and other non-current assets and reflects changes in long-term inventories and proceeds from
insurance claim. Our net funds used in investing activities (to acquire property, plant and equipment and other non-current assets) were Ps. 484 million in 2007 compared to net resources provided by investing activities of Ps. 13 million (which
amount includes the proceeds from an insurance claim of Ps. 436 million, see note 14 to our consolidated financial statements). Our net funds provided by investing activities (to acquire property, plant and equipment and other non-current assets)
were Ps. 13 million in 2006 compared to net resources used in investing activities (to acquire property, plant and equipment and other non-current assets) of Ps. 2,076 million in 2005, primarily due to our net funds used to acquire Republic for Ps.
1,403 million.</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We do not have in place any interest rate or currency hedging instruments. We are not a party to any non-exchange traded contracts accounted for at fair value other than, as described in Note 6 to our audited financial
statements, certain futures contracts that we entered to fix the price of our natural gas purchases.</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of December 31, 2007, we had no material commitments for capital expenditures.</P>
<P align="left">
<B>C. Research and Development, Patents and Licenses</B></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We do not own any registered patents or copyrights which are material to our business as a whole.</P>
<P align="left">
<B>D. Trend Information</B></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All of the statements in this &#147;Trend Information&#148; section are subject to and qualified by the information set forth under the &#147;Cautionary Statement Regarding Forward-Looking Statements.&#148;See also
&#147;Item 5A&#151;Operating and Financial Review and Prospects&#151;Overview of Operating Results.&#148;</P>
<P align="left">
<B>E. Off-Balance Sheet Arrangements</B></P>
<P align="left"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We do not have any material off-balance
  sheet arrangements.</P>


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<P align="left">
<B>F. Contractual Obligations</B></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The table below sets forth our significant long-term contractual obligations as of December 31, 2007:</P>



<TABLE width="100%" border=0 cellPadding=0 cellSpacing=0 style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'">
  <TR vAlign=bottom>
    <TD width="38%" align=center>&nbsp; </TD>
    <TD width="8%" align=center>&nbsp; </TD>
    <TD width="4%" align=center>&nbsp; </TD>
    <TD width="9%" align=center>&nbsp; </TD>
    <TD width="3%" align=center>&nbsp; </TD>
    <TD width="11%" align=center><B><FONT size=2>Maturity</FONT></B></TD>
    <TD width="3%" align=center>&nbsp; </TD>
    <TD width="11%" align=center>&nbsp; </TD>
    <TD width="3%" align=center>&nbsp;</TD>
    <TD width="10%" align=center>&nbsp; </TD>
  </TR>
  <TR>
    <TD align=center>&nbsp; </TD>
    <TD colspan="9" align=center> <HR noshade SIZE=1> </TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=center>&nbsp; </TD>
    <TD align=center rowSpan=2><B><FONT size=2>Less than</FONT></B><BR> <B><FONT size=2>1
      year</FONT></B></TD>
    <TD align=center>&nbsp; </TD>
    <TD align=center rowSpan=2><B><FONT size=2>1 &#150; 3</FONT></B><BR> <B><FONT size=2>years</FONT></B></TD>
    <TD align=center><B></B></TD>
    <TD align=center rowSpan=2><B><FONT size=2>4 &#150; 5</FONT></B><BR> <B><FONT size=2>years</FONT></B></TD>
    <TD align=center><B></B></TD>
    <TD align=center rowSpan=2><B><FONT size=2>In excess of</FONT></B><BR> <B><FONT size=2>5
      years</FONT></B></TD>
    <TD align=center>&nbsp;</TD>
    <TD align=center>&nbsp; </TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=center>&nbsp; </TD>
    <TD align=center><B></B></TD>
    <TD align=center>&nbsp; </TD>
    <TD align=center>&nbsp; </TD>
    <TD align=center>&nbsp;&nbsp;</TD>
    <TD align=center><B><FONT size=2>Total</FONT></B></TD>
  </TR>
  <TR>
    <TD align=center>&nbsp; </TD>
    <TD align=center> <HR noshade SIZE=1> </TD>
    <TD align=center>&nbsp; </TD>
    <TD align=center> <HR noshade SIZE=1> </TD>
    <TD align=center>&nbsp; </TD>
    <TD align=center> <HR noshade SIZE=1> </TD>
    <TD align=center>&nbsp; </TD>
    <TD align=center> <HR noshade SIZE=1> </TD>
    <TD align=center>&nbsp;</TD>
    <TD align=center> <HR noshade SIZE=1> </TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=center>&nbsp; </TD>
    <TD align=center>&nbsp; </TD>
    <TD align=center>&nbsp; </TD>
    <TD align=center colSpan=5><FONT size=2>(millions of constant December 31,
      2007 Pesos)</FONT></TD>
    <TD align=center>&nbsp;</TD>
    <TD align=center>&nbsp; </TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left><FONT size=2>Long-term debt obligations</FONT><SUP><FONT size=2>(1)</FONT></SUP>
    </TD>
    <TD align=center><FONT size=2>54</FONT> </TD>
    <TD align=center>&nbsp; </TD>
    <TD align=center><FONT size=2>&#151;</FONT> </TD>
    <TD align=center>&nbsp; </TD>
    <TD align=center><FONT size=2>&#151;</FONT></TD>
    <TD align=center>&nbsp; </TD>
    <TD align=center><FONT size=2>&#151;</FONT></TD>
    <TD align=center>&nbsp;</TD>
    <TD align=center><FONT size=2>54</FONT> </TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left><FONT size=2>Short-term debt obligations</FONT> </TD>
    <TD align=center><FONT size=2>&nbsp;&nbsp;3</FONT> </TD>
    <TD align=center>&nbsp; </TD>
    <TD align=center><FONT size=2>&#151;</FONT></TD>
    <TD align=center>&nbsp; </TD>
    <TD align=center><FONT size=2>&#151;</FONT></TD>
    <TD align=center>&nbsp; </TD>
    <TD align=center><FONT size=2>&#151;</FONT></TD>
    <TD align=center>&nbsp;</TD>
    <TD align=center><FONT size=2>&nbsp;&nbsp;3</FONT> </TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left><FONT size=2>Long-term contractual obligations</FONT> </TD>
    <TD align=center><FONT size=2>&#151;</FONT> </TD>
    <TD align=center>&nbsp; </TD>
    <TD align=center><FONT size=2>&#151;</FONT> </TD>
    <TD align=center>&nbsp; </TD>
    <TD align=center><FONT size=2>&#151;</FONT></TD>
    <TD align=center>&nbsp; </TD>
    <TD align=center><FONT size=2>&#151;</FONT></TD>
    <TD align=center>&nbsp;</TD>
    <TD align=center><FONT size=2>&#151;</FONT></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp; &nbsp;<FONT size=2>Total</FONT> </TD>
    <TD align=center><FONT size=2>57</FONT> </TD>
    <TD align=center>&nbsp; </TD>
    <TD align=center><FONT size=2>0</FONT> </TD>
    <TD align=center>&nbsp; </TD>
    <TD align=center><FONT size=2>0</FONT> </TD>
    <TD align=center>&nbsp; </TD>
    <TD align=center><FONT size=2>0</FONT> </TD>
    <TD align=center>&nbsp;</TD>
    <TD align=center><FONT size=2>57</FONT> </TD>
  </TR>
</TABLE>
<BR>

<hr align="left" width="150" size="1" noshade>
(1) Account payable to Industrias CH is denominated in U.S. dollars, is for an indefinite term and bears annual interest at a rate of 5.23%.
<P align=left>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of December 31, 2007, Republic had U.S.$ 1.8 million included in property, plant and equipment for various equipment and computer capital leases. Republic&#146;s capital leases required future minimum payments of U.S.$0.7 million for 2008, $0.7 million for 2009, $0.3 million for 2010 and will be repaid in full in 2010.</P>
<P align=left><B>Item 6. Directors, Senior Management and Employees </B></P>
<P align=left><B>A. Directors and Senior Management </B></P>
<P align=left><B>Our Board of Directors</B></P>
<P align=left>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our board of directors is responsible for managing our business. Pursuant to our by-laws, the board of directors shall consist of a maximum of 21 but not less than five members elected at an ordinary general meeting of shareholders. Our board of directors currently consists of seven directors, each of whom is elected at the annual shareholders&#146; meeting for a term of one year with an additional period of thirty days, if a successor has not been appointed. The board of directors may appoint provisional directors until the shareholders&#146; meeting appoints the new directors. Under the Mexican Securities Market Law and our by-laws, at least 25% of our directors must be independent. Under the law, the determination as to the independence of our directors made by our shareholders&#146; meeting may be contested by the Mexican National Banking and Securities Commission.</P>
<P align=left><I>Election of the Board of Directors</I></P>
<P align=left>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At each shareholders&#146; meeting for the election of directors, the holders of shares are entitled pursuant to our by-laws to elect the directors. Each person (or group of persons acting together) holding 10% of our capital stock is entitled to designate one director.</P>
<P align=left>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The current members of our board of directors were nominated and elected to such position at the 2008 general meeting of shareholders as proposed by Industrias CH. We expect that Industrias CH will be in a position to continue to elect the majority of our directors and to exercise substantial influence and control over our business and policies and to influence us to enter into transactions with Industrias CH and affiliated companies. However, our by-laws provide that at least 25% of our directors must be independent from us and our affiliates, and our board of directors has passed a resolution requiring the approval of at least two independent directors for certain transactions between us and our affiliates which are not our subsidiaries.</P>
<P align=center>58</P>
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<P align=left>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under Mexican law, a majority shareholder has no fiduciary duty to minority shareholders but may not act contrary to the interests of the corporation for the majority shareholder&#146;s benefit. Such a majority shareholder is required to abstain from voting on any matter in which it directly or indirectly has a conflict of interest and can be liable for actual and consequential damages if such matter passes as a result of its vote in favor thereof. In addition, the directors of a Mexican corporation owe a duty to act in a manner which, in their independent judgment, is in the best interests of the corporation and all its shareholders.</P>


<P align="left">
Our board of directors adopted a code of ethics in December 2002.</P>
<P align="left">
<I>Authority of the Board of Directors</I></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The board of directors is our legal representative. The board of directors must approve, among other matters:</P>
<UL>
  <LI>
    <p> our general strategy;</p>
  </LI>
  <LI>
    <p> annual approval of the business plan and the investment budget;</p>
  </LI>
  <LI>
    <p> capital investments not considered in the approved annual budget for each
      fiscal year;</p>
  </LI>
  <LI>
    <p> proposals to increase our capital or that of our subsidiaries;</p>
  </LI>
  <LI>
    <p> with input from the audit and corporate practices committee, on an individual
      basis: (i) any transactions with related parties, subject to certain limited
      exceptions, (ii) our management structure and any amendments thereto, and
      (iii) the election of our chief executive officer, his compensation and
      removal for justified causes; (iv) our financial statements and those of
      our subsidiaries, (v) unusual or non-recurrent transactions and any transactions
      or series of related transactions during any calendar year that involve
      (a) the acquisition or sale of assets with a value equal to or exceeding
      5% of our consolidated assets or (b) the giving of collateral or guarantees
      or the assumption of liabilities, equal to or exceeding 5% of our consolidated
      assets, and (vi) contracts with external auditors and the chief executive
      officer annual report to the shareholders&#146; meeting;</p>
  </LI>
  <LI>
    <p> calling shareholders&#146; meetings and acting on their resolutions;</p>
  </LI>
  <LI>
    <p> any transfer by us of shares in our subsidiaries;</p>
  </LI>
  <LI>
    <p> creation of special committees and granting them the power and authority,
      provided that the committees will not have the authority which by law or
      under our by-laws is expressly reserved for the board of directors or the
      shareholders;</p>
  </LI>
  <LI>
    <p> determining how to vote the shares that we hold in our subsidiaries; and</p>
  </LI>
  <LI>
    <p> the exercise of our general powers in order to comply with our corporate
      purpose.</p>
  </LI>
</UL>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Meetings of the board of directors will be validly convened and held if a majority of our members are present. Resolutions at the meetings will be valid if approved by a majority of the members of the board of
directors, unless our by-laws require a higher number. The chairman has a tie-breaking vote. Notwithstanding the board&#146;s authority, our shareholders pursuant to decisions validly taken at a shareholders&#146; meeting at all times may override
the board.</P>
<P align="center"> 59</P>

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<P align="left">
<I>Duty of Care and Duty of Loyalty</I></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Mexican Securities Market Law imposes a duty of care and a duty of loyalty on directors. The duty of care requires our directors to act in good faith and in the best interests of the company. In carrying out this duty, our directors are required to obtain the necessary information from the executive officers, the external auditors or any other person to act in the best interests of the company. Our directors are liable for damages and
losses caused to us and our subsidiaries as a result of violating their duty of care.</P>


<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The duty of loyalty requires our directors to preserve the confidentiality of information received in connection with the performance of their duties and to abstain from discussing or voting on matters in which they
have a conflict of interest. In addition, the duty of loyalty is violated if a shareholder or group of shareholders is knowingly favored or if, without the express approval of the board of directors, a director takes advantage of a corporate
opportunity. The duty of loyalty is also violated, among other things, by (i) failing to disclose to the audit and corporate practices committee or the external auditors any irregularities that the director encounters in the performance of his or
her duties or (ii) disclosing information that is false or misleading or omitting to record any transaction in our records that could affect our financial statements. Directors are liable for damages and losses caused to us and our subsidiaries for
violations of this duty of loyalty. This liability also extends to damages and losses caused as a result of benefits obtained by the director or directors or third parties, as a result of actions of such directors.</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our directors may be subject to criminal penalties of up to 12 years&#146; imprisonment for certain illegal acts involving willful misconduct that result in losses to us. Such acts include the alteration of financial
statements and records.</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Liability actions for damages and losses resulting from the violation of the duty of care or the duty of loyalty may be exercised solely for our benefit and may be brought by us, or by shareholders representing 5% or
more of our capital stock, and criminal actions only may be brought by the Mexican Ministry of Finance, after consulting with the Mexican National Banking and Securities Commission. As a safe harbor for directors, the liabilities specified above
(including criminal liability) will not be applicable if the director acting in good faith (i) complied with applicable law, (ii) made the decision based upon information provided by our executive officers or third-party experts, the capacity and
credibility of which could not be subject to reasonable doubt, (iii) selected the most adequate alternative in good faith or if the negative effects of such decision could not have been foreseeable, and (iv) complied with shareholders&#146;
resolutions provided the resolutions do not violate applicable law.</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The members of the board are liable to our shareholders only for the loss of net worth suffered as a consequence of disloyal acts carried out in excess of their authority or in violation of our by-laws.</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In accordance with the Mexican Securities Market Law, supervision of our management is entrusted to our board of directors, which shall act through an audit and corporate practices committee for such purposes, and to
our external auditor. The audit and corporate practices committee (together with the board of directors) replaces the statutory auditor (<I>comisario</I>) that previously had been required by the Mexican Corporations Law.
See &#147;Management&#151;Committees.&#148;</P>
<P align="left">
<I>Biographical Information of our Board of Directors</I></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Gerardo Arturo Avenda&ntilde;o Guzm&aacute;n</I></B><B>. </B>Mr. Avenda&ntilde;o was born in 1955. He is an independent director for purposes of Mexican law and has been a member of our board of directors and the
audit committee since 2001 and is a member of our audit and corporate practices committee. Mr. Avenda&ntilde;o is an independent lawyer specializing in civil, mercantile and fiscal litigation.</P>
<P align="center">
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<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Rodolfo Garc&iacute;a G&oacute;mez de Parada</I></B>. Mr. Garc&iacute;a was born in 1953. He has been a member of our board of directors since 2001 and is an independent director for purposes of Mexican law. He
has been the tax adviser of Industrias CH since 1978 and our tax adviser since 2001 and is a member of the board of directors of a group of self-service stores and restaurants since 1990.</P>


<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Ra&#250;l Arturo P&eacute;rez Trejo</I></B>. Mr. P&eacute;rez was born in 1959. He has been a member of our board of directors since 2003, and is an independent director for purposes of Mexican law, and is the
chairman of our audit and corporate practices committee. Mr. P&eacute;rez has also served since 1992 as the chief financial officer of a group that produces and sells structural steel racks for warehousing and other industrial storage.</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Jos&eacute; Luis Rico Maciel</I></B><B>. </B>Mr. Rico was born in 1926. He has been a member of our board of directors since 2001. He also serves as our corporate legal and tax director and is a member of the
board of directors of a group of self-service stores and restaurants since 1957.</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Eduardo Vigil Gonz&aacute;lez</I></B><B>. </B>Mr. Vigil was born in 1957. He has been a member of our board of directors since 2001. Since 1976, Mr. Vigil has been chief executive officer of a welded pipe
corporation. Mr. Vigil is a brother of Rufino Vigil Gonz&aacute;lez and Ra&#250;l Vigil Gonz&aacute;lez.</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Ra&#250;l Vigil Gonz&aacute;lez</I></B>. Mr. Vigil was born in 1961. He has been a member of our board of directors since 2001. Since 1992 he has been chief executive officer of a steel company. In addition, he
has also been general manager of a steel distribution company. Mr. Vigil is a brother of Rufino Vigil Gonz&aacute;lez and Eduardo Vigil Gonz&aacute;lez.</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Rufino Vigil Gonz&aacute;lez</I></B><B>. </B>Mr. Vigil was born in 1948. He is currently the chairman of our board of directors and has been a member of the board of directors since 2001. Since 1973, Mr. Vigil has
been chief executive officer of a steel related products corporation. From 1988 to 1993, Mr. Vigil was a member of the board of directors of a Mexican investment bank and from 1971 to 1973 he was a construction corporation manager. Mr. Vigil is a
brother of Eduardo Vigil Gonz&aacute;lez and Ra&#250;l Vigil Gonz&aacute;lez.</P>
<P align="left">
<B>Committees</B></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our by-laws provide for an audit and corporate practices committee to assist the board of directors with the management of our business.</P>
<P align="left">
<I>Audit and Corporate Practices Committee</I></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our by-laws provide that the audit and corporate practices committee shall be at least three members, all of which must be independent directors. The chairman of the audit and corporate practices committee is elected by
our shareholders&#146; meeting, and the board of directors appoints the remaining members.</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The audit and corporate practices committee is responsible, among others, for (i) supervising our external auditors and analyzing their reports, (ii) analyzing and supervising the preparation of our financial
statements, (iii) informing the board of our internal controls and their adequacy, (iv) requesting reports of our board of directors and executive officers whenever it deems appropriate, (v) informing the board of any irregularities that it may
encounter, (vi) receiving and analyzing recommendations and observations made by the shareholders, members of the board, executive officers, our external auditors or any third party and taking the necessary actions, (vii) calling shareholders&#146;
meetings, (viii) supervising the activities of our chief executive officer, (ix) providing an annual report to the annual
shareholders&#146; meeting, (x) providing opinions to our board of directors, (xi) requesting and obtaining opinions from independent third parties and (xii) assisting the board in the preparation of annual reports and other reporting obligations.</P>
<P align="center">
61</P>

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<P align=left></P>
<P align=left>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The chairman of the audit and corporate practices committee, shall prepare an annual
report to the annual shareholders&#146; meeting with respect to the findings of the audit and corporate practices committee, which
shall include (i) the status of the internal controls and internal audits and any deviations and deficiencies thereof, taking into
consideration the reports of external auditors and independent experts, (ii) the results of any preventive and corrective measures
taken based on results of investigations in respect of non-compliance of operating and accounting policies, (iii) the evaluation of
external auditors, (iv) the main results from the review of our financial statements and those of our subsidiaries, (v) the description
and effects of changes to accounting policies, (vi) the measures adopted as result of observations of shareholders, directors,
executive officers and third parties relating to accounting, internal controls, and internal or
external audits; (vii) compliance with shareholders&#146; and directors&#146; resolutions; (viii) observations with respect to relevant
directors and officers; (ix) the transactions entered into with related parties; and (x) the remuneration paid to directors and officers.</P>
<P align=left><B>Executive Officers</B></P>
<P align=left>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth the names of our executive officers, their current position with us and the year of their initial appointment to that position.</P>
<TABLE width="100%" border=0 cellPadding=0 cellSpacing=0 style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'">
<TR vAlign=bottom>
     <TD width="57%" align=center>&nbsp; </TD>
     <TD width="23%" align=center>&nbsp; </TD>
     <TD width="16%" rowSpan=2 align=center><B><FONT size=2>Position</FONT></B><BR>
<B><FONT size=2>Held Since</FONT></B></TD>
     <TD width="4%" align=center>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD align=left><B><FONT size=2>Name</FONT></B></TD>
     <TD align=center><B><FONT size=2>Position</FONT></B></TD>
     <TD align=center>&nbsp; </TD></TR>
<TR>
     <TD align=center>
<HR align="left" width="95%" SIZE=1 noshade>
</TD>

    <TD align=center> <HR width="95%" SIZE=1 noshade> </TD>
     <TD align=center>
<HR width="95%" SIZE=1 noshade>
</TD>
     <TD align=center>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD align=left><FONT size=2>Luis Garc&#237;a Lim&#243;n</FONT> </TD>
     <TD align=center><FONT size=2>Chief Executive Officer</FONT> </TD>

    <TD align=center><FONT size=2>1982*</FONT> </TD>
    <TD align=left>&nbsp;</TD>
  </TR>
<TR vAlign=bottom>
     <TD align=left><FONT size=2>Jos&#233; Flores Flores</FONT> </TD>
     <TD align=center><FONT size=2>Chief Financial Officer</FONT> </TD>

    <TD align=center><FONT size=2>2005</FONT> &nbsp;</TD>
     <TD align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD align=left><FONT size=2>Juan Jos&#233; Acosta Mac&#237;as</FONT> </TD>
     <TD align=center><FONT size=2>Chief Operating Officer</FONT> </TD>

    <TD align=center><FONT size=2>2004</FONT> &nbsp;</TD>
     <TD align=left>&nbsp; </TD></TR>
<TR vAlign=bottom>
     <TD align=left><FONT size=2>Marcos Maga&#241;a Rodarte</FONT> </TD>
     <TD align=center><FONT size=2>Chief Sales Officer</FONT> </TD>

    <TD align=center><FONT size=2>2001</FONT> &nbsp;</TD>
     <TD align=left>&nbsp; </TD></TR></TABLE><BR>
<hr align="left" width="150" size="1" noshade>
<TABLE style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'" cellSpacing=0 cellPadding=0 border=0>
<TR>
     <TD vAlign=top nowrap>*&nbsp; &nbsp; &nbsp; </TD>
     <TD width="100%">Represents the date as of which Mr. Garc&#237;a Lim&#243;n first held this office with our predecessor, CSG. </TD></TR>
<TR>
     <TD colSpan=2>&nbsp;</TD></TR></TABLE>
<P align=left>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Luis Garc&#237;a Lim&#243;n</I></B>. Mr. Garc&#237;a was born in 1944. He is currently our chief executive officer. From 1982 to 1990 he was general director of CSG, from 1978 to 1982 he was Operation Director of CSG, from 1974 to 1978 he was general manager of Moly Cop and Pyesa, and from 1969-1974 he was Engineering Manager of CSG. In addition, from 1967 to 1969 Mr. Garc&#237;a was the director of electrical installation of a construction company.</P>
<P align=left>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Jos&#233; Flores Flores</I></B>. Mr. Flores was born in 1950. He is currently our chief financial officer. From 2001 to 2004 he was our chief corporate financial planning officer. From 1990 to 2001 he was our manager of financial analysis and stock market disclosure. Before that, Mr. Flores was the auditor manager of a food company from 1988 to 1990, the controller manager of Grupo Situr, Holding Company of Hotels, a subsidiary of Grupo Sidek from 1986 to 1988, and our auditor manager from 1983 to 1986.</P>
<P align=left>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Juan Jos&#233; Acosta Mac&#237;as</I></B><B>. </B>Mr. Acosta was born in 1960. He is currently our chief operating officer. From 1998 to 2004 he was production manager of CSG, he has been working with us since 1983. Prior to working with us, Mr. Acosta worked for Mexicana de Cobre as a supervisor in 1982.</P>
<P align=left>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Marcos Maga&#241;a Rodarte</I></B>. Mr. Maga&#241;a was born in 1965. He is currently our marketing and sales director. Before holding this position, Mr. Maga&#241;a was domestic sales manager of CSG from 1997 to 2001, sales manager for the western region of CSG from 1994 to 1996, sales manager of Met&#225;lica las Torres, our subsidiary, from 1992 to 1994 and a salesman for CSG, from 1990 to 1992. Before working with us, Mr. Maga&#241;a worked for a bank as executive promoter of sales.</P>
<P align=center>62</P>
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<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our chief executive officer and executive officers are required, under the Mexican Securities Market Law, to act for our benefit and not that of a shareholder or group of shareholders. Our chief executive is required,
principally, to (i) implement the instructions of our shareholders&#146; meeting and our board of directors, (ii) submit to the board of directors for approval the principal strategies for the business, (iii) submit to the audit and corporate
practices committee proposals for the systems of internal control, (iv) disclose all material information to the public and (v) maintain adequate accounting and registration systems and mechanisms for internal control. Our chief executive officer
and our executive officers will also be subject to liability of the type described above in connection with our directors.</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The business address of our directors and executive officers is our principal executive headquarters.</P>
<P align="left">
<B>B. Compensation</B></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For the years ended December 31, 2007 and 2006, we paid no fees to our seven directors, and the aggregate compensation our executive officers earned was approximately Ps. 24.5 million and Ps. 22 million,
respectively.</P>
<P align="left">
<B>C. Board Practices</B></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth the names of the members of our board of directors and the year of their initial appointment:</P>
<TABLE border=0 width=100% cellspacing=0 cellpadding=0 style="font-family: 'Times New Roman';font-size: 10pt;">
<TR valign="bottom">
        <TD align=left width=88%>
<B><FONT size=2>Name</FONT></B>
        </TD>
        <TD align=center width=12%>
<B><FONT size=2>Director Since</FONT></B>
        </TD>
</TR>
<TR>
        <TD>
      <HR align="left" width="25%" size=1 noshade>
        </TD>
        <TD>
<HR width="95%" size=1 noshade>
        </TD>
</TR>
<TR valign="bottom">
        <TD align=left width=88%>
<I><FONT size=2>Directors:</FONT></I>
        </TD>
        <TD align=left width=12%>&nbsp;

        </TD>
</TR>
<TR valign="bottom">
        <TD align=left width=88%>
<FONT size=2>Rufino Vigil Gonz&aacute;lez</FONT>
        </TD>
        <TD align=center width=12%>
<FONT size=2>2001</FONT>
        </TD>
</TR>
<TR valign="bottom">
        <TD align=left width=88%>
<FONT size=2>Ra&#250;l Arturo P&eacute;rez Trejo</FONT>
        </TD>
        <TD align=center width=12%>
<FONT size=2>2003</FONT>
        </TD>
</TR>
<TR valign="bottom">
        <TD align=left width=88%>
<FONT size=2>Eduardo Vigil Gonz&aacute;lez</FONT>
        </TD>
        <TD align=center width=12%>
<FONT size=2>2001</FONT>
        </TD>
</TR>
<TR valign="bottom">
        <TD align=left width=88%>
<FONT size=2>Ra&#250;l Vigil Gonz&aacute;lez</FONT>
        </TD>
        <TD align=center width=12%>
<FONT size=2>2001</FONT>
        </TD>
</TR>
<TR valign="bottom">
        <TD align=left width=88%>
<FONT size=2>Jos&eacute; Luis Rico Maciel</FONT>
        </TD>
        <TD align=center width=12%>
<FONT size=2>2001</FONT>
        </TD>
</TR>
<TR valign="bottom">
        <TD align=left width=88%>
<FONT size=2>Rodolfo Garc&iacute;a G&oacute;mez de Parada</FONT>
        </TD>
        <TD align=center width=12%>
<FONT size=2>2001</FONT>
        </TD>
</TR>
<TR valign="bottom">
        <TD align=left width=88%>
<FONT size=2>Gerardo Arturo Avenda&ntilde;o Guzm&aacute;n</FONT>
        </TD>
        <TD align=center width=12%>
<FONT size=2>2001</FONT>
        </TD>
</TR>
</TABLE><BR>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;None of our directors or executive officers are entitled to benefits upon termination under their service contracts with us, except for what is due them according to the Mexican Federal Labor Law (Ley Federal del
Trabajo).</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The audit and corporate practices committee is currently composed of three members. Ra&#250;l Arturo P&eacute;rez Trejo, the chairman of the audit and corporate practices committee, was elected at our extraordinary and
annual ordinary shareholders&#146; meeting held on April 30, 2008, and Gerardo Arturo Avenda&ntilde;o Guzm&aacute;n and Rodolfo Garc&iacute;a G&oacute;mez de Parada were appointed. Ra&#250;l Arturo P&eacute;rez Trejo has been appointed as the
&#147;audit committee financial expert.&#148;</P>
<P align="left">
<B>D. Employees</B></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At December 31, 2007, we had 4,437 employees (of whom 1,915 were employed at our Mexico facilities, and 1,136 were unionized, and 2,522 were employed at the Republic facilities, of whom 2,060 were unionized) compared to
4,053 employees at December 31, 2006 (of whom 1,921 were employed at our Mexico facilities, and 1,143 were unionized, and 2,132 were employed at the Republic facilities, of whom 1,719 were unionized) compared to 4,360 employees at December 31, 2005
(of whom 1,905 were employed at our Mexican facilities, and 1,141 were unionized, and 2,455 were employed at the Republic facilities, and 2,007 were unionized).</P>
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<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The unionized employees in each of our Mexican facilities are affiliated with different unions. Salaries and benefits of our Mexican unionized employees are determined annually through union contracts. Set forth below
is the union affiliation of the employees of each of our Mexican facilities and the expiration date of the current contract.</P>
<UL>
  <LI>
    <p><I>Guadalajara facilities</I>: Sindicato de Trabajadores en la Industria
      Sider&#250;rgica y Similares en el Edo. de Jalisco. The contract expires
      in February 14, 2009.</p>
  </LI>
  <LI>
    <p><I>Mexicali facilities</I>: Sindicato de Trabajadores de la Industria Procesadora
      y Comercializaci&oacute;n de Metales de Baja California. The contract expires
      in January 16, 2009.</p>
  </LI>
  <LI>
    <p><I>Apizaco facilities</I>: Sindicato Nacional de Trabajadores de Productos
      Metalicos, Similares y Conexos de la Rep&#250;blica Mexicana. The contract
      expires in January 16, 2009.</p>
  </LI>
  <LI>
    <p><I>Cholula facilities</I>: Sindicato Industrial &#147;Acci&oacute;n y Fuerza&#148;
      de Trabajadores Metalurgicos Fundidores, Mec&aacute;nicos y Conexos Crom
      del Estado. The contract expires in March 1, 2009.</p>
  </LI>
</UL>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have had good relations with the unions in our Mexican facilities. The bargaining agreements are revised every two years, and wages are adjusted every year.</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The employees of our Republic facilities are affiliated with United Steelworkers of America. The existing labor agreement with the employees of our Republic facilities includes an employee profit sharing program, to
which our Republic subsidiary must contribute 3% of its quarterly net income before taxes exceeding &#36;12.5 million (Ps. 136 million) for the year ending December 31, 2007 for unionized employees and 3% of its quarterly net income before taxes
exceeding &#36;12.5 million (Ps. 136 million) for the year ending December 31, 2007 for the non-unionized employees.</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Wages and benefits for non-unionized employees are fixed by a compensation system that incorporates both performance incentives and market wages. We believe that our relations with employees are satisfactory within all
our operating subsidiaries, and we have had no strikes or work stoppage in our history. We consider employee training a priority and, as a result, have implemented programs in the professional and technical areas of each operating
facility<I>.</I></P>
<P align="left">
<B>E. Share Ownership</B></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Industrias CH and its direct wholly-owned subsidiaries currently hold approximately 84% of our series B shares. Rufino Vigil Gonz&aacute;lez, the chairman of our board of directors, owns approximately 62% of Industrias
CH directly or through its subsidiaries, and Eduardo Vigil Gonz&aacute;lez and Ra&#250;l Vigil Gonz&aacute;lez, each members of our board of directors, owned 0.6% and 0%, respectively.</P>
<P align="left">
<B>Item 7. Major Shareholders and Related Party Transactions</B></P>
<P align="left">
<B>A. Major Shareholders</B></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of June 1, 2008, we had 474,621,611 shares of series B common stock outstanding, including 53,406,905 additional series B shares that we sold in a public offering on February 8, 2007. Based on</P>
<P align="center"> 64</P>

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<P align=left>information available to us, we believe that our officers and directors own no series B shares. Accordingly, on an individual basis, and as a group, our directors and executive officers beneficially owned less than one percent of any class of our shares. None of our directors or officers holds any options to purchase series B shares or preferred shares. Prior to June 2002, our capital stock also included series A shares. On June 5, 2002, we converted all of our series A shares to series B shares on a one-for-one basis.</P>
<P align=left>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Industrias CH and its direct wholly-owned subsidiaries currently hold approximately 84% of our series B shares. Rufino Vigil Gonz&#225;lez, the chairman of our board of directors, owns approximately 62% of Industrias CH directly or through its subsidiaries. Members of the Vigil family currently control indirectly approximately another 1.5% of our series B shares.</P>
<P align=left>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our major shareholders do not have voting rights different from the rights of our other shareholders.</P>
<P align=center>The following table shows the ownership of our series B shares as of June 1, 2008.</P>
<table border=0 cellpadding=0 cellspacing=0 style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'" width="740" align="center">


  <tr>
    <td width="531" valign="bottom">
      <b><font size=2>Name of Shareholder</font></b>
      <hr align="left" width="95%" size=1 noshade>
       </td>
    <td align=center colspan="2">
      <b><font size=2>Number of shares</font></b><br>

      <b><font size=2>owned</font></b>
      <hr noshade size=1 width="80%">
        </td>
    <td align=center colspan="2">
      <b><font size=2>% of shares</font></b><br>

      <b><font size=2>owned</font></b>
      <hr noshade size=1>
        </td>
  </tr>
  <tr valign=bottom>
    <td align=left width="531"><font size=2>Industrias CH</font> </td>
    <td align=right width="94"><font size=2>261,218,532</font> </td>
    <td align=left width="28">&nbsp; </td>
    <td align=right width="62"><font size=2>55</font> </td>
    <td align=left width="25"><font size=2>%</font> </td>
  </tr>
  <tr valign=bottom>
    <td align=left width="531"><font size=2>Tuber&#237;as Procarsa, S.A. de C.V. </font><sup><font size=2>(1)</font></sup>
    </td>
    <td align=right width="94"><font size=2>94,338,450</font> </td>
    <td align=left width="28">&nbsp; </td>
    <td align=right width="62"><font size=2>19</font> </td>
    <td align=left width="25"><font size=2>%</font> </td>
  </tr>
  <tr valign=bottom>
    <td align=left width="531"><font size=2>Operadora de Manufacturera de Tubos, S.A. de C.V.
      </font><sup><font size=2>(2) </font></sup><font size=2>.</font> </td>
    <td align=right width="94"><font size=2>26,113,038</font> </td>
    <td align=left width="28">&nbsp; </td>
    <td align=right width="62"><font size=2>5</font> </td>
    <td align=left width="25"><font size=2>%</font> </td>
  </tr>
  <tr valign=bottom>
    <td align=left width="531"><font size=2>Aceros y Laminados Sigosa, S.A. de C.V</font><sup><font size=2>(1)</font></sup>
    </td>
    <td align=right width="94"><font size=2>4,136,373</font> </td>
    <td align=left width="28">&nbsp; </td>
    <td align=right width="62"><font size=2>1</font> </td>
    <td align=left width="25"><font size=2>%</font> </td>
  </tr>
  <tr valign=bottom>
    <td align=left width="531"><font size=2>SEYCO Estructuras S.A. de C.V. </font><sup><font size=2>(2)</font></sup>
    </td>
    <td align=right width="94"><font size=2>5,847,159</font> </td>
    <td align=left width="28">&nbsp; </td>
    <td align=right width="62"><font size=2>1</font> </td>
    <td align=left width="25"><font size=2>%</font> </td>
  </tr>
  <tr valign=bottom>
    <td align=left width="531"><font size=2>Industrial de Herramientas CH, S.A. de C.V. </font><sup><font size=2>(2)</font></sup>
    </td>
    <td align=right width="94"><font size=2>2,117,073</font> </td>
    <td align=left width="28">&nbsp; </td>
    <td align=right width="62"><font size=2>1</font> </td>
    <td align=left width="25"><font size=2>%</font> </td>
  </tr>
  <tr valign=bottom>
    <td align=left width="531"><font size=2>Compa&#241;ia Mexicana de Tubos, S.A. de C.V.
      </font><sup><font size=2>(2)</font></sup> </td>
    <td align=right width="94"><font size=2>3,629,274</font> </td>
    <td align=left width="28">&nbsp; </td>
    <td align=right width="62"><font size=2>1</font> </td>
    <td align=left width="25"><font size=2>%</font> </td>
  </tr>
  <tr valign=bottom>
    <td align=left width="531"><font size=2>Controladora VG, S.A. de C.V. </font><sup><font size=2>(2)</font></sup>
    </td>
    <td align=right width="94"><font size=2>1,948,101</font> </td>
    <td align=left width="28">&nbsp; </td>
    <td align=right width="62"><font size=2>1</font> </td>
    <td align=left width="25"><font size=2>%</font> </td>
  </tr>
  <tr valign=bottom>
    <td align=left width="531"><font size=2>Public Investors</font> </td>
    <td align=right width="94"><font size=2>75,273,611</font> </td>
    <td align=left width="28">&nbsp; </td>
    <td align=right width="62"><font size=2>16</font> </td>
    <td align=left width="25"><font size=2>%</font> </td>
  </tr>
  <tr valign=bottom>
    <td align=left width="531">&nbsp;</td>
    <td align=right width="94">
      <hr align="right" width="70" size=1 noshade>
    </td>
    <td align=left width="28">&nbsp;</td>
    <td align=right width="62">
      <hr align="right" width="30" size=1 noshade>
    </td>
    <td align=left width="25">&nbsp;</td>
  </tr>
  <tr valign=bottom>
    <td align=left width="531"><font size=2>Total</font> </td>
    <td align=right width="94"><font size=2>474,621,611</font> </td>
    <td align=left width="28"><sup><font size=2>(3)</font></sup> </td>
    <td align=right width="62"><font size=2>100</font> </td>
    <td align=left width="25"><font size=2>%</font> </td>
  </tr>
</table>
<BR>
<hr align="left" width="150" size="1" noshade>
<TABLE style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'" cellSpacing=0 cellPadding=0 border=0>
<TR>
     <TD vAlign=top nowrap>(1)&nbsp; &nbsp; &nbsp; </TD>
     <TD width="100%">A subsidiary of Industrias CH. </TD></TR>
<TR>
     <TD colSpan=2>&nbsp;</TD></TR>
<TR>
     <TD vAlign=top nowrap>(2)&nbsp; &nbsp; &nbsp; </TD>
     <TD width="100%">Companies directly or indirectly owned by members of the Vigil family. </TD></TR>
<TR>
     <TD colSpan=2>&nbsp;</TD></TR>
<TR>
     <TD vAlign=top nowrap>(3)&nbsp; &nbsp; &nbsp; </TD>
     <TD width="100%">Includes 53,406,905 shares sold in a public offering on February 8, 2007. </TD></TR>
<TR>
     <TD colSpan=2>&nbsp;</TD></TR></TABLE>
<P align=left>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At May 31, 2008, 451,353,014 series B common shares were held in Mexico and by approximately 396 shareholders who were record holders in Mexico.</P>
<P align=left><B>B. Related Party Transactions</B></P>
<P align=left>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have engaged from time to time in a number of transactions with certain of our shareholders and companies that are owned or controlled, directly or indirectly, by our controlling shareholder, Industrias CH. These transactions were made on terms that we believe were not less favorable to us than those obtainable on an arm&#146;s length basis. See note 4 to our consolidated financial statements included elsewhere herein. On July 22, 2005, we and Industrias CH acquired 100% of the stock of Republic through SimRep. We acquired 50.2% (U.S.$123 million Ps. 1,403 million) of Republic&#146;s stock through our majority owned subsidiary, SimRep, and Industrias CH purchased the remaining 49.8% (U.S.$122 million Ps. 1,392) through SimRep. We financed our portion of the U.S.$245 million (Ps. 2,795 million) purchase price principally from a loan that we received through Industrias CH that has since been repaid in full.</P>
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<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have borrowed various amounts from Industrias CH, primarily to finance acquisitions (including the acquisition of Republic), debt redemptions and bank loan amortization and interest payments, a substantial portion of
which borrowings were converted to equity. We have also received various capital contributions from Industrias CH.</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;From time to time we sell steel products, primarily billet, to Industrias CH and its affiliates. In 2005, these sales totaled Ps. 26 million, in 2006 they totaled Ps. 39 million, and in 2007 they totaled Ps. 28 million.
In addition, in 2005, 2006 and 2007 we purchased Ps. 2 million, Ps. 7 million and Ps. 76 million, respectively, of steel products from Industrias CH and its affiliates. We negotiated these prices on an arms-length basis.</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have a services agreement with Industrias CH, by which Industrias CH provides administrative services to us and other of our subsidiaries. The term of the agreement is indefinite. The payments are paid to Industrias
CH on a monthly basis. In 2005 we paid Ps. 8 million to Industrias CH for its services, in 2006 we paid Ps. 10 million, and in 2007 we paid Ps. 12 million.</P>
<P align="left">
<B>C. Interests of Experts and Counsel</B></P>
<P align="left"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Not applicable.</P>
<P align="left">
<B>Item 8. Financial Information</B></P>
<P align="left">
<B>A. Consolidated Statements and Other Financial Information</B></P>
<P align="left"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;See Item 18 - &#147;Financial Statements&#148;
  and &#147;Index to Financial Statements.&#148;</P>
<P align="left">
<B>Legal Proceedings</B></P>
<P align="left">
<I>Mexico</I></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;With the exception of the tax litigation noted below, there are currently no material legal or administrative proceedings pending in Mexico against us or any of our subsidiaries which we expect to have a material
adverse effect on our financial condition or results of operations, or we expect to result in material capital expenditures or materially adversely affect our competitive position.</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Tax Litigation. </I>On July 2, 2003, Compa&ntilde;&iacute;a Sider&#250;rgica de Guadalajara, S.A. de C.V. (CSG) filed a nullity suit with the Mexican Federal Tax and Administrative Court of Justice against an
official communication issued by the Central International Fiscal Auditing Office of the Tax Administration Service, whereby CSG is deemed to have unpaid taxes of Ps. 93,045 on alleged omissions of income taxes it should have withheld from third
parties on interest payments abroad in 1998, 1999, 2000, and for the period from January 1, 2001 through June 30, 2001. On October 9, 2007, we participated in the fiscal amnesty offered by the Federal Government and paid the sum of &#36;8,512,
abandoning the trial and fully paying the tax credit.</P>
<P align="left">
<I>United States</I></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our operations in the United States and Canada have been the subject of various environmental claims, including those described below. The resolution of any claims against us may result in significant liabilities.</P>
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<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Department of Toxic Substances Control. </I>In September 2002, the Department of Toxic Substances Control inspected Pacific Steel&#146;s facilities based on an alleged complaint from neighbors due to Pacific
Steel&#146;s excavating to recover scrap metal on its property and on a neighbor&#146;s property which it rents from a third party. In this same month, the Department of Toxic Substances Control issued an enforcement order of imminent and
substantial endangerment determination, which alleges that certain soil piles, soil management and metal recovery operations may cause an imminent and substantial danger to human health and the environment. Consequently, the department sanctioned
Pacific Steel for violating hazardous waste laws and the State of California Security Code and imposed the obligation to make necessary changes to the location. In July 2004, in an effort to continue with this order, the department filed a Complaint
for Civil Penalties and Injunctive Relief in San Diego Superior Court. On July 26, 2004, the court issued a judgment, whereby Pacific Steel is obligated to pay &#36;235,000 (payable in four payments of &#36;58,750 over the course of one year) for
fines of &#36;131,250, the department's costs of &#36;45,000 and an environmental project of &#36;58,750. At December 31, 2007, Pacific Steel has made all of the payments.</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In August 2004, Pacific Steel and the Department of Toxic Substances Control entered into a corrective action consent agreement. In September 2005, the Department of Toxic Substances Control approved the Corrective
Measures Plan presented by Pacific Steel. The remediation work activities began in November 2006, once the permits from local authorities became available.</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Due to the fact that the cleanliness levels have not yet been defined by the Department and since the characterization of all the property has not yet been finished, the allowance for the costs for the different remedy
options are still subject to considerable uncertainty.</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We estimated, based on experience in prior years and using the same processes, a liability of between &#36;0.8 million and &#36;1.7 million. Due to the above, at December 31, 2002 and 2003, we created a reserve for this
contingency of approximately &#36;0.8 million and &#36;1.7 million, respectively. At December 31, 2007, such reserve is Ps. 14.7 million (&#36;1.4 million).</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>The Community Development Commission. </I>The Community Development Commission of National City, California (CDC) has expressed its intention to develop the site and is preparing a purchase offer for Pacific
Steel&#146;s land at market value, less the cost of remediation and less certain investigation costs incurred. Pacific Steel has informed the CDC that the land will not be voluntarily sold unless there is an alternate property where it could
relocate its business. The CDC, in accordance with the State of California law, has the power to expropriate in exchange for payment at market value and, in the event that there is no other land available to relocate the business, it would also have
to pay Pacific Steel the land&#146;s book value. The CDC made an offer to purchase the land from Pacific Steel for &#36;6.9 million, based on a business appraisal. The expropriation process was temporarily suspended through an agreement entered into
by both parties in April 2006. This agreement allows Pacific Steel to explore the possibility of finishing the remediation process of the land and to propose an attractive alternative to CDC which would allow us to remain in the area.</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Due to this situation and considering the imminent expropriation of part of the land on which Pacific Steel carries out certain operations, for the year ended December 31, 2002, Pacific Steel recorded its land at
realizable value based on an appraisal by independent experts. Such appraisal caused a decrease in the value of part of the land of Ps. 24,173 (19,750 historical pesos) and a charge to results of operations of 2002 for the same amount.</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Environmental Liabilities. </I>At December 31, 2007, we had a reserve of &#36;2.5 million (Ps. 27 million) to cover probable environmental liabilities and compliance activities. The current and non-current portions
of the environmental reserve are included in the caption &#147;Other Accounts Payable and</P>
<P align="center">
67</P>

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<P align=left>Accrued Expenses&#148; and &#147;Other Long-Term Liabilities&#148;, respectively, in the attached consolidated balance sheets. We have no knowledge of any additional environmental remediation liabilities or contingent liabilities related to environmental issues in regards to the facilities; consequently, it would not be appropriate to establish an additional reserve at this time.</P>
<P align=left>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As is the case for most steel producers in the United States and Canada, we may incur material expenses related to future environmental issues, including those which arise from environmental compliance activities and the remediation of past administrative waste practices in our U.S. facilities.</P>
<P align=left><B>B. Significant Changes</B></P>
<P align=left>On February 8, 2007, we sold 53,406,905 series B shares in a public offering, with total cash proceeds in the amount of approximately U.S. $214 million.</P>
<P align=left>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On February 21, 2008, we entered into an agreement to acquire 100% of the shares of Corporaci&#243;n Aceros DM, S.A. de C.V. and certain of its affiliates (&#147;Grupo San&#148;), and on May 30, 2008 such acquisition was consummated. Grupo San is a long products steel mini-mill and the second-largest corrugated rebar producer in Mexico. Grupo San&#146;s operations are based in San Luis Potos&#237;, Mexico. Its plants and 1,450 employees. produce 700 thousand tons of finished products annually.</P>
<P align=left><B>Item 9. The Offer and Listing</B><BR>
<BR>
<B>A. Offer and Listing Details</B></P>
<P align=left>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our series B common stock is listed on the Mexican Stock Exchange, and the ADSs are listed on the American Stock Exchange. On February 20, 2003, we effected a 1 for 20 reverse stock split. On May 30, 2006, we effected a 3 for 1 stock split. To maintain trading prices in the U.S., the ADS to share ratio was simultaneously adjusted from one ADS representing one share to one ADS representing three shares. The ADSs are evidenced by American depositary receipts, or &#147;ADRs&#148;, issued by the Bank of New York as depositary under a Deposit Agreement, dated as of July 8, 1993, as amended, among us, the depositary and the holders from time to time of ADRs.</P>
<P align=left><B>Share Price Information</B></P>
<P align=left>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth for the periods indicated the high and low sales prices expressed in historical pesos of our series B common stock on the Mexican Stock Exchange, and the high and low sales price expressed in dollars of the ADSs on the American Stock Exchange.</P>
<TABLE width="100%" border=0 cellPadding=0 cellSpacing=0 style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'">
  <TR vAlign=bottom>
    <TD width="38%" align=center>&nbsp; </TD>
    <TD colspan="2" rowSpan=3 align=center><B><FONT size=2>Mexican </FONT></B><BR>
      <B><FONT size=2>Stock <br>
      Exchange </FONT></B> <B></B></TD>
    <TD colSpan=2 rowspan="3" align=center><B><FONT size=2>American </FONT></B><B><FONT size=2><br>
      Stock </FONT></B> <B><FONT size=2><br>
      Exchange </FONT></B></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=center>&nbsp; </TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=center>&nbsp; </TD>
  </TR>
  <TR>
    <TD align=center>&nbsp; </TD>
    <TD align=center colSpan=2> <HR width="98%" SIZE=1 noshade> </TD>
    <TD align=center colSpan=2> <HR width="98%" SIZE=1 noshade> </TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=center>&nbsp; </TD>
    <TD width="14%" align=center><B><FONT size=2>High</FONT></B></TD>
    <TD width="15%" align=center><B><FONT size=2>Low</FONT></B></TD>
    <TD width="17%" align=center><B><FONT size=2>High</FONT></B></TD>
    <TD width="16%" align=center><B><FONT size=2>Low</FONT></B></TD>
  </TR>
  <TR>
    <TD align=center>&nbsp; </TD>
    <TD align=center> <HR width="95%" SIZE=1 noshade> </TD>
    <TD align=center> <HR width="95%" SIZE=1 noshade> </TD>
    <TD align=center> <HR width="95%" SIZE=1 noshade> </TD>
    <TD align=center> <HR width="95%" SIZE=1 noshade> </TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left><B><FONT size=2>2003</FONT></B> </TD>
    <TD align=center><FONT size=2>37.50</FONT> </TD>
    <TD align=center><FONT size=2>10.20</FONT> </TD>
    <TD align=center><FONT size=2>&nbsp;&nbsp;5.34</FONT> </TD>
    <TD align=center>&nbsp; &nbsp;<FONT size=2>0.85</FONT> </TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left><B><FONT size=2>2004</FONT></B> </TD>
    <TD align=center><FONT size=2>95.99</FONT> </TD>
    <TD align=center><FONT size=2>22.40</FONT> </TD>
    <TD align=center><FONT size=2>&nbsp;&nbsp;8.75</FONT> </TD>
    <TD align=center>&nbsp; &nbsp;<FONT size=2>2.10</FONT> </TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left><B><FONT size=2>2005</FONT></B> </TD>
    <TD align=center><FONT size=2>95.00</FONT> </TD>
    <TD align=center><FONT size=2>40.75</FONT> </TD>
    <TD align=center><FONT size=2>&nbsp;&nbsp;8.70</FONT> </TD>
    <TD align=center>&nbsp; &nbsp;<FONT size=2>3.63</FONT> </TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left><B><FONT size=2>2006</FONT></B> </TD>
    <TD align=center><FONT size=2>80.00</FONT> </TD>
    <TD align=center><FONT size=2>22.00</FONT> </TD>
    <TD align=center><FONT size=2>21.64</FONT> </TD>
    <TD align=center>&nbsp; &nbsp;<FONT size=2>3.96</FONT> </TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left><B><FONT size=2>2007</FONT></B> </TD>
    <TD align=center><FONT size=2>55.91</FONT> </TD>
    <TD align=center><FONT size=2>32.50</FONT> </TD>
    <TD align=center><FONT size=2>15.46</FONT> </TD>
    <TD align=center>&nbsp; &nbsp;<FONT size=2>8.55</FONT> </TD>
  </TR>
</TABLE>
<BR>
<P align=center>68</P>
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<TABLE style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'" cellSpacing=0 cellPadding=0 width="100%" border=0>
  <TR vAlign=bottom>
    <TD align=center>&nbsp; </TD>
    <TD colspan="2" rowSpan=3 align=center><B><FONT size=2>Mexican </FONT></B><BR>
      <B><FONT size=2>Stock <br>
      Exchange </FONT></B> <B></B></TD>
    <TD colSpan=2 rowspan="3" align=center><B><FONT size=2>American </FONT></B><B><FONT size=2><br>
      Stock </FONT></B> <B><FONT size=2><br>
      Exchange </FONT></B></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=center>&nbsp; </TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=center>&nbsp; </TD>
  </TR>
  <TR>
    <TD align=center>&nbsp; </TD>
    <TD align=center colSpan=2> <HR width="98%" SIZE=1 noshade> </TD>
    <TD align=center colSpan=2> <HR width="98%" SIZE=1 noshade> </TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=center>&nbsp; </TD>
    <TD align=center><B><FONT size=2>High</FONT></B></TD>
    <TD align=center><B><FONT size=2>Low</FONT></B></TD>
    <TD align=center><B><FONT size=2>High</FONT></B></TD>
    <TD align=center><B><FONT size=2>Low</FONT></B></TD>
  </TR>
  <TR>
    <TD align=center>&nbsp; </TD>
    <TD align=center> <HR width="95%" SIZE=1 noshade> </TD>
    <TD align=center> <HR width="95%" SIZE=1 noshade> </TD>
    <TD align=center> <HR width="95%" SIZE=1 noshade> </TD>
    <TD align=center> <HR width="95%" SIZE=1 noshade> </TD>
  </TR>
  <TR vAlign=bottom>
    <TD width="38%" height="20" align=left>&nbsp;<B><FONT size=2>2006</FONT></B>
    </TD>
    <TD align=left width="14%">&nbsp; </TD>
    <TD align=left width="15%">&nbsp; </TD>
    <TD align=left width="17%">&nbsp; </TD>
    <TD align=left width="16%">&nbsp; </TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left width="38%">&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<FONT size=2>First
      Quarter</FONT> </TD>
    <TD align=center width="14%">&nbsp;<FONT size=2>80.00</FONT> </TD>
    <TD align=center width="15%">&nbsp;<FONT size=2>43.28</FONT> </TD>
    <TD align=center width="17%"><FONT size=2>&nbsp;&nbsp;7.48</FONT> </TD>
    <TD align=center width="16%"><FONT size=2>&nbsp;&nbsp;3.96</FONT> </TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left width="38%">&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<FONT size=2>Second
      Quarter</FONT> </TD>
    <TD align=center width="14%">&nbsp;<FONT size=2>33.47</FONT> </TD>
    <TD align=center width="15%">&nbsp;<FONT size=2>22.00</FONT> </TD>
    <TD align=center width="17%"><FONT size=2>&nbsp;&nbsp;9.49</FONT> </TD>
    <TD align=center width="16%"><FONT size=2>&nbsp;&nbsp;5.55</FONT> </TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left width="38%">&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<FONT size=2>Third
      Quarter</FONT> </TD>
    <TD align=center width="14%">&nbsp;<FONT size=2>57.50</FONT> </TD>
    <TD align=center width="15%">&nbsp;<FONT size=2>25.00</FONT> </TD>
    <TD align=center width="17%"><FONT size=2>15.90</FONT> </TD>
    <TD align=center width="16%"><FONT size=2>&nbsp;&nbsp;6.60</FONT> </TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left width="38%">&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<FONT size=2>Fourth
      Quarter</FONT> </TD>
    <TD align=center width="14%">&nbsp;<FONT size=2>79.40</FONT> </TD>
    <TD align=center width="15%">&nbsp;<FONT size=2>50.00</FONT> </TD>
    <TD align=center width="17%"><FONT size=2>21.64</FONT> </TD>
    <TD align=center width="16%"><FONT size=2>13.50</FONT> </TD>
  </TR>
  <TR>
    <TD colSpan=5>&nbsp; </TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left width="38%">&nbsp;<B><FONT size=2>2007</FONT></B> </TD>
    <TD align=center width="14%">&nbsp; </TD>
    <TD align=center width="15%">&nbsp; </TD>
    <TD align=center width="17%">&nbsp; </TD>
    <TD align=center width="16%">&nbsp; </TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left width="38%">&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<FONT size=2>First
      Quarter</FONT> </TD>
    <TD align=center width="14%">&nbsp;<FONT size=2>55.91</FONT> </TD>
    <TD align=center width="15%">&nbsp;<FONT size=2>40.38</FONT> </TD>
    <TD align=center width="17%"><FONT size=2>15.46</FONT> </TD>
    <TD align=center width="16%"><FONT size=2>10.00</FONT> </TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left width="38%">&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<FONT size=2>Second
      Quarter</FONT> </TD>
    <TD align=center width="14%">&nbsp;<FONT size=2>52.00</FONT> </TD>
    <TD align=center width="15%">&nbsp;<FONT size=2>44.00</FONT> </TD>
    <TD align=center width="17%"><FONT size=2>14.40</FONT> </TD>
    <TD align=center width="16%"><FONT size=2>11.31</FONT> </TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left width="38%">&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<FONT size=2>Third
      Quarter</FONT> </TD>
    <TD align=center width="14%">&nbsp;<FONT size=2>54.50</FONT> </TD>
    <TD align=center width="15%">&nbsp;<FONT size=2>32.50</FONT> </TD>
    <TD align=center width="17%"><FONT size=2>15.30</FONT> </TD>
    <TD align=center width="16%"><FONT size=2>&nbsp;&nbsp;8.55</FONT> </TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left width="38%">&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<FONT size=2>Fourth
      Quarter</FONT> </TD>
    <TD align=center width="14%">&nbsp;<FONT size=2>39.90</FONT> </TD>
    <TD align=center width="15%">&nbsp;<FONT size=2>34.40</FONT> </TD>
    <TD align=center width="17%"><FONT size=2>11.02</FONT> </TD>
    <TD align=center width="16%"><FONT size=2>&nbsp;&nbsp;8.89</FONT> </TD>
  </TR>
  <TR>
    <TD colSpan=5>&nbsp; </TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left width="38%">&nbsp;<B><FONT size=2>2008</FONT></B> </TD>
    <TD align=center width="14%">&nbsp; </TD>
    <TD align=center width="15%">&nbsp; </TD>
    <TD align=center width="17%">&nbsp; </TD>
    <TD align=center width="16%">&nbsp; </TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left width="38%">&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<FONT size=2>First
      Quarter</FONT> </TD>
    <TD align=center width="14%">&nbsp;<FONT size=2>43.20</FONT> </TD>
    <TD align=center width="15%">&nbsp;<FONT size=2>32.70</FONT> </TD>
    <TD align=center width="17%"><FONT size=2>12.43</FONT> </TD>
    <TD align=center width="16%"><FONT size=2>&nbsp;&nbsp;8.75</FONT> </TD>
  </TR>
  <TR>
    <TD colSpan=5>&nbsp; </TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left width="38%">&nbsp;<B><FONT size=2>2007</FONT></B> </TD>
    <TD align=center width="14%">&nbsp; </TD>
    <TD align=center width="15%">&nbsp; </TD>
    <TD align=center width="17%">&nbsp; </TD>
    <TD align=center width="16%">&nbsp; </TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left width="38%">&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<FONT size=2>December</FONT>
    </TD>
    <TD align=center width="14%"><FONT size=2>39.25</FONT> </TD>
    <TD align=center width="15%"><FONT size=2>34.85</FONT> </TD>
    <TD align=center width="17%"><FONT size=2>10.99</FONT> </TD>
    <TD align=center width="16%"><FONT size=2>&nbsp;&nbsp;9.50</FONT> </TD>
  </TR>
  <TR>
    <TD colSpan=5>&nbsp; </TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left width="38%">&nbsp;<B><FONT size=2>2008</FONT></B> </TD>
    <TD align=center width="14%">&nbsp; </TD>
    <TD align=center width="15%">&nbsp; </TD>
    <TD align=center width="17%">&nbsp; </TD>
    <TD align=center width="16%">&nbsp; </TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left width="38%">&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<FONT size=2>January</FONT>
    </TD>
    <TD align=center width="14%">&nbsp;<FONT size=2>38.76</FONT> </TD>
    <TD align=center width="15%">&nbsp;<FONT size=2>32.70</FONT> </TD>
    <TD align=center width="17%"><FONT size=2>10.65</FONT> </TD>
    <TD align=center width="16%"><FONT size=2>&nbsp;&nbsp;8.75</FONT> </TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left width="38%">&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<FONT size=2>February</FONT>
    </TD>
    <TD align=center width="14%">&nbsp;<FONT size=2>43.20</FONT> </TD>
    <TD align=center width="15%">&nbsp;<FONT size=2>36.65</FONT> </TD>
    <TD align=center width="17%"><FONT size=2>12.43</FONT> </TD>
    <TD align=center width="16%"><FONT size=2>10.05</FONT> </TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left width="38%">&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<FONT size=2>March</FONT>
    </TD>
    <TD align=center width="14%">&nbsp;<FONT size=2>41.20</FONT> </TD>
    <TD align=center width="15%">&nbsp;<FONT size=2>38.00</FONT> </TD>
    <TD align=center width="17%"><FONT size=2>11.55</FONT> </TD>
    <TD align=center width="16%"><FONT size=2>10.50</FONT> </TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left width="38%">&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<FONT size=2>April</FONT>
    </TD>
    <TD align=center width="14%">&nbsp;<FONT size=2>46.00</FONT> </TD>
    <TD align=center width="15%">&nbsp;<FONT size=2>39.97</FONT> </TD>
    <TD align=center width="17%"><FONT size=2>13.40</FONT> </TD>
    <TD align=center width="16%"><FONT size=2>11.00</FONT> </TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left width="38%">&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<FONT size=2>May</FONT>
    </TD>
    <TD align=center width="14%">&nbsp;<FONT size=2>54.60</FONT> </TD>
    <TD align=center width="15%">&nbsp;<FONT size=2>42.18</FONT> </TD>
    <TD align=center width="17%"><FONT size=2>15.85</FONT> </TD>
    <TD align=center width="16%"><FONT size=2>11.43</FONT> </TD>
  </TR>
  <TR>
    <TD colSpan=5>&nbsp; </TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left width="38%"><B><FONT size=2>Trading on the Mexican Stock Exchange</FONT></B>
    </TD>
    <TD align=left width="14%">&nbsp; </TD>
    <TD align=left width="15%">&nbsp; </TD>
    <TD align=left width="17%">&nbsp; </TD>
    <TD align=left width="16%">&nbsp; </TD>
  </TR>
</TABLE>
<BR>
<P align=left>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Mexican Stock Exchange, located in Mexico City, is the only stock exchange in Mexico. Operating continuously since 1907, the Mexican Stock Exchange is organized as a corporation (<I>sociedad anonima de capital variable</I>). Securities trading on the Mexican Stock Exchange occurs each business day from 8:30 a.m. to 3:00 p.m., Mexico City time.</P>
<P align=left>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Since January 1999, all trading on the Mexican Stock Exchange has been effected electronically. The Mexican Stock Exchange may impose a number of measures to promote an orderly and transparent trading price of securities, including the operation of a system of automatic suspension of trading in shares of a particular issuer when price fluctuation exceeds certain limits. The Mexican Stock Exchange may also suspend trading in shares of a particular issuer as a result of:</P>
<UL>
  <LI>
    <p>non-disclosure of material events; or </p>
  <LI>
    <p>changes in the offer or demand, volume traded, or prevailing share price
      that are inconsistent with the shares&#146; historical performance and cannot
      be explained through publicly available information. </p>
  </LI>
</UL>
<P align=left>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Mexican Stock Exchange may reinstate trading in suspended shares when it deems that the material events have been adequately disclosed to public investors or when it deems that the issuer has adequately explained the reasons for the changes in offer and demand, volume traded, or prevailing share price. Under current regulations, the Mexican Stock Exchange may consider the measures adopted by the</P>
<P align=center>69</P>
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<P align="left">
other stock exchanges in order to suspend and/or resume trading in an issuer&#146;s shares in cases where the relevant securities are simultaneously traded on a stock exchange outside of Mexico.</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Settlement on the Mexican Stock Exchange is effected two business days after a share transaction. Deferred settlement is not permitted without the approval of the Mexican National Banking and Securities Commission, even
where mutually agreed. Most securities traded on the Mexican Stock Exchange are on deposit with the INDEVAL, a privately owned securities depositary that acts as a clearinghouse, depositary, and custodian, as well as a settlement, transfer, and
registration agent for Mexican Stock Exchange transactions, eliminating the need for physical transfer of securities.</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Although the Mexican Securities Market Law (<I>Ley del Mercado de Valores</I>) provides for the existence of an over-the-counter market, no such market for securities in Mexico has developed.</P>
<P align="left"> <B>Item 10. Additional Information</B><BR>
  <BR>
  <B>A. Share Capital</B><BR>
  &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<BR>
  &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Not applicable.<BR>
  <BR>
  <B>B. Memorandum and Articles of Association</B></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our principal objects and purposes, as expressed in the Second Clause of our Bylaws, are to engage in the control of companies dedicated to the manufacture, processing and distribution of diversified special bar quality
(&#147;SBQ&#148;) steel and structural products.</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Mexican Securities Market Law imposes a duty of care and a duty of loyalty on directors. The duty of care requires our directors to act in good faith and in the best interests of the company. Our directors are
liable for damages and losses caused to us and to our subsidiaries as a result of violating their duty of care.</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The duty of loyalty requires our directors to preserve the confidentiality of information received in connection with the performance of their duties and to abstain from discussing or voting on matters in which they
have a conflict of interest. In addition, the duty of loyalty is violated if a shareholder or group of shareholders is knowingly favored or if, without the express approval of the board of directors, a director takes advantage of a corporate
opportunity. The duty of loyalty is also violated, among other things, by (i) failing to disclose to the audit and corporate practices committee or the external auditors any irregularities that the director encounters in the performance of his or
her duties or (ii) disclosing information that is false or misleading or omitting to record any transaction in our records that could affect or financial statements. Directors are liable for damages and losses caused to us and our subsidiaries for
violations of this duty of loyalty. This liability also extends to damages and losses caused as a result of benefits obtained by the director or directors or third parties, as a result of actions of such directors.</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our directors may be subject to criminal penalties of up to 12 years&#146; imprisonment for certain illegal acts involving willful misconduct that result in losses to us, which include, among others, altering financial
statements or records. In terms of the  General Law of Commercial Companies and our Bylaws,
only the shareholders&#146; meeting can determinate compensation for the directors. Our directors
cannot individually exercise any of our borrowing powers. We do not have any retirement plan. Shareholders, or a group of shareholders, that control 10% of our shares can name a director and (in that director&#146;s absence) an alternate director.</P>
<P align="center"> 70</P>

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<P align="left">
<I>Voting Rights and Shareholders&#146; Meetings</I></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each series B share entitles its holder to one vote at any meeting of our shareholders. Each series L share would entitle its holder to one vote at any meeting at which holders of series L shares are entitled to vote.
Holders of series L shares would be entitled to vote only on the following matters:</P>
<UL>
  <LI>
    <p> our transformation from one type of company to another;</p>
  </LI>
  <LI>
    <p> to elect one member of our board of directors pursuant to the provisions
      of our by-laws and the Securities Market Law;</p>
  </LI>
  <LI>
    <p> any merger or corporate spin-off in which we are not the surviving entity;</p>
  </LI>
  <LI>
    <p> our dissolution or liquidation;</p>
  </LI>
  <LI>
    <p> cancellation of the registration of our shares with the National Registry
      of Securities; and</p>
  </LI>
  <LI>
    <p> any action that would prejudice the rights of holders of series L shares
      and not prejudice the other classes of shares similarly. A resolution on
      any such action requires the affirmative vote of a majority of all outstanding
      series L shares.</p>
  </LI>
</UL>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Shareholders may vote by proxy duly appointed in writing. Under Mexican law, holders of shares of any series are also entitled to vote as a class on any action that would prejudice the rights of holders of shares of
such series but not rights of holders of shares of other series, and a holder of shares of such series would be entitled to judicial relief against any such action taken without such a vote. Our board of directors or other party calling for
shareholder action initially would determine whether an action requires a class vote on these grounds. A negative determination would be subject to judicial challenge by an affected shareholder, and a court ultimately would determine the necessity
for a class vote. There are no other procedures for determining whether a proposed shareholder action requires a class vote, and Mexican law does not provide extensive guidance on the criteria to be applied in making such a determination.</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under Mexican law and our by-laws, we may hold three types of shareholders&#146; meetings: ordinary, extraordinary and special. Ordinary shareholders&#146; meetings are those called to discuss any issue not reserved for
extraordinary shareholders&#146; meeting. An annual ordinary shareholders&#146; meeting must be convened and held within the first four months following the end of each fiscal year to discuss, among other things, the board of director&#146;s report
on our financial statements, the chief executive officer&#146;s report on our operations during the preceeding year, a report on fulfillment of our tax obligations of the last fiscal year and the audit and corporate practices committee&#146;s report
with respect to the preceeding year, the appointment of members of the board of directors and the chairman of the audit and corporate practices committee, declaration of dividends and the determination of compensation for members of the board of
directors and for members of the audit and corporate practices committee. Under the Mexican Securities Market Law, our ordinary shareholders&#146; meeting, in addition to those matters described above, will have to approve any transaction
representing 20% or more of our consolidated assets, executed in a single or a series of transactions, during any fiscal year.</P>
<P align="left"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Extraordinary shareholders&#146;
  meetings are those called to consider any of the following matters:</P>
<UL>
  <LI>
    <p> voluntary dissolution of the company;</p>
  </LI>
  <LI>
    <p> an increase or decrease in a company&#146;s minimum fixed capital;</p>
  </LI>
</UL>
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<UL>
  <LI>
    <p> change in corporate purpose or nationality;</p>
  </LI>
  <LI>
    <p> any transformation, merger or spin-off involving the company;</p>
  </LI>
  <LI>
    <p> any stock redemption or issuance of preferred stock or bonds;</p>
  </LI>
  <LI>
    <p> the cancellation of the listing of our shares with the National Securities
      Registry or on any stock exchange;</p>
  </LI>
  <LI>
    <p> any other amendment to our by-laws; and</p>
  </LI>
  <LI>
    <p> any other matters for which applicable Mexican law or our by-laws specifically
      require an extraordinary meeting.</p>
  </LI>
</UL>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Special shareholders&#146; meetings are those that shareholders of the same series or class call and hold to consider any matter particularly affecting the relevant series or class of shares.</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Shareholders&#146; meetings are required to be held in our corporate domicile, which is Guadalajara, Jalisco. Calls for shareholders&#146; meetings must be made by the chairman or the secretary of the board of directors
or the chairman of our audit and corporate practices committee. Any shareholder or group of shareholders representing at least 10% of our capital stock has the right to request that the chairman of the board of directors or the chairman of the audit
and corporate practices committee call a shareholders&#146; meeting to discuss the matters indicated in the relevant request. If the chairman of the board of directors or the chairman of the audit and corporate practices committee fail to call a
meeting within 15 calendar days following receipt of the request, the shareholder or group of shareholders representing at least 10% of our capital stock may request that the call be made by a competent court.</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Calls for shareholders&#146; meetings must be published in the official gazette of the state of Jalisco or any major newspaper located in the City of Guadalajara, Jalisco at least 15 calendar days prior to the date of
the meeting. Each call must set forth the place, date and time of the meeting and the matters to be addressed. Calls must be signed by whomever makes them, provided that calls made by the board of directors or the audit and corporate practices
committee must be signed by the chairman, the secretary or a special delegate appointed by the board of directors or the audit and corporate practices committee as appropriate, for that purpose. Shareholders&#146; meetings will be validly held and
convened without the need of a prior call or publication whenever all the shares representing our capital are duly represented.</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;To be admitted to any shareholders&#146; meeting, shareholders must: (i) be registered in our share registry; and (ii) at least 24 hours prior to the commencement of the meeting submit (a) an admission ticket issued by
us for that purpose, and (b) a certificate of deposit of the relevant stock certificates issued by the Secretary or by a securities deposit institution, a Mexican or foreign bank or securities dealer in accordance with the Mexican Securities Market
Law. Shareholders may be represented at any shareholders&#146; meeting by one or more attorneys-in-fact, and these representatives may not be one of our directors. Representation at shareholders&#146; meetings may be substantiated pursuant to
general or special powers of attorney or by a proxy executed before two witnesses.</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At or prior to the time of the publication of any call for a shareholders&#146; meeting, we will provide copies of the publication to the depositary for distribution to the holders of ADSs. Holders of ADSs are entitled
to instruct the depositary as to the exercise of voting rights pertaining to the Series B shares. See &#147;Description of American Depository Receipts&#151;Voting Rights.&#148;</P>
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<P align="left">
<I>Quorums</I></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Ordinary meetings are regarded as legally convened pursuant to a first call when shares representing more than 50% of our capital are present or duly represented. Resolutions at ordinary meetings of shareholders are
valid when approved by a majority of the shares present at the meeting approves them. Any number of shares represented at an ordinary meeting of shareholders convened pursuant to a second or subsequent call constitutes a quorum. Resolutions at
ordinary meetings of shareholders convened pursuant to a second or subsequent call are valid when a majority of the shares present at the meeting approves them.</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Extraordinary shareholders&#146; meetings are regarded as legally convened pursuant to a first call when shares representing at least 75% of our capital are present or duly represented, and extraordinary
shareholders&#146; meetings convened pursuant to a second or subsequent call are regarded as legally convened when shares representing 50% of our capital are present or duly represented. Resolutions at extraordinary meetings of shareholders are
valid when approved by 50% of our capital. Special meetings of holders of series L shares are governed by the same rules applicable to extraordinary general meeting of holders of series B shares. The quorum for an extraordinary general meeting at
which holders of series L shares may not vote is 75% of the series B shares, and the quorum for an extraordinary general meeting at which holders of L shares are entitled to vote is 75% of the outstanding capital stock. Whether on first, second or
subsequent call, actions at an extraordinary general meeting generally may be taken by a majority vote of the series B shares outstanding and, on matters which holders of series L shares are entitled to vote, a majority vote of all the outstanding
capital stock.</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our by-laws also establish that a delisting of our shares requires the vote of holders of 95% of our capital stock.</P>
<P align="left">
<I>No Right of Redemption</I></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Mexican Securities Market Law and our bylaws provide that our shareholders do not have redemption rights for their shares.</P>
<P align="left">
<I>Registration and Transfer</I></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our shares are registered with the National Securities Registry, as required under the Mexican Securities Market Law and regulations issued by the National Banking and Securities Commission. Our shares are evidenced by
share certificates in registered form, and registered dividend coupons may be attached thereto. Our shareholders either may hold their shares directly, in the form of physical certificates, or indirectly, in book-entry form, through institutions
that have accounts with INDEVAL.</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;INDEVAL is the holder of record in respect of all such shares held in book-entry form. INDEVAL will issue certificates on behalf of our shareholders upon request. INDEVAL participants, brokers, banks, other financial
entities or other entities approved by the National Banking and Securities Commission maintain accounts at INDEVAL. We maintain a stock registry and only those persons listed in such stock registry, and those holding certificates issued by INDEVAL
indicating ownership, and any relevant INDEVAL participants, will be recognized as our shareholders.</P>
<P align="left">
<I>Dividends and Distributions</I></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At the annual general ordinary shareholders&#146; meeting, the board of directors submits our financial statements for the previous fiscal year, together with their report on us, to the series B shareholders for
approval. Under our by-laws and Mexican law, our annual net income, based upon our audited financial</P>
<P align="center">
73</P>

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<P align="left">
statements prepared in accordance with Mexican GAAP, is applied as follows: (i) five percent of our net earnings must be allocated to a legal reserve fund, until such fund reaches an amount equal to a least 20% of our then current capital stock
(which, as of December 31, 2007, was approximately Ps. 4,030 million), (ii) thereafter, a certain percentage of net earnings may be allocated to any general or specific reserve fund, and (iii) the remainder of any net earnings is allocated as
determined by the majority of our shareholders and may be distributed as dividends. All shares that are fully paid and outstanding at the time a dividend or other distribution is declared are entitled to share equally in any or other distribution.
We will distribute through INDEVAL cash dividends on shares held through INDEVAL. Any cash dividends on shares evidenced by physical certificates will be paid by surrendering to us the relevant dividend coupon registered in the name of its holder.
See &#147;Dividends and Dividend Policy.&#148;</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;To the extent that we declare and pay dividends on our shares, owners of ADSs at the time a dividend or other distribution is declared will be entitled to receive any dividends payable in respect of the series B shares
underlying their ADSs, subject to the terms of the Deposit Agreement. Cash dividends will be paid to the depositary in pesos, and, except as otherwise described under &#147;Description of American Depositary Receipts&#151;Dividends, Other
Distribution and Rights&#148;, the depositary will convert them into dollars and pay them to the holders of ADSs net of currency expenses and applicable fees.</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A shareholder&#146;s entitlement to uncollected dividends lapses within five years following the stated payment date, in favor of us.</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For additional tender offer and insider trading rules applicable to our securities pursuant to Mexican Law, see &#147;Market Information.&#148;</P>
<P align="left">
<I>Changes in Capital Stock</I></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Increases and reductions of our share capital must be approved at an ordinary or extraordinary shareholders&#146; meeting, subject to the provisions of our by-laws and the Mexican Corporations Law.</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Subject to the individual ownership limitations set forth in our by-laws, in the event of an increase of our capital stock, other than (i) in connection with mergers, (ii) for the conversion of convertible debentures as
provided in Section 210 Bis of the Mexican General Law on Negotiable Instruments and Credit Transactions, (iii) for purposes of conducting a public offering of such shares or (iv) for the resale of shares maintained in our treasury as a result of
repurchase of shares conducted on the Mexican Stock Exchange, our shareholders will have a preemptive right to subscribe and pay for new stock issued as a result of such increase in proportion to their shareholder interest at that time. This
preemptive right must be exercised by any method provided in Section 132 of the Mexican Corporations Law, by subscription and payment of the relevant stock within fifteen business days after the date of publication of the corresponding notice to our
shareholders in the in the official gazette of the state of Jalisco or in one of the newspapers of general circulation in Guadalajara, Jalisco, Mexico, provided that if at the corresponding meeting all of our shares are duly represented, the fifteen
business day period shall commence on the date of the meeting. Preemptive rights cannot be waived in advance and cannot be traded separately from the corresponding shares that give rise to such right.</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Holders of ADSs may exercise preemptive rights in limited circumstances. See &#147;Description of American Depositary Receipts&#151;Dividends, Other Distributions and Rights.&#148; If a holder of series B shares or ADSs
were unable or unwilling to exercise its preemptive rights in connection with such a capital increase, such holder&#146;s proportionate share of dividends and other distributions and voting rights would decline. In addition, depending on the series
of shares increased and the pattern in which preemptive rights were exercised, such a capital increase might increase or reduce the portion of our capital stock represented by series B shares and ADSs or increase or reduce the proportionate voting rights of such holder.</P>
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<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our capital stock may be reduced by resolution of a shareholders&#146; meeting taken pursuant to the rules applicable to capital increases. Our capital stock also may be reduced upon withdrawal of a shareholder as
provided in Section 206 of the Mexican Corporations Law, see &#147;&#151;Voting Rights and Shareholders&#146; Meetings&#148; above, or by repurchase of our own stock in accordance with the Mexican Securities Market Law, see &#147;Share
Repurchases&#148; below.</P>
<P align="left">
<I>Share Repurchases</I></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We may choose to acquire our own shares through the Mexican Stock Exchange on the following terms and conditions:</P>
<UL>
  <LI>
    <p> the acquisition must be carried out through the Mexican Stock Exchange;</p>
  </LI>
  <LI>
    <p> the acquisition must be carried out at market price, unless a public offer
      or auction has been authorized by the National Banking and Securities Commission;</p>
  </LI>
  <LI>
    <p> the acquisition must be carried out against our net worth (<I>capital
      contable</I>) without adopting a reduction in capital stock or against our
      capital stock, and the shares so acquired will be held as treasury stock
      without any requirement to adopt a reduction in capital stock. No shareholder
      consent is required for such purchases;</p>
  </LI>
  <LI>
    <p> the amount and price paid in all share repurchases must be made public;</p>
  </LI>
  <LI>
    <p> the annual ordinary shareholders meeting must determine the maximum amount
      of resources to be used in the fiscal year for the repurchase of shares;</p>
  </LI>
  <LI>
    <p> we may not be delinquent on payments due on any outstanding debt issued
      by us that is registered with the National Securities Registry; and</p>
  </LI>
  <LI>
    <p> any acquisition of shares must be in conformity with the requirements
      of Article 54 of the Mexican Securities Market Law, and we must maintain
      a sufficient number of outstanding shares to meet the minimum trading volumes
      required by the stock markets on which our shares are listed.</p>
  </LI>
</UL>
<P align="left">
<I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Ownership of Capital Stock by Subsidiaries</I></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our subsidiaries may not, directly or indirectly, invest in our shares, except for shares acquired as part of an employee stock option plan and in conformity with the Mexican Securities Market Law.</P>
<P align="left">
<I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Delisting</I></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant to the Mexican Securities Market Law, in the event that we decide to cancel the registration of our shares in the National Securities Registry and the listing of our shares on the Mexican Stock Exchange, or if
the National Banking and Securities Commission orders such cancellation, we will be required to conduct a tender offer for the shares held by minority shareholders and to create a trust with a term of six months, with amounts sufficient to purchase
all shares not participating in the tender offer. Under the law, our controlling shareholders will be secondarily liable for these obligations. The price at which the shares must be purchased in the offer must be the greater of (i) the average of
the</P>
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trading price on the Mexican Stock Exchange during the last 30 days on which the shares were quoted prior to the date on which the tender offer is made or (ii) the book value of such shares as determined pursuant to our latest quarterly financial
information filed with the National Banking and Securities Commission and the Mexican Stock Exchange. If the National Banking and Securities Commission orders the cancellation, we must launch the tender offer within 180 days from the date of their
request. If we initiate it, under the Mexican Securities Market Law, the cancellation must be approved by 95% of our shareholders.</P>
<P align="left">
<I>Other Provisions</I></P>
<P align="left"> <I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Information to Shareholders</I></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Mexican Corporations Law establishes that companies, acting through their boards of directors, must annually present a report at a shareholder&#146;s meeting that includes:</P>
<UL>
  <LI>
    <p> a report of the directors on our financial statements, as well as on the
      policies followed by the directors and on the principal existing projects,</p>
  </LI>
  <LI>
    <p> a report explaining the principal accounting and information policies
      and criteria followed in the preparation of the financial information,</p>
  </LI>
  <LI>
    <p> a statement of the financial condition of the company at the end of the
      fiscal year,</p>
  </LI>
  <LI>
    <p> a statement showing the results of operations of the company during the
      preceding year, as well as changes in the company&#146;s financial condition
      and capital stock during the preceding year,</p>
  </LI>
  <LI>
    <p> a report of the chief executive officer on the operations of the company
      during the preceding year,</p>
  </LI>
  <LI>
    <p> a report of the fulfillment of the company&#146;s tax obligations of the
      last fiscal year,</p>
  </LI>
  <LI>
    <p> a report of the audit and corporate practices committee with respect to
      the preceding year,</p>
  </LI>
  <LI>
    <p> the notes which are required to complete or clarify the above mentioned
      information, and</p>
  </LI>
</UL>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition to the foregoing, our by-laws provide that our board of directors also should prepare the information referred to above with respect to any subsidiary that represents at least 20% of our net worth (based on
the financial statements most recently available).</P>
<P align="left">
<I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Shareholders&#146; Conflict of Interest</I></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under Mexican law, any shareholder that has a conflict of interest with respect to any transaction must abstain from voting thereon at the relevant shareholders&#146; meeting. A shareholder that votes on a transaction
in which its interest conflicts with ours may be liable for damages in the event the relevant transaction would not have been approved without such shareholder&#146;s vote.</P>
<P align="left">
<I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Liquidation</I></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In the event we are liquidated, the surplus assets remaining after payment of all our creditors will be divided among our shareholders in proportion to their respective share holdings. Shares that are only</P>
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<P align="left">
partially paid will participate in the distribution in the proportion that they were paid. The general extraordinary shareholders&#146; meeting at which the liquidation resolution is made, will appoint one or more liquidators.</P>
<P align="left"> <I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Foreign Investment</I></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Ownership by foreign investors of shares of Mexican enterprises in certain economic sectors is regulated by the Foreign Investment Law and the regulations thereunder. The Ministry of the Economy and the National
Commission on Foreign Investment are responsible for the administration of the Foreign Investment Law and Regulations.</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant to the Mexican Foreign Investment Law and Regulations, foreign investors may acquire up to 100% of the capital stock of Mexican companies or entities in the steel industry. In accordance with our by-laws,
Mexican and non-Mexican nationals may own all series of our share capital. We have registered any foreign owner of our shares, and the depositary with respect to the ADSs representing our shares, with the National Registry of Foreign Investment
<I>(Registro Nacional de Inversi&oacute;n Extranjera)</I>.</P>
<P align="left"> <I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other Provisions</I></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Forfeiture of Shares</I>. As required by Mexican law, our by-laws provide that &#147;any alien who at the time of incorporation or at any time thereafter acquires an interest or participation in the capital of the
corporation shall be considered, by virtue thereof, as Mexican in respect thereof and shall be deemed to have agreed not to invoke the protection of his own government, under penalty, in case of breach of such agreement, of forfeiture of such
interest or participation in favor of the Mexican nation.&#148; Under this provision, a non-Mexican shareholder is deemed to have agreed not to invoke the protection of his own government by asking such government to interpose a diplomatic claim
against the Mexican government with respect to the shareholder&#146;s rights as a shareholder but is not deemed to have waived any other rights it may have, including any rights under the U.S. securities laws, with respect to its investment in us.
If the shareholder invokes such governmental protection in violation of this agreement, its shares could be forfeited to the Mexican government. Mexican law requires that such a provision be included in the bylaws of all Mexican corporations unless
such by-laws prohibit ownership of shares by non-Mexican persons or entities.</P>
<P align="left"> <I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Duration</I>. Our existence
  under our by-laws is indefinite.</P>
<P align="left">
<I>Certain Differences between Mexican and U.S. Corporate Law</I></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;You should be aware that the Mexican Corporations Law and the Mexican Securities Market Law, which apply to us, differ in certain material respects from laws generally applicable to U.S. corporations and their
shareholders.</P>
<P align="left"> <I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Independent Directors</I></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Mexican Securities Market Law requires that 25% of the directors of Mexican public companies must be independent, but the audit and corporate practices committee must be comprised entirely of independent directors.
Pursuant to the rules and regulations of the American Stock Exchange, 50% of the directors of listed companies must be independent, and foreign companies subject to reporting requirements under the U.S. federal securities laws and listed on the
American Stock Exchange must maintain an audit committee comprised entirely of independent directors as defined in the U.S. federal securities laws.</P>
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<P align="left"> <I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Mergers, Consolidations, and
  Similar Arrangements</I></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A Mexican company may merge with another company only if a majority of the shares representing its outstanding capital stock approve the merger at a duly convened general extraordinary shareholders&#146; meeting, unless
the company&#146;s by-laws impose a higher threshold. Dissenting shareholders are not entitled to appraisal rights. Creditors have ninety days to oppose a merger judicially, provided they have a legal interest to oppose the merger.</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under Delaware law, with certain exceptions, a merger, consolidation, or sale of all or substantially all the assets of a corporation must be approved by the board of directors and a majority of the outstanding shares
entitled to vote thereon. Under Delaware law, a shareholder of a corporation participating in certain major corporate transactions, under certain circumstances, may be entitled to appraisal rights pursuant to which the shareholder may receive
payment in the amount of the fair market value of the shares held by the shareholder (as determined by a court) in lieu of the consideration the shareholder would otherwise receive in the transaction. Delaware law also provides that a parent
corporation, by resolution of its board of directors and without any shareholder vote, may merge with any subsidiary of which it owns at least 90% of each class of share capital. Upon any such merger, dissenting shareholders of the subsidiary would
have appraisal rights.</P>
<P align="left"> <I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Anti-Takeover Provisions</I></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Subject to the approval of the National Banking and Securities Commission, the Mexican Securities Market Law permits public companies to include anti-takeover provisions in their by-laws that restrict the ability of
third parties to acquire control of the company without obtaining approval of the company&#146;s board of directors. See &#147;Market Information&#151;Market Regulation&#151;Anti-Takeover Protections.&#148;</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under Delaware law, corporations can implement shareholder rights plans and other measures, including staggered terms for directors and super-majority voting requirements, to prevent takeover attempts. Delaware law also
prohibits a publicly-held Delaware corporation from engaging in a business combination with an interested shareholder for a period of three years after the date of the transaction in which the shareholder became an interested shareholder
unless:</P>
<UL>
  <LI>
    <p> prior to the date of the transaction in which the shareholder became an
      interested
      shareholder, the board of directors of the corporation approves either the
      business
      combination or the transaction that resulted in the shareholder becoming
      an interested
      shareholder;</p>
  </LI>
  <LI>
    <p> upon consummation of the transaction that resulted in the shareholder
      becoming an
      interested shareholder, the interested shareholder owns at least 85% of
      the voting stock of
      the corporation, excluding shares held by directors, officers, and employee
      stock plans; or</p>
  </LI>
  <LI>
    <p> at or after the date of the transaction in which the shareholder became
      an interested
      shareholder, the business combination is approved by the board of directors
      and
      authorized at a shareholders&#146; meeting by at least 66 <SUP><font size="1">2</font></SUP>/<sub><font size="1">3</font></sub>%
      of the voting stock which is not
      owned by the interested shareholder.</p>
  </LI>
</UL>
<P align="left"> <I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Shareholders&#146; Suits</I></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant to the Mexican Securities Market Law (<I>Ley de Mercado de Valores</I>), only a shareholder or group of shareholders holding at least 5% of our outstanding shares may bring a claim against some or</P>
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all of our directors, secretary of the board of directors or relevant executives for violation of their duty of care or duty of loyalty. In addition, such shareholder or group of shareholders must include in its claim the amount of damages or losses
caused to the company and not only the damages or losses caused to the shareholder or group of shareholders bringing the claim, provided that any amount recovered as indemnification arising from the liability action will be for the benefit of the
company, and not for the benefit of the shareholder or group of shareholders. The shareholder or group or shareholders must demonstrate the direct and immediate link between the damage or loss caused to the company, and the acts alleged to have
caused it. There is no requirement for the shareholder or group of shareholders to hold the shares for a certain period of time in order to bring a claim.</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If the court determines that the shareholder or group of shareholders that initiated the claim acted in bad faith, such shareholder or group of shareholders will be liable to pay the legal fees and legal proceeding
expenses.</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The statute of limitations for these actions is five years from the date on which the act or event that caused the damage or loss occurred. These actions must be brought in the federal or local courts in Guadalajara,
Jalisco (Mexico) and the court must personally notify the parties that have been sued, and must comply with all other legal formalities in order to satisfy the due process requirements of the Mexican Constitution.</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Process must be served on the defendant personally, or, in the defendant&#146;s absence, process can be served by a judicial officer on the defendant&#146;s domicile whether or not the defendant is present. A method of
service that does not comply with these requirements could be considered void. Class action lawsuits are not permitted under Mexican law.</P>
<P align="left"> <I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Shareholder Proposals</I></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under Mexican law and our by-laws, holders of at least 10% of our outstanding capital stock are entitled to appoint one member of our board of directors.</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Delaware law does not include a provision restricting the manner in which nominations for directors may be made by shareholders or the manner in which business may be brought before a meeting.</P>
<P align="left"> <I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Calling of Special Shareholders&#146;
  Meetings</I></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under Mexican law and our by-laws, the board of directors, the chairman of the board of directors or the chairman of the audit and corporate practices committee may call a shareholders&#146; meeting. Any shareholder or
group of shareholders with voting rights representing at least 10% of our capital stock may request that the chairman of the board of directors or the audit and corporate practices committee call a shareholders&#146; meeting to discuss the matters
indicated in the written request. If the chairman of the board of directors or the chairman of the audit and corporate practices committee fails to call a meeting within 15 calendar days following date of the written request, the shareholder or
group of shareholders may request that a competent court call the meeting. A single shareholder may call a shareholders&#146; meeting if no meeting has been held for two consecutive years or if matters to be dealt with at an ordinary
shareholders&#146; meeting have not been considered.</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Delaware law permits the board of directors or any person who is authorized under a corporation&#146;s certificate of incorporation or by-laws to call a special meeting of shareholders.</P>
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<P align="left"> <I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cumulative Voting</I></P>
<P align="left"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under Mexican law, cumulative voting
  for the election of directors is permitted.</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under Delaware law, cumulative voting for the election of directors is permitted if expressly authorized in the certificate of incorporation.</P>
<P align="left"> <I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Staggered Board of Directors</I></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Mexican law does not permit companies to have a staggered board of directors, while Delaware law does permit corporations to have a staggered board of directors.</P>
<P align="left"> <I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Approval of Corporate Matters
  by Written Consent</I></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Mexican law permits shareholders to take action by unanimous written consent of the holders of all shares entitled to vote. These resolutions have the same legal effect as those adopted in a general or special
shareholders&#146; meeting. The board of directors may also approve matters by unanimous written consent.</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Delaware law permits shareholders to take action by written consent of holders of outstanding shares having more than the minimum number of votes necessary to take the action at a shareholders&#146; meeting at which all
voting shares were present and voted.</P>
<P align="left"> <I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Amendment of Certificate of
  Incorporation</I></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under Mexican law, it is not possible to amend a company&#146;s certificate of incorporation (<I>acta constitutiva</I>). However, the provisions that govern a Mexican company are contained in its by-laws, which may be
amended as described below. Under Delaware law, a company&#146;s certificate of incorporation generally may be amended by a vote of holders of a majority of the outstanding stock entitled to vote thereon (unless otherwise provided in the certificate
of incorporation), subsequent to a resolution of the board of directors proposing such amendment.</P>
<P align="left"> <I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Amendment of By-laws</I></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under Mexican law, amending a company&#146;s by-laws requires shareholder approval at an extraordinary shareholders&#146; meeting. Mexican law requires that at least 75% of the shares representing a company&#146;s
outstanding capital stock be present at the meeting in the first call (unless the by-laws require a higher threshold) and that the resolutions be approved by a majority of the shares representing a company&#146;s outstanding capital stock.</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under Delaware law, holders of a majority of the outstanding stock entitled to vote and, if so provided in the certificate of incorporation, the directors of the corporation, have the power to adopt, amend, and repeal
the by-laws of a corporation.</P>
<P align="left">
<B>C. Material Contracts</B></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In 2002 we entered into a long term supply contract with U.S. Steel, which we have extended several times. Most recently, on September 22, 2006, we renewed the contract through September 30, 2008. This contract provides
for our obligation to produce and sell to U.S. Steel, and U.S. Steel&#146;s obligation to purchase from us, 25,000 to 30,000 tons of our tube rounds per month, and we may agree to</P>
<P align="center">
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sell rounds to U.S. Steel in excess of 30,000 tons. We may not deliver fewer than 75,000 tons during any quarter without paying a penalty, unless the shortfall is based solely on U.S. Steel&#146;s act or omission.</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On July 22, 2005, we and our parent company, Industrias CH, entered into a stock purchase agreement under which we acquired 100% of the stock of Republic, a U.S. producer of SBQ steel. We acquired 50.2% of
Republic&#146;s stock for U.S.&#36;123 million (Ps. 1,403 million) through our majority owned subsidiary, SimRep, and Industrias CH purchased the remaining 49.8% through SimRep for U.S.&#36;122 million (Ps. 1,392 million). We financed our portion of
the U.S.&#36;245 million (Ps. 2,795 million) purchase price principally from a loan received through Industrias CH that we have since repaid in full.</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On February 21, 2008, we entered into an agreement to acquire 100% of the shares of Grupo San, and on May 30, 2008 such acquisition was consummated. Grupo San is a long products steel mini-mill and the second-largest
corrugated rebar producer in Mexico. Grupo San&#146;s operations are based in San Luis Potos&iacute;, Mexico. Its plants and 1,450 employees. produce 700 thousand tons of finished products annually.</P>
<P align="left">
<B>D. Exchange Control</B></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;There are no legislative or legal provisions currently in force in Mexico or arising under our bylaws restricting the payment of dividends to holders of our common stock not resident in Mexico, except for regulations
restricting the remittance of dividends and other payments in compliance with United Nations sanctions. There are no limitations, either under the laws of Mexico or in our by-laws, on the right of foreigners to hold or vote on shares of our common
stock.</P>
<P align="left">
<B>E. Taxation</B></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following summary contains a description of the material anticipated U.S. and Mexican federal income tax consequences of the purchase, ownership and disposition of the series B shares or ADSs by a holder that is a
citizen or resident of the United States or a U.S. domestic corporation or that otherwise will be subject to U.S. federal income tax on a net income basis in respect of the series B shares or ADSs and that is a &#147;non-Mexican holder&#148; (as
defined below) (a &#147;U.S. holder&#148;), but it does not purport to be a comprehensive description of all of the tax considerations that may be relevant to a decision to purchase the series B shares or ADSs. In particular, the summary deals only
with U.S. holders that will hold the series B shares or ADSs as capital assets and use the U.S. dollar as their functional currency and does not address the tax treatment of a U.S. holder that owns or is treated as owning 10% or more of our
outstanding voting shares. In addition, the summary does not address any U.S. or Mexican state or local tax considerations that may be relevant to U.S. holders that are subject to special tax rules, such as banks, securities dealers, insurance
companies, tax-exempt entities, persons that hold ADSs or series B shares as a hedge or as part of a straddle, conversion transaction or other risk reduction transaction for tax purposes.</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The summary is based upon the federal income tax laws of the United States and Mexico as in effect on the date of this annual report, including the provisions of the income tax treaty between the United States and
Mexico and protocol thereto (the &#147;Tax Treaty&#148;), all of which are subject to change, possibly with retroactive effect in the case of U.S. federal income tax law. Prospective investors in the series B shares or ADSs should consult their own
tax advisors as to the U.S., Mexican or other tax consequences of the purchase, ownership and disposition of the series B shares or ADSs, including, in particular, the effect of any foreign, state or local tax laws and their entitlement to the
benefits, if any, afforded by the Tax Treaty.</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For purposes of this summary, the term &#147;non-Mexican holder&#148; shall mean a holder that is not a resident of Mexico and that will not hold the series B shares or ADSs or a beneficial interest therein in connection with the conduct of a trade or business through a permanent establishment or fixed base in Mexico.</P>
<P align="center"> 81</P>

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<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;An individual is a resident of Mexico for tax purposes, if he established his home in Mexico. When the individual in question has a home in another country, the individual will be deemed a resident in Mexico if his
&#147;center of vital interests&#148; is located in Mexico. This will be deemed to occur if (i) more than 50% of the aggregate income realized by such individual in the calendar year is from a Mexican source or (ii) the principal center of his
professional activities is located in Mexico.</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A Mexican national who files a change of tax residence notice with a country or jurisdiction that does not have a comprehensive exchange of information agreement with Mexico and in which his income is subject to a
preferred tax regime pursuant to the provisions of the Mexican Income Tax Law, will be considered a Mexican resident for tax purposes during the year the notice is filed and during the following three years. Unless otherwise proven, a Mexican
national is deemed a resident of Mexico for tax purposes.</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;An entity in Mexico is a resident of Mexico if it maintains its principal place of business or its place of effective management in Mexico. If non-residents of Mexico are deemed to have a permanent establishment in
Mexico for tax purposes, all income attributable to the permanent establishment will be subject to Mexican taxes, in accordance with applicable Mexican tax law.</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In general, for U.S. federal income tax purposes, holders of ADSs will be treated as the beneficial owners of the series B shares represented by those ADSs.</P>
<P align="left">
<I>Taxation of Dividends</I></P>
<P align="left"> <I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Mexican Tax Considerations</I></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under Mexican Income Tax Law provisions (<I>Ley del Impuesto Sobre la Renta</I>), dividends paid to non-Mexican holders with respect to the series B shares represented by the ADSs are not subject to Mexican withholding
tax.</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Dividends paid from distributable earnings that have not been subject to corporate income tax are subject to a corporate-level dividend tax at a rate of 38.89% for the year ended December 31, 2007. The corporate-level
dividend tax on the distribution of earnings is not final and may be credited against income tax payable during the fiscal year in which the dividend tax was paid and for the following two years. Dividends paid from distributable earnings, after
corporate income tax has been paid with respect to these earnings, are not subject to this corporate-level dividend tax. Currently, after corporate tax dividend distributions are not subject to individual withholding taxes for shareholder recipients
thereof.</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Distributions made by us to our shareholders other than as dividends, including capital reductions, amortization of shares or otherwise, would be subject to taxation in Mexico at the corporate rate of 28% or at the rate
mentioned above, as the case may be.</P>
<P align="left"> <I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;U.S. Federal Income Tax Considerations</I></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The gross amount of any distributions paid with respect to the series B shares represented by the ADSs, to the extent paid out of our current or accumulated earnings and profits, as determined for U.S. federal income
tax purposes, will be taxable as dividends and generally will be includible in the gross income of a U.S. holder as ordinary income on the date on which the distributions are received by the depositary and will not be eligible for the dividends
received deduction allowed to certain corporations</P>
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<P align="left">
under the U.S. Internal Revenue Code of 1986, as amended. Subject to certain exceptions for short-term and hedged positions, the U.S. dollar amount of dividends received by an individual prior to January 1, 2011 with respect to the B shares and ADSs
will be subject to taxation at a maximum rate of 15% if the dividends are &#147;qualified dividends.&#148; Dividends paid on the B shares and ADSs will be treated as qualified dividends if (i) the issuer is eligible for the benefits of a
comprehensive income tax treaty with the United States that the IRS has approved for the purposes of the qualified dividend rules, and (ii) we were not, in the year prior to the year in which the dividend was paid, and are not, in the year in which
the dividend is paid, a passive foreign investment company (&#147;PFIC&#148;). The income tax treaty between Mexico and the United States has been approved for the purposes of the qualified dividend rules. Based on our audited financial statements
and relevant market and shareholder data, we believe that we were not treated as a PFIC for U.S. federal income tax purposes with respect to our 2006 or our 2007 taxable year.</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;To the extent that a distribution exceeds our current and accumulated earnings and profits, it generally will be treated as a non-taxable return of basis to the extent thereof, and thereafter as capital gain from the
sale of series B shares or ADSs. Distributions, which will be made in pesos, will be includible in the income of a U.S. holder in a U.S. dollar amount calculated by reference to the exchange rate in effect on the date they are received by the
depositary whether or not they are converted into U.S. dollars. U.S. holders should consult their own tax advisors regarding the treatment of foreign currency gain or loss, if any, on any pesos received that are converted into U.S. dollars on a date
subsequent to receipt. Dividend income generally will constitute foreign source &#147;passive income&#148; or, in the case of certain U.S. holders, &#147;financial services income&#148; for U.S. foreign tax credit purposes.</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Distributions of additional series B shares to holders of ADSs with respect to their ADSs that are made as part of a pro rata distribution to all our stockholders generally will not be subject to U.S. federal income
tax.</P>
<P align="left">
<I>Taxation of Dispositions of Shares or ADSs</I></P>
<P align="left"> <I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Mexican Tax Considerations</I></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Gain on the sale or other disposition of ADSs by a U.S. holder will generally not be subject to Mexican tax. Deposits and withdrawals of series B shares in exchange for ADSs will not give rise to Mexican tax or transfer
duties.</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Gain on the sale of series B shares by a U.S. holder will not be subject to any Mexican tax if the transaction is carried out through the Mexican Stock Exchange or other stock exchange or securities markets approved by
the Mexican Ministry of Finance and Public Credit. Gain on sales or other dispositions of series B shares made in other circumstances generally would be subject to Mexican tax at a rate of 25% based on the total amount of the transaction or, subject
to certain requirements applicable to the seller, at a rate of 28% for the year ended December 31, 2007 of gains realized from the disposition.</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under the Tax Treaty, a U.S. holder that is eligible to claim the benefits of the Tax Treaty will be exempt from Mexican tax on gains realized on a sale or other disposition of series B shares, in a transaction that is
not carried out through the Mexican Stock Exchange or such other approved securities markets, so long as the holder did not own, directly or indirectly, 25% or more of our share capital (including ADSs) during the twelve-month period preceding the
sale or other disposition, and the value of those shares does not derive mainly from immovable property located in Mexico. Specific formalities apply to claim such as treaty benefits.</P>
<P align="center"> 83</P>

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<P align="left"> <I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;U.S. Federal Income Tax Considerations</I></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Upon the sale or other disposition of the series B shares or ADSs, a U.S. holder generally will recognize capital gain or loss in an amount equal to the difference between the amount realized on the sale or other
disposition and such U.S. holder&#146;s tax basis in the series B shares or ADSs. Gain or loss recognized by a U.S. holder on such sale or other disposition generally will be long-term capital gain or loss if, at the time of the sale or other
disposition, the series B shares or ADSs have been held for more than one year. Long-term capital gain recognized by a U.S. holder that is an individual generally is subject to a maximum federal income tax rate of 15%. The deduction of a capital
loss is subject to limitations for U.S. federal income tax purposes. Deposits and withdrawals of series B shares by U.S. holders in exchange for ADSs will not result in the realization of gain or loss for U.S. federal income tax purposes.</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A U.S. holder that receives pesos upon sale or other disposition of the series B shares will realize an amount equal to the U.S. dollar value of the pesos upon the date of sale (or in the case of cash basis and electing
accrual basis taxpayers, the settlement date). A U.S. holder will have a tax basis in the pesos received equal to the U.S. dollar value of the pesos received translated at the same rate the U.S. holder used to determine the amount realized on its
disposal of the series B shares. Any gain or loss realized by a U.S. holder on a subsequent conversion of the pesos generally will be a U.S. source ordinary income or loss.</P>
<P align="left">
<I>Other Mexican Taxes</I></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;There are no Mexican inheritance, gift, succession or value added taxes applicable to the ownership, transfer or disposition of the series B shares or ADSs by non-Mexican holders; provided, however, that gratuitous
transfers of the series B shares or ADSs may in certain circumstances cause a Mexican federal tax to be imposed upon the recipient. There are no Mexican stamp, issue, registration or similar taxes or duties payable by non-Mexican holders of the
series B shares or ADSs.</P>
<P align="left">
<I>U.S. Backup Withholding Tax and Information Reporting Requirements</I></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In general, information reporting requirements will apply to certain payments by a paying agent to a U.S. holder of dividends in respect of the series B shares or ADSs or the proceeds received on the sale or other
disposition of the series B shares or ADSs, and a backup withholding tax may apply to such amounts if the U.S. holder fails to provide an accurate taxpayer identification number to the paying agent or fails to establish an exemption or otherwise
comply with these provisions. Amounts withheld as backup withholding tax will be creditable against the U.S. holder&#146;s U.S. federal income tax liability, provided that the required information is furnished to the U.S. Internal Revenue
Service.</P>
<P align="left"> <B>F. Dividends and Paying Agents</B><BR>
  <BR>
  &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Not applicable.<BR>
  <BR>
  <B>G. Statements by Experts</B><BR>
  <BR>
  &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Not applicable<BR>
  <BR>
  <B>H. Documents on Display</B></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Statements contained in this annual report regarding the contents of any contract or other document are not necessarily complete, and, where the contract or other document is an exhibit to the annual report, each of these statements is qualified in all respects by the provisions of the actual contract or other documents.</P>
<P align="center"> 84</P>

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<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are subject to the informational requirements of the U.S. Securities Exchange Act of 1934, or the Exchange Act. Accordingly, we file reports and other information with the Commission, including annual reports on Form
20-F and reports on Form 6-K. You may inspect and copy the reports and other information that we file with the Commission at the public reference facilities of the Commission at 100 F. Street, N.E., Washington D.C. 20549. You may obtain information
on the operation of the Commission&#146;s public reference room by calling the Commission in the United States at 1-800-SEC-0330. In addition, the Commission maintains an internet website at <I>www.sec.gov </I>from which you can electronically
access this annual report and the other materials that we file with the Commission.</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As a foreign private issuer, we are not subject to the same disclosure requirements as a domestic U.S. registrant under the Exchange Act. For example, we are not required to prepare and issue quarterly reports. However,
we are required to file with the SEC, promptly after it is made public or filed, information that we make public in Mexico, file with the Mexican Stock Exchange or the National Banking and Securities Commission or distribute to our securityholders.
As a foreign private issuer, we are exempt from Exchange Act rules regarding proxy statements and short-swing profits.</P>
<P align="left"> <B>I. Subsidiary Information</B><BR>
  <BR>
  &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Not applicable.</P>
<P align="left">
<B>Item 11. Quantitative and Qualitative Disclosures About Market Risk</B></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are exposed to market risk, which is the potential risk of loss in fair values, cash flows or earnings due to changes in interest rates and foreign currency rates (primarily the peso/dollar exchange rate), as a
result of our holdings of financial instrument positions. Our financial instruments include cash and cash equivalents, trade and other accounts receivable, accounts payable, long-term debt securities and related party debt. We do not maintain a
trading portfolio. Our borrowings are entirely denominated in dollars. We do not utilize derivative financial instruments to manage our market risks with respect to our financial instruments. Historically, based on the last ten years of data,
inflation in Mexico has been 177% higher than the Mexican peso&#146;s devaluation relative to the dollar.</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are exposed to market risk due to fluctuations of the purchase price of natural gas. To limit our exposure, we use derivative financial instruments, which currently consist of natural gas swap contracts. These
contracts are recognized on our balance sheet at fair value. The swaps are considered as cash flow hedges since the cash flow exchanges under the swap are highly effective in mitigating exposure to natural gas price fluctuations. The change in fair
value of the swaps is recorded as part of comprehensive income in stockholders&#146; equity for those contracts that are designated as accounting hedges. For those contracts that are not designated as accounting hedges, the change in fair value is recorded directly into income. We do not believe our market risk with respect to these natural gas futures contracts is material. See note 6 to the consolidated financial statements.</P>
<P align="left">
<B>Market Risk Measurement</B></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We measure our market risk related to our financial instruments based on changes in interest rates and foreign currency rates utilizing a sensitivity analysis. The sensitivity analysis measures the potential loss in
fair values, cash flows and earnings based on a hypothetical increase in interest rates and a decline in the peso/dollar exchange rate. We used market rates as of December 31, 2007 on our financial instruments to perform the sensitivity analysis. We
believe that these potential changes in market rates are reasonably possible in the near-term (one year or less). Based upon our analysis of the impact of a 100 basis point increase in interest rates and a 10% decline in the peso/dollar exchange
rate, we have</P>
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<P align="left">
determined that such increase in interest rates and such decline in the peso/dollar exchange rate would not have a material adverse effect on our earnings. Because there is no active trading market for our debt instruments, we are not able to determine
the impact of these changes on the fair value of those debt instruments. The sections below describe our exposure to interest rates and currency rates including the impact of changes in these rates on our earnings.</P>
<P align="left">
<B>Interest Rate Exposure</B></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our primary interest rate exposure relates to long-term debt. On the asset side, we are exposed to changes in short-term interest rates as we invest in short-term dollar-denominated interest bearing investments. On the
liability side, we utilize a combination of floating rate debt and fixed rate debt. The floating rate debt is exposed to changes in interest expense and cash flows from changes in LIBOR, while the fixed rate debt is mostly exposed to changes in fair
value from changes in medium term interest rates. Based on an immediate 100 basis point rise in interest rates, we estimate that our earnings before taxes would not be significantly affected.</P>
<P align="left">
<B>Currency Rate Exposure</B></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our primary foreign currency exchange rate exposure relates to our debt securities as well as our dollar-denominated trade receivables and trade payables. Our principal currency exposure is to changes in the peso/dollar
exchange rate. We estimate that a 10% decline in the peso/dollar exchange rate would result in a decrease in our earnings before taxes of approximately Ps. 328 thousand (&#36;30 thousand).</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The sensitivity analysis is an estimate and should not be viewed as predictive of our future financial performance. Additionally, we cannot assure that our actual losses in any particular year will not exceed the
amounts indicated above. However, we do believe that these amounts are reasonable based on the financial instrument portfolio at December 31, 2007 and assuming that the hypothetical market rate changes selected by us in our market risk analysis
occur during 2008. The sensitivity analysis does not give effect to the impact of inflation on its exposure to increases in interest rates or the decline in the peso/dollar exchange rate.</P>
<P align="left">
<B>Item 12. Description of Securities Other than Equity Securities</B></P>
<P align="left"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Not applicable.</P>
<P align="center"> <B>PART II.</B></P>
<P align="left">
<B>Item 13. Defaults, Dividends Arrearages and Delinquencies</B></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Simec is in default on the payment of U.S. &#36;302,000 principal amount of 8 <sup><font size="1">7</font></sup>/<sub><font size="1">8</font></sub>% MTNs due 1998 which were issued in 1993 as part of a U.S. &#36;68 million exchange offer. Accrued interest on the MTNs at December 31,
2007 was U.S. &#36;363,703. The U.S. &#36;363,703 due reflects sums that were not paid to holders that could not be identified at the time of the exchange offer.</P>
<P align="left"> <B>Item 14. Material Modifications to the Rights of Security
  Holders and Use of Proceeds</B></p>


&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;None.<BR>


<P align="center">
86</P>

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<p><B>Item 15. Controls and Procedures</B><BR>
  <BR>
  <B>A. Disclosure Control and Procedures</B>


</p>
<p align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our principal executive officer and our principal financial officer, after evaluating the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e)) as of the end of the period
covered by this annual report, have concluded that, as of such date, our disclosure controls and procedures were effective.</p>
<P align="left">
<B>B. Management&#146;s Annual Report on Internal Control over Financial Reporting</B></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) under the Exchange Act. Our internal control system is designed to provide
reasonable assurance as to the reliability of the published financial statements under generally accepted accounting principles. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Therefore, even those systems determined to be effective can provide only reasonable assurances with respect to financial statement preparation and presentation. Also, projections of any evaluation of effectiveness to future periods are subject to
the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may decline.</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2007. In making this assessment, it used the criteria set forth by the Committee of Sponsoring Organizations
of the Treadway Commission (COSO) in Internal Control &#150; Integrated Framework. Based on its assessment and those criteria, our management has concluded that, as of December 31, 2007, the Company&#146;s internal control over financial reporting is effective.</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The effectiveness of the Company&#146;s internal control over financial reporting as of December 31, 2007, has been audited by Mancera, S.C., a member firm of Ernst &amp; Young Global, an independent registered public accounting firm, who has audited the financial statements included in this annual report as stated in their report which appears herein. </P>
<P align="left">
<B>C. Attestation Report of the Independent Registered Public Accounting Firm </B></P>






<!-- MARKER FORMAT-SHEET="Center Head 2-Bold" FSL="Workstation" -->
<p align="center"><b>REPORT OF MANCERA</b></p>
<!-- MARKER FORMAT-SHEET="Center no bold" FSL="Workstation" -->
<p align=CENTER><font face="Times New Roman, Times, Serif" size=2><b>Report of Independent
Registered Public Accounting Firm</b> </font></p>
<!-- MARKER FORMAT-SHEET="Left Head 2 Bold" FSL="Workstation" -->
<p align=LEFT><font face="Times New Roman, Times, Serif" size=2><b>The Board of Directors
and <br>
Shareholders of Grupo Simec, S.A.B. de C.V. </b></font></p>
<!-- MARKER FORMAT-SHEET="Para Flush 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>We have audited Grupo Simec S.A.B.
de C.V.&#146;s internal control over financial reporting as of December 31, 2007, based
on criteria established in Internal Control&#151;Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria).
Grupo Simec S.A.B. de C.V.&#146;s management is responsible for maintaining effective
internal control over financial reporting, and for its assessment of the effectiveness of
internal control over financial reporting included in the accompanying management&#146;s
assessment on the effectiveness of internal control over financial reporting. Our
responsibility is to express an opinion on the company&#146;s internal control over
financial reporting based on our audit. </font></p>
<!-- MARKER FORMAT-SHEET="Para Flush 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>We conducted our audit in accordance
with the standards of the Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audit to obtain reasonable assurance
about whether effective internal control over financial reporting was maintained in all
material respects. Our audit included obtaining an understanding of internal control over
financial reporting, assessing the risk that a material weakness exists, testing and
evaluating the design and operating effectiveness of internal control based on the
assessed risk, and performing such other procedures as we considered necessary in the
circumstances. We believe that our audit provides a reasonable basis for our opinion. </font></p>
<!-- MARKER FORMAT-SHEET="Para Flush 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>A company&#146;s internal control
over financial reporting is a process designed to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles. A company&#146;s
internal control over financial reporting includes those policies and procedures that (1)
pertain to the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the company; (2) provide
reasonable assurance that transactions are recorded as necessary to permit preparation of
financial statements in accordance with generally accepted accounting principles, and
that receipts and expenditures of the company are being made only in accordance with
authorizations of management and directors of the company; and (3) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the company&#146;s assets that could have a material effect on the
financial statements. </font></p>
<!-- MARKER FORMAT-SHEET="Para Flush 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>Because of its inherent limitations,
internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk
that controls may become inadequate because of changes in conditions, or that the degree
of compliance with the policies or procedures may deteriorate. </font></p>
<!-- MARKER FORMAT-SHEET="Para Flush 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>In our opinion, Grupo Simec S.A.B.
de C.V. maintained, in all material respects, effective internal control over financial
reporting as of December 31, 2007, based on the COSO criteria. </font></p>
<!-- MARKER FORMAT-SHEET="Para Flush 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>We also have audited, in accordance
with the standards of the Public Company Accounting Oversight Board (United States), the
consolidated balance sheets the Grupo Simec, S.A.B. de C.V. and subsidiaries as of
December 31, 2007 and 2006, and the related consolidated statements of income, changes in
stockholders&#146;equity and changes in financial position for each of the three years in
the period ended December 31, 2007. We did not audit the financial statements of Simrep
Corporation and subsidiaries, a majority owned subsidiary, for the period ended December
31, 2005 which statements reflect total assets of Ps. 6,453,517 (thousand), as of
December 31, 2005 and total revenues of Ps. 6,707,749 (thousand), for the period then
ended. Those statements were audited by other independent auditors whose report has been
furnished to us, and our opinion, insofar as it relates to the amounts included for
Simrep Corporation and subsidiaries, is based solely on the report of the other
independent auditors. Our report dated June 25, 2008 expressed an unqualified opinion
thereon. </font></p>
<!-- MARKER FORMAT-SHEET="Para Flush 50 sigs" FSL="Workstation" -->
<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=50%><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=50%>
      <div align="center"><font face="Times New Roman, Times, Serif" size=2>
Mancera,
S.C.
                                                                                     <br>
      A
Member Practice of
                                                                                     <br>
      Ernst
&amp; Young Global
                                                                                                <br>
      <br>
      Jose
Maria Tabares </font></div>
    </td>
  </tr>
</table>
<br>

<!-- MARKER FORMAT-SHEET="Para Flush 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>Guadalajara, Jal., Mexico <br>
June 25, 2008</font></p>
<P align="left"><B>D. Changes in Internal Control Over Financial Reporting</B></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;There were no changes in our internal control over financial reporting during the period covered by this annual report that have materially affected, or are reasonably likely to materially affect, our internal control
over financial reporting.</P>


<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As a result of our evaluation of the effectiveness of our internal controls for the year ended December 31, 2006 and the material weakness and deficiencies identified during that period, we implemented significant changes in our internal controls over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting:</P>

<ul>
  <li>
    <p>We revised access levels for all users of our information systems at our U.S. operations  in order to adequately secure our information systems and system change control;

</p>
  </li>
  <li>
    <p>We adequately segregated functions and procedures in our month-end process and in our financial statements presentation for our plants in Mexico; and

</p>
  </li>
  <li>
    <p>We reassigned review duties among executives for the consolidation of our financial statements so that functions and procedures are adequately segregated.




</p>
  </li>
</ul>
<P align="left">
<B>Item 16. [Reserved]</B></P>
<P align="center"> 87</P>

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<P align="left">
<B>Item 16A. Audit Committee Financial Expert</B></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our board of directors has determined that it has at least one &#147;audit committee financial expert&#148;, as defined in Item 16A of Form 20-F, serving on the audit committee. Raul Arturo P&eacute;rez Trejo is the
director whom the board of directors has determined to be an audit committee financial expert. Holders of ADSs should understand that this designation is a disclosure requirement of the SEC related to Mr. P&eacute;rez&#146;s experience and
understanding with respect to certain accounting and auditing matters. The designation does not impose on Mr. P&eacute;rez any duties, obligations or liability that are greater than those which are generally imposed on him as a member of the audit
and corporate practices committee and board of directors, and his designation as an audit committee financial expert pursuant to this SEC requirement does not affect the duties, obligations or liability of any other member of the audit and corporate
practices committee or board of directors. Mr. P&eacute;rez is &#147;independent&#148; as such term is defined in the listing standards of the American Stock Exchange.</P>
<P align="left">
<B>Item 16B. Code of Ethics</B></P>

<table width="95%" border="0" cellspacing="0" cellpadding="0">
  <tr>
    <td><font face="Times New Roman, Times, serif" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In 2002, we adopted a code of ethics that applies to all of our employees and directors, including our principal executive officer, principal financial officer and principal accounting officer. In 2007, we did not amend
our code of ethics in any manner, nor did we grant any waiver from any provision of the code of ethics to any person. We will provide to any person without charge, upon written or oral request, a copy of such code of ethics. Requests should be
directed to: Grupo Simec, S.A.B. de C.V., Attention: Jos&eacute; Flores Flores, telephone number: 011-52-33-3770-6700.</font></td>
  </tr>
</table>
<P align="left"><B>Item 16C. Principal Accountant Fees and Services</B></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Audit Fees</I>. We paid fees in the amount of Ps. 11.8 million and Ps. 13.7 million, respectively, in 2006 and 2007 to Mancera, S.C. Ernst &amp; Young for the audit of our annual consolidated financial statements
included in our annual report on Form 20-F.</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Tax Fees</I>. We paid fees to Mancera, S.C. Ernst &amp; Young in the amount of Ps. 0.3 million and Ps. 0.08 million, respectively, in 2006 and 2007 associated with tax compliance and tax consultation.</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Other Fees</I>. In 2007 we paid fees to Mancera, S.C. Ernst &amp; Young in the amount of Ps. 4.7 million associated with the public offering of ADS and Series B shares completed on February 8, 2007. We paid no fees
in 2006 other than those set forth above to Mancera, S.C. Ernst &amp; Young. The audit committee approved all of the services incurred in 2006 and 2007, described as &#147;Audit Fees&#148;, &#147;Tax Fees&#148; and &#147;Other Fees&#148;, in
accordance with our policy on auditor independence.</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Pre-Approval Policies. </I>Our audit committee has adopted a formal policy on auditor independence requiring it to approve all professional services rendered by our independent auditor prior to the commencement of
the specified services. The audit committee will consider annually and, if appropriate, approve the provision of audit services by our independent auditor and consider and, if appropriate, pre-approve the provision of certain defined audit and
non-audit services. The audit committee also will consider on a case-by-case basis and, if appropriate, approve specific engagements that are not otherwise pre-approved. Any proposed engagement that does not fit within the definition of a
pre-approved service may be presented to the audit committee for consideration at its next regular meeting or, if earlier consideration is required, to the audit committee for action by written consent.</P>
<P align="left">
<B>Item 16D. Exemptions from the Listing Standards for Audit Committees</B></P>
<P align="left"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Not applicable.</P>
<P align="center">
88</P>

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<A name="page_92"></A>

<P align="left">
<B>Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers.</B></P>
<P align="left"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Not applicable.</P>
<P align="center"> <B>PART III.</B></P>
<P align="left">
<B>Item 17. Financial Statements</B></P>
<P align="left"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have responded to Item 18 in
  lieu of responding to this item.</P>
<P align="left">
<B>Item 18. Financial Statements</B></P>
<P align="left"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Reference is made to the consolidated
  financial statements included herein.</P>
<P align="left">
<B>Item 19. Exhibits</B></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The consolidated financial statements, together with the report of our independent registered public accounting firm, are filed as part of this annual report.</P>
<P align="center">
89</P>

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<A name="page_93"></A>
<TABLE style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'" cellSpacing=0 cellPadding=0 width="100%" border=0>
  <TR vAlign=top>
    <TD colspan="2"> <P><B>List of Exhibits:</B></P></TD>
  </TR>
  <TR vAlign=top>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD><P>Exhibit<br>
        <U>Number</U></P></TD>
    <TD><U>Item</U></TD>
  </TR>
  <TR vAlign=top>
    <TD>1</TD>
    <TD>Amended and Restated By-laws (<I>estatutos sociales</I>) of the registrant,
      together with an English translation.*</TD>
  </TR>
  <TR vAlign=top>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD width="12%"> <P>8</P></TD>
    <TD width="87%"> <P>List of subsidiaries, their jurisdiction of incorporation
        and names under which they do business.</P></TD>
  </TR>
  <TR vAlign=top>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD width="12%"> <P>10.1</P></TD>
    <TD width="87%"> <P>Stock Purchase Agreement by and Among PAV Republic, Inc.,
        The Shareholders of PAV Republic, Inc., SimRep Corporation and Industrias
        C.H., S.A. de C.V.*</P></TD>
  </TR>
  <TR vAlign=top>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD width="12%"> <P>10.2</P></TD>
    <TD width="87%"> <P>2007-2008 Rounds Supply Agreement by and Between Republic,
        Inc. and United States Steel Corporation.*</P></TD>
  </TR>
  <TR vAlign=top>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD width="12%"> <P>10.3</P></TD>
    <TD width="87%"> <P>Stock Purchase Agreement, dated as of February 21, 2008,
        among the Sellers (as defined therein) and Grupo Simec, S.A.B. de C.V.
        relating to the acquisition of 100% of the shares of Grupo San.</P></TD>
  </TR>
  <TR vAlign=top>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD width="12%"> <P>12.1 </P></TD>
    <TD width="87%"> <P>Certification pursuant to Section 302 of the Sarbanes-Oxley
        Act of 2002. </P></TD>
  </TR>
  <TR vAlign=top>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD>12.2</TD>
    <TD>Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
    </TD>
  </TR>
  <TR vAlign=top>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD>13</TD>
    <TD>Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.</TD>
  </TR>
</TABLE>
<BR>
<hr align="left" width="150" size="1" noshade>
<TABLE style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'" cellSpacing=0 cellPadding=0 border=0>
<TR>
     <TD vAlign=top nowrap>*&nbsp; &nbsp; &nbsp; </TD>
     <TD width="100%">Previously filed. </TD></TR>
<TR>
     <TD colSpan=2>&nbsp;</TD></TR></TABLE>
<P align=center>90</P>
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<P align="center">
<B>SIGNATURES</B></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.</P>
<TABLE border=0 width=100% cellspacing=0 cellpadding=0 style="font-family: 'Times New Roman';font-size: 10pt;">
  <TR valign="bottom">
    <TD width=50% align=left>&nbsp; </TD>
    <TD align=left width=58%> <B><FONT size=2>GRUPO SIMEC, S.A.B. DE C.V.</FONT></B>
    </TD>
  </TR>
  <TR>
    <TD colspan=2>&nbsp; </TD>
  </TR>
  <TR>
    <TD colspan=2>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp; </TD>
    <TD align=left width=58%> <FONT size=2>By: /s/ Luis Garc&iacute;a Lim&oacute;n</FONT>
    </TD>
  </TR>
  <TR>
    <TD>&nbsp; </TD>
    <TD> <HR noshade size=1> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp; </TD>
    <TD align=left width=58%> &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<FONT size=2>Luis
      Garc&iacute;a Lim&oacute;n</FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp; </TD>
    <TD align=left width=58%> &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<I><FONT size=2>Chief
      Executive Officer</FONT></I> </TD>
  </TR>
  <TR>
    <TD colspan=2>&nbsp; </TD>
  </TR>
  <TR>
    <TD colspan=2>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp; </TD>
    <TD align=left width=58%> <FONT size=2>By: </FONT><U><FONT size=2>/s/ Jos&eacute;
      Flores Flores</FONT></U> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp; </TD>
    <TD align=left width=58%> &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<FONT size=2>Jos&eacute;
      Flores Flores</FONT> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp; </TD>
    <TD align=left width=58%> &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<I><FONT size=2>Chief
      Financial Officer</FONT></I> </TD>
  </TR>
  <TR>
    <TD colspan=2>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <FONT size=2>Dated:</FONT> <FONT size=2>June 30, 2008</FONT>
    </TD>
    <TD align=left width=58%>&nbsp; </TD>
  </TR>
</TABLE>
<BR>

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<P align="center">
<B>INDEX TO FINANCIAL STATEMENTS</B><BR>
  <BR>
  <B>(Constant Mexican Pesos as of December 31, 2007)</B></P>
<table border=0 cellspacing=0 cellpadding=0 style="font-family: 'Times New Roman';font-size: 10pt;" width=100%>
  <tr valign="bottom">

    <td align=left colspan=2>
<b><font size=2>Grupo Simec, S.A.B. de C.V.</font></b>
        </td>
    <td align=right>&nbsp;

        </td>
  </tr>
  <tr valign="bottom">
    <td align=left colspan=2>&nbsp;</td>
    <td align=right>&nbsp;</td>
  </tr>
  <tr valign="bottom">

    <td align=left colspan=2>
<font size=2>Report of Mancera, S.C. Ernst &amp; Young</font>
        </td>
    <td align=right>
<font size=2>F-2</font>
        </td>
  </tr>
  <tr valign="bottom">
    <td align=left colspan=2>&nbsp;</td>
    <td align=right>&nbsp;</td>
  </tr>
  <tr valign="bottom">

    <td align=left colspan=2>
<font size=2>Report of BDO Hern&aacute;ndez Marr&oacute;n y C&iacute;a., S.C</font>
        </td>
    <td align=right>
<font size=2>F-3</font>
        </td>
  </tr>
  <tr valign="bottom">
    <td align=left colspan=2>&nbsp;</td>
    <td align=right>&nbsp;</td>
  </tr>
  <tr valign="bottom">

    <td align=left colspan=2>
<font size=2>Consolidated Balance Sheets as of December 31, 2007 and 2006</font>
        </td>
    <td align=right>
<font size=2>F-4</font>
        </td>
  </tr>
  <tr valign="bottom">
    <td align=left colspan=2>&nbsp;</td>
    <td align=right>&nbsp;</td>
  </tr>
  <tr valign="bottom">

    <td align=left colspan=2>
<font size=2>Consolidated Statements of Income for the years ended</font>
        </td>
    <td align=right>&nbsp;

        </td>
  </tr>
  <tr valign="bottom">

    <td align=left colspan=2>
 &nbsp; &nbsp; &nbsp; &nbsp;<font size=2>December 31, 2007, 2006 and 2005</font>
        </td>
    <td align=right>
<font size=2>F-5</font>
        </td>
  </tr>
  <tr valign="bottom">
    <td align=left colspan=2>&nbsp;</td>
    <td align=right>&nbsp;</td>
  </tr>
  <tr valign="bottom">

    <td align=left colspan=2>
<font size=2>Consolidated Statements of Changes in Stockholders&#146; Equity</font>
        </td>
    <td align=right>&nbsp;

        </td>
  </tr>
  <tr valign="bottom">

    <td align=left colspan=2>
 &nbsp; &nbsp; &nbsp; &nbsp;<font size=2>for the years ended December 31, 2007, 2006 and 2005</font>
        </td>
    <td align=right>
<font size=2>F-6</font>
        </td>
  </tr>
  <tr valign="bottom">
    <td align=left colspan=2>&nbsp;</td>
    <td align=right>&nbsp;</td>
  </tr>
  <tr valign="bottom">

    <td align=left colspan=2>
<font size=2>Consolidated Statements of Changes in Financial Position for</font>
        </td>
    <td align=right>&nbsp;

        </td>
  </tr>
  <tr valign="bottom">

    <td align=left colspan=2>
 &nbsp; &nbsp; &nbsp; &nbsp;<font size=2>the years ended December 31, 2007, 2006 and 2005</font>
        </td>
    <td align=right>
<font size=2>F-7</font>
        </td>
  </tr>
  <tr valign="bottom">
    <td align=left colspan=2>&nbsp;</td>
    <td align=right>&nbsp;</td>
  </tr>
  <tr valign="bottom">

    <td align=left colspan=2>
<font size=2>Notes to Consolidated Financial Statements</font>
        </td>
    <td align=right>
<font size=2>F-8</font>
        </td>
  </tr>
  <tr valign="bottom">
    <td align=left colspan=2>&nbsp;</td>
    <td align=right>&nbsp;</td>
  </tr>
  <tr valign="bottom">

    <td align=left colspan=2>
<b><font size=2>Schedules to Financial Statements</font></b>
        </td>
    <td align=right>&nbsp;

        </td>
  </tr>
  <tr valign="bottom">

    <td align=left>
<font size=2>Schedule I-</font>
        </td>
    <td align=left>
<font size=2>Condensed Parent Company Balance Sheets as of</font>
        </td>
    <td align=right>&nbsp;

        </td>
  </tr>
  <tr valign="bottom">

    <td align=left>&nbsp;

        </td>
    <td align=left>
<font size=2>December 31, 2007 and 2006</font>
        </td>
    <td align=right>
<font size=2>S-1</font>
        </td>
  </tr>
  <tr valign="bottom">
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=right>&nbsp;</td>
  </tr>
  <tr valign="bottom">

    <td align=left>
<font size=2>Schedule I-</font>
        </td>
    <td align=left>
<font size=2>Condensed Parent Company Statements of Income</font>
        </td>
    <td align=right>&nbsp;

        </td>
  </tr>
  <tr valign="bottom">

    <td align=left>&nbsp;

        </td>
    <td align=left>
<font size=2>for the years ended December 31, 2007, 2006 and 2005</font>
        </td>
    <td align=right>
<font size=2>S-2</font>
        </td>
  </tr>
  <tr valign="bottom">
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=right>&nbsp;</td>
  </tr>
  <tr valign="bottom">

    <td align=left>
<font size=2>Schedule I-</font>
        </td>
    <td align=left>
<font size=2>Condensed Parent Company Statements of Changes in</font>
        </td>
    <td align=right>&nbsp;

        </td>
  </tr>
  <tr valign="bottom">

    <td align=left>&nbsp;

        </td>
    <td align=left>
<font size=2>Financial Position for the years ended December 31, 2007, 2006 and 2005</font>
        </td>
    <td align=right>
<font size=2>S-3</font>
        </td>
  </tr>
  <tr valign="bottom">
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=right>&nbsp;</td>
  </tr>
  <tr valign="bottom">

    <td align=left>
<font size=2>Schedule I-</font>
        </td>
    <td align=left>
<font size=2>Note to Parent Company Financial Statements for the</font>
        </td>
    <td align=right>&nbsp;

        </td>
  </tr>
  <tr valign="bottom">

    <td align=left>&nbsp;

        </td>
    <td align=left>
<font size=2>years ended December 31, 2007, 2006 and 2005</font>
        </td>
    <td align=right>
<font size=2>S-4</font>
        </td>
  </tr>
</table>
<BR>
<P align="center">F-1</P>
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<P align="center">&nbsp;
</P>
<p align=CENTER><font face="Times New Roman, Times, Serif" size=2><b>REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM </b></font></p>
<!-- MARKER FORMAT-SHEET="Para Flush 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>The Board of Directors and
Stockholders <br>
Grupo Simec, S.A.B. de C.V. </font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
have audited the accompanying consolidated balance sheets of Grupo Simec, S.A.B. de C.V.
and subsidiaries as of December 31, 2007 and 2006, and the related consolidated
statements of income, changes in stockholders&#146; equity and changes in financial
position for each of the three years in the period ended December 31, 2007. These
financial statements are the responsibility of the Company&#146;s management. Our
responsibility is to express an opinion on these financial statements based on our
audits. We did not audit the financial statements of Simrep Corporation and subsidiaries,
a majority owned subsidiary, for the period ended December 31, 2005 which statements
reflect total assets of Ps. 6,453,517 (thousand), as of December 31, 2005 and total
revenues of Ps. 6,707,749 (thousand), for the period then ended. Those statements were
audited by other independent auditors whose report has been furnished to us, and our
opinion, insofar as it relates to the amounts included for Simrep Corporation and
subsidiaries, is based solely on the report of the other independent auditors. </font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
conducted our audits in accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes assessing
the accounting principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our audits and
the report of other independent auditors provide a reasonable basis for our opinion. </font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
our opinion, based on our audits and the report of the other independent auditors, the
financial statements referred to above present fairly, in all material respects, the
consolidated financial position of Grupo Simec, S.A.B. de C.V. and subsidiaries at
December 31, 2007 and 2006, and the consolidated results of their operations and changes
in their financial position for each of the three years in the period ended December 31,
2007, in conformity with Mexican Financial Reporting Standards, which differ in certain
respects from those followed in the United States of America (see Note 18 to the
consolidated financial statements). </font></p>
<!-- MARKER FORMAT-SHEET="Para Indent 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
also have audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States), Grupo Simec, S.A.B. de C.V.&#146;s internal control over
financial reporting as of December 31, 2007, based on criteria established in Internal
Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission and our report dated June 25, 2008, expressed an unqualified opinion
on the effectiveness of internal control over financial reporting. </font></p>
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<table width=100% cellpadding=0 cellspacing=0>
  <tr valign=TOP>
    <td width=50%><font face="Times New Roman, Times, Serif" size=2>&nbsp; </font></td>
    <td width=50%>
      <p align="center"><font face="Times New Roman, Times, Serif" size=2>
Mancera,
S.C.                                                                                    <br>
        </font><font face="Times New Roman, Times, Serif" size=2>
      A
Member Practice of
                                                                                   <br>
        Ernst
&amp; Young Global
                                                                                    <br>
        <br>
        Jose
Maria Tabares </font></p>
    </td>
  </tr>
</table>
<br>

<!-- MARKER FORMAT-SHEET="Para Flush 00" FSL="Workstation" -->
<p><font face="Times New Roman, Times, Serif" size=2>Guadalajara, Jal., Mexico <br>
June 25, 2008 </font></p>
<P align="center">F-2</P>
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<P align="center">
<B><U>Report of Independent Registered Public Accounting Firm</U></B></P>
<P align="left">
<B>To the Board of Directors and Shareholders of</B><BR>
  <B>SimRep Corporation</B></P>
<P align="left">
We have audited the consolidated balance sheet of SimRep Corporation and subsidiaries as of December 31, 2005, and the related consolidated statements of operations, changes in shareholders&#146; equity and
changes in financial position for the period from July 22 (date of acquisition) to December 31, 2005. These financial statements are the responsibility of the Company&#146;s management. Our responsibility is to express an opinion on these financial
statements based on our audit.</P>
<P align="left">
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board ( United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial
reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company&#146;s internal control over financial reporting. Accordingly, we
express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.</P>
<P align="left">
Accounting principles generally accepted in Mexico vary in certain significant respects from accounting principles generally accepted in the United States of America. Information relating to the nature and effect of such differences is presented in
Note 18 to the financial statements.</P>
<P align="left">
In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of SimRep Corporation and subsidiaries as of December 31, 2005, and
the consolidated results of their operations, the changes in shareholders&#146; equity and the changes in their financial position for the period from July 22 (date of acquisition) to December 31, 2005, in conformity with accounting principles
generally accepted in Mexico.</P>
<P align="left">
These consolidated financial statements have been translated into English solely for the convenience of readers of this language. <br>
  Hern&aacute;ndez, Marr&oacute;n y C&iacute;a., S.C.</P>
<P align="left">
<B>Bernardo Soto Pe&ntilde;afiel, CPA</B><BR>
  <B>Partner</B><BR>
Mexico City</P>
<P align="left">
<B>April 28, 2006, except for the restatement to December 31, 2007 constant Mexican pesos, as to which the date is June 19, 2008.</B></P>
<P align="center">F-3</P>
<HR noshade align="center" width="100%" size="5">



<!-- MARKER PAGE="sheet: 1; page: 1" -->

<P align=center><B>GRUPO SIMEC, S.A.B. DE C.V. AND SUBSIDIARIES</B></P>
<P align=center>Consolidated Balance Sheets<BR>
  <BR>
December 31, 2007 and 2006</P>
<P align=center>(In thousands of Mexican pesos with purchasing power at December 31, 2007)</P>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'" cellspacing=0 cellpadding=0 border=0 width="100%">

  <tr valign=bottom>

    <td align=center>&nbsp; </td>
    <td align=center colspan="4"> <b><font size=2>2007</font></b> </td>
    <td>&nbsp;&nbsp;&nbsp; </td>
    <td align=center colspan="3"> <font size=2>2006</font> </td>
  </tr>

  <tr>

    <td align=center>&nbsp; </td>
    <td align=center colspan=8>
      <hr noshade size=1>

</td>
  </tr>

  <tr valign=bottom>

    <td align=left><b><font size=2>Assets</font></b> </td>
    <td align=left>&nbsp;&nbsp;&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
  </tr>

  <tr valign=bottom>

    <td align=left><font size=2>Current assets:</font> </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
  </tr>

  <tr valign=bottom>

    <td align=left><font size=2>Cash and cash equivalents</font> </td>
    <td align=left>&nbsp;</td>
    <td align=left><b><font size=2>Ps.</font></b> </td>
    <td align=right><b><font size=2>6,396,155</font></b> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left><font size=2>Ps.</font> </td>
    <td align=right><font size=2>2,204,018</font> </td>
    <td align=left>&nbsp; </td>
  </tr>

  <tr>

    <td>&nbsp; </td>
    <td colspan=8>
      <hr noshade size=1>

</td>
  </tr>

  <tr valign=bottom>

    <td align=left><font size=2>Accounts receivable</font> </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
  </tr>

  <tr valign=bottom>

    <td align=left>&nbsp; &nbsp; &nbsp;<font size=2>Trade</font> </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><b><font size=2>2,578,444</font></b> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>2,305,139</font> </td>
    <td align=left>&nbsp; </td>
  </tr>

  <tr valign=bottom>

    <td align=left>&nbsp; &nbsp; &nbsp;<font size=2>Related parties (note 4)</font> </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><b><font size=2>3,572</font></b> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>138</font> </td>
    <td align=left>&nbsp; </td>
  </tr>

  <tr valign=bottom>

    <td align=left>&nbsp; &nbsp; &nbsp;<font size=2>Recoverable taxes</font> </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><b><font size=2>517,645</font></b> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>241,007</font> </td>
    <td align=left>&nbsp; </td>
  </tr>

  <tr valign=bottom>

    <td align=left>&nbsp; &nbsp; &nbsp;<font size=2>Other receivables</font> </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><b><font size=2>52,785</font></b> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>21,693</font> </td>
    <td align=left>&nbsp; </td>
  </tr>

  <tr>

    <td>&nbsp; </td>
    <td colspan=8>
      <hr noshade size=1>

</td>
  </tr>

  <tr valign=bottom>

    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><b><font size=2>3,152,446</font></b> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>2,567,977</font> </td>
    <td align=left>&nbsp; </td>
  </tr>

  <tr valign=bottom>

    <td align=left><font size=2>Less: allowance for doubtful accounts (note 2s)</font> </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><b><font size=2>97,255</font></b> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>61,745</font> </td>
    <td align=left>&nbsp; </td>
  </tr>

  <tr>

    <td>&nbsp; </td>
    <td colspan=8>
      <hr noshade size=1>

</td>
  </tr>

  <tr valign=bottom>

    <td align=left>&nbsp; &nbsp; &nbsp;<font size=2>Total accounts receivable, net</font> </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><b><font size=2>3,055,191</font></b> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>2,506,232</font> </td>
    <td align=left>&nbsp; </td>
  </tr>

  <tr>

    <td colspan=9>&nbsp; </td>
  </tr>

  <tr valign=bottom>

    <td align=left><font size=2>Inventories, net (note 5)</font> </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><b><font size=2>4,930,404</font></b> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>5,052,434</font> </td>
    <td align=left>&nbsp; </td>
  </tr>

  <tr valign=bottom>

    <td align=left><font size=2>Prepaid expenses</font> </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><b><font size=2>72,005</font></b> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>108,361</font> </td>
    <td align=left>&nbsp; </td>
  </tr>

  <tr>

    <td>&nbsp; </td>
    <td colspan=8>
      <hr noshade size=1>

</td>
  </tr>

  <tr valign=bottom>

    <td align=left><font size=2>Total current assets</font> </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><b><font size=2>14,453,755</font></b> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>9,871,045</font> </td>
    <td align=left>&nbsp; </td>
  </tr>

  <tr>

    <td colspan=9>&nbsp; </td>
  </tr>

  <tr valign=bottom>

    <td align=left><font size=2>Non-current inventories (note 2f)</font> </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><b><font size=2>97,459</font></b> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>89,167</font> </td>
    <td align=left>&nbsp; </td>
  </tr>

  <tr valign=bottom>

    <td align=left><font size=2>Property, plant and equipment, net (note 7)</font> </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><b><font size=2>7,900,638</font></b> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>7,599,837</font> </td>
    <td align=left>&nbsp; </td>
  </tr>

  <tr valign=bottom>

    <td align=left><font size=2>Other assets and deferred charges, net (note 8)</font> </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><b><font size=2>389,405</font></b> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>482,731</font> </td>
    <td align=left>&nbsp; </td>
  </tr>

  <tr>

    <td>&nbsp; </td>
    <td colspan=8>
      <hr noshade size=1>

</td>
  </tr>

  <tr valign=bottom>

    <td align=left><font size=2>Total assets</font> </td>
    <td align=left>&nbsp;</td>
    <td align=left><b><font size=2>Ps.</font></b> </td>
    <td align=right><b><font size=2>22,841,257</font></b> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left><font size=2>Ps.</font> </td>
    <td align=right><font size=2>18,042,780</font> </td>
    <td align=left>&nbsp; </td>
  </tr>

  <tr>

    <td>&nbsp; </td>
    <td colspan=8>
      <hr noshade size=2>

</td>
  </tr>

  <tr>

    <td colspan=9>&nbsp; </td>
  </tr>

  <tr valign=bottom>

    <td align=left><b><font size=2>Liabilities and stockholders' equity</font></b> </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
  </tr>

  <tr valign=bottom>

    <td align=left><font size=2>Current liabilities:</font> </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
  </tr>

  <tr valign=bottom>

    <td align=left>&nbsp; &nbsp; &nbsp;<font size=2>Current portion of debt</font> </td>
    <td align=left>&nbsp;</td>
    <td align=left><b><font size=2>Ps.</font></b> </td>
    <td align=right><b><font size=2>3,282</font></b> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left><font size=2>Ps.</font> </td>
    <td align=right><font size=2>3,406</font> </td>
    <td align=left>&nbsp; </td>
  </tr>

  <tr valign=bottom>

    <td align=left>&nbsp; &nbsp; &nbsp;<font size=2>Accounts payable</font> </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><b><font size=2>2,104,235</font></b> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>1,848,857</font> </td>
    <td align=left>&nbsp; </td>
  </tr>

  <tr valign=bottom>

    <td align=left>&nbsp; &nbsp; &nbsp;<font size=2>Related parties (note 4)</font> </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><b><font size=2>103,879</font></b> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>238,555</font> </td>
    <td align=left>&nbsp; </td>
  </tr>

  <tr valign=bottom>

    <td align=left>&nbsp; &nbsp; &nbsp;<font size=2>Other accounts payable and accrued expenses</font> </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><b><font size=2>648,728</font></b> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>816,680</font> </td>
    <td align=left>&nbsp; </td>
  </tr>

  <tr>

    <td>&nbsp; </td>
    <td colspan=8>
      <hr noshade size=1>

</td>
  </tr>

  <tr valign=bottom>

    <td align=left><font size=2>Total current liabilities</font> </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><b><font size=2>2,860,124</font></b> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>2,907,498</font> </td>
    <td align=left>&nbsp; </td>
  </tr>

  <tr>

    <td>&nbsp; </td>
    <td colspan=8>
      <hr noshade size=1>

</td>
  </tr>

  <tr>

    <td colspan=9>&nbsp; </td>
  </tr>

  <tr valign=bottom>

    <td align=left>&nbsp; &nbsp; &nbsp;<font size=2>Seniority premiums and termination benefits (note 10)</font> </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><b><font size=2>18,422</font></b> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>23,107</font> </td>
    <td align=left>&nbsp; </td>
  </tr>

  <tr valign=bottom>

    <td align=left>&nbsp; &nbsp; &nbsp;<font size=2>Deferred income tax (note 12)</font> </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><b><font size=2>2,672,480</font></b> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>2,081,717</font> </td>
    <td align=left>&nbsp; </td>
  </tr>

  <tr valign=bottom>

    <td align=left>&nbsp; &nbsp; &nbsp;<font size=2>Other long-term liabilities (note 16)</font> </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><b><font size=2>38,197</font></b> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>70,125</font> </td>
    <td align=left>&nbsp; </td>
  </tr>

  <tr>

    <td>&nbsp; </td>
    <td colspan=8>
      <hr noshade size=1>

</td>
  </tr>

  <tr valign=bottom>

    <td align=left><font size=2>Total long-term liabilities</font> </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><b><font size=2>2,729,099</font></b> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>2,174,949</font> </td>
    <td align=left>&nbsp; </td>
  </tr>

  <tr>

    <td>&nbsp; </td>
    <td colspan=8>
      <hr noshade size=1>

</td>
  </tr>

  <tr valign=bottom>

    <td align=left><font size=2>Total liabilities</font> </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><b><font size=2>5,589,223</font></b> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>5,082,447</font> </td>
    <td align=left>&nbsp; </td>
  </tr>

  <tr>

    <td>&nbsp; </td>
    <td colspan=8>
      <hr noshade size=1>

</td>
  </tr>

  <tr>

    <td colspan=9>&nbsp; </td>
  </tr>

  <tr valign=bottom>

    <td align=left><font size=2>Stockholders' equity (note 13):</font> </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
  </tr>

  <tr valign=bottom>

    <td align=left><font size=2>Capital stock</font> </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><b><font size=2>4,030,427</font></b> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>3,763,412</font> </td>
    <td align=left>&nbsp; </td>
  </tr>

  <tr valign=bottom>

    <td align=left><font size=2>Additional paid-in capital</font> </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><b><font size=2>3,151,317</font></b> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>997,606</font> </td>
    <td align=left>&nbsp; </td>
  </tr>

  <tr valign=bottom>

    <td align=left><font size=2>Retained earnings</font> </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><b><font size=2>8,550,179</font></b> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>7,021,122</font> </td>
    <td align=left>&nbsp; </td>
  </tr>

  <tr valign=bottom>

    <td align=left><font size=2>Cumulative deferred income tax</font> </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><b><font size=2>(970,513</font></b> </td>
    <td align=left><b><font size=2>)</font></b> </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>(970,513</font> </td>
    <td align=left><font size=2>)</font> </td>
  </tr>

  <tr valign=bottom>

    <td align=left><font size=2>Translation effect in foreign subsidiaries, net</font> </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><b><font size=2>(31,710</font></b> </td>
    <td align=left><b><font size=2>)</font></b> </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>(25,539</font> </td>
    <td align=left><font size=2>)</font> </td>
  </tr>

  <tr valign=bottom>

    <td align=left><font size=2>Deficit on restatement of stockholders&#146; equity</font> </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><b><font size=2>132,155</font></b> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>(73,659</font> </td>
    <td align=left><font size=2>)</font> </td>
  </tr>

  <tr valign=bottom>

    <td align=left><font size=2>Fair value of derivative financial instruments (note 6)</font> </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><b><font size=2>-</font></b> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>(4,557</font> </td>
    <td align=left><font size=2>)</font> </td>
  </tr>

  <tr>

    <td>&nbsp; </td>
    <td colspan=8>
      <hr noshade size=1>

</td>
  </tr>

  <tr valign=bottom>

    <td align=left><font size=2>Majority stockholders' equity</font> </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><b><font size=2>14,861,855</font></b> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>10,707,872</font> </td>
    <td align=left>&nbsp; </td>
  </tr>

  <tr valign=bottom>

    <td align=left><font size=2>Minority interest</font> </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><b><font size=2>2,390,179</font></b> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>2,252,461</font> </td>
    <td align=left>&nbsp; </td>
  </tr>

  <tr>

    <td>&nbsp; </td>
    <td colspan=8>
      <hr noshade size=1>

</td>
  </tr>

  <tr valign=bottom>

    <td align=left><font size=2>Total stockholders' equity</font> </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><b><font size=2>17,252,034</font></b> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>12,960,333</font> </td>
    <td align=left>&nbsp; </td>
  </tr>

  <tr>

    <td>&nbsp; </td>
    <td colspan=8>
      <hr noshade size=1>

</td>
  </tr>

  <tr valign=bottom>

    <td align=left><font size=2>Total liabilities and stockholders' equity</font> </td>
    <td align=left>&nbsp;</td>
    <td align=left><b><font size=2>Ps.</font></b> </td>
    <td align=right><b><font size=2>22,841,257</font></b> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left><font size=2>Ps.</font> </td>
    <td align=right><font size=2>18,042,780</font> </td>
    <td align=left>&nbsp; </td>
  </tr>

  <tr>

    <td>&nbsp; </td>
    <td colspan=8>
      <hr noshade size=2>

</td>
  </tr>
</table>
<BR>

<P align=left>See accompanying notes to consolidated financial statements.</P>
<P align=center>F-4</P>
<HR align=center width="100%" noshade SIZE=5>


<!-- MARKER PAGE="sheet: 1; page: 1" -->

<P align=center><B>GRUPO SIMEC, S.A.B. DE C.V. AND SUBSIDIARIES</B></P>
<P align=center>Consolidated Statements of Income<BR>
  <BR>
Years ended December 31, 2007, 2006 and 2005</P>
<P align=center>(In thousands of Mexican pesos with purchasing power at December 31, 2007, except share and earnings per share figures )</P>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'" cellspacing=0 cellpadding=0 border=0 width="100%">

  <tr valign=bottom>

    <td align=center>&nbsp; </td>
    <td align=center colspan="4"> <b><font size=2>2007</font></b> </td>
    <td>&nbsp;&nbsp;&nbsp; </td>
    <td align=center colspan="3"> <font size=2>2006</font> </td>
    <td>&nbsp;&nbsp;&nbsp; </td>
    <td align=center colspan="4"> <font size=2>2005</font> </td>
  </tr>

  <tr>

    <td align=center>&nbsp; </td>
    <td align=center colspan=13>
      <hr noshade size=1>

</td>
  </tr>

  <tr valign=bottom>

    <td align=left><font size=2>Net sales</font> </td>
    <td align=left>&nbsp;&nbsp;&nbsp;</td>
    <td align=left><b><font size=2>Ps.</font></b> </td>
    <td align=right><b><font size=2>24,106,094</font></b> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left><font size=2>Ps.</font> </td>
    <td align=right><font size=2>23,515,297</font> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left><font size=2>Ps.</font> </td>
    <td align=right><font size=2>13,892,574</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;&nbsp;&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=left><font size=2>Direct cost of sales</font> </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><b><font size=2>20,498,918</font></b> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>19,131,879</font> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>11,111,529</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr>

    <td>&nbsp; </td>
    <td colspan=13>
      <hr noshade size=1>

</td>
  </tr>

  <tr valign=bottom>

    <td align=left>&nbsp; &nbsp; &nbsp;<font size=2>Marginal profit</font> </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><b><font size=2>3,607,176</font></b> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>4,383,418</font> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>2,781,045</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=left><font size=2>Indirect overhead, selling, general and</font> </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=left>&nbsp; &nbsp; &nbsp;<font size=2>administrative expenses</font> </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><b><font size=2>1,423,159</font></b> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>1,351,682</font> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>1,090,808</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr>

    <td>&nbsp; </td>
    <td colspan=13>
      <hr noshade size=1>

</td>
  </tr>

  <tr valign=bottom>

    <td align=left><font size=2>Operating income</font> </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><b><font size=2>2,184,017</font></b> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>3,031,736</font> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>1,690,237</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr>

    <td>&nbsp; </td>
    <td colspan=13>
      <hr noshade size=1>

</td>
  </tr>

  <tr valign=bottom>

    <td align=left><font size=2>Other income (expenses), net:</font> </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><b><font size=2>21,329</font></b> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>39,205</font> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>(12,520</font> </td>
    <td align=left><font size=2>)</font> </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=left><font size=2>Comprehensive financing cost:</font> </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=left>&nbsp; &nbsp; &nbsp;<font size=2>Interest income (expense), net</font> </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><b><font size=2>273,313</font></b> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>46,932</font> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>(16,853</font> </td>
    <td align=left><font size=2>)</font> </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=left>&nbsp; &nbsp; &nbsp;<font size=2>Foreign exchange (loss) gain, net</font> </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><b><font size=2>(37,879</font></b> </td>
    <td align=left><b><font size=2>)</font></b> </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>(37,424</font> </td>
    <td align=left><font size=2>)</font> </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>(80,655</font> </td>
    <td align=left><font size=2>)</font> </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=left>&nbsp; &nbsp; &nbsp;<font size=2>Monetary position loss</font> </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><b><font size=2>(194,931</font></b> </td>
    <td align=left><b><font size=2>)</font></b> </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>(72,952</font> </td>
    <td align=left><font size=2>)</font> </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>(57,494</font> </td>
    <td align=left><font size=2>)</font> </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr>

    <td>&nbsp; </td>
    <td colspan=13>
      <hr noshade size=1>

</td>
  </tr>

  <tr valign=bottom>

    <td align=left>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<font size=2>Comprehensive financial result, net</font> </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><b><font size=2>40,503</font></b> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>(63,444</font> </td>
    <td align=left><font size=2>)</font> </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>(155,002</font> </td>
    <td align=left><font size=2>)</font> </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr>

    <td>&nbsp; </td>
    <td colspan=13>
      <hr noshade size=1>

</td>
  </tr>

  <tr>

    <td colspan=14>&nbsp; </td>
  </tr>

  <tr valign=bottom>

    <td align=left>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<font size=2>Income before income tax</font> </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><b><font size=2>2,245,849</font></b> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>3,007,497</font> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>1,522,715</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr>

    <td>&nbsp; </td>
    <td colspan=13>
      <hr noshade size=1>

</td>
  </tr>

  <tr valign=bottom>

    <td align=left><font size=2>Income tax (note 12):</font> </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=left>&nbsp; &nbsp; &nbsp;<font size=2>Current</font> </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><b><font size=2>111,522</font></b> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>627,612</font> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>84,957</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=left>&nbsp; &nbsp; &nbsp;<font size=2>Deferred</font> </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><b><font size=2>509,152</font></b> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>(18,891</font> </td>
    <td align=left><font size=2>)</font> </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>47,723</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr>

    <td>&nbsp; </td>
    <td colspan=13>
      <hr noshade size=1>

</td>
  </tr>

  <tr valign=bottom>

    <td align=left><font size=2>Total income tax</font> </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><b><font size=2>620,674</font></b> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>608,721</font> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>132,680</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr>

    <td>&nbsp; </td>
    <td colspan=13>
      <hr noshade size=1>

</td>
  </tr>

  <tr valign=bottom>

    <td align=left><font size=2>Net consolidated income</font> </td>
    <td align=left>&nbsp;</td>
    <td align=left><b><font size=2>Ps.</font></b> </td>
    <td align=right><b><font size=2>1,625,175</font></b> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left><font size=2>Ps.</font> </td>
    <td align=right><font size=2>2,398,776</font> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left><font size=2>Ps.</font> </td>
    <td align=right><font size=2>1,390,035</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr>

    <td>&nbsp; </td>
    <td colspan=13>
      <hr noshade size=2>

</td>
  </tr>

  <tr valign=bottom>

    <td align=left><u><font size=2>Allocation of net income</font></u> </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=left>&nbsp; &nbsp; &nbsp;<font size=2>Minority interest</font> </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><b><font size=2>96,118</font></b> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>220,082</font> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>18,739</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=left>&nbsp; &nbsp; &nbsp;<font size=2>Majority interest</font> </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><b><font size=2>1,529,057</font></b> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>2,178,694</font> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>1,371,296</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr>

    <td>&nbsp; </td>
    <td colspan=13>
      <hr noshade size=1>

</td>
  </tr>

  <tr valign=bottom>

    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
    <td align=left><b><font size=2>Ps.</font></b> </td>
    <td align=right><b><font size=2>1,625,175</font></b> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left><font size=2>Ps.</font> </td>
    <td align=right><font size=2>2,398,776</font> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left><font size=2>Ps.</font> </td>
    <td align=right><font size=2>1,390,035</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr>

    <td>&nbsp; </td>
    <td colspan=13>
      <hr noshade size=2>

</td>
  </tr>

  <tr valign=bottom>

    <td align=left><font size=2>Majority earnings per share:</font> </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=left>&nbsp; &nbsp; &nbsp;<font size=2>Weighted average shares outstanding</font> </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><b><font size=2>468,228,497</font></b> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>420,339,873</font> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>413,788,797</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr>

    <td>&nbsp; </td>
    <td colspan=13>
      <hr noshade size=1>

</td>
  </tr>

  <tr valign=bottom>

    <td align=left>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<font size=2>Majority earnings per share (pesos)</font> </td>
    <td align=left>&nbsp;</td>
    <td align=left><b><font size=2>Ps.</font></b> </td>
    <td align=right><b><font size=2>3.27</font></b> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left><font size=2>Ps.</font> </td>
    <td align=right><font size=2>5.18</font> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left><font size=2>Ps.</font> </td>
    <td align=right><font size=2>3.31</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr>

    <td>&nbsp; </td>
    <td colspan=13>
      <hr noshade size=2>

</td>
  </tr>
</table>
<BR>

<P align=left>See accompanying notes to consolidated financial statements.</P>
<P align=center>F-5</P>
<HR align=center width="100%" noshade SIZE=5>


<!-- MARKER PAGE="sheet: 1; page: 1" -->

<P align=center><B>GRUPO SIMEC, S.A.B. DE C.V. AND SUBSIDIARIES</B><BR>
  <BR>
Consolidated Statements of Changes in Stockholders' Equity<BR>
  <BR>
Years ended December 31, 2007, 2006 and 2005<BR>
  <BR>
(In thousands of Mexican pesos with purchasing power at December 31, 2007)</P>
<table style="FONT-FAMILY: 'Times New Roman'" cellspacing=0 cellpadding=0 border=0 width="740" align="center">








  <tr valign=bottom>

    <td align=center>&nbsp; </td>
    <td align=center colspan="3"> <font size="1"><b>Capital</b><br>
      <b>stock</b>&nbsp;</font></td>
    <td align=center colspan="2"> <font size="1"><b>Additional</b><br>
      <b>paid-in capital</b>&nbsp;&nbsp; </font></td>
    <td align=center>&nbsp;</td>
    <td align=center colspan="3"> <font size="1"><b>Contributions</b><br>
      <b>for future</b><br>
      <b>capital stock</b><br>
      <b>increases</b></font></td>
    <td align=center colspan="2"> <font size="1"><b>Retained</b><br>
      <b>earnings</b>&nbsp;</font></td>
    <td>&nbsp;</td>
    <td align=center colspan="3"> <font size="1"><b>Cumulative</b><br>
      <b>deferred</b><br>
      <b>income tax</b> </font></td>
    <td align=center colspan="3"> <font size="1"><b>Deficit on</b><br>
      <b>restatement of</b><br>
      <b>stockholders&#146;</b><br>
      <b>equity</b> </font></td>
    <td align=center>&nbsp;</td>
  </tr>

  <tr>

    <td align=center>&nbsp; </td>
    <td align=center colspan=19>
      <hr noshade size=1>

</td>
  </tr>



  <tr valign=bottom>

    <td align=left><font size="1">Balance at December 31, 2004</font> </td>
    <td align=right><font size="1">Ps.</font> </td>
    <td align=right><font size="1">3,651,888</font> </td>
    <td><font size="1">&nbsp;&nbsp;&nbsp;</font></td>
    <td align=left><font size="1">Ps.</font> </td>
    <td align=right><font size="1">730,772</font> </td>
    <td align=right><font size="1">&nbsp;&nbsp;</font></td>
    <td align=right><font size="1">Ps.</font> </td>
    <td align=right><font size="1">246,755</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1">Ps.</font> </td>
    <td align=right><font size="1">3,471,132</font> </td>
    <td>&nbsp;&nbsp; </td>
    <td align=left><font size="1">Ps.</font> </td>
    <td align=right><font size="1">(970,513</font> </td>
    <td align=left><font size="1">)</font> </td>
    <td align=left><font size="1">Ps.</font> </td>
    <td align=right><font size="1">192,113</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>



  <tr valign=bottom>

    <td align=left><font size="1">Increase in capital stock (note 13)</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1">72,868</font> </td>
    <td><font size="1"></font></td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1">174,589</font> </td>
    <td align=left><font size="1"></font></td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1">(246,755</font> </td>
    <td align=left><font size="1">)</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1">-</font> </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1">-</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1">-</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>



  <tr valign=bottom>

    <td align=left><font size="1">Investment in PAV Republic &#150; ICH</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1">-</font> </td>
    <td><font size="1"></font></td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1">-</font> </td>
    <td align=left><font size="1"></font></td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1">-</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1">-</font> </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1">-</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1">-</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>



  <tr valign=bottom>

    <td align=left><font size="1">Comprehensive income:</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td><font size="1"></font></td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left><font size="1"></font></td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=left><font size="1">Net income for the year</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1">-</font> </td>
    <td><font size="1"></font></td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1">-</font> </td>
    <td align=left><font size="1"></font></td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1">-</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1">1,371,296</font> </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1">-</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1">-</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=left><font size="1">&nbsp;Translation effect in foreign subsidiaries</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1">-</font> </td>
    <td><font size="1"></font></td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1">-</font> </td>
    <td align=left><font size="1"></font></td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1">-</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1">-</font> </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1">-</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1">-</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=left><font size="1">&nbsp;Effect of market value of swaps net of deferred taxes</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1">-</font> </td>
    <td><font size="1"></font></td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1">-</font> </td>
    <td align=left><font size="1"></font></td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1">-</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1">-</font> </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1">-</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1">-</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=left><font size="1">&nbsp;Result of holding non-monetary assets,</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td><font size="1"></font></td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left><font size="1"></font></td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=left><font size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;net of deferred taxes</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1">-</font> </td>
    <td><font size="1"></font></td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1">-</font> </td>
    <td align=left><font size="1"></font></td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1">-</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1">-</font> </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1">-</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1">(373,991</font> </td>
    <td align=left><font size="1">)</font> </td>
    <td align=left>&nbsp;</td>
  </tr>





  <tr>

    <td>&nbsp; </td>
    <td colspan=19>
      <hr noshade size=1>

</td>
  </tr>



  <tr valign=bottom>

    <td align=left><font size="1">Balance at December 31, 2005</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1">3,724,756</font> </td>
    <td><font size="1"></font></td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1">905,361</font> </td>
    <td align=left><font size="1"></font></td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1">-</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1">4,842,428</font> </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1">(970,513</font> </td>
    <td align=left><font size="1">)</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1">(181,878</font> </td>
    <td align=left><font size="1">)</font> </td>
    <td align=left>&nbsp;</td>
  </tr>



  <tr valign=bottom>

    <td align=left><font size="1">Increase in capital stock (note 13)</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1">38,656</font> </td>
    <td><font size="1"></font></td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1">92,245</font> </td>
    <td align=left><font size="1"></font></td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1">-</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1">-</font> </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1">-</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1">-</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>



  <tr valign=bottom>

    <td align=left><font size="1">Investment in PAV Republic &#150; ICH</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1">-</font> </td>
    <td><font size="1"></font></td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1">-</font> </td>
    <td align=left><font size="1"></font></td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1">-</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1">-</font> </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1">-</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1">-</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>



  <tr valign=bottom>

    <td align=left><font size="1">Comprehensive income:</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td><font size="1"></font></td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left><font size="1"></font></td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=left><font size="1">Net income for the year</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1">-</font> </td>
    <td><font size="1"></font></td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1">-</font> </td>
    <td align=left><font size="1"></font></td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1">-</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1">2,178,694</font> </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1">-</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1">-</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=left><font size="1">&nbsp;Translation effect in foreign subsidiaries</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1">-</font> </td>
    <td><font size="1"></font></td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1">-</font> </td>
    <td align=left><font size="1"></font></td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1">-</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1">-</font> </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1">-</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1">-</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=left><font size="1">&nbsp;Effect of market value of swaps net of deferred taxes</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1">-</font> </td>
    <td><font size="1"></font></td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1">-</font> </td>
    <td align=left><font size="1"></font></td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1">-</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1">-</font> </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1">-</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1">-</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=left><font size="1">&nbsp;Result of holding non-monetary assets,</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td><font size="1"></font></td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left><font size="1"></font></td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=left><font size="1">&nbsp;&nbsp;&nbsp;&nbsp;net of deferred taxes</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1">-</font> </td>
    <td><font size="1"></font></td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1">-</font> </td>
    <td align=left><font size="1"></font></td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1">-</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1">-</font> </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1">-</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1">108,219</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>





  <tr>

    <td>&nbsp; </td>
    <td colspan=19>
      <hr noshade size=1>

</td>
  </tr>



  <tr valign=bottom>

    <td align=left><font size="1">Balance at December 31, 2006</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1">3,763,412</font> </td>
    <td><font size="1"></font></td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1">997,606</font> </td>
    <td align=left><font size="1"></font></td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1">-</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1">7,021,122</font> </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1">(970,513</font> </td>
    <td align=left><font size="1">)</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1">(73,659</font> </td>
    <td align=left><font size="1">)</font> </td>
    <td align=left>&nbsp;</td>
  </tr>



  <tr valign=bottom>

    <td align=left><font size="1">Increase in capital stock (note 13)</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1"><b>267,015</b> </font></td>
    <td><font size="1"></font></td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1"><b>2,153,711</b> </font></td>
    <td align=left><font size="1"></font></td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1"><b>-</b> </font></td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1"><b>-</b> </font></td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1"><b>-</b> </font></td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1"><b>-</b> </font></td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>



  <tr valign=bottom>

    <td align=left><font size="1">Investment in Simec International &#150; ICH</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1"><b>-</b> </font></td>
    <td><font size="1"></font></td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1"><b>-</b> </font></td>
    <td align=left><font size="1"></font></td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1"><b>-</b> </font></td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1"><b>-</b> </font></td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1"><b>-</b> </font></td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1"><b>-</b> </font></td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>



  <tr valign=bottom>

    <td align=left><font size="1">Comprehensive income:</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td><font size="1"></font></td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left><font size="1"></font></td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=left><font size="1">Net income for the year</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1"><b>-</b> </font></td>
    <td><font size="1"></font></td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1"><b>-</b> </font></td>
    <td align=left><font size="1"></font></td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1"><b>-</b> </font></td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1"><b>1,529,057</b> </font></td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1"><b>-</b> </font></td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1"><b>-</b> </font></td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=left><font size="1">&nbsp;Translation effect in foreign subsidiaries</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1"><b>-</b> </font></td>
    <td><font size="1"></font></td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1"><b>-</b> </font></td>
    <td align=left><font size="1"></font></td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1"><b>-</b> </font></td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1"><b>-</b> </font></td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1"><b>-</b> </font></td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1"><b>-</b> </font></td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=left><font size="1">&nbsp;Effect of market value of swaps net of deferred taxes</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1"><b>-</b> </font></td>
    <td><font size="1"></font></td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1"><b>-</b> </font></td>
    <td align=left><font size="1"></font></td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1"><b>-</b> </font></td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1"><b>-</b> </font></td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1"><b>-</b> </font></td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1"><b>-</b> </font></td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=left><font size="1">&nbsp;Result of holding non-monetary assets,</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td><font size="1"></font></td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left><font size="1"></font></td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=left><font size="1">&nbsp;&nbsp;&nbsp;&nbsp;net of deferred taxes</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1"><b>-</b> </font></td>
    <td><font size="1"></font></td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1"><b>-</b> </font></td>
    <td align=left><font size="1"></font></td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1"><b>-</b> </font></td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1"><b>-</b> </font></td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1"><b>-</b> </font></td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1"><b>205,814</b> </font></td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>





  <tr>

    <td>&nbsp; </td>
    <td colspan=19>
      <hr noshade size=1>

</td>
  </tr>



  <tr valign=bottom>

    <td align=left><font size="1">Balances at December 31, 2007</font> </td>
    <td align=right><font size="1"><b>Ps.</b> </font></td>
    <td align=right><font size="1"><b>4,030,427</b> </font></td>
    <td><font size="1"></font></td>
    <td align=left><font size="1"><b>Ps.</b> </font></td>
    <td align=right><font size="1"><b>3,151,317</b> </font></td>
    <td align=right><font size="1"></font></td>
    <td align=right><font size="1"><b>Ps.</b> </font></td>
    <td align=right><font size="1"><b>-</b> </font></td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1"><b>Ps.</b> </font></td>
    <td align=right><font size="1"><b>8,550,179</b> </font></td>
    <td>&nbsp; </td>
    <td align=left><font size="1"><b>Ps.</b> </font></td>
    <td align=right><font size="1"><b>(970,513</b> </font></td>
    <td align=left><font size="1"><b>)</b> </font></td>
    <td align=left><font size="1"><b>Ps.</b> </font></td>
    <td align=right><font size="1"><b>132,155</b> </font></td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr>

    <td>&nbsp; </td>
    <td colspan=19>
      <hr noshade size=2>

</td>
  </tr>
</table>
<br>
<table style="FONT-FAMILY: 'Times New Roman'" cellspacing=0 cellpadding=0 border=0 align="center" width="740">








  <tr valign=bottom>

    <td align=center>&nbsp; </td>
    <td align=center colspan="3">  <font size="1"><b>Translation</b><br>
      <b>effect in</b><br>
      <b>foreign</b><br>
      <b>subsidiaries</b> </font></td>
    <td colspan="3" align="center"><font size="1">&nbsp; <b>Fair</b><br>
      <b>value of</b><br>
      <b>derivative</b><br>
      <b>financial</b><br>
      <b>instruments</b> </font></td>
    <td colspan="3" align="center"><font size="1"><b>Total</b><br>
      <b>majority</b><br>
      <b>interest</b></font></td>
    <td align=center colspan="3"> <font size="1"><b>Minority</b><br>
      <b>interest</b> </font></td>
    <td align=center colspan="3"> <font size="1"><b>Comprehensive</b><br>
      <b>income</b></font></td>
    <td colspan="4" align="center"> <font size="1"><b>Total</b><br>
      <b>stockholders'</b><br>
      <b>equity</b> </font></td>
  </tr>

  <tr>

    <td align=center>&nbsp; </td>
    <td align=center colspan=19>
      <hr noshade size=1>
    </td>
  </tr>



  <tr valign=bottom>

    <td align=left><font size="1">Balance at December 31, 2004</font> </td>
    <td align=left><font size="1">Ps.</font> </td>
    <td align=right>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align="right"><font size="1">Ps.</font> </td>
    <td align=right><font size="1">13,764</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1">Ps.</font> </td>
    <td align=right><font size="1">7,335,911</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1">Ps.</font> </td>
    <td align=right><font size="1">345</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right>&nbsp; </td>
    <td align=right>&nbsp;</td>
    <td align="right"><font size="1">Ps.</font> </td>
    <td align=right><font size="1">7,336,256</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>



  <tr valign=bottom>

    <td align=left><font size="1">Increase in capital stock (note 13)</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1">-</font> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=right><font size="1">-</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1">702</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1">-</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
    <td>&nbsp; </td>
    <td align=right><font size="1">702</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>



  <tr valign=bottom>

    <td align=left><font size="1">Investment in PAV Republic &#150; ICH</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1">-</font> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=right><font size="1">-</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1">-</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1">1,917,686</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
    <td>&nbsp; </td>
    <td align=right><font size="1">1,917,686</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>



  <tr valign=bottom>

    <td align=left><font size="1">Comprehensive income:</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=left><font size="1">Net income for the year</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1">-</font> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=right><font size="1">-</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1">1,371,296</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1">18,739</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left><font size="1">Ps.</font> </td>
    <td align=right><font size="1">1,390,035</font> </td>
    <td align=right>&nbsp;</td>
    <td>&nbsp; </td>
    <td align=right><font size="1">1,390,035</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=left><font size="1">&nbsp;Translation effect in foreign subsidiaries</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1">16,106</font> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=right><font size="1">-</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1">16,106</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1">-</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1">16,106</font> </td>
    <td align=right>&nbsp;</td>
    <td>&nbsp; </td>
    <td align=right><font size="1">16,106</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=left><font size="1">&nbsp;Effect of market value of swaps net of deferred taxes</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1">-</font> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=right><font size="1">29,471</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1">29,471</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1">29,471</font> </td>
    <td align=right>&nbsp;</td>
    <td>&nbsp; </td>
    <td align=right><font size="1">29,471</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=left><font size="1">&nbsp;Result of holding non-monetary assets,</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=left><font size="1">&nbsp;&nbsp;&nbsp;&nbsp;net of deferred taxes</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1">-</font> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=right><font size="1">-</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1">(373,991</font> </td>
    <td align=left><font size="1">)</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1">(373,991</font> </td>
    <td align=left><font size="1">)</font></td>
    <td>&nbsp; </td>
    <td align=right><font size="1">(373,991</font> </td>
    <td align=left><font size="1">)</font> </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr>

    <td colspan=14>&nbsp; </td>
    <td>
      <hr noshade size=1>

</td>
    <td>&nbsp;</td>
    <td>&nbsp; </td>
    <td colspan=3>&nbsp; </td>
  </tr>

  <tr valign=bottom>

    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left><font size="1">Ps.</font> </td>
    <td align=right><font size="1">1,061,621</font> </td>
    <td align=right>&nbsp;</td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr>

    <td>&nbsp; </td>
    <td colspan=12>
      <hr noshade size=1>
    </td>
    <td>&nbsp; </td>
    <td>
      <hr noshade size=2>

</td>
    <td>&nbsp;</td>
    <td>&nbsp; </td>
    <td colspan=3>
      <hr noshade size=1>

</td>
  </tr>



  <tr valign=bottom>

    <td align=left><font size="1">Balance at December 31, 2005</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1">16,106</font> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=right><font size="1">43,235</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1">8,379,495</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1">1,936,770</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
    <td>&nbsp; </td>
    <td align=right><font size="1">10,316,265</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>



  <tr valign=bottom>

    <td align=left><font size="1">Increase in capital stock (note 13)</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1">-</font> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=right><font size="1">-</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1">130,901</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1">-</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1">-</font> </td>
    <td align=right>&nbsp;</td>
    <td>&nbsp; </td>
    <td align=right><font size="1">130,901</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>



  <tr valign=bottom>

    <td align=left><font size="1">Investment in PAV Republic &#150; ICH</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1">-</font> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=right><font size="1">-</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1">-</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1">145,188</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1">-</font> </td>
    <td align=right>&nbsp;</td>
    <td>&nbsp; </td>
    <td align=right><font size="1">145,188</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>



  <tr valign=bottom>

    <td align=left><font size="1">Comprehensive income:</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=left><font size="1">Net income for the year</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1">-</font> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=right><font size="1">-</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1">2,178,694</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1">220,082</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1">2,398,776</font> </td>
    <td align=right>&nbsp;</td>
    <td>&nbsp; </td>
    <td align=right><font size="1">2,398,776</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=left><font size="1">&nbsp;Translation effect in foreign subsidiaries</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1">(41,645</font> </td>
    <td align=left><font size="1">)</font> </td>
    <td>&nbsp; </td>
    <td align=right><font size="1">-</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1">(41,645</font> </td>
    <td align=left><font size="1">)</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1">(41,280</font> </td>
    <td align=left><font size="1">)</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1">(82,925</font> </td>
    <td align=left><font face="Arial, Helvetica, sans-serif" size="1">)</font></td>
    <td>&nbsp; </td>
    <td align=right><font size="1">(82,925</font> </td>
    <td align=left><font size="1">)</font> </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=left><font size="1">&nbsp;Effect of market value of swaps net of deferred taxes</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1">-</font> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=right><font size="1">(47,792</font> </td>
    <td align=left><font size="1">)</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1">(47,792</font> </td>
    <td align=left><font size="1">)</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1">-</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1">(47,792</font> </td>
    <td align=left><font face="Arial, Helvetica, sans-serif" size="1">)</font></td>
    <td>&nbsp; </td>
    <td align=right><font size="1">(47,792</font> </td>
    <td align=left><font size="1">)</font> </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=left><font size="1">&nbsp;Result of holding non-monetary assets,</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=left><font size="1">&nbsp;&nbsp;&nbsp;&nbsp;net of deferred taxes</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1">-</font> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=right><font size="1">-</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1">108,219</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1">(8,299</font> </td>
    <td align=left><font size="1">)</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1">99,920</font> </td>
    <td align=right>&nbsp;</td>
    <td>&nbsp; </td>
    <td align=right><font size="1">99,920</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr>

    <td colspan=14>&nbsp; </td>
    <td>
      <hr noshade size=1>

</td>
    <td>&nbsp;</td>
    <td>&nbsp; </td>
    <td colspan=3>&nbsp; </td>
  </tr>

  <tr valign=bottom>

    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left><font size="1">Ps.</font> </td>
    <td align=right><font size="1">2,367,979</font> </td>
    <td align=right>&nbsp;</td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr>

    <td>&nbsp; </td>
    <td colspan=12>
      <hr noshade size=1>
    </td>
    <td>&nbsp; </td>
    <td>
      <hr noshade size=2>

</td>
    <td>&nbsp;</td>
    <td>&nbsp; </td>
    <td colspan=3>
      <hr noshade size=1>

</td>
  </tr>



  <tr valign=bottom>

    <td align=left><font size="1">Balance at December 31, 2006</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1">(25,539</font> </td>
    <td align=left><font size="1">)</font> </td>
    <td>&nbsp; </td>
    <td align=right><font size="1">(4,557</font> </td>
    <td align=left><font size="1">)</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1">10,707,872</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1">2,252,461</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
    <td>&nbsp; </td>
    <td align=right><font size="1">12,960,333</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>



  <tr valign=bottom>

    <td align=left><font size="1">Increase in capital stock (note 13)</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1"><b>-</b> </font></td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=right><font size="1"><b>-</b> </font></td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1"><b>2,420,726</b> </font></td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1"><b>-</b> </font></td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1"><b>-</b> </font></td>
    <td align=right>&nbsp;</td>
    <td>&nbsp; </td>
    <td align=right><font size="1"><b>2,420,726</b> </font></td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>



  <tr valign=bottom>

    <td align=left><font size="1">Investment in Simec International &#150; ICH</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1"><b>-</b> </font></td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=right><font size="1"><b>-</b> </font></td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1"><b>-</b> </font></td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1"><b>38,436</b> </font></td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1"><b>-</b> </font></td>
    <td align=right>&nbsp;</td>
    <td>&nbsp; </td>
    <td align=right><font size="1"><b>38,436</b> </font></td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>



  <tr valign=bottom>

    <td align=left><font size="1">Comprehensive income:</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=left><font size="1">Net income for the year</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1"><b>-</b> </font></td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=right><font size="1"><b>-</b> </font></td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1"><b>1,529,057</b> </font></td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1"><b>96,118</b> </font></td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1"><b>1,625,175</b> </font></td>
    <td align=right>&nbsp;</td>
    <td>&nbsp; </td>
    <td align=right><font size="1"><b>1,625,175</b> </font></td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=left><font size="1">&nbsp;Translation effect in foreign subsidiaries</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1"><b>(6,171</b> </font></td>
    <td align=left><font size="1"><b>)</b> </font></td>
    <td>&nbsp; </td>
    <td align=right><font size="1"><b>-</b> </font></td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1"><b>(6,171</b> </font></td>
    <td align=left><font size="1"><b>)</b> </font></td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1"><b>(6,055</b> </font></td>
    <td align=left><font size="1"><b>)</b> </font></td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1"><b>(12,226</b> </font></td>
    <td align=left><b><font face="Arial, Helvetica, sans-serif" size="1">)</font></b></td>
    <td>&nbsp; </td>
    <td align=right><font size="1"><b>(12,226</b> </font></td>
    <td align=left><font size="1"><b>)</b> </font></td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=left><font size="1">&nbsp;Effect of market value of swaps net of deferred taxes</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1"><b>-</b> </font></td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=right><font size="1"><b>4,557</b> </font></td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1"><b>4,557</b> </font></td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1"><b>-</b> </font></td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1"><b>4,557</b> </font></td>
    <td align=right>&nbsp;</td>
    <td>&nbsp; </td>
    <td align=right><font size="1"><b>4,557</b> </font></td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=left><font size="1">&nbsp;Result of holding non-monetary assets,</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=left><font size="1">&nbsp;&nbsp;&nbsp;&nbsp;net of deferred taxes</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1"><b>-</b> </font></td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=right><font size="1"><b>-</b> </font></td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1"><b>205,814</b> </font></td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1"><b>9,219</b> </font></td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1"><b>215,033</b> </font></td>
    <td align=right>&nbsp;</td>
    <td>&nbsp; </td>
    <td align=right><font size="1"><b>215,033</b> </font></td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr>

    <td colspan=14>&nbsp; </td>
    <td>
      <hr noshade size=1>

</td>
    <td>&nbsp;</td>
    <td>&nbsp; </td>
    <td colspan=3>&nbsp; </td>
  </tr>

  <tr valign=bottom>

    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left><font size="1"><b>Ps.</b> </font></td>
    <td align=right><font size="1"><b>1,832,539</b> </font></td>
    <td align=right>&nbsp;</td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr>

    <td>&nbsp; </td>
    <td colspan=12>
      <hr noshade size=1>
    </td>
    <td>&nbsp; </td>
    <td>
      <hr noshade size=2>

</td>
    <td>&nbsp;</td>
    <td>&nbsp; </td>
    <td colspan=3>
      <hr noshade size=1>

</td>
  </tr>



  <tr valign=bottom>

    <td align=left><font size="1">Balances at December 31, 2007</font> </td>
    <td align=left><font size="1"><b>Ps.</b> </font></td>
    <td align=right><font size="1"><b>(31,710</b> </font></td>
    <td align=left><font size="1"><b>) </b> </font></td>
    <td align="right"><font size="1"><b>Ps.</b> </font></td>
    <td align=right><font size="1"><b>-</b> </font></td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1"><b>Ps.</b> </font></td>
    <td align=right><font size="1"><b>14,861,855</b> </font></td>
    <td align=left>&nbsp; </td>
    <td align=right><font size="1"><b>Ps.</b> </font></td>
    <td align=right><font size="1"><b>2,390,179</b> </font></td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right>&nbsp;</td>
    <td align=right>&nbsp;</td>
    <td align="right"><font size="1"><b>Ps.</b> </font></td>
    <td align=right><font size="1"><b>17,252,034</b> </font></td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr>

    <td>&nbsp; </td>
    <td colspan=12>
      <hr noshade size=2>

</td>
    <td colspan=3>&nbsp; </td>
    <td>&nbsp; </td>
    <td colspan=3>
      <hr noshade size=2>

</td>
  </tr>
</table>
<p>See accompanying notes to consolidated financial statements.</p>
<P align=center>F-6</P>
<HR align=center width="100%" noshade SIZE=5>


<!-- MARKER PAGE="sheet: 1; page: 1" -->

<P align=center><B>GRUPO SIMEC, S.A.B. DE C.V. AND SUBSIDIARIES</B><BR>
  <BR>
Consolidated Statements of Changes in Financial Position<BR>
  <BR>
Years ended December 31, 2007, 2006 and 2005<BR>
  <BR>
(In thousands of Mexican pesos with purchasing power at December 31, 2007)</P>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'" cellspacing=0 cellpadding=0 border=0 width="100%">

  <tr valign=bottom align="center">

    <td>&nbsp; </td>
    <td>&nbsp; </td>
    <td colspan="2"> <b><font size=2>2007</font></b> </td>
    <td>&nbsp;&nbsp;&nbsp;</td>
    <td>&nbsp; </td>
    <td colspan="2"> <b><font size=2>2006</font></b> </td>
    <td>&nbsp;&nbsp;&nbsp;</td>
    <td>&nbsp; </td>
    <td colspan="3"> <b><font size=2>2005</font></b> </td>
  </tr>

  <tr>

    <td align=center colspan=2>&nbsp; </td>
    <td align=center colspan=11>
      <hr noshade size=1>

</td>
  </tr>

  <tr>

    <td align=center colspan=13>&nbsp; </td>
  </tr>

  <tr valign=bottom>

    <td align=left><font size=2>Operating activities:</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;&nbsp;&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=left><font size=2>Net income</font> </td>
    <td align=left><font size=2>Ps.</font> </td>
    <td align=right><b><font size=2>1,625,175</font></b> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left><font size=2>Ps.</font> </td>
    <td align=right><font size=2>2,398,776</font> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left><font size=2>Ps.</font> </td>
    <td align=right><font size=2>1,390,035</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=left><font size=2>Add (deduct) items not requiring the use of resources</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr>

    <td colspan=13>&nbsp; </td>
  </tr>

  <tr valign=bottom>

    <td align=left>&nbsp; &nbsp; &nbsp;<font size=2>Depreciation and amortization</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><b><font size=2>549,256</font></b> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>449,742</font> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>348,928</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=left>&nbsp; &nbsp; &nbsp;<font size=2>Deferred income tax</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><b><font size=2>509,152</font></b> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>(18,891</font> </td>
    <td align=left><font size=2>)</font> </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>47,723</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=left>&nbsp; &nbsp; &nbsp;<font size=2>Seniority premiums and termination benefits</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><b><font size=2>4,575</font></b> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>5,461</font> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>5,584</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr>

    <td colspan=2>&nbsp; </td>
    <td colspan=11>
      <hr noshade size=1>

</td>
  </tr>



  <tr valign=bottom>

    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><b><font size=2>2,688,158</font></b> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>2,835,088</font> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>1,792,270</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr>

    <td colspan=13>&nbsp; </td>
  </tr>

  <tr valign=bottom>

    <td align=left><font size=2>Net changes in operating assets and liabilities:</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=left>&nbsp; &nbsp; &nbsp;<font size=2>Trade receivable, net</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><b><font size=2>(237,795</font></b> </td>
    <td align=left><b><font size=2>)</font></b> </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>205,508</font> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>(138,575</font> </td>
    <td align=left><font size=2>)</font> </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=left>&nbsp; &nbsp; &nbsp;<font size=2>Other accounts receivable and prepaid expenses</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><b><font size=2>(271,374</font></b> </td>
    <td align=left><b><font size=2>)</font></b> </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>232,258</font> </td>
    <td align=left>&nbsp;</td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>(238,910</font> </td>
    <td align=left><font size=2>)</font> </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=left>&nbsp; &nbsp; &nbsp;<font size=2>Inventories, net</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><b><font size=2>123,835</font></b> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>(1,219,702</font> </td>
    <td align=left><font size=2>)</font> </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>668,114</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=left>&nbsp; &nbsp; &nbsp;<font size=2>Derivative financial instruments</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><b><font size=2>-</font></b> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>-</font> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>(11,728</font> </td>
    <td align=left><font size=2>)</font> </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=left>&nbsp; &nbsp; &nbsp;<font size=2>Related parties receivables</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><b><font size=2>(3,434</font></b> </td>
    <td align=left><b><font size=2>)</font></b> </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>2,494</font> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>3,262</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=left>&nbsp; &nbsp; &nbsp;<font size=2>Accounts payable, other accounts payable and accrued expenses</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><b><font size=2>84,494</font></b> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>378,191</font> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>(177,203</font> </td>
    <td align=left><font size=2>)</font> </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=left>&nbsp; &nbsp; &nbsp;<font size=2>Other long-term liabilities</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><b><font size=2>(31,928</font></b> </td>
    <td align=left><b><font size=2>)</font></b> </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>(49,944</font> </td>
    <td align=left><font size=2>)</font> </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>98,445</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr>

    <td colspan=2>&nbsp; </td>
    <td colspan=11>
      <hr noshade size=1>

</td>
  </tr>



  <tr valign=bottom>

    <td align=left>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<font size=2>Resources provided by operating activities</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><b><font size=2>2,351,956</font></b> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>2,383,893</font> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>1,995,675</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr>

    <td colspan=2>&nbsp; </td>
    <td colspan=11>
      <hr noshade size=1>

</td>
  </tr>

  <tr>

    <td colspan=13>&nbsp; </td>
  </tr>

  <tr valign=bottom>

    <td align=left><font size=2>Financing activities:</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=left>&nbsp; &nbsp; &nbsp;<font size=2>Increase in capital stock</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><b><font size=2>2,420,726</font></b> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>130,901</font> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>702</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=left>&nbsp; &nbsp; &nbsp;<font size=2>Related parties payable (financing)</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><b><font size=2>(134,676</font></b> </td>
    <td align=left><b><font size=2>)</font></b> </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>(254,538</font> </td>
    <td align=left><font size=2>)</font> </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>483,534</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=left>&nbsp; &nbsp; &nbsp;<font size=2>Unpaid foreign exchange gain</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><b><font size=2>-</font></b> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>-</font> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>9,536</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=left>&nbsp; &nbsp; &nbsp;<font size=2>Increase of investment in subsidiaries by Industrias CH</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><b><font size=2>38,436</font></b> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>145,188</font> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>525,562</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=left>&nbsp; &nbsp; &nbsp;<font size=2>Short-term loans (repaid)</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><b><font size=2>(124</font></b> </td>
    <td align=left><b><font size=2>)</font></b> </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>(19,131</font> </td>
    <td align=left><font size=2>)</font> </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>(146,258</font> </td>
    <td align=left><font size=2>)</font> </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=left>&nbsp; &nbsp; &nbsp;<font size=2>Financial debt repayment</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><b><font size=2>-</font></b> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>(419,510</font> </td>
    <td align=left><font size=2>)</font> </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>(1,127,177</font> </td>
    <td align=left><font size=2>)</font> </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=left>&nbsp; &nbsp; &nbsp;<font size=2>Decrease in debt due to restatement to constant Mexican pesos</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=left>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<font size=2>as of year end</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><b><font size=2>-</font></b> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>-</font> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>(5,620</font> </td>
    <td align=left><font size=2>)</font> </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr>

    <td colspan=2>&nbsp; </td>
    <td colspan=11>
      <hr noshade size=1>

</td>
  </tr>



  <tr valign=bottom>

    <td align=left>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<font size=2>Resources (used in ) provided by financing activities</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><b><font size=2>2,324,362</font></b> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>(417,090</font> </td>
    <td align=left><font size=2>)</font> </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>(259,721</font> </td>
    <td align=left><font size=2>)</font> </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr>

    <td colspan=2>&nbsp; </td>
    <td colspan=11>
      <hr noshade size=1>

</td>
  </tr>



  <tr valign=bottom>

    <td align=left><font size=2>Investing activities:</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=left>&nbsp; &nbsp; &nbsp;<font size=2>Increase in long-term inventories</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><b><font size=2>(8,292</font></b> </td>
    <td align=left><b><font size=2>)</font></b> </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>(6,836</font> </td>
    <td align=left><font size=2>)</font> </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>(8,423</font> </td>
    <td align=left><font size=2>)</font> </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=left>&nbsp; &nbsp; &nbsp;<font size=2>Acquisition of property, plant and equipment</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><b><font size=2>(485,668</font></b> </td>
    <td align=left><b><font size=2>)</font></b> </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>(417,219</font> </td>
    <td align=left><font size=2>)</font> </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>(539,706</font> </td>
    <td align=left><font size=2>)</font> </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=left>&nbsp; &nbsp; &nbsp;<font size=2>Proceeds from insurance claim, net (Note 15a)</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><b><font size=2>-</font></b> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>436,900</font> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>-</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=left>&nbsp; &nbsp; &nbsp;<font size=2>Effect from the acquisition of Pav Republic</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><b><font size=2>-</font></b> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>-</font> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>(1,403,315</font> </td>
    <td align=left><font size=2>)</font> </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=left>&nbsp; &nbsp; &nbsp;<font size=2>Increase in other noncurrent assets</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><b><font size=2>9,779</font></b> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>-</font> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>17,849</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=left>&nbsp; &nbsp; &nbsp;<font size=2>Effect from the acquisition of OAL</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><b><font size=2>-</font></b> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>-</font> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>(142,345</font> </td>
    <td align=left><font size=2>)</font> </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr>

    <td colspan=2>&nbsp; </td>
    <td colspan=11>
      <hr noshade size=1>

</td>
  </tr>



  <tr valign=bottom>

    <td align=left>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<font size=2>Resources provided by (used in) investing activities</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><b><font size=2>(484,181</font></b> </td>
    <td align=left><b><font size=2>)</font></b> </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>12,845</font> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>(2,075,940</font> </td>
    <td align=left><font size=2>)</font> </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr>

    <td colspan=2>&nbsp; </td>
    <td colspan=11>
      <hr noshade size=1>

</td>
  </tr>

  <tr>

    <td colspan=13>&nbsp; </td>
  </tr>

  <tr valign=bottom>

    <td align=left>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<font size=2>Net increase (decrease) in cash and cash equivalents</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><b><font size=2>4,192,137</font></b> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>1,979,648</font> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>(339,986</font> </td>
    <td align=left><font size=2>)</font> </td>
    <td align=left>&nbsp;</td>
  </tr>



  <tr valign=bottom>

    <td align=left><font size=2>Cash and cash equivalents:</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=left>&nbsp; &nbsp; &nbsp;<font size=2>At beginning of year</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><b><font size=2>2,204,018</font></b> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>224,370</font> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>564,356</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr>

    <td colspan=2>&nbsp; </td>
    <td colspan=11>
      <hr noshade size=1>

</td>
  </tr>



  <tr valign=bottom>

    <td align=left>&nbsp; &nbsp; &nbsp;<font size=2>At end of year</font> </td>
    <td align=left><font size=2>Ps.</font> </td>
    <td align=right><b><font size=2>6,396,155</font></b> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left><font size=2>Ps.</font> </td>
    <td align=right><font size=2>2,204,018</font> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left><font size=2>Ps.</font> </td>
    <td align=right><font size=2>224,370</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr>

    <td colspan=2>&nbsp; </td>
    <td colspan=11>
      <hr noshade size=2>

</td>
  </tr>
</table>
<BR>

<P align=left>See accompanying notes to consolidated financial statements.</P>
<P align=center>F-7</P>
<HR align=center width="100%" noshade SIZE=5>


<!-- MARKER PAGE="sheet: 1; page: 1" -->


<P align="center">
<B>GRUPO SIMEC, S.A.B. DE C.V. AND SUBSIDIARIES</B></P>
<P align="center">
Notes to Consolidated Financial Statements</P>
<P align="center">
(In thousands of Mexican pesos with purchasing power at December 31, 2007, unless otherwise indicated)</P>
<table border=0 cellspacing=0 cellpadding=0 style="font-family: 'Times New Roman';font-size: 10pt;" width="100%">
  <tr>

    <td nowrap valign=top width="40">
<b>(1)</b>&nbsp; &nbsp; &nbsp;  </td>
    <td colspan=2>
<b>Description of the Business and Significant Transactions</b> </td>
  </tr>
  <tr>
    <td colspan=3>&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td colspan=2>
<b><i>Description of the Business</i></b>       </td>
  </tr>
  <tr>
    <td colspan=3>&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td colspan=2>
The principal activities of Grupo Simec, S.A.B. de C.V. and subsidiaries (the Company) are the manufacture and sale of iron and steel products for the construction and automotive industries both in Mexico, the United States (USA) and Canada. The
Company is a subsidiary of Industrias CH, S.A.B. de C.V. (Industrias CH).       </td>
  </tr>
  <tr>
    <td colspan=3>&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td colspan=2>
The issuance of the financial statements and accompanying notes were authorized on June 25, 2008 by Lu&iacute;s Garc&iacute;a Lim&oacute;n and Jos&eacute; Flores Flores, Chief Executive Officer and Chief Financial Officer, respectively, which must
be also approved by the Company&#146;s Board of Directors, Audit Committee and Stockholders at their next meetings.     </td>
  </tr>
  <tr>
    <td colspan=3>&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td colspan=2>
Significant Transactions -      </td>
  </tr>
  <tr>
    <td colspan=3>&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td nowrap valign=top width="40">
<b>(a)</b>&nbsp; &nbsp; &nbsp;  </td>
    <td>
At an Extraordinary Meeting held on October 24, 2006, the stockholders&#146; approved to increase the capital stock of the Company, through a public offer of 60,000,000 shares in the domestic and international markets. The Mexican Banking and
Securities Commission (<i>Comisi&oacute;n Nacional Bancaria y de Valores</i>) and the Securities and Exchange Commission authorized the Offer in January 2007. The registration of the Offer was performed on February 9, 2007. See note 13 a). </td>
  </tr>
  <tr>
    <td colspan=3>&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td nowrap valign=top>
<b>(b)</b>&nbsp; &nbsp; &nbsp;  </td>
    <td>
On November 24, 2007 the Company acquired 99.95% of the shares of TMM Am&eacute;rica, S.A. de C.V., TMM Continental, S.A. de C.V. and Mutimodal Dom&eacute;stica, S.A. de C.V., subsidiaries of Grupo TMM S.A de C.V., to turn them into three
distribution subsidiaries for the manufacturing plants located in Mexico (Note 14). In February 2008, these companies were renamed to CSG Comercial, S.A. de C.V., Comercializadora de Productos de Acero de Tlaxcala, S.A. de C.V. and Sider&#250;rgica
de Baja California, S.A. de C.V.        </td>
  </tr>
  <tr>
    <td colspan=3>&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td nowrap valign=top>
<b>(c)</b>&nbsp; &nbsp; &nbsp;  </td>
    <td>
In 2007, the Board of Directors of the subsidiary Compa&ntilde;&iacute;a Sider&#250;rgica de Guadalajara, S.A. de C.V. (CSG) decided to spin-off the company, conveying 87.4% of the companies&#146; stockholders equity to Tenedora CSG, S.A. de C.V, as
the spun-off company. Such corporate restructure did not produce effects in the consolidated financial statements as all are subsidiaries of the Company.      </td>
  </tr>
  <tr>
    <td colspan=3>&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td nowrap valign=top>
<b>(d)</b>&nbsp; &nbsp; &nbsp;  </td>
    <td>
On October 9, 2006 the Company&#146;s total share ownership in Administradora de Cartera de Occidente, S.A. de C.V. (ACOSA) was sold since the business purpose of the latter did not relate to the Company&#146;s business purpose. ACOSA is engaged in
the recovery of non-performing loans formerly acquired pursuant to a public bidding process conducted by the &#147;Instituto de Protecci&oacute;n al Ahorro Bancario&#148; in Mexico.  </td>
  </tr>
  <tr>
    <td colspan=3>&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td nowrap valign=top>
<b>(e)</b>&nbsp; &nbsp; &nbsp;  </td>
    <td>
As mentioned in Note 14 of these notes, on July 22, 2005, the Company and Industrias CH acquired the outstanding shares of PAV Republic Inc. (Republic) through its subsidiary SimRep Corporation, a U.S. company.      </td>
  </tr>

</table>
<P align="center">F-8</P>
<HR noshade align="center" width="100%" size="5">



<!-- MARKER PAGE="sheet: 1; page: 1" -->

<table style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'" cellspacing=0 cellpadding=0 border=0 width="100%">

  <tr>

    <td width="40">&nbsp;</td>
    <td valign=top nowrap width="40"><b>(f)</b>&nbsp; &nbsp; &nbsp; </td>
    <td>On July 20, 2005, the Company acquired all the shares of Operadora de Apoyo Log&#237;stico, S.A. de C.V., (&#147;OAL&#148;) a subsidiary of Grupo TMM, S.A. de C.V., for the purpose of converting the acquired company into the operator of three of the iron and steel plants in Mexico (Note 14). </td>
  </tr>

  <tr>

    <td colspan=3>&nbsp;</td>
  </tr>

  <tr>

    <td>&nbsp;</td>
    <td valign=top nowrap><b>(g)</b>&nbsp; &nbsp; &nbsp; </td>
    <td>On October 14, 2005 the Company&#146;s Board of Directors decided to spin off its subsidiary Compa&#241;&#237;a Sider&#250;rgica de California, S.A. de C.V., transferring all of the subsidiary&#146;s assets, liabilities and stockholders&#146; equity to the following two new companies: Controladora Simec, S.A. de C.V. and Arrendadora Simec, S.A. de C.V.; consequently, the original company was dissolved to separate the control over the shares of the subsidiaries from the assets that comprise the industrial plants in Guadalajara and Mexicali. This restructure had no effect on the consolidated financial statements as all are subsidiaries of the Company. </td>
  </tr>

  <tr>

    <td colspan=3>&nbsp;</td>
  </tr>

  <tr>

    <td valign=top nowrap><b>(2)</b>&nbsp; &nbsp; &nbsp; </td>
    <td colspan=2><b>Summary of significant accounting policies -</b> </td>
  </tr>

  <tr>

    <td colspan=3>&nbsp;</td>
  </tr>

  <tr>

    <td>&nbsp;</td>
    <td valign=top nowrap><b>(a)</b>&nbsp; &nbsp; &nbsp; </td>
    <td><b><i>Accounting policies and practices</i></b> </td>
  </tr>

  <tr>

    <td colspan=3>&nbsp;</td>
  </tr>

  <tr>

    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>Below is a summary of the most significant accounting policies and practices used in the preparation of the consolidated financial statements, in conformity with Mexican Financial Reporting Standards (hereinafter referred as &#147;MFRS&#148; or &#147;Mexican Accounting Bulletin&#148;), which include Bulletins and Circulars issued by the Accounting Principles Commission (CPC) of the Mexican Institute of Public Accountants (IMCP) which have not been amended, replaced or abrogated by MFRS issued by the Mexican Financial Reporting Standards Research and Development Board (<i>Consejo Mexicano para la Investigaci&#243;n y Desarrollo de Normas de Informaci&#243;n Financiera, A.C. </i>(CINIF). </td>
  </tr>

  <tr>

    <td colspan=3>&nbsp;</td>
  </tr>

  <tr>

    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>The indexes used to recognize the effects of inflation were the following: </td>
  </tr>

  <tr>

    <td colspan=3>&nbsp;</td>
  </tr>
</table>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'" cellspacing=0 cellpadding=0 border=0 width="500" align="center">


  <tr valign=bottom>


    <td align=center><b><font size=2>December 31,</font></b></td>
    <td>&nbsp;&nbsp;&nbsp; </td>
    <td align=center><b><font size=2>NCPI (1)</font></b></td>
    <td>&nbsp;&nbsp;&nbsp; </td>
    <td align=center><b><font size=2>Inflation</font></b></td>
  </tr>
  <tr valign=bottom>
    <td align=center>
      <hr noshade size=1>
    </td>
    <td>&nbsp;</td>
    <td align=center>
      <hr noshade size=1>
    </td>
    <td>&nbsp;</td>
    <td align=center>
      <hr noshade size=1>
    </td>
  </tr>







  <tr valign=bottom>


    <td align=center><font size=2>2007</font> </td>
    <td>&nbsp; </td>
    <td align=center><font size=2>125.422</font> </td>
    <td>&nbsp; </td>
    <td align=center><font size=2>3.64%</font> </td>
  </tr>


  <tr valign=bottom>


    <td align=center><font size=2>2006</font> </td>
    <td>&nbsp; </td>
    <td align=center><font size=2>121.015</font> </td>
    <td>&nbsp; </td>
    <td align=center><font size=2>4.05%</font> </td>
  </tr>


  <tr valign=bottom>


    <td align=center><font size=2>2005</font> </td>
    <td>&nbsp; </td>
    <td align=center><font size=2>116.301</font> </td>
    <td>&nbsp; </td>
    <td align=center><font size=2>3.33%</font> </td>
  </tr>

</table>
<br>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'" cellspacing=0 cellpadding=0 border=0>

  <tr>

    <td valign=top nowrap><sup>(1)&nbsp; &nbsp; &nbsp; </sup></td>
    <td>Nat<font size="1">ional Consumer Price Index published by Banco de M&#233;xico: The index for the year 2007 as shown in the table, was estimated by the Company. The real inflation reported by the <i>Banco de M&#233;xico </i>for such period was 3.75%. </font></td>
  </tr>

  <tr>

    <td colspan=2>&nbsp;</td>
  </tr>
</table>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'" cellspacing=0 cellpadding=0 border=0 width="100%">

  <tr>

    <td width="40">&nbsp;</td>
    <td>For purposes of disclosure in these notes, hereinafter the term &#147;pesos&#148; or abbreviation &#147;Ps&#148; shall refer to thousands of Mexican pesos. The term dollars or abbreviation &#147;US&#148; shall be taken to mean thousands of U.S. dollars. </td>
  </tr>

  <tr>

    <td colspan=2>&nbsp;</td>
  </tr>

  <tr>

    <td valign=top nowrap><b>(b)</b>&nbsp; &nbsp; &nbsp; </td>
    <td><b><i>Basis of consolidation -</i></b> </td>
  </tr>

  <tr>

    <td colspan=2>&nbsp;</td>
  </tr>

  <tr>

    <td>&nbsp;</td>
    <td>The consolidated financial statements include the financial statements of Grupo Simec, S.A.B. de C.V. and those of its majority-owned and/or controlled subsidiaries. All significant intercompany balances and transactions have been eliminated in the consolidation. </td>
  </tr>


</table>
<p align="center">F-9</p>
<HR align=center width="100%" noshade SIZE=5>


  <!-- MARKER PAGE="sheet: 1; page: 1" -->


<blockquote>
  <p>The Company&#146;s subsidiaries and its equity percentage are as follows:</p>
</blockquote>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'" cellspacing=0 cellpadding=0 border=0 width="600" align="center">



  <tr valign=bottom>

    <td align=center>&nbsp; </td>
    <td>&nbsp;&nbsp;&nbsp; </td>
    <td align=center colspan=5><b><font size=2>Percentage of Equity</font></b><br>
      <b><font size=2>Owned</font></b> </td>
  </tr>

  <tr>

    <td align=center>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=center colspan=5>
      <hr noshade size=1>

</td>
  </tr>

  <tr valign=bottom>

    <td align=center>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=center colspan="2"><b><font size=2>2007</font></b> </td>
    <td>&nbsp;&nbsp;&nbsp; </td>
    <td align=center colspan="2"><font size=2>2006</font> </td>
  </tr>

  <tr>

    <td align=center>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=center colspan=5>
      <hr noshade size=1>

</td>
  </tr>

  <tr valign=bottom>

    <td align=left><font size=2>Compa&#241;&#237;a Sider&#250;rgica de Guadalajara, S.A. de C.V.</font> </td>
    <td>&nbsp; </td>
    <td align=right><b><font size=2>99.99</font></b> </td>
    <td align=left><b><font size=2>%</font></b> </td>
    <td>&nbsp; </td>
    <td align=right><font size=2>99.99</font> </td>
    <td align=left><font size=2>%</font> </td>
  </tr>

  <tr valign=bottom>

    <td align=left><font size=2>Tenedora CSG, S.A. de C.V. (effective 2007)</font> </td>
    <td>&nbsp; </td>
    <td align=right><b><font size=2>100</font></b> </td>
    <td align=left><b><font size=2>%</font></b> </td>
    <td>&nbsp; </td>
    <td align=right><font size=2>-</font> </td>
    <td align=left>&nbsp; </td>
  </tr>

  <tr valign=bottom>

    <td align=left><font size=2>Arrendadora Norte de Matamoros S.A. de C.V. (effective 2007)</font> </td>
    <td>&nbsp; </td>
    <td align=right><b><font size=2>100</font></b> </td>
    <td align=left><b><font size=2>%</font></b> </td>
    <td>&nbsp; </td>
    <td align=right><font size=2>-</font> </td>
    <td align=left>&nbsp; </td>
  </tr>

  <tr valign=bottom>

    <td align=left><font size=2>Arrendadora Simec, S.A. de C.V. (effective 2005)</font> </td>
    <td>&nbsp; </td>
    <td align=right><b><font size=2>100</font></b> </td>
    <td align=left><b><font size=2>%</font></b> </td>
    <td>&nbsp; </td>
    <td align=right><font size=2>100</font> </td>
    <td align=left><font size=2>%</font> </td>
  </tr>

  <tr valign=bottom>

    <td align=left><font size=2>Simec International, S.A. de C.V. (effective 2005)</font> </td>
    <td>&nbsp; </td>
    <td align=right><b><font size=2>99.99</font></b> </td>
    <td align=left><b><font size=2>%</font></b> </td>
    <td>&nbsp; </td>
    <td align=right><font size=2>100</font> </td>
    <td align=left><font size=2>%</font> </td>
  </tr>

  <tr valign=bottom>

    <td align=left><font size=2>Controladora Simec, S.A. de C.V. (effective 2005)</font> </td>
    <td>&nbsp; </td>
    <td align=right><b><font size=2>100</font></b> </td>
    <td align=left><b><font size=2>%</font></b> </td>
    <td>&nbsp; </td>
    <td align=right><font size=2>100</font> </td>
    <td align=left><font size=2>%</font> </td>
  </tr>

  <tr valign=bottom>

    <td align=left><font size=2>SimRep and Subsidiaries (effective 2005)</font> </td>
    <td>&nbsp; </td>
    <td align=right><b><font size=2>50.22</font></b> </td>
    <td align=left><b><font size=2>%</font></b> </td>
    <td>&nbsp; </td>
    <td align=right><font size=2>50.22</font> </td>
    <td align=left><font size=2>%</font> </td>
  </tr>

  <tr valign=bottom>

    <td align=left><font size=2>Undershaft Investments, N.V.</font> </td>
    <td>&nbsp; </td>
    <td align=right><b><font size=2>100</font></b> </td>
    <td align=left><b><font size=2>%</font></b> </td>
    <td>&nbsp; </td>
    <td align=right><font size=2>100</font> </td>
    <td align=left><font size=2>%</font> </td>
  </tr>

  <tr valign=bottom>

    <td align=left><font size=2>Pacific Steel, Inc.</font> </td>
    <td>&nbsp; </td>
    <td align=right><b><font size=2>100</font></b> </td>
    <td align=left><b><font size=2>%</font></b> </td>
    <td>&nbsp; </td>
    <td align=right><font size=2>100</font> </td>
    <td align=left><font size=2>%</font> </td>
  </tr>

  <tr valign=bottom>

    <td align=left><font size=2>Compa&#241;&#237;a Sider&#250;rgica del Pac&#237;fico, S.A. de C.V.</font> </td>
    <td>&nbsp; </td>
    <td align=right><b><font size=2>99.99</font></b> </td>
    <td align=left><b><font size=2>%</font></b> </td>
    <td>&nbsp; </td>
    <td align=right><font size=2>99.99</font> </td>
    <td align=left><font size=2>%</font> </td>
  </tr>

  <tr valign=bottom>

    <td align=left><font size=2>Coordinadora de Servicios Sider&#250;rgicos de Calidad,</font> </td>
    <td>&nbsp; </td>
    <td align=right><b><font size=2>100</font></b> </td>
    <td align=left><b><font size=2>%</font></b> </td>
    <td>&nbsp; </td>
    <td align=right><font size=2>100</font> </td>
    <td align=left><font size=2>%</font> </td>
  </tr>

  <tr valign=bottom>

    <td align=left><font size=2>&nbsp; &nbsp; &nbsp;<font size=2></font>S.A. de C.V.</font> </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
  </tr>

  <tr valign=bottom>

    <td align=left><font size=2>Comercializadora Simec S.A. de C.V. (effective 2007, before</font> </td>
    <td>&nbsp; </td>
    <td align=right><b><font size=2>99.99</font></b> </td>
    <td align=left><b><font size=2>%</font></b> </td>
    <td>&nbsp; </td>
    <td align=right><font size=2>99.99</font> </td>
    <td align=left><font size=2>%</font> </td>
  </tr>

  <tr valign=bottom>

    <td align=left>&nbsp; &nbsp; &nbsp;<font size=2>Administradora de Servicios de la Industria Sider&#250;rgica ICH,</font> </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
  </tr>

  <tr valign=bottom>

    <td align=left>&nbsp; &nbsp; &nbsp;<font size=2>S.A. de C.V.</font> </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
  </tr>

  <tr valign=bottom>

    <td align=left><font size=2>Industrias del Acero y del Alambre, S.A. de C.V.</font> </td>
    <td>&nbsp; </td>
    <td align=right><b><font size=2>99.99</font></b> </td>
    <td align=left><b><font size=2>%</font></b> </td>
    <td>&nbsp; </td>
    <td align=right><font size=2>99.99</font> </td>
    <td align=left><font size=2>%</font> </td>
  </tr>

  <tr valign=bottom>

    <td align=left><font size=2>Procesadora Mexicali, S.A. de C.V.</font> </td>
    <td>&nbsp; </td>
    <td align=right><b><font size=2>99.99</font></b> </td>
    <td align=left><b><font size=2>%</font></b> </td>
    <td>&nbsp; </td>
    <td align=right><font size=2>99.99</font> </td>
    <td align=left><font size=2>%</font> </td>
  </tr>

  <tr valign=bottom>

    <td align=left><font size=2>Servicios Simec, S.A. de C.V.</font> </td>
    <td>&nbsp; </td>
    <td align=right><b><font size=2>100</font></b> </td>
    <td align=left><b><font size=2>%</font></b> </td>
    <td>&nbsp; </td>
    <td align=right><font size=2>100</font> </td>
    <td align=left><font size=2>%</font> </td>
  </tr>

  <tr valign=bottom>

    <td align=left><font size=2>Sistemas de Transporte de Baja California, S.A. de C.V.</font> </td>
    <td>&nbsp; </td>
    <td align=right><b><font size=2>100</font></b> </td>
    <td align=left><b><font size=2>%</font></b> </td>
    <td>&nbsp; </td>
    <td align=right><font size=2>100</font> </td>
    <td align=left><font size=2>%</font> </td>
  </tr>

  <tr valign=bottom>

    <td align=left><font size=2>Operadora de Metales, S.A. de C.V. </font> </td>
    <td>&nbsp; </td>
    <td align=right><b><font size=2>100</font></b> </td>
    <td align=left><b><font size=2>%</font></b> </td>
    <td>&nbsp; </td>
    <td align=right><font size=2>100</font> </td>
    <td align=left><font size=2>%</font> </td>
  </tr>

  <tr valign=bottom>

    <td align=left><font size=2>Operadora de Servicios Sider&#250;rgicos de Tlaxcala, S.A. de C.V.</font> </td>
    <td>&nbsp; </td>
    <td align=right><b><font size=2>100</font></b> </td>
    <td align=left><b><font size=2>%</font></b> </td>
    <td>&nbsp; </td>
    <td align=right><font size=2>100</font> </td>
    <td align=left><font size=2>%</font> </td>
  </tr>

  <tr valign=bottom>

    <td align=left><font size=2>Administradora de Servicios Sider&#250;rgicos de Tlaxcala, S.A,.</font> </td>
    <td>&nbsp; </td>
    <td align=right><b><font size=2>100</font></b> </td>
    <td align=left><b><font size=2>%</font></b> </td>
    <td>&nbsp; </td>
    <td align=right><font size=2>100</font> </td>
    <td align=left><font size=2>%</font> </td>
  </tr>

  <tr valign=bottom>

    <td align=left>&nbsp; &nbsp; &nbsp;<font size=2>de C.V.</font> </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
  </tr>

  <tr valign=bottom>

    <td align=left><font size=2>Operadora de Servicios de la Industria Sider&#250;rgica ICH, S.A.</font> </td>
    <td>&nbsp; </td>
    <td align=right><b><font size=2>100</font></b> </td>
    <td align=left><b><font size=2>%</font></b> </td>
    <td>&nbsp; </td>
    <td align=right><font size=2>100</font> </td>
    <td align=left><font size=2>%</font> </td>
  </tr>

  <tr valign=bottom>

    <td align=left>&nbsp; &nbsp; &nbsp;<font size=2>de C.V.</font> </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
  </tr>

  <tr valign=bottom>

    <td align=left><font size=2>TMM America S.A. de C.V. (effective 2007)</font> </td>
    <td>&nbsp; </td>
    <td align=right><b><font size=2>99.95</font></b> </td>
    <td align=left><b><font size=2>%</font></b> </td>
    <td>&nbsp; </td>
    <td align=right><font size=2>-</font> </td>
    <td align=left>&nbsp; </td>
  </tr>

  <tr valign=bottom>

    <td align=left><font size=2>TMM Continental S.A. de C.V. (effective 2007)</font> </td>
    <td>&nbsp; </td>
    <td align=right><b><font size=2>99.95</font></b> </td>
    <td align=left><b><font size=2>%</font></b> </td>
    <td>&nbsp; </td>
    <td align=right><font size=2>-</font> </td>
    <td align=left>&nbsp; </td>
  </tr>

  <tr valign=bottom>

    <td align=left><font size=2>Multimodal Domestic S.A. de C.V. (effective 2007)</font> </td>
    <td>&nbsp; </td>
    <td align=right><b><font size=2>99.95</font></b> </td>
    <td align=left><b><font size=2>%</font></b> </td>
    <td>&nbsp; </td>
    <td align=right><font size=2>-</font> </td>
    <td align=left>&nbsp; </td>
  </tr>
</table>
<br>
<TABLE style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'" cellSpacing=0 cellPadding=0 border=0 width="100%">

  <TR>

    <TD vAlign=top nowrap width="40"><B>(c)</B>&nbsp; &nbsp; &nbsp; </TD>
    <TD><B><I>Recognition of the effects of inflation on the financial information</I></B> </TD>
  </TR>

  <TR>

    <TD colSpan=2>&nbsp;</TD>
  </TR>

  <TR>

    <TD>&nbsp;</TD>
    <TD>The financial information recognizes the effects of inflation, therefore, the amounts stated in the financial statements and notes thereto are expressed in thousands of Mexican pesos with purchasing power as of December 31, 2007. The restatement factors applied to the financial statements at December 31, 2006 and 2005 were 1.0364 and 1.0405 respectively, which correspond to the inflation applicable from January 1 of each year (2007 and 2006) to December 31, 2007.  The most important effects derived from the recognition of inflation in the financial information are indicated below: </TD>
  </TR>


</TABLE>
<blockquote>
  <ul type="disc">
    <li>
      <p>Inventories and cost of sales, property, plant and equipment and intangible assets are restated as described in notes 2f, 2h and 2j.
</p>
    </li>
    <li>
      <p>Stockholders&#146; equity accounts were restated by applying adjustment factors derived from the NCPI.
</p>
    </li>
    <li>
      <p>The deficit on restatement of stockholders&#146; equity is comprised of the accumulated deficit on monetary position as of the date of the initial application </p>
    </li>
  </ul>
</blockquote>
<p align="center">F-10</p>
<HR align=center width="100%" noshade SIZE=5>


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<blockquote>
  <blockquote>
    <p>of Bulletin B-10 and the accumulated result from holding non-monetary assets, which represents the difference between the increase in the specific value of non- monetary assets and such had they only been affected by inflation, measured in terms of
the NCPI.</p>
  </blockquote>
  <ul type="disc">
    <li>
      <p>The loss on monetary position represents the effects of inflation on monetary assets and liabilities. The related amounts are included in the statements of income as part of the comprehensive financing cost.</p>
    </li>
  </ul>
</blockquote>
<table border=0 cellspacing=0 cellpadding=0 style="font-family: 'Times New Roman';font-size: 10pt;" width="100%">
  <tr>

    <td nowrap valign=top width="40">
<b>(d)</b>&nbsp; &nbsp; &nbsp;  </td>
    <td>
<b><i>Basis of translation of financial statements of foreign subsidiaries -</i></b>    </td>
  </tr>
  <tr>
    <td colspan=2>&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>
The financial statements of the subsidiaries abroad, Simrep and subsidiaries, Pacific Steel and Undershaft Investments, were translated into Mexican pesos in conformity with Mexican accounting Bulletin B-15, <i>Transactions in Foreign Currency and
Translation of Financial Statements of Foreign Operations</i>.  </td>
  </tr>
  <tr>
    <td colspan=2>&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>
For translation purposes, SimRep and subsidiaries were considered as a foreign entity, as indicated by Bulletin B-15, therefore, their financial statements were translated to Mexican pesos and Mexican Financial Reporting Standards using the exchange
rate of the balance sheet date, including the recognition of the effects of inflation, in conformity with Mexican accounting Bulletin B-10, applying inflation adjustment factors derived from the U.S. Consumer Price Index (CPI) published by the U.S.
Labor Department. The translation effect is recorded in stockholders&#146; equity as &#147;translation effect in foreign subsidiaries.&#148;    </td>
  </tr>
  <tr>
    <td colspan=2>&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>
The foreign subsidiaries Pacific Steel and Undershaft Investment were considered an &#147;integrated part of the operations&#148; given their financial and operating dependency on the Mexican operations of the Company, and their financial statements
were translated to Mexican pesos using the historical exchange rate and applying the NCPI to recognize the inflation effect. The translation effect is recorded in the statement of income as part of the comprehensive financing cost. </td>
  </tr>
  <tr>
    <td colspan=2>&nbsp;</td>
  </tr>
  <tr>

    <td nowrap valign=top>
<b>(e)</b>&nbsp; &nbsp; &nbsp;  </td>
    <td>
<b><i>Cash and cash equivalents</i></b> </td>
  </tr>
  <tr>
    <td colspan=2>&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>
Cash and cash equivalents consist basically of bank deposits and highly liquid investments with original maturities of less than 90 days, and are presented at acquisition cost plus accrued interest, which is similar to the market value of these
investments.    </td>
  </tr>
  <tr>
    <td colspan=2>&nbsp;</td>
  </tr>
  <tr>

    <td nowrap valign=top>
<b>(f)</b>&nbsp; &nbsp; &nbsp;  </td>
    <td>
<b><i>Inventories and cost of sales -</i></b>   </td>
  </tr>
  <tr>
    <td colspan=2>&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>
Domestic subsidiaries&#146; inventories are recorded initially at average cost and then adjusted to the lower of replacement cost or net realizable market value under the direct costing system. Foreign subsidiaries&#146; inventories are valued on a
last-in, first-out (LIFO) basis. For translation effects into Mexican GAAP the inventories have been adjusted from LIFO to the lower of replacement cost or net realizable market value.        </td>
  </tr>

</table>
<p align="center">F-11</p>
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<blockquote>
  <p>
The inventory values of the Company were determined as follows:</p>
</blockquote>
<TABLE border=0 cellspacing=0 cellpadding=0 style="font-family: 'Times New Roman';font-size: 10pt;" width=100%>
  <TR valign="top">
    <TD width=80>&nbsp;</TD>
    <TD>
      <P>Billet, finished goods and work in process.</P>
    </TD>
    <TD>&nbsp;&nbsp;&nbsp;</TD>
    <TD colspan=1>
      <P>At the most recent direct production cost</P>
    </TD>
  </TR>
</TABLE>
<blockquote>
  <p>Direct cost of sales represents the replacement cost of inventories at the time of sale, expressed in constant pesos as of the most recent balance sheet date reported on.</p>
</blockquote>
<TABLE border=0 cellspacing=0 cellpadding=0 style="font-family: 'Times New Roman';font-size: 10pt;" width=100%>
  <TR valign="bottom">

    <TD align=left width=80>&nbsp;

        </TD>
    <TD align=left>
Raw materials.
        </TD>
    <TD>&nbsp;&nbsp;&nbsp;
        </TD>
    <TD align=left>
At the prevailing market purchase
price at the consolidated balance sheet date    </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
  </TR>


  <TR valign="bottom">

    <TD align=left>&nbsp;

        </TD>
    <TD align=left>
Materials, spare parts and rollers.
        </TD>
    <TD>&nbsp;
        </TD>
    <TD align=left>
At historical cost, restated using
the inflation rates of the steel industry. This amount is similar to its net realizable market value.   </TD>
  </TR>

</TABLE>
<br>
<table border=0 cellspacing=0 cellpadding=0 style="font-family: 'Times New Roman';font-size: 10pt;">
  <tr>
    <td width="3%">&nbsp;</td>
    <td width=97%>
The Company classifies rollers and spare parts as long-term inventories, which in accordance with historical data and production trends will not be used in the short-term (one year).  </td>
  </tr>
  <tr>
    <td colspan=2>&nbsp;</td>
  </tr>
  <tr>
    <td width="3%">&nbsp;</td>
    <td width=97%>
The reserve for slow-moving inventories is determined considering the reprocessing cost of the materials and finished products inventories with a turnover above one year.      </td>
  </tr>
  <tr>
    <td colspan=2>&nbsp;</td>
  </tr>
  <tr>

    <td nowrap valign=top width="3%">
<b><i>(g)</i></b>&nbsp; &nbsp; &nbsp;   </td>
    <td width=97%>
<b><i>Derivative financial instruments -</i></b>        </td>
  </tr>
  <tr>
    <td colspan=2>&nbsp;</td>
  </tr>
  <tr>
    <td width="3%">&nbsp;</td>
    <td width=97%>
In 2007, 2006 and 2005, the Company used derivative financial instruments for hedging risks associated with natural gas prices for which it conducted studies on historical consumption, future requirements and commitments acquired, thus diminishing
its exposure to risks other than its normal operating risks.    </td>
  </tr>
  <tr>
    <td colspan=2>&nbsp;</td>
  </tr>
  <tr>
    <td width="3%">&nbsp;</td>
    <td width=97%>
To mitigate the risks associated with changes in natural gas prices occurring naturally as a result of the supply and demand on international markets, the Company uses natural gas cash- flow exchange contracts or natural gas swaps to offset
fluctuations in the price of natural gas, whereby the Company receives a floating price and pays a fixed price. Fluctuations in natural gas prices from volumes consumed are recognized as part of the Company&#146;s operating costs.  </td>
  </tr>
  <tr>
    <td colspan=2>&nbsp;</td>
  </tr>
  <tr>
    <td width="3%">&nbsp;</td>
    <td width=97%>
Derivative financial instruments are recognized in the balance sheet at fair value, which is initially represented by the amount of consideration agreed on. Such fair value is restated at the end of each month based on the new estimate. The Company
periodically evaluates the changes in the cash flows of derivative instruments to analyze if the swaps are highly effective for mitigating the exposure to natural gas price fluctuations. In 2007, 2006 and 2005, the fair value of derivatives not
qualifying as accounting hedging instruments was recorded currently against results of operations in the year. In the case of instruments qualifying as derivative accounting hedging instruments of the cash flow type, the fair value and subsequent
changes were recorded under stockholders&#146; equity as Comprehensive income, net of the deferred tax effect. As of December 31, 2007, as a result of the evaluation of the market conditions of the natural gas in the Mexican operations, the
Company&#146;s management decided not to continue natural gas hedging for their facilities in Mexico. The Company also uses natural gas hedges at the U.S. operations.     </td>
  </tr>

</table>
<p align="center">F-12</p>
<HR noshade align="center" width="100%" size="5">



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<table style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'" cellspacing=0 cellpadding=0 border=0 width="100%">

  <tr>

    <td width="40">&nbsp;</td>
    <td>The effectiveness of hedging instruments is determined at the time the derivative financial instruments are designated as hedging, and this is evaluated periodically. A highly effective instrument is such in which the changes in the fair value of cash flows of primary position are offset on a periodic or cumulative basis, by the changes in the fair value or cash flows of the hedging instruments within a range of 80% and 125%. </td>
  </tr>

  <tr>

    <td colspan=2>&nbsp;</td>
  </tr>

  <tr>

    <td valign=top nowrap><b><i>(h)</i></b>&nbsp; &nbsp; &nbsp; </td>
    <td><b><i>Property, plant and equipment -</i></b> </td>
  </tr>

  <tr>

    <td colspan=2>&nbsp;</td>
  </tr>

  <tr>

    <td>&nbsp;</td>
    <td>Property, plant and equipment is recorded initially at acquisition cost, and then adjusted for inflation by applying NCPI factors, except for imported machinery and equipment, which is restated based on the inflation rate in the country of origin and changes in the foreign exchange rate of the country&#146;s particular currency in relation to the Mexican peso. </td>
  </tr>

  <tr>

    <td colspan=2>&nbsp;</td>
  </tr>

  <tr>

    <td>&nbsp;</td>
    <td>The comprehensive financing cost which includes (i) the interest cost, (ii) any foreign currency fluctuations, and (iii) the related monetary position result of assets under construction or installation is capitalized as part of the value of such assets and is restated based on the NCPI factors from the date capitalized through year-end and amortized over the average depreciation period of the related assets. The amount of the comprehensive financing cost to be capitalized results from the average capitalization rate of financing of the average of investments in qualified assets during the period of their acquisition. </td>
  </tr>

  <tr>

    <td colspan=2>&nbsp;</td>
  </tr>

  <tr>

    <td>&nbsp;</td>
    <td>Depreciation of property, plant and equipment is computed using the straight-line method based on the estimated remaining useful lives of the related assets. </td>
  </tr>

  <tr>

    <td colspan=2>&nbsp;</td>
  </tr>

  <tr>

    <td>&nbsp;</td>
    <td>The value of property, plant and equipment is reviewed whenever there are indicators of impairment in the value of these assets. When the recovery value, which is the greater between the selling price and the value of use, is lower than the net carrying value, the difference is recognized as an impairment loss. </td>
  </tr>

  <tr>

    <td colspan=2>&nbsp;</td>
  </tr>

  <tr>

    <td>&nbsp;</td>
    <td>The estimated useful lives of the Company&#146;s main assets are the following: </td>
  </tr>

  <tr>

    <td colspan=2>&nbsp;</td>
  </tr>
</table>
<TABLE style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'" cellSpacing=0 cellPadding=0 border=0 width="500" align="center">

  <TR vAlign=bottom>

    <TD align=center>&nbsp; </TD>
    <TD>&nbsp;&nbsp;&nbsp; </TD>
    <TD align=center><B><FONT size=2>Years</FONT></B></TD>
  </TR>

  <TR>

    <TD align=center>&nbsp; </TD>
    <TD>&nbsp; </TD>
    <TD align=center>
      <HR noshade SIZE=1>

</TD>
  </TR>



  <TR vAlign=bottom>

    <TD align=left><FONT size=2>Buildings</FONT> </TD>
    <TD>&nbsp; </TD>
    <TD align=center><FONT size=2>10 to 65</FONT> </TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left><FONT size=2>Machinery and equipment</FONT> </TD>
    <TD>&nbsp; </TD>
    <TD align=center><FONT size=2>5 to 40</FONT> </TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left><FONT size=2>Transportation equipment</FONT> </TD>
    <TD>&nbsp; </TD>
    <TD align=center><FONT size=2>4</FONT> </TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left><FONT size=2>Furniture, mixtures and computer equipment</FONT> </TD>
    <TD>&nbsp; </TD>
    <TD align=center><FONT size=2>3 to 10</FONT> </TD>
  </TR>
</TABLE>
<br>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'" cellspacing=0 cellpadding=0 border=0 width="100%">

  <tr>

    <td width="40">&nbsp;</td>
    <td>Maintenance and minor repairs are expensed as incurred. </td>
  </tr>

  <tr>

    <td colspan=2>&nbsp;</td>
  </tr>

  <tr>

    <td valign=top nowrap><b><i>(i)</i></b>&nbsp; &nbsp; &nbsp; </td>
    <td><b><i>Leases -</i></b> </td>
  </tr>

  <tr>

    <td colspan=2>&nbsp;</td>
  </tr>

  <tr>

    <td>&nbsp;</td>
    <td>Lease arrangements are classified as capital leases if under the agreement, the ownership of the leased asset is transferred to the lessee upon termination of the lease, the agreement includes an option to purchase the asset at a reduced price, the term of the lease is basically the same as the remaining useful life of the leased asset, or the present value of minimum lease payments is basically the same as the market value of the leased asset, net of any benefit or scrap value. When the lessor retains the risks or benefits inherent to the ownership of the leased asset, the agreements are classified as operating leases and rent is charged to results of operations. </td>
  </tr>


</table>
<p align="center">F-13</p>
<HR align=center width="100%" noshade SIZE=5>


  <!-- MARKER PAGE="sheet: 1; page: 1" -->


<table border=0 cellspacing=0 cellpadding=0 style="font-family: 'Times New Roman';font-size: 10pt;" width="100%">
  <tr>

    <td nowrap valign=top width="40">
<b><i>(j)</i></b>&nbsp; &nbsp; &nbsp;   </td>
    <td>
<b><i>Intangible assets</i></b> </td>
  </tr>
  <tr>
    <td colspan=2>&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>
Intangible assets are recorded initially at acquisition cost, and then adjusted for inflation by applying NCPI factors, Intangible assets are amortized based on their adjusted for inflation value, calculated through the straight-line method and
based on their estimated useful lives. Intangibles of indefinite life are not amortized.        </td>
  </tr>
  <tr>
    <td colspan=2>&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>
Intangible assets with a definite life are evaluated annually when there are indications of impairment. When the recovery value, which is the greater between the selling price and the value of use is lower than the net carrying value, the difference
is recognized as an impairment loss.    </td>
  </tr>
  <tr>
    <td colspan=2>&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>
Intangible assets with an indefinite life are tested for impairment every year end.     </td>
  </tr>
  <tr>
    <td colspan=2>&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>
As of December 31 2007, 2006 and 2005 no losses were acknowledged for the wear and tear of the intangible assets shown in the balance sheet.    </td>
  </tr>
  <tr>
    <td colspan=2>&nbsp;</td>
  </tr>
  <tr>

    <td nowrap valign=top>
<b><i>(k)</i></b>&nbsp; &nbsp; &nbsp;   </td>
    <td>
<b><i>Accruals and contingencies -</i></b>      </td>
  </tr>
  <tr>
    <td colspan=2>&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>
Accruals are recognized whenever (i) the Company has a current obligation (legal or assumed) as a result of a past event, (ii) it is probable that a transfer of assets or the rendering of services will be required to settle such obligation and (iii)
the obligation can be reasonably estimated.     </td>
  </tr>
  <tr>
    <td colspan=2>&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>
The Company recognizes contingent liabilities only when a cash disbursement to settle the contingent obligation is probable and when there are reasonable elements for quantifying the related liabilities. Also, commitments are only recognized when
they generate a loss.   </td>
  </tr>
  <tr>
    <td colspan=2>&nbsp;</td>
  </tr>
  <tr>

    <td nowrap valign=top>
<b>(l)</b>&nbsp; &nbsp; &nbsp;  </td>
    <td>
<b><i>Seniority premiums and termination payments -</i></b>     </td>
  </tr>
  <tr>
    <td colspan=2>&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>
The annual cost of accumulated benefits for seniority premiums to which employees are entitled by law, are recognized in the results of operations of each year, based on actuarial computations of the present value of such obligation. Past service
costs are being amortized over the estimated remaining working lifetime of employees. At December 31, 2007, the estimated average working lifetime of the Company&#146;s employees entitled to pension benefits ranges from 8 to 9 years,
approximately.  </td>
  </tr>
  <tr>
    <td colspan=2>&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>
The costs due to seniority premiums and termination payments are periodically recognized based on actuarial computations of the present value of such obligations, using the projected unit-credit method in conformity with accounting Bulleting D-3
&#147;Labor Obligations&#148;.  </td>
  </tr>
  <tr>
    <td colspan=2>&nbsp;</td>
  </tr>
  <tr>

    <td nowrap valign=top>
<b>(m)</b>&nbsp; &nbsp; &nbsp;  </td>
    <td>
<b><i>Deferred Income tax</i></b>       </td>
  </tr>
  <tr>
    <td colspan=2>&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>
Deferred taxes are calculated using the assets and liabilities method. Under such method, all temporary differences between accounting and tax reporting amounts of assets and liabilities are calculated using the Income tax rate or Flat rate business
tax, as applicable, using the enacted rate which will be applicable when the assets and liabilities estimated for deferred taxes will be recovered or paid.     </td>
  </tr>
  <tr>
    <td colspan=2>&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>
To assess the recoverable amount of deferred tax assets, management determines which portion of the asset is more likely than not to be recovered. The final realization of deferred tax assets depends largely on taxable profits generated in the
periods in which temporary      </td>
  </tr>

</table>
<p align="center">F-14</p>
<HR noshade align="center" width="100%" size="5">



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<table border=0 cellspacing=0 cellpadding=0 style="font-family: 'Times New Roman';font-size: 10pt;" width="100%">
  <tr>
    <td width="40">&nbsp;</td>
    <td>
differences are deductible. When this analysis is performed, management considers the expected reversal of deferred tax liabilities, projected taxable profits and planning strategies. </td>
  </tr>
  <tr>
    <td colspan=2>&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>
The initial cumulative effect of deferred income tax presented in stockholders&#146; equity represents the effect of the recognition of deferred taxes through the date of the initial application of the respective Mexican Financial Reporting Standard
restated as of the most recent balance sheet date.      </td>
  </tr>
  <tr>
    <td colspan=2>&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>
Asset tax is offset against deferred income tax, making the appropriate evaluation of recovery. </td>
  </tr>
  <tr>
    <td colspan=2>&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>
Deferred employee profit sharing is recognized only on temporary differences determined in the reconciliation of current year net income and taxable income for employee profit sharing purposes, provided it may be reasonably estimated that a future
liability or benefit will arise and there is no indication that the related liability or benefit will not be realized in the future. For the years 2007, 2006 and 2005, the Company&#146;s deferred and current employee profit sharing was immaterial
and such amount is presented as part of the year&#146;s income tax for Mexican operations.      </td>
  </tr>
  <tr>
    <td colspan=2>&nbsp;</td>
  </tr>
  <tr>

    <td nowrap valign=top>
<b><i>(n)</i></b>&nbsp; &nbsp; &nbsp;   </td>
    <td>
<b><i>Deferred credit &#150;</i></b>    </td>
  </tr>
  <tr>
    <td colspan=2>&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>
The Company applied on a supplementary basis to Mexican GAAP, US EITF 98-11 &#147;Accounting for Acquired Temporary Differences in Certain Purchase Transactions that are not Accounted for as Business Combinations&#148; to the OAL acquisition. The
accounting pronouncement was issued by the &#147;<i>The Emerging Issues Task Force</i>&#148; and published on September 24, 1998. The deferred credit is obtained from the difference between the amount paid and the deferred tax asset recognized
resulting from the purchase of future tax benefits from OAL.    </td>
  </tr>
  <tr>
    <td colspan=2>&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>
The deferred credit is being amortized to results of operations in the same proportion to the realization of the tax benefits that gave rise to the deferred credit (See note 14c).     </td>
  </tr>
  <tr>
    <td colspan=2>&nbsp;</td>
  </tr>
  <tr>

    <td nowrap valign=top>
<b><i>(o)</i></b>&nbsp; &nbsp; &nbsp;   </td>
    <td>
<b><i>Environmental costs-</i></b>      </td>
  </tr>
  <tr>
    <td colspan=2>&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>
The Company established a liability for an amount considered appropriate to cover costs of environmental remediation that are likely to be incurred in the future. The amount was determined based on information currently available, current
technology, applicable environmental laws and regulations, and also the effects of inflation and other social and economic factors that could have an effect, in accordance with accounting Bulletin C-9, &#147;Liabilities, Provisions, Contingent
Assets and Liabilities and Commitments.&#148;   </td>
  </tr>
  <tr>
    <td colspan=2>&nbsp;</td>
  </tr>
  <tr>

    <td nowrap valign=top>
<b><i>(p)</i></b>&nbsp; &nbsp; &nbsp;   </td>
    <td>
<b><i>Revenue recognition -</i></b>   </td>
  </tr>
  <tr>
    <td colspan=2>&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>
Revenues from the sale of products are recognized at the time products are shipped and the related risks and benefits of merchandise are transferred to the customer.   </td>
  </tr>
  <tr>
    <td colspan=2>&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>
The Company recognizes sales returns and sales discounts at the time the related revenue is recognized. These provisions are deducted from net sales in the statement of income.        </td>
  </tr>
  <tr>
    <td colspan=2>&nbsp;</td>
  </tr>
  <tr>

    <td nowrap valign=top>
<b><i>(q)</i></b>&nbsp; &nbsp; &nbsp;   </td>
    <td>
<b><i>Business and credit concentration</i></b> </td>
  </tr>
  <tr>
    <td colspan=2>&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>
Cash amounts in excess of current requirements are deposited in bank institutions with qualified credit ratings. Products, mainly for the construction and automotive industries, are   </td>
  </tr>

</table>
<p align="center">F-15</p>
<HR noshade align="center" width="100%" size="5">



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<table style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'" cellspacing=0 cellpadding=0 border=0 width="100%">

  <tr>

    <td width="40">&nbsp;</td>
    <td>sold in the domestic market and the Company has a large customer base, which is geographically diverse, consequently, there is no significant concentration in a specific customer or market. In the case of the U.S. market, our sales are concentrated; for the year ended December 31, 2007, five of the most significant customers represented 29.8% of total sales in this area. During 2006 United Steel Corporation, Inc. represented 10.1% of the total sales in the USA market. </td>
  </tr>

  <tr>

    <td colspan=2>&nbsp;</td>
  </tr>

  <tr>

    <td valign=top nowrap><b><i>(r)</i></b>&nbsp; &nbsp; &nbsp; </td>
    <td><b><i>Earnings per share-</i></b> </td>
  </tr>

  <tr>

    <td colspan=2>&nbsp;</td>
  </tr>

  <tr>

    <td>&nbsp;</td>
    <td>Majority earnings per share have been computed by dividing the net consolidated income by the weighted average number of shares outstanding of each period, in conformity with accounting Bulletin B-14, &#147;Earnings per Share.&#148; </td>
  </tr>

  <tr>

    <td colspan=2>&nbsp;</td>
  </tr>

  <tr>

    <td valign=top nowrap><b><i>(s)</i></b>&nbsp; &nbsp; &nbsp; </td>
    <td><b><i>Use of estimates-</i></b> </td>
  </tr>

  <tr>

    <td colspan=2>&nbsp;</td>
  </tr>

  <tr>

    <td>&nbsp;</td>
    <td>The preparation of consolidated financial statements requires management to make estimates and assumptions that affect the financial statements, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the year. Actual results could differ from these estimates. </td>
  </tr>

  <tr>

    <td colspan=2>&nbsp;</td>
  </tr>

  <tr>

    <td>&nbsp;</td>
    <td>The Company has made significant accounting estimates with respect to the valuation allowances of accounts receivable, inventories, long-lived assets, deferred tax assets and liabilities and environmental obligations. </td>
  </tr>

  <tr>

    <td colspan=2>&nbsp;</td>
  </tr>

  <tr>

    <td>&nbsp;</td>
    <td>The following is the rollforward of the allowance for bad debt for the years ended December 31, 2007 and 2006: </td>
  </tr>

  <tr>

    <td colspan=2>&nbsp;</td>
  </tr>
</table>
<TABLE style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'" cellSpacing=0 cellPadding=0 border=0 width="500" align="center">

  <TR vAlign=bottom>

    <TD align=center>&nbsp; </TD>
    <TD align=center colspan="4"><B><FONT size=2>2007</FONT></B> </TD>
    <TD>&nbsp;&nbsp;&nbsp;</TD>
    <TD align=center colspan="4"> <FONT size=2>2006</FONT> </TD>
  </TR>

  <TR>

    <TD align=center>&nbsp; </TD>
    <TD align=center colSpan=9>
      <HR noshade SIZE=1>

</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left><FONT size=2>Initial balance</FONT> </TD>
    <TD align=left>&nbsp;&nbsp;&nbsp;</TD>
    <TD align=left><B><FONT size=2>Ps.</FONT></B> </TD>
    <TD align=right><B><FONT size=2>61,745</FONT></B> </TD>
    <TD align=left>&nbsp; </TD>
    <TD>&nbsp; </TD>
    <TD align=left><FONT size=2>Ps.</FONT> </TD>
    <TD align=right><FONT size=2>33,505</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp;&nbsp;&nbsp;</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left><FONT size=2>Provision for the year</FONT> </TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right><B><FONT size=2>49,405</FONT></B> </TD>
    <TD align=left>&nbsp; </TD>
    <TD>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right><FONT size=2>33,417</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp;</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left><FONT size=2>Write-off of uncollectible accounts</FONT> </TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right><B><FONT size=2>(11,561</FONT></B> </TD>
    <TD align=left><B><FONT size=2>)</FONT></B> </TD>
    <TD>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right><FONT size=2>(4,001</FONT> </TD>
    <TD align=left><FONT size=2>)</FONT> </TD>
    <TD align=left>&nbsp;</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left><FONT size=2>Inflation effect of initial balance</FONT> </TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right><B><FONT size=2>(2,334</FONT></B> </TD>
    <TD align=left><B><FONT size=2>)</FONT></B> </TD>
    <TD>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right><FONT size=2>(1,176</FONT> </TD>
    <TD align=left><FONT size=2>)</FONT> </TD>
    <TD align=left>&nbsp;</TD>
  </TR>

  <TR>

    <TD>&nbsp; </TD>
    <TD colSpan=9>
      <HR noshade SIZE=1>

</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left><FONT size=2>Final balance</FONT> </TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left><B><FONT size=2>Ps.</FONT></B> </TD>
    <TD align=right><B><FONT size=2>97,255</FONT></B> </TD>
    <TD align=left>&nbsp; </TD>
    <TD>&nbsp; </TD>
    <TD align=left><FONT size=2>Ps.</FONT> </TD>
    <TD align=right><FONT size=2>61,745</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp;</TD>
  </TR>

  <TR>

    <TD>&nbsp; </TD>
    <TD colSpan=9>
      <hr noshade size=2>




</TD>
  </TR>
</TABLE>
<br>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'" cellspacing=0 cellpadding=0 border=0 width="100%">

  <tr>

    <td valign=top nowrap width="40"><b><i>(t)</i></b>&nbsp; &nbsp; &nbsp; </td>
    <td><b><i>Exchange fluctuation-</i></b> </td>
  </tr>

  <tr>

    <td colspan=2>&nbsp;</td>
  </tr>

  <tr>

    <td>&nbsp;</td>
    <td>Transactions in foreign currency are recorded at the prevailing exchange rate on the day of the related transactions. Assets and liabilities in foreign currency are translated into Mexican pesos at the prevailing exchange rate as of the balance sheet date. Exchange differences determined from such date to the time foreign currency denominated balances are settled or translated at the balance sheet date are charged or credited to operations. </td>
  </tr>

  <tr>

    <td colspan=2>&nbsp;</td>
  </tr>

  <tr>

    <td>&nbsp;</td>
    <td>See Note 3 for the Company&#146;s consolidated foreign currency position at the end of each year and the exchange rates used to translate foreign currency denominated balances. </td>
  </tr>

  <tr>

    <td colspan=2>&nbsp;</td>
  </tr>

  <tr>

    <td valign=top nowrap><b><i>(u)</i></b>&nbsp; &nbsp; &nbsp; </td>
    <td><b><i>Comprehensive income -</i></b> </td>
  </tr>

  <tr>

    <td colspan=2>&nbsp;</td>
  </tr>

  <tr>

    <td>&nbsp;</td>
    <td>As established in accounting Bulletin B-4, comprehensive income consists of the net income or loss for the year, plus the effects of the translation of foreign entities, the changes in the fair value of derivative financial instruments and the result from holding non-monetary assets in the year, applied directly in stockholders&#145; equity, as well as the effect of minority interest. </td>
  </tr>


</table>
<p align="center">F-16</p>
<HR align=center width="100%" noshade SIZE=5>


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<table border=0 cellspacing=0 cellpadding=0 style="font-family: 'Times New Roman';font-size: 10pt;" width="100%">
  <tr>

    <td nowrap valign=top width="40">
<b><i>(v)</i></b>&nbsp; &nbsp; &nbsp;   </td>
    <td>
<b><i>Segment Information -</i></b>     </td>
  </tr>
  <tr>
    <td colspan=2>&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>
Segment information is presented in accordance with the information used by management for decision making purposes. The Company segments its information by region, due to the operational and organizational structure of its business, in accordance
with accounting Bulletin B-5, &#147;Financial Information-Segments&#148; (see Note 15). </td>
  </tr>
  <tr>
    <td colspan=2>&nbsp;</td>
  </tr>
  <tr>

    <td nowrap valign=top>
<b>(w)</b>&nbsp; &nbsp; &nbsp;  </td>
    <td>
<b><i>Presentation of the income statement</i></b>      </td>
  </tr>
  <tr>
    <td colspan=2>&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>
Costs and expenses in the Company&#146;s statement of income are presented by function, since such classification allows proper evaluation of marginal profit and operating income.     </td>
  </tr>
  <tr>
    <td colspan=2>&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>
Even though, the MFRS B-3 (described below) did not establish specific rules with respect to the presentation of operating income, this is shown in the statement of income, since operating income is an important indicator used for evaluating the
Company&#146;s performance. Operating income consists of ordinary revenues and operating costs and expenses and thus excludes other ordinary income (expense).  </td>
  </tr>
  <tr>
    <td colspan=2>&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>
This presentation is comparable to the one used in the financial statements for the years ended December 31, 2006 and 2005.     </td>
  </tr>
  <tr>
    <td colspan=2>&nbsp;</td>
  </tr>
  <tr>

    <td nowrap valign=top>
<b><i>(x)</i></b>&nbsp; &nbsp; &nbsp;   </td>
    <td>
<b><i>New accounting pronouncements -</i></b>   </td>
  </tr>
  <tr>
    <td colspan=2>&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>
The most important new pronouncements that came into force in 2007 are as follows:      </td>
  </tr>
  <tr>
    <td colspan=2>&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>
<i>MFRS B-3 &#147;Statement of operations&#148;</i>     </td>
  </tr>
  <tr>
    <td colspan=2>&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>
MFRS B-3 establishes the guidelines for classifying income, costs and expenses as either ordinary or non-ordinary and eliminates the captions &#147;Operating income&#148; and &#147;Initial accumulated effect of accounting changes&#148; from the
income statement; however, it does not prohibit the presentation of operating income. This standard also requires that costs and expenses be presented in the statement of income based on their function, nature or a combination of both. When an
entity does decide to include the &#147;Operating income&#148; caption, MFRS B-3 requires the disclosure of the items comprising such caption and a justification for its inclusion in the statement of income. </td>
  </tr>
  <tr>
    <td colspan=2>&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>
<i>MFRS B-13, &#147;Subsequent Events at the Date of the Financial Statements&#148;</i> </td>
  </tr>
  <tr>
    <td colspan=2>&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>
MFRS B-13 modifies the former rules relative to subsequent events, by establishing that certain events, such as the restructuring of assets and liabilities and the relinquishing by creditors of their collection rights in the case of debt default,
must be disclosed in the notes to the financial statements and recognized in the period in which they took place. Accordingly, the financial statements may no longer be adjusted to reflect such subsequent events.    </td>
  </tr>
  <tr>
    <td colspan=2>&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>
The adoption of MFRS B-13 had no effect on the Company&#146;s financial position.       </td>
  </tr>
  <tr>
    <td colspan=2>&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>
<i>MFRS C-13, Related Parties</i>       </td>
  </tr>
  <tr>
    <td colspan=2>&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>
This MFRS broadens the concept of related parties to include immediate family members of key management personnel or directors, as well as funds derived from labor obligation plans.   </td>
  </tr>

</table>
<p align="center">F-17</p>
<HR noshade align="center" width="100%" size="5">



  <!-- MARKER PAGE="sheet: 1; page: 1" -->



<blockquote>
  <p>
Mexican FRS C-13 also requires the following disclosures: i) the relationship between the controlling company and its subsidiaries, irrespective of whether transactions were carried out between them in the period; ii) the name of the direct
controlling company and, when different from such, the name of the principal controlling company of the economic entity to which the entity belongs; and iii) compensation granted to the entity&#146;s key management personnel or directors (in the
case of public companies). This standard allows entities to disclose, only when there are enough elements to sustain such an assertion, that the transactions carried out with related parties are on terms similar to market conditions.</p>
  <p>
The adoption of the requirements of MFRS C-13 resulted in the presentation of management compensation in note 4.</p>
  <p>
<I>MFRS D-6, Capitalization of the Comprehensive Result of Financing</I></p>
  <p>
Mexican FRS D-6 establishes that entities must capitalize Comprehensive result of financing (CRF), which had been optional under the previous Mexican accounting Bulletin C-6, <I>Property, Plant and Equipment</I>.</p>
  <p>
Capitalizable CRC is defined as the amount attributable to qualifying assets that could have been avoided if such acquisition had not taken place, and includes in the case of Mexican peso denominated financing, interest and the net monetary
position, and in the case of foreign currency denominated financing, it also includes both exchange gains and exchange losses. Qualifying assets are defined as those assets acquired by an entity requiring a prolonged acquisition or construction
period for their use, as well as assets that are to be sold or leased that require a prolonged period to be acquired or readied for sale or lease. The capitalization of the comprehensive financing result starts and continues provided the investments
in the acquisition are actually being made, the activities required for conditioning the asset for sale or use are underway and interest is being accrued.</p>
  <p>
Mexican FRS D-6 establishes that the amount of capitalizable CRF is to be determined based on the proportional part of loans used to acquire assets, or by applying the weighted average capitalization rate for financing to the weighted average number
of investments in qualifying assets made during the acquisition period. Financing with imputed interest cost may be capitalized against the cost of acquired assets, since the financing is recognized at its present value.</p>
  <p>
The adoption of Mexican FRS D-6 had no effect on the results of operations of the year ended December 31, 2007 as the Company had previously capitalized the Comprehensive result of financing.</p>
  <p>
<I>MFRS interpretation 4, Presentation of Employee Profit Sharing in the Statement of Income</I></p>
  <p>
MFRS interpretation 4 establishes that employee profit sharing must be presented in the statement of income as an ordinary expense.</p>
  <p>
<I>MFRS Interpretation 8, Effects of the Flat Rate Business Tax (FRBT)</I></p>
  <p>
In December 2007, the CINIF issued the Interpretation to Mexican FRS 8, which is effective for years ending on or after October 1, 2007. Such standard was created as a result of the need to clarify whether or not the flat-rate business tax should be
treated as a tax on profits and to establish the guidelines for its accounting treatment.</p>
</blockquote>
<p align="center">F-18</p>
<HR noshade align="center" width="100%" size="5">



  <!-- MARKER PAGE="sheet: 1; page: 1" -->



<blockquote>
  <p>
The Interpretation to Mexican FRS 8 establishes that the FRBT is a tax on profit and that for the year ended December 31, 2007, its effects should be recognized in conformity with the provisions of Mexican accounting Bulletin D-4, <I>Accounting for
Income Tax, Asset Tax and Employee Profit Sharing</I>, and as of January 1, 2008, in conformity with Mexican FRS D-4, <I>Taxes on Profits</I>. Based on the conclusions of this Interpretation, an entity must first determine whether its tax base
generates FRBT payable or income tax payable. To do so, taxpayers should carry out financial projections to determine if their tax-on-profits base will be for income tax or FRBT. Based on the results of these projections, taxpayers will be able to
plan in advance for either FRBT or income tax as it arises each year.</p>
  <p>
Entities that have determined that they will essentially pay FRBT must recognize the effects of deferred FRBT in their financial statements dated between October 1 and December 31, 2007. This deferred tax must correspond to the temporary differences
and FRBT credits existing in 2007 for which payment or recovery of FRBT is expected as of or after 2008. Therefore, those entities that have determined that they will essentially pay FRBT in the future must recognize, at the date of the
corresponding financial statements, the deferred FRBT asset or liability and at the same time eliminate the deferred income tax asset or liability recognized at such date. These adjustments give rise to an expense or income that must be recognized
in the 2007 statement of operations as part of the caption Tax on profits or in stockholders&#146; equity when it relates to other comprehensive items.</p>
  <p>
In the determination of deferred FRBT assets or liabilities, taxpayers must consider that certain FRBT credits generate a deferred tax asset, provided that the Law establishes the possibility of crediting such credits against the FRBT of future
periods. These credits must be reviewed at least once a year and written down for those portions for which there is uncertainty as to recoverability.</p>
  <p>
The deferred tax rate is either the rate enacted and established in the tax provisions at the date of the financial statements or the rate that is expected to be in force at the time the deferred FRBT assets and liabilities will be realized (16.5%
for 2008, 17% for 2009 and 17.5% for 2010 and subsequent years).</p>
  <p>
Deferred FRBT for the period must be recognized as a deferred tax expense or income in the income statement of the period as part of the income tax caption (in stockholders&#146; equity for those amounts associated with comprehensive income items)
and as a non-current asset or long-term liability in the balance sheet. In the notes to the financial statements, the entity must disclose an analysis of the taxes on profits presented in the income statement, listing the amounts of current-year and
deferred FRBT. Entities must also mention the amount of deferred FRBT related to other comprehensive income items.</p>
  <p>
Under the FRBT Law, an entity must determine the amount of asset tax generated through 2007 that it will be able to recover as of 2008. Such amount must be recognized in the 2007 financial statements as a recoverable tax account, and any amount of
asset tax considered unrecoverable must be cancelled from the 2007 balance sheet and recognized as an expense in the statement of operations of the same period as part of the Taxes on profit caption. As of 2008, the balance of taxes receivable must
be reviewed at each financial statement closing date and written down whenever there is evidence that some amounts may not be recoverable after all.</p>
  <p>
The effects of adopting this new accounting pronouncement are described in Note 12.</p>
</blockquote>
<p align="center">F-19</p>
<HR noshade align="center" width="100%" size="5">



  <!-- MARKER PAGE="sheet: 1; page: 1" -->



<blockquote>

  <p>
The new accounting pronouncements that come into effect on January 1, 2008, are summarized below:</p>


  <p>
<I>MFRS B-2, Statement of Cash Flows</I></p>
  <p>
In November 2007, Mexican FRS B-2 was issued by the CINIF to replace Mexican accounting Bulletin B-12, <I>Statement of Changes in Financial Position</I>. This standard establishes that the statement of changes in financial position will be
substituted by a statement of cash flows as part of the basic financial statements. The main differences between both statements lie in the fact that the statement of cash flows will show the entity&#146;s cash receipts and disbursements for the
period, while the statement of changes in financial position showed the changes in the entity&#146;s financial structure rather than its cash flows. In an inflationary environment, the amounts of both financial statements are expressed in constant
Mexican pesos. However, in preparing the statement of cash flows, the entity must first eliminate the effects of inflation for the period and, accordingly, determine cash flows at constant Mexican pesos, while in the statement of changes in
financial position, the effects of inflation for the period are not eliminated.</p>
  <p>
Mexican FRS B-2 establishes that in the statement of cash flows, the entity must first present cash flows derived from operating activities, then from investing activities, the sum of these activities and finally cash flows derived from financing
activities. The statement of changes in financial position first shows the entity's operating activities, then financing activities and finally its investing activities. Under this new standard, the statement of cash flows may be determined by
applying the direct or indirect method.</p>
  <p>
The transitory rules of Mexican FRS B-2 establish that the application of this standard is prospective. Therefore, the financial statements for years ended prior to 2008 presented for comparative purposes, should include a statement of changes in
financial position, as established by Mexican accounting Bulletin B-12.</p>
  <p>
The Company is analyzing the method (direct or indirect) to be applied when it adopts this standard as of January 1, 2008.</p>
  <p>
MFRS B-10, Effects of Inflation</p>
  <p>
In July 2007, the CINIF issued Mexican FRS B-10, <I>Effects of Inflation</I>, which is applicable for years beginning on or after January 1, 2008 and replaces Mexican accounting Bulletin B-10, <I>Accounting Recognition of the Effects of Inflation on Financial Information</I>. Mexican FRS B-10 defines the two economic environments in Mexico that will determine whether or not entities must recognize the effects of inflation on financial
information: i) inflationary, when inflation is equal to or higher than 26%; accumulated in the preceding three fiscal years; and ii) non-inflationary, when accumulated inflation for the preceding three fiscal years is less than the aforementioned
accumulated 26%. Based on these definitions, the effects of inflation on financial information must be recognized only when entities operate in an inflationary environment.</p>
  <p>
Mexican FRS B-10 also establishes the accounting rules applicable whenever the economy changes from one type of environment to the other. When the economy changes from an inflationary environment to a non-inflationary one, the entity must maintain
in its financial statements the effects of inflation recognized through the immediate prior year, since the amounts of prior periods are taken as the base amounts of the financial statements for the period of change and subsequent periods. Whenever
the economy changes from a non-inflationary environment to an inflationary one, the effects of inflation on the financial information must be recognized retrospectively, meaning that all information for prior periods must be adjusted to recognize
the accumulated effects of inflation of the periods in which the economic environment was considered non-inflationary.</p>
</blockquote>
<p align="center">F-20</p>
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<blockquote>
  <p>
This standard also abolishes the use of the specific-indexation method for the valuation of imported fixed assets and the replacement-cost method for the valuation of inventories, thus eliminating the result from holding non-monetary assets.
Therefore, at the date this Mexican FRS comes into force, entities which have recognized any accumulated result from holding non-monetary assets in their shareholders&#146; equity, under Retained earnings (accumulated deficit), must identify the
realized and unrealized portions of such result.</p>
  <p>
The realized result from holding non-monetary assets must be reclassified to Retained earnings, while the unrealized portion must be maintained as such within shareholders&#146; equity, and reclassified to results of operations when the asset giving
rise to it is realized. Whenever it is deemed impractical to separate the realized from the unrealized result from holding non-monetary assets, the full amount of this item may be reclassified to the Retained earnings caption.</p>
  <p>
The effect of the adoption of this standard on the Company&#146;s 2008 financial statements shall be the Company&#146;s ceasing to recognize the effects of inflation on its financial information and is currently analyzing the treatment for the
result from holding non-monetary assets in accordance with this new MFRS.</p>
  <p>
<I>MFRS B-15, Foreign Currency Translation</I></p>
  <p>
In November 2007, the CINIF issued MFRS B-15, Foreign Currency Translation, which is effective for years beginning on or after January 1, 2008. This standard replaces the previous Mexican accounting Bulletin B-15, Transactions in Foreign Currency
and Translation of Financial Statements of Foreign Operations.</p>
  <p>
Since MFRS B-15 includes the concepts of recording currency, functional currency and reporting currency, the standard eliminates the concept of integrated foreign operations and foreign entity established in Mexican accounting Bulletin B-15. The
recording currency is defined as that currency in which accounting records are kept. Functional currency is the currency in which cash flows are generated and the reporting currency is that in which the financial statements are presented. Derived
from the adoption of the aforementioned concepts, this standard also establishes new procedures for translating the financial statements of foreign operations, from the recording currency into the functional currency, and from the functional
currency into the reporting currency.</p>
  <p>
Under FRS B-15, the first step in the translation of foreign operations is to determine the functional currency, which is usually the currency of the primary economic environment in which the foreign operation is located. However, the functional
currency may in some cases differ from the local currency or recording currency, which occurs when these currencies do not represent the currency in which cash flows of foreign operations are expressed.</p>
  <p>
If the functional currency differs from the recording currency, the financial statements must be translated into their functional currency, as follows: i) monetary assets and liabilities by applying the exchange rates at the balance sheet date; ii)
non-monetary assets and liabilities, as well as stockholders&#146; equity accounts, at the historical exchange rate; and iii) revenues, costs and expenses at the historical exchange rate, except for the effects of non-monetary assets and liabilities
on results of operations of the period, such as depreciation and cost of sales, which must be translated at the historical exchange rate used in the translation of the corresponding balance sheet item. Translation differences shall be carried
directly to the income statement. Once the financial statements have been expressed in the functional currency, they must be translated into the reporting currency by applying: i) the exchange rates at the balance sheet</p>
</blockquote>
<p align="center">F-21</p>
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<blockquote>
  <p>
date to all asset, liability and stockholders&#146; equity accounts and ii) the historical exchange rate to revenues, costs and expenses. Any difference resulting from the translation or consolidation processes or from applying the equity method,
must be recognized as a cumulative translation adjustment as part of other comprehensive income items in stockholders&#146; equity.</p>
  <p>
This procedure is applicable to operations carried out in a non-inflationary environment. For foreign operations that are carried out in an inflationary environment, MFRS B-15 requires that the effects of inflation on financial information be
recognized prior to translation and in conformity with Mexican accounting Bulletin B-10, using the price index of the country in which the operations are carried out. Once the effects of inflation on financial information have been recognized in the
recording currency: i) asset, liability and stockholders&#146; equity accounts must be translated using the prevailing exchange rate at the balance sheet date; ii) income statement accounts must be translated at the exchange rate at the balance
sheet date; and iii) differences resulting from the translation or consolidation processes or from applying the equity method must be recognized as a cumulative translation adjustment as part of other comprehensive income items in stockholders&#146;
equity.</p>
  <p>
MFRS B-15 establishes that the preparation of comparative financial statements must take into account the economic environment of the reporting entity. If the entity operates in a non-inflationary economic environment, the financial statements from
prior years included for comparative purposes shall be presented as originally issued; however, if the reporting entity operates in an inflationary economic environment, the financial statements included for comparative purposes must be presented in
Mexican pesos with purchasing power at the latest balance sheet date.</p>
  <p>
At the date of the issuance of these financial statements, management is evaluating what effect the observance of this accounting pronouncement will have on the Company&#146;s results of operations and financial position.</p>
  <p>
MFRS D-3, Employee Benefits</p>
  <p>
On January 1, 2008, the new Mexican FRS D-3, <I>Employee Benefits</I>, issued by the CINIF, went into effect and replaced the old Mexican accounting Bulletin D-3, <I>Labor Obligations</I>. The most significant changes contained in Mexican FRS D-3
are as follows: i) shorter periods for the amortization of unamortized items, with the option to credit or charge actuarial gains or losses directly to results of operations, as they accrue; ii) elimination of the recognition of an additional
liability and resulting recognition of an intangible asset and comprehensive income item; iii) accounting treatment of current-year and deferred employee profit sharing, requiring that deferred employee profit sharing be recognized using the asset
and liability method established under Mexican FRS D-4; and iv) current-year and deferred employee profit sharing expense is to be presented as an ordinary expense in the income statement rather than as part of taxes on profits.</p>
  <p>
The adoption of this standard in 2008 will require that both the additional liability and the related intangible asset and comprehensive income item be eliminated and that the unamortized items be carried to results of operations in a period not
exceeding five years. The initial effect of the recognition of deferred employee profit sharing must be charged or credited to retained earnings with no effect on results of operations for the year ending December 31, 2008.</p>
</blockquote>
<p align="center">F-22</p>
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<blockquote>
  <p>
At the date of these financial statements, management is evaluating what effect the observance of this accounting pronouncement will have on the Company&#146;s results of operations and financial position.</p>
  <p>
<I>MFRS D-4, Taxes on Profits</I></p>
  <p>
In July 2007, CINIF issued Mexican FRS D-4, <I>Taxes on Profits</I>, which is applicable for years beginning on or after January 1, 2008 and replaces Mexican accounting Bulletin D-4, <I>Accounting for Income Tax, Asset Tax and Employee Profit Sharing</I>. The most significant changes included in this standard with respect to Mexican accounting Bulletin D-4, are as follows: i) The concept of permanent differences is eliminated,
since the asset and liability method requires the recognition of deferred taxes on basically all temporary differences in balance sheet accounts for financial and tax reporting purposes; ii) since current-year and deferred employee profit sharing is
considered as an ordinary expense, it is excluded from this standard and reincorporated into Mexican FRS D-3; iii) asset tax is required to be recognized as a tax liability and, consequently, as a deferred income tax asset only in those cases in
which there is certainty as to its realization in the future; and iv) the cumulative effect of adopting Mexican accounting Bulletin D-4 is to be reclassified to retained earnings, unless it is identified with comprehensive items in
stockholders&#146; equity not yet taken to income.</p>
  <p>
The Company expects that the application of this new standard will not have a significant effect on its financial position or its results of operations.</p>
  <p>
<I>MFRS interpretation 5, Accounting Recognition of the Additional Consideration Agreed at the Inception of a Derivative to Adjust the Instrument to its Fair Value</I></p>
  <p>
In November 2007, the CINIF issued MFRS interpretation 5, which is effective for years beginning on or after January 1, 2008. This Interpretation is intended to clarify whether or not the additional consideration agreed at the inception of a
derivative to adjust the instrument to its fair value should be amortized over the life of the hedge. This Interpretation clarifies that the additional consideration agreed at the inception of a derivative is part of the fair value of the derivative
and, accordingly, it must be included as part of the fair value in which the derivative is initially recorded, which will be adjusted for changes in its fair value in subsequent periods. Therefore, the additional consideration should not be
amortized.</p>
  <p>
<I>MFRS interpretation 6, When a Hedge May Be Formally Designated</I></p>
  <p>
In November 2007, the CINIF issued MFRS interpretation 6, which is effective for years beginning on or after January 1, 2008. This Interpretation is intended to clarify whether a derivative may be formally designated as a hedge on a date subsequent
to its contract date. Mexican interpretation FRS 6 establishes that a derivative may be designated as a &#147;hedge&#148; at its inception date or contract date or at a subsequent date, provided that it meets the conditions established in Mexican
accounting Bulletin C-10 for such designation. Also, this standard establishes that the hedge accounting treatment must not commence until such time as the entity evaluates whether the instrument qualifies as and meets the conditions for hedge
accounting. When a derivative instrument is designated as a hedge on a date subsequent to its contract date, the related effects will only be recognized as of the date on which it first meets the formal conditions and qualifies for consideration as
a hedge.</p>
</blockquote>
<p align="center">F-23</p>
<HR noshade align="center" width="100%" size="5">



  <!-- MARKER PAGE="sheet: 1; page: 1" -->

<table style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'" cellspacing=0 cellpadding=0 border=0 width="100%">
  <tr>
    <td width="40">&nbsp;</td>
    <td><i>MFRS interpretation 7, Application of Comprehensive Income Item Generated by a Cash Flow Hedge on a Forecasted Purchase of a Non-financial Asset</i></td>
  </tr>
  <tr>
    <td width="40">&nbsp;</td>
    <td>&nbsp;</td>
  </tr>



  <tr>

    <td width="40">&nbsp;</td>
    <td>In November 2007, the CINIF issued MFRS interpretation 7, which is effective for years beginning on or after January 1, 2008. This Interpretation is intended to clarify whether or not the amount resulting from a cash flow hedge on a forecasted transaction that is recognized in stockholders&#146; equity as part of other comprehensive income items may be included in the cost of the non-financial asset whose value is being set by the hedge. </td>
  </tr>

  <tr>

    <td colspan=2>&nbsp;</td>
  </tr>

  <tr>

    <td>&nbsp;</td>
    <td>This Interpretation clarifies that if a derivative is designated as a cash flow hedge on a forecasted transaction, to set the price of the non-financial asset to the functional currency, the effect recognized in comprehensive income is considered a complement to the cost of the asset and, therefore, must be included in such cost. The effect of the adoption of this Interpretation must be recognized by reclassifying at the Interpretation&#146;s effective date, all relevant balances presented in Comprehensive income to the cost of the asset acquired. </td>
  </tr>

  <tr>

    <td colspan=2>&nbsp;</td>
  </tr>

  <tr>

    <td>&nbsp;</td>
    <td>At the date of these financial statements, management is evaluating what effect the observance of the aforementioned interpretations (5, 6 and 7) will have on the Company&#146;s results of operations and financial position. </td>
  </tr>

  <tr>

    <td colspan=2>&nbsp;</td>
  </tr>

  <tr>

    <td valign=top nowrap><b>(3)</b>&nbsp; &nbsp; &nbsp; </td>
    <td><b>Foreign Currency Position -</b> </td>
  </tr>

  <tr>

    <td colspan=2>&nbsp;</td>
  </tr>

  <tr>

    <td>&nbsp;</td>
    <td>At December 31, 2007 and 2006, foreign currency denominated assets and liabilities were as follows: </td>
  </tr>

  <tr>

    <td colspan=2>&nbsp;</td>
  </tr>
</table>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'" cellspacing=0 cellpadding=0 border=0 width="700">

  <tr valign=bottom>
    <td align=center width="40">&nbsp;</td>
    <td align=center>&nbsp; </td>
    <td colspan="9" align="center">   <font size=2>Thousands of US dollars</font> </td>
  </tr>

  <tr valign=bottom>
    <td align=center>&nbsp;</td>
    <td align=center>&nbsp; </td>
    <td colspan="4" align="center">   <b><font size=2>2007</font></b> </td>
    <td>&nbsp;&nbsp;&nbsp; </td>
    <td align=center colspan="4">  <font size=2>2006</font> </td>
  </tr>

  <tr>
    <td align=center>&nbsp;</td>
    <td align=center>&nbsp; </td>
    <td colspan="9">
      <hr noshade size=1>

</td>
  </tr>

  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=left><font size=2>Current monetary assets</font> </td>
    <td>&nbsp;&nbsp;&nbsp; </td>
    <td align=left><b><font size=2>US$</font></b> </td>
    <td align=right><b><font size=2>758,115</font></b> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left><font size=2>US$</font> </td>
    <td align=right><font size=2>321,428</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;&nbsp;&nbsp;</td>
  </tr>

  <tr>
    <td>&nbsp;</td>
    <td>&nbsp; </td>
    <td colspan="9">
      <hr noshade size=1>

</td>
  </tr>

  <tr>

    <td colspan=11>&nbsp; </td>
  </tr>

  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=left><font size=2>Current liabilities</font> </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><b><font size=2>(216,114</font></b> </td>
    <td align=left><b><font size=2>)</font></b> </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>(197,190</font> </td>
    <td align=left><font size=2>)</font> </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=left><font size=2>Long-term liabilities</font> </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><b><font size=2>(3,329</font></b> </td>
    <td align=left><b><font size=2>)</font></b> </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>(7,175</font> </td>
    <td align=left><font size=2>)</font> </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr>
    <td>&nbsp;</td>
    <td>&nbsp; </td>
    <td colspan="9">
      <hr noshade size=1>

</td>
  </tr>

  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=left><font size=2>Total liabilities</font> </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><b><font size=2>(219,443</font></b> </td>
    <td align=left><b><font size=2>)</font></b> </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>(204,365</font> </td>
    <td align=left><font size=2>)</font> </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr>
    <td>&nbsp;</td>
    <td>&nbsp; </td>
    <td colspan="9">
      <hr noshade size=1>

</td>
  </tr>

  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=left><font size=2>Net assets (liabilities)</font> </td>
    <td>&nbsp; </td>
    <td align=left><b><font size=2>US$</font></b> </td>
    <td align=right><b><font size=2>538,672</font></b> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left><font size=2>US$</font> </td>
    <td align=right><font size=2>117,063</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr>
    <td>&nbsp;</td>
    <td>&nbsp; </td>
    <td colspan="9">
      <hr noshade size=2>




</td>
  </tr>
</table>
<blockquote>
  <p>
  At June 25, 2008 and December 31, 2007, 2006 and 2005 the exchange rates were as follows (amounts in Mexican pesos):</p>
</blockquote>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'" cellspacing=0 cellpadding=0 border=0 width="700">



  <tr valign=bottom>
    <td align=center width="40">&nbsp;</td>
    <td align=center>&nbsp; </td>
    <td colspan="4" align="center">&nbsp;&nbsp;&nbsp;<b><font size=2>June 25,</font></b><br>
      <b><font size=2>2008</font></b></td>
    <td>&nbsp;&nbsp;&nbsp;</td>
    <td align=center colspan="4"> <b><font size=2>2007</font></b></td>
    <td>&nbsp;&nbsp;&nbsp;</td>
    <td align=center colspan="4"><b><font size=2>December 31,</font></b><br>
      <font size=2>2006</font></td>
    <td>&nbsp;&nbsp;&nbsp;</td>
    <td align=center colspan="4"><font size=2>2005</font></td>
  </tr>


  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td colspan="4">
      <hr noshade size=1>
    </td>
    <td>&nbsp;</td>
    <td align=left colspan="4">
      <hr noshade size=1>
    </td>
    <td>&nbsp;</td>
    <td align=left colspan="4">
      <hr noshade size=1>
    </td>
    <td>&nbsp;</td>
    <td align=left colspan="4">
      <hr noshade size=1>
    </td>
  </tr>

  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=left><font size=2>U.S. dollar</font> </td>
    <td>&nbsp;&nbsp;&nbsp;</td>
    <td><font size=2>Ps.</font> </td>
    <td align=right><font size=2> 10.3180</font> </td>
    <td align=right>&nbsp;&nbsp;&nbsp;</td>
    <td>&nbsp; </td>
    <td align=left>&nbsp;&nbsp;&nbsp;</td>
    <td align=left><font size=2>Ps.</font> </td>
    <td align=right valign="bottom">&nbsp; &nbsp; &nbsp;<font size=2>10.866</font> </td>
    <td align=right valign="bottom">&nbsp;&nbsp;&nbsp;</td>
    <td>&nbsp; </td>
    <td align=left>&nbsp;&nbsp;&nbsp;</td>
    <td align=left><font size=2>Ps.</font></td>
    <td align=right>&nbsp; &nbsp;<font size=2> 10.881</font> </td>
    <td align=right>&nbsp;&nbsp;&nbsp;</td>
    <td>&nbsp; </td>
    <td align=left>&nbsp;&nbsp;&nbsp;</td>
    <td align=left><font size=2>Ps.</font> </td>
    <td align=right>&nbsp; &nbsp; &nbsp;<font size=2>10.777</font> </td>
    <td align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</td>
  </tr>
</table>
<blockquote>
  <p>At December 31, 2007 and 2006, the Company had the following monetary position from foreign non-monetary assets, or from assets whose replacement cost can only be determined in U.S. dollars:</p>
</blockquote>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'" cellspacing=0 cellpadding=0 border=0 width="700">

  <tr valign=bottom>
    <td align=center>&nbsp;</td>
    <td align=center width="40">&nbsp;</td>
    <td align=center>&nbsp; </td>
    <td colspan="7" align="center">   <b><font size=2>Thousands of U.S. dollars</font></b>  </td>
  </tr>

  <tr>
    <td align=center>&nbsp;</td>
    <td align=center>&nbsp;</td>
    <td align=center>&nbsp; </td>
    <td colspan="7">
      <hr noshade size=1>

</td>
  </tr>

  <tr valign=bottom>
    <td align=center>&nbsp;</td>
    <td align=center>&nbsp;</td>
    <td align=center>&nbsp; </td>
    <td colspan="3" align="center">   <b><font size=2>2007</font></b></td>
    <td align="center">&nbsp;   </td>
    <td align="center" colspan="3"><font size=2>2006</font></td>
  </tr>

  <tr>
    <td align=center>&nbsp;</td>
    <td align=center>&nbsp;</td>
    <td align=center>&nbsp; </td>
    <td colspan="7">
      <hr noshade size=1>

</td>
  </tr>



  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=left><font size=2>Machinery and equipment, net</font> </td>
    <td>&nbsp;&nbsp;&nbsp; </td>
    <td align=left><b><font size=2>US$</font></b> </td>
    <td align=right>&nbsp;<b><font size=2>417,321</font></b> </td>
    <td>&nbsp;&nbsp;&nbsp; </td>
    <td align=left><font size=2>US$</font> </td>
    <td align=right><font size=2>377,843</font> </td>
    <td align=center>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</td>
  </tr>

  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=left><font size=2>Inventories</font> </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right>&nbsp;<b><font size=2>379,333</font></b> </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>391,091</font> </td>
    <td align=center>&nbsp;</td>
  </tr>

  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp; </td>
    <td colspan="7">
      <hr noshade size=1>

</td>
  </tr>

  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right>&nbsp;<b><font size=2>796,654</font></b> </td>
    <td>&nbsp; </td>
    <td align=left><font size=2>US$</font> </td>
    <td align=right><font size=2>768,934</font> </td>
    <td align=center>&nbsp;</td>
  </tr>

  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp; </td>
    <td colspan="7">



      <hr noshade size=2>

</td>
  </tr>
</table>
<p align="center">
  F-24</p>
<HR align=center width="100%" noshade SIZE=5>


  <!-- MARKER PAGE="sheet: 1; page: 1" -->


<blockquote>
  <p>A summary of transactions carried out for the years ended December 31, 2007, 2006 and 2005, in U.S. dollars, excluding imports of machinery and equipment and excluding transactions of foreign subsidiaries is as follows:</p>
</blockquote>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'" cellspacing=0 cellpadding=0 border=0 width="700">

  <tr valign=bottom>
    <td align=center width="40">&nbsp;</td>
    <td align=center>&nbsp; </td>
    <td align=center>&nbsp; </td>
    <td align=center colspan="11">  <b><font size=2>(Amounts in thousands)</font></b>    </td>
  </tr>

  <tr>

    <td align=center colspan=3>&nbsp; </td>
    <td align=center colspan=11>
      <hr noshade size=1>

</td>
  </tr>

  <tr valign=bottom>
    <td align=center>&nbsp;</td>
    <td align=center>&nbsp; </td>
    <td align=center>&nbsp; </td>
    <td align=center colspan="2"><b><font size=2>2007</font></b> </td>
    <td align="center">&nbsp; </td>
    <td align=center colspan="3"> <font size=2>2006</font> </td>
    <td align="center">&nbsp;</td>
    <td colspan="4" align="center"> <font size=2>2005</font> </td>
  </tr>

  <tr>

    <td align=center colspan=3>&nbsp; </td>
    <td align=center colspan=11>
      <hr noshade size=1>

</td>
  </tr>



  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=left><font size=2>Sales</font> </td>
    <td align=right><b><font size=2>US$</font></b> </td>
    <td align=right><b><font size=2>119,539</font></b> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp;&nbsp;&nbsp; </td>
    <td align=left><font size=2>US$</font> </td>
    <td align=right><font size=2>66,578</font> </td>
    <td align=left>&nbsp;</td>
    <td>&nbsp;&nbsp;&nbsp;</td>
    <td><font size=2>US$</font>  </td>
    <td align=right><font size=2>73,368</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;&nbsp;&nbsp;</td>
  </tr>

  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=left><font size=2>Purchases (raw material)</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><b><font size=2>(39,382</font></b> </td>
    <td align=left><b><font size=2>)</font></b> </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>(75,884</font> </td>
    <td align=left><font size=2>)</font> </td>
    <td>&nbsp;</td>
    <td>&nbsp; </td>
    <td align=right><font size=2>(28,978</font> </td>
    <td align=left><font size=2>)</font> </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=left><font size=2>Interest expense</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><b><font size=2>(172</font></b> </td>
    <td align=left><b><font size=2>)</font></b> </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>(963</font> </td>
    <td align=left><font size=2>)</font> </td>
    <td>&nbsp;</td>
    <td>&nbsp; </td>
    <td align=right><font size=2>(734</font> </td>
    <td align=left><font size=2>)</font> </td>
    <td align=left>&nbsp;</td>
  </tr>
</table>
<blockquote>
  <p>The exchange rate of the peso to the U.S. dollar used by the Company is based on the weighted average of free market rates available to settle its overall foreign currency transactions.
  </p>
  </blockquote>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'" cellspacing=0 cellpadding=0 border=0 width="100%">

  <tr>

    <td valign=top nowrap width="40"><b>(4)</b>&nbsp; &nbsp; &nbsp; </td>
    <td><b>Related party transactions and balances -</b> </td>
  </tr>

  <tr>

    <td colspan=2>&nbsp;</td>
  </tr>

  <tr>

    <td>&nbsp;</td>
    <td>Transactions carried out with related parties for the years ended December 31, 2007, 2006 and 2005 were as follows: </td>
  </tr>

  <tr>

    <td colspan=2>&nbsp;</td>
  </tr>
</table>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'" cellspacing=0 cellpadding=0 border=0 width="700">

  <tr valign=bottom>
    <td align=center width="40">&nbsp;</td>
    <td align=center>&nbsp; </td>
    <td align=center colspan="3"> <b><font size=2>2007</font></b></td>
    <td>&nbsp;&nbsp;&nbsp; </td>
    <td align=center colspan="2"> <font size=2>2006</font></td>
    <td>&nbsp;&nbsp;&nbsp; </td>
    <td align=center colspan="3"> <font size=2>2005</font></td>
  </tr>

  <tr>
    <td align=center>&nbsp;</td>
    <td align=center>&nbsp; </td>
    <td align=center colspan=10>
      <hr noshade size=1>

</td>
  </tr>

  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=left><font size=2>Sales</font> </td>
    <td align=left>&nbsp;&nbsp;&nbsp;</td>
    <td align=left><b><font size=2>Ps.</font></b> </td>
    <td align=right><b><font size=2>28,351</font></b> </td>
    <td>&nbsp; </td>
    <td align=left><font size=2>Ps.</font> </td>
    <td align=right><font size=2>39,206</font> </td>
    <td>&nbsp; </td>
    <td align=left><font size=2>Ps.</font> </td>
    <td align=right><font size=2>25,710</font> </td>
    <td align=right>&nbsp;&nbsp;&nbsp;</td>
  </tr>

  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=left><font size=2>Purchases</font> </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><b><font size=2>76,015</font></b> </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>6,955</font> </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>1,708</font> </td>
    <td align=right>&nbsp;</td>
  </tr>

  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=left><font size=2>Interest expense</font> </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><b><font size=2>7,261</font></b> </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>3,052</font> </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>-</font> </td>
    <td align=right>&nbsp;</td>
  </tr>

  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=left><font size=2>Administrative services expenses</font> </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><b><font size=2>11,896</font></b> </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>10,253</font> </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>8,434</font> </td>
    <td align=right>&nbsp;</td>
  </tr>
</table>
<blockquote>
  <p>From time to time we sell steel products, primarily billet, to Industrias CH and its affiliates. In addition, we purchased steel products from Industrias CH and its affiliates. We also have a services agreement with Industrias CH, by which Industrias CH provides administrative services to us and other of our subsidiaries. The term of the agreement is indefinite. The payments are paid to Industrias CH on a monthly basis.</p>
  <p>Balances due from/to related parties at December 31, 2007 and 2006 consist of the following:</p>
</blockquote>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'" cellspacing=0 cellpadding=0 border=0 width="700">

  <tr valign=bottom>
    <td align=left width="40">&nbsp;</td>
    <td align=left><u><font size=2>Accounts receivable:</font></u></td>
    <td align=center colspan="3">  <b><font size=2>2007</font></b>  </td>
    <td>&nbsp;&nbsp;&nbsp;</td>
    <td align=center colspan="3"><font size=2>2006</font>    </td>
  </tr>

  <tr>
    <td align=center>&nbsp;</td>
    <td align=center>&nbsp; </td>
    <td align=center colspan=7>
      <hr noshade size=1>

</td>
  </tr>

  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;<font size=2>Aceros y Laminados SIGOSA, S.A. de C.V.</font> </td>
    <td align=left>&nbsp;&nbsp;&nbsp;</td>
    <td align=left><b><font size=2>Ps.</font></b> </td>
    <td align=right><b><font size=2>3,440</font></b> </td>
    <td>&nbsp; </td>
    <td align=left><font size=2>Ps.</font> </td>
    <td align=right><font size=2>-</font> </td>
    <td align=right>&nbsp;&nbsp;&nbsp;</td>
  </tr>

  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;<font size=2>Servicios Estructurales, S.A. de C.V.</font> </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><b><font size=2>46</font></b> </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>-</font> </td>
    <td align=right>&nbsp;</td>
  </tr>

  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;<font size=2>Administraci&#243;n de empresas CH, S.A. de C.V.</font> </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><b><font size=2>86</font></b> </td>
    <td>&nbsp; </td>
    <td align=left><font size=2>Ps.</font> </td>
    <td align=right><font size=2>138</font> </td>
    <td align=right>&nbsp;</td>
  </tr>

  <tr>
    <td>&nbsp;</td>
    <td>&nbsp; </td>
    <td colspan=7>
      <hr noshade size=1>

</td>
  </tr>

  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; &nbsp; &nbsp;<font size=2>Total (1)</font> </td>
    <td align=left>&nbsp;</td>
    <td align=left><b><font size=2>Ps.</font></b> </td>
    <td align=right><b><font size=2>3,572</font></b> </td>
    <td>&nbsp; </td>
    <td align=left><font size=2>Ps.</font> </td>
    <td align=right><font size=2>138</font> </td>
    <td align=right>&nbsp;</td>
  </tr>

  <tr>
    <td>&nbsp;</td>
    <td>&nbsp; </td>
    <td colspan="7">



      <hr noshade size=2>

</td>
  </tr>
  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=left><u><font size=2>Accounts payable:</font></u> </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>
  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=right>&nbsp;</td>
    <td>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=right>&nbsp;</td>
    <td align=right>&nbsp;</td>
  </tr>

  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=left><font size=2>Compan&#237;a Sider&#250;rgica del Golfo, S.A. de C.V. (1)</font> </td>
    <td align=left>&nbsp;</td>
    <td align=left><b><font size=2>Ps.</font></b> </td>
    <td align=right><b><font size=2>37,558</font></b> </td>
    <td>&nbsp; </td>
    <td align=left><font size=2>Ps.</font> </td>
    <td align=right><font size=2>-</font> </td>
    <td align=right>&nbsp;</td>
  </tr>
  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=left><font size=2>Industrias CH, S.A. de C.V. (2)</font> </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><b><font size=2>54,100</font></b> </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>238,555</font> </td>
    <td align=right>&nbsp;</td>
  </tr>
  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=left><font size=2>Operadora ICH, S.A. de C.V. (1)</font> </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><b><font size=2>12,125</font></b> </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>-</font> </td>
    <td align=right>&nbsp;</td>
  </tr>
  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=left><font size=2>Operadora Manufacturera de Tubos, S.A. de C.V. (1)</font> </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><b><font size=2>96</font></b> </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>-</font> </td>
    <td align=right>&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp; </td>
    <td colspan=7>
      <hr noshade size=1>

</td>
  </tr>
  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;<font size=2>Total</font> </td>
    <td align=left>&nbsp;</td>
    <td align=left><b><font size=2>Ps.</font></b> </td>
    <td align=right><b><font size=2>103,879</font></b> </td>
    <td>&nbsp; </td>
    <td align=left><font size=2>Ps.</font> </td>
    <td align=right><font size=2>238,555</font> </td>
    <td align=right>&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp; </td>
    <td colspan="7">



      <hr noshade size=2>

</td>
  </tr>

</table>
<br>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'" cellspacing=0 cellpadding=0 border=0>

  <tr>

    <td valign=top nowrap><font size="1">(1)&nbsp; &nbsp; &nbsp; </font></td>
    <td><font size="1">Affiliate company </font></td>
  </tr>

  <tr>

    <td colspan=2><font size="1"></font></td>
  </tr>

  <tr>

    <td valign=top nowrap><font size="1">(2)&nbsp; &nbsp; &nbsp; </font></td>
    <td><font size="1">Holding company </font></td>
  </tr>


</table>
<p align="center">F-25</p>
<HR align=center width="100%" noshade SIZE=5>


  <!-- MARKER PAGE="sheet: 1; page: 1" -->

<blockquote>
  <p>As of December 31, 2006 the account payable to Industrias CH is in dollars, its term is undefined and generates interest at a rate of 5.23% per annum. As of December 31, 2007 Ps. 45.6 million of the balance for the Industrias CH account is in dollars, the term is undefined and it generates interest at a rate of 5.23% per annum.</p>
  <p>At an Extraordinary Meeting held on June 21, 2007, the stockholders of Simec International, S.A. de C.V. approved a contribution for future capital stock increase made by ICH for Ps. 38.4 millions. At December 31, 2007, ICH only holds one share in Simec International.</p>
  <p>The benefits granted to key senior personnel or relevant directors of the Company as of December 31, 2007, 2006 and 2005 were $24.5 million, $21.8 million and $18.6 million, respectively.</p>
</blockquote>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'" cellspacing=0 cellpadding=0 border=0 width="100%">

  <tr>

    <td valign=top nowrap width="40"><b>(5)</b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </td>
    <td><b>Inventories -</b> </td>
  </tr>

  <tr>

    <td colspan=2>&nbsp;</td>
  </tr>

  <tr>

    <td>&nbsp;</td>
    <td>Inventories are comprised of the following: </td>
  </tr>


</table>
<br>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'" cellspacing=0 cellpadding=0 border=0 width="700">

  <tr valign=bottom>
    <td align=center width="40">&nbsp;</td>
    <td align=center>&nbsp; </td>
    <td align=center colspan="4">  <b><font size=2>2007</font></b></td>
    <td align="center">&nbsp;&nbsp;&nbsp;   </td>
    <td colspan="4" align="center"><font size=2>2006</font> </td>
  </tr>

  <tr>
    <td align=center>&nbsp;</td>
    <td align=center>&nbsp; </td>
    <td align=center colspan=9>
      <hr noshade size=1>

</td>
  </tr>

  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=left><font size=2>Finished goods</font> </td>
    <td align=left>&nbsp;&nbsp;&nbsp;</td>
    <td align=left><b><font size=2>Ps.</font></b> </td>
    <td align=right><b><font size=2>2,654,196</font></b> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
    <td align=left><font size=2>Ps.</font> </td>
    <td align=right><font size=2>2,604,250</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;&nbsp;&nbsp;</td>
  </tr>

  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=left><font size=2>Work in process</font> </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><b><font size=2>22,351</font></b> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>16,041</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=left><font size=2>Billet</font> </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><b><font size=2>294,759</font></b> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>144,323</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=left><font size=2>Raw materials and supplies</font> </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><b><font size=2>1,524,764</font></b> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>1,822,930</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=left><font size=2>Materials, spare parts and rollers</font> </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><b><font size=2>85,873</font></b> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>93,755</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=left><font size=2>Advances to suppliers and others</font> </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><b><font size=2>321,724</font></b> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>185,838</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=left><font size=2>Goods in transit</font> </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><b><font size=2>30,723</font></b> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>189,428</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr>
    <td>&nbsp;</td>
    <td>&nbsp; </td>
    <td colspan=9>
      <hr noshade size=1>

</td>
  </tr>

  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><b><font size=2>4,934,390</font></b> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>5,056,565</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr>

    <td colspan=11>&nbsp; </td>
  </tr>

  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=left><font size=2>Less allowance for obsolescence</font> </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><b><font size=2>(3,986</font></b> </td>
    <td align=left><b><font size=2>)</font></b> </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>(4,131</font> </td>
    <td align=left><font size=2>)</font> </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr>
    <td>&nbsp;</td>
    <td>&nbsp; </td>
    <td colspan=9>
      <hr noshade size=1>

</td>
  </tr>

  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
    <td align=left><b><font size=2>Ps.</font></b> </td>
    <td align=right><b><font size=2>4,930,404</font></b> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
    <td align=left><font size=2>Ps.</font> </td>
    <td align=right><font size=2>5,052,434</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr>
    <td>&nbsp;</td>
    <td>&nbsp; </td>
    <td colspan="9">



      <hr noshade size=2>

</td>
  </tr>
</table>
<br>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'" cellspacing=0 cellpadding=0 border=0 width="100%">

  <tr>

    <td valign=top nowrap width="40"><b>(6)</b>&nbsp; &nbsp; &nbsp; </td>
    <td><b>Derivative financial instruments -</b> </td>
  </tr>

  <tr>

    <td colspan=2>&nbsp;</td>
  </tr>

  <tr>

    <td>&nbsp;</td>
    <td>The Company uses derivative financial instruments primarily to offset its exposure to financial risks related to the price of natural gas. Derivative instruments currently used by the Company consist of natural gas swap contracts. These contracts are recognized on the balance sheet at fair value. Certain swaps are considered as cash flow hedges since the cash flow exchanges under the swap are highly effective in mitigating exposure to natural gas price fluctuations. The change in fair value of these swaps is recorded as part of Comprehensive income in stockholders&#146; equity. </td>
  </tr>




</table>
<p align="center">F-26</p>
<HR align=center width="100%" noshade SIZE=5>


  <!-- MARKER PAGE="sheet: 1; page: 1" -->

<table style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'" cellspacing=0 cellpadding=0 border=0 width="100%">

  <tr>

    <td width="40">&nbsp;</td>
    <td>For the Mexican operations, at the end of 2006, the Company entered into these type of contracts with PEMEX Gas and Petroqu&#237;mica B&#225;sica (PGPB) and Natgasmex, S.A. de C.V. (Natgasmex). This hedge guaranteed that a portion of the Company&#146;s future consumption of natural gas with PGPB during 2007 to be paid at a fixed price of US$6.99 and US$7.23 per MMBtu (one million British Thermal Units) respectively in January 2007 and US$6.62 per MMBtu for the period from February to December 2007. With Natgasmex, the fixed price was US$7.04 per MMBtu for the months of January and February 2007 and US$6.75 per MMBtu for the period from March to December 2007. </td>
  </tr>

  <tr>

    <td colspan=2>&nbsp;</td>
  </tr>

  <tr>

    <td>&nbsp;</td>
    <td>As of December 31, 2007, the Company has decided not to renegotiate natural gas coverage agreements for the plants located in Mexico and the loss recognized in comprehensive income in 2006 was reclassified to earnings in 2007 as they matured. As of December 31, 2006, the Company recognized a liability for $6,329 and a deferred Income Tax asset for $1,772. The amounts recorded in the stockholders&#146;s equity as part of the comprehensive income as of December 31, 2006 and 2005 was a loss of $47,793 and a gain of $29,471, respectively. </td>
  </tr>

  <tr>

    <td colspan=2>&nbsp;</td>
  </tr>

  <tr>

    <td>&nbsp;</td>
    <td>Based on its inventory turnover, the Company believes that the natural gas burned and incorporated in its products during a given month is reflected in the cost of sales of the subsequent month; consequently, the realized effects of this hedge are reclassified from the comprehensive income account to results of operations in the following month. In the years ended December 31, 2007, 2006 and 2005, the Company recorded an increase of Ps. 1 million and a reduction of Ps. 26.1 million and Ps. 37.6 million, respectively, to its cost of sales resulting from settled transactions. </td>
  </tr>

  <tr>

    <td colspan=2>&nbsp;</td>
  </tr>

  <tr>

    <td>&nbsp;</td>
    <td>In Republic, natural gas swap contracts are used, generally for a term of up to one year. Republic recognizes all derivatives on the balance sheet at fair value. As of December 31, 2007 and 2006 Republic recognized an asset of Ps. 1,087 and a liability of Ps. 15,788 in the captions other assets and other accounts payable and accrued expenses, respectively. Derivatives that are not designated as hedges are adjusted to fair value through earnings. </td>
  </tr>

  <tr>

    <td colspan=2>&nbsp;</td>
  </tr>

  <tr>

    <td valign=top nowrap><b>(7)</b>&nbsp; &nbsp; &nbsp; </td>
    <td><b>Property, Plant and Equipment-</b> </td>
  </tr>

  <tr>

    <td colspan=2>&nbsp;</td>
  </tr>

  <tr>

    <td>&nbsp;</td>
    <td>Property, plant and equipment are comprised of the following: </td>
  </tr>


</table>
<br>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'" cellspacing=0 cellpadding=0 border=0 width="700">

  <tr valign=bottom>
    <td align=center width="40">&nbsp;</td>
    <td align=center>&nbsp; </td>
    <td align=center colspan="4"> <b><font size=2>2007</font></b> </td>
    <td>&nbsp;&nbsp;&nbsp; </td>
    <td align=center colspan="4">  <font size=2>2006</font> </td>
  </tr>

  <tr>
    <td align=center>&nbsp;</td>
    <td align=center>&nbsp; </td>
    <td align=center colspan=9>
      <hr noshade size=1>

</td>
  </tr>

  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=left><font size=2>Buildings</font> </td>
    <td align=left>&nbsp;&nbsp;&nbsp;</td>
    <td align=left><b><font size=2>Ps.</font></b> </td>
    <td align=right><b><font size=2>2,067,318</font></b> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left><font size=2>Ps.</font> </td>
    <td align=right><font size=2>2,033,557</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;&nbsp;&nbsp;</td>
  </tr>

  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=left><font size=2>Machinery and equipment</font> </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><b><font size=2>8,961,505</font></b> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>8,045,418</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=left><font size=2>Transportation equipment</font> </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><b><font size=2>41,377</font></b> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>48,068</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=left><font size=2>Furniture, mixtures and computer equipment</font> </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><b><font size=2>67,860</font></b> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>67,985</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr>
    <td>&nbsp;</td>
    <td>&nbsp; </td>
    <td colspan=9>
      <hr noshade size=1>

</td>
  </tr>

  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><b><font size=2>11,138,060</font></b> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>10,195,028</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr>

    <td colspan=11>&nbsp; </td>
  </tr>

  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=left><font size=2>Less: accumulated depreciation</font> </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><b><font size=2>(4,016,312</font></b> </td>
    <td align=left><b><font size=2>)</font></b> </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>(3,299,068</font> </td>
    <td align=left><font size=2>)</font> </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr>
    <td>&nbsp;</td>
    <td>&nbsp; </td>
    <td colspan=9>
      <hr noshade size=1>

</td>
  </tr>

  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><b><font size=2>7,121,748</font></b> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>6,895,960</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr>

    <td colspan=11>&nbsp; </td>
  </tr>

  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=left><font size=2>Land</font> </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><b><font size=2>552,279</font></b> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>544,641</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=left><font size=2>Construction in progress (*)</font> </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><b><font size=2>196,043</font></b> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>127,554</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=left><font size=2>Idle machinery and equipment</font> </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><b><font size=2>30,568</font></b> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>31,682</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr>
    <td>&nbsp;</td>
    <td>&nbsp; </td>
    <td colspan=9>
      <hr noshade size=1>

</td>
  </tr>

  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
    <td align=left><b><font size=2>Ps.</font></b> </td>
    <td align=right><b><font size=2>7,900,638</font></b> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left><font size=2>Ps.</font> </td>
    <td align=right><font size=2>7,599,837</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr>
    <td>&nbsp;</td>
    <td>&nbsp; </td>
    <td colspan="9">



      <hr noshade size=2>

</td>
  </tr>
</table>
<p><font size="1">(*) Construction in progress corresponds primarily to improvements intended to increase the installed capacity. The completion date of these projects in progress at December 31, 2007 is scheduled for August 2008 and the pending investment amount is Ps. 39,650.</font></p>
<p align="center">F-27</p>
<HR align=center width="100%" noshade SIZE=5>


  <!-- MARKER PAGE="sheet: 1; page: 1" -->

<table style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'" cellspacing=0 cellpadding=0 border=0 width="100%">

  <tr>

    <td width="40">&nbsp;</td>
    <td>For the years ended December 31, 2007, 2006 and 2005 depreciation expense amounted to Ps. 464,726, Ps. 352,941 and Ps. 278,705 respectively. </td>
  </tr>

  <tr>

    <td colspan=2>&nbsp;</td>
  </tr>

  <tr>

    <td>&nbsp;</td>
    <td>Through December 31, 2007, 2006 and 2005, the Company has capitalized the comprehensive financing cost of buildings and machinery and equipment in the net amount of Ps. 524,298, Ps. 524,298 and Ps. 523,171, respectively. </td>
  </tr>

  <tr>

    <td colspan=2>&nbsp;</td>
  </tr>

  <tr>

    <td>&nbsp;</td>
    <td>At December 31, 2007 and 2006, the specific restatement rate of machinery and equipment was greater than the NCPI, since a significant portion of such machinery is imported and the inflation factor of the country of origin and the fluctuation of the peso versus the respective currency were greater than the NCPI. </td>
  </tr>

  <tr>

    <td colspan=2>&nbsp;</td>
  </tr>

  <tr>

    <td valign=top nowrap><b>(8)</b>&nbsp; &nbsp; &nbsp; </td>
    <td><b>Other assets, intangibles and deferred charges -</b> </td>
  </tr>

  <tr>

    <td colspan=2>&nbsp;</td>
  </tr>

  <tr>

    <td>&nbsp;</td>
    <td>Other assets include primarily organization and preoperating expenses that are expressed at restated value, based on the NPCI. Amortization is computed by the straight-line method, based on the restated value in a period from 2 to 20 years. </td>
  </tr>

  <tr>

    <td colspan=2>&nbsp;</td>
  </tr>

  <tr>

    <td>&nbsp;</td>
    <td>As mentioned in note 14 b), as a result of the acquisition of Republic, the Company determined and recognized intangible assets at their fair value for a total of Ps. 307 million. At December 31, 2007 and 2006, intangibles amount to Ps. 172.8 and Ps. 215.6 million, net of amortization, respectively. </td>
  </tr>

  <tr>

    <td colspan=2>&nbsp;</td>
  </tr>

  <tr>

    <td>&nbsp;</td>
    <td>The values originally expressed at December 31, 2005 were adjusted in 2006 as a result of the insurance recovery described in note 14 b). </td>
  </tr>

  <tr>

    <td colspan=2>&nbsp;</td>
  </tr>

  <tr>

    <td>&nbsp;</td>
    <td>At December 31, 2007 and 2006, this item is comprised of the following: </td>
  </tr>


</table>
<br>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'" cellspacing=0 cellpadding=0 border=0 width="740">

  <tr valign=bottom>
    <td align=center>&nbsp;</td>
    <td align=center>&nbsp; </td>
    <td align=center>&nbsp;</td>
    <td align=center colspan="8">   <b><font size=2>2007</font></b>   </td>
    <td>&nbsp; </td>
    <td align=center colspan="9"> <font size=2>2006</font>      </td>
  </tr>





  <tr valign=bottom>
    <td align=center width="40">&nbsp;</td>
    <td align=center>&nbsp; </td>
    <td align=center>&nbsp;&nbsp;&nbsp;</td>
    <td align=center colspan="2"> <b><font size=2>Cost</font></b></td>
    <td>&nbsp;&nbsp;&nbsp; </td>
    <td align=center colspan=2><b><font size=2>Accumulated</font></b><br>
      <b><font size=2>amortization</font></b></td>
    <td>&nbsp;&nbsp;&nbsp; </td>
    <td align=center colspan=2><b><font size=2>Balance <br>
      as of  <br>
      Dec 31, 07 </font></b></td>
    <td>&nbsp;&nbsp;&nbsp; </td>
    <td align=center colspan="2"> <font size=2>Cost</font></td>
    <td>&nbsp;&nbsp;&nbsp; </td>
    <td align=center colspan=2><font size=2>Accumulated</font><br>
      <font size=2>amortization</font></td>
    <td>&nbsp;&nbsp;&nbsp; </td>
    <td align=center colspan=3><font size=2>Balance <br>
       as of <br>
       Dec 31, 06 </font></td>
  </tr>

  <tr>
    <td align=center>&nbsp;</td>
    <td align=center>&nbsp; </td>
    <td align=center colspan=19>
      <hr noshade size=1>

</td>
  </tr>

  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=left><font size=2>Registered Name Republic</font> </td>
    <td align=left>&nbsp;&nbsp;&nbsp;</td>
    <td align=left><b><font size=2>Ps.</font></b> </td>
    <td align=right><b><font size=2>70,004</font></b> </td>
    <td>&nbsp;&nbsp;&nbsp; </td>
    <td align=left>&nbsp;<b><font size=2>Ps.</font></b> </td>
    <td align=center><b><font size=2>-</font></b> </td>
    <td>&nbsp;&nbsp;&nbsp; </td>
    <td align=left><b><font size=2>Ps.</font></b> </td>
    <td align=right><b><font size=2>70,004</font></b> </td>
    <td>&nbsp;&nbsp;&nbsp; </td>
    <td align=left><font size=2>Ps.</font> </td>
    <td align=right><font size=2>69,805</font> </td>
    <td>&nbsp;&nbsp;&nbsp; </td>
    <td align=left>&nbsp;<font size=2>Ps.</font> </td>
    <td align=center><font size=2>-</font> </td>
    <td>&nbsp;&nbsp;&nbsp; </td>
    <td align=left><font size=2>Ps.</font> </td>
    <td align=right><font size=2>69,805</font> </td>
    <td align=right>&nbsp;&nbsp;&nbsp;</td>
  </tr>

  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=left><font size=2>Union agreements</font> </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><b><font size=2>112,779</font></b> </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><b><font size=2>112,779</font></b> </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><b><font size=2>-</font></b> </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>112,458</font> </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>78,059</font> </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>34,399</font> </td>
    <td align=right>&nbsp;</td>
  </tr>

  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=left><font size=2>Kobe Tech Contract</font> </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><b><font size=2>81,660</font></b> </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><b><font size=2>16,444</font></b> </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><b><font size=2>65,216</font></b> </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>81,428</font> </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>9,617</font> </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>71,811</font> </td>
    <td align=right>&nbsp;</td>
  </tr>

  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=left><font size=2>Listing of customers</font> </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><b><font size=2>42,776</font></b> </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><b><font size=2>5,165</font></b> </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><b><font size=2>37,611</font></b> </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>42,653</font> </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>3,023</font> </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>39,630</font> </td>
    <td align=right>&nbsp;</td>
  </tr>

  <tr>
    <td>&nbsp;</td>
    <td>&nbsp; </td>
    <td colspan=19>
      <hr noshade size=1>

</td>
  </tr>

  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=left><font size=2>Intangibles</font> </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><b><font size=2>307,219</font></b> </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><b><font size=2>134,388</font></b> </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><b><font size=2>172,831</font></b> </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><b><font size=2>306,344</font></b> </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><b><font size=2>90,699</font></b> </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><b><font size=2>215,645</font></b> </td>
    <td align=right>&nbsp;</td>
  </tr>

  <tr>

    <td colspan=21>&nbsp; </td>
  </tr>

  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=left><font size=2>Preoperating expenses</font> </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><b><font size=2>626,919</font></b> </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><b><font size=2>455,659</font></b> </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><b><font size=2>171,260</font></b> </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>626,865</font> </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>414,594</font> </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>212,271</font> </td>
    <td align=right>&nbsp;</td>
  </tr>

  <tr>

    <td colspan=21>&nbsp; </td>
  </tr>

  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=left><font size=2>Other assets (1)</font> </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><b><font size=2>45,314</font></b> </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><b><font size=2>-</font></b> </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><b><font size=2>45,314</font></b> </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>54,815</font> </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>-</font> </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>54,815</font> </td>
    <td align=right>&nbsp;</td>
  </tr>

  <tr>
    <td>&nbsp;</td>
    <td>&nbsp; </td>
    <td colspan=19>
      <hr noshade size=1>

</td>
  </tr>

  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
    <td align=left><b><font size=2>Ps.</font></b> </td>
    <td align=right><b><font size=2>979,452</font></b> </td>
    <td>&nbsp; </td>
    <td align=left><b><font size=2>Ps.</font></b> </td>
    <td align=right><b><font size=2>590,047</font></b> </td>
    <td>&nbsp; </td>
    <td align=left><b><font size=2>Ps.</font></b> </td>
    <td align=right><b><font size=2>389,405</font></b> </td>
    <td>&nbsp; </td>
    <td align=left><font size=2>Ps.</font> </td>
    <td align=right><font size=2>988,024</font> </td>
    <td>&nbsp; </td>
    <td align=right colspan=2><font size=2>Ps. 505,293</font> </td>
    <td>&nbsp; </td>
    <td align=left><font size=2>Ps.</font> </td>
    <td align=right><font size=2>482,731</font> </td>
    <td align=right>&nbsp;</td>
  </tr>

  <tr>
    <td>&nbsp;</td>
    <td>&nbsp; </td>
    <td colspan=19>



      <hr noshade size=2>

</td>
  </tr>
</table>
<br>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'" cellspacing=0 cellpadding=0 border=0 width="100%">

  <tr>
    <td valign=top nowrap width="80">&nbsp;</td>
    <td valign=top nowrap>(1)&nbsp; &nbsp; &nbsp; </td>
    <td>The other assets are not subject to amortization and are integrated principally by intangible assets derived from the calculation of labor obligations, as well as guarantee deposits, among others. </td>
  </tr>


</table>
<blockquote>
  <p>For the years ended December 31, 2007, 2006 and 2005 amortization amounted to Ps. 84,530, Ps. 96,801 and Ps. 70,223 respectively.</p>
</blockquote>
<p align="center">F-28</p>
<HR align=center width="100%" noshade SIZE=5>


  <!-- MARKER PAGE="sheet: 1; page: 1" -->


<blockquote>
  <p>The estimated useful lives and amortization for the following five years are as follows:</p>
</blockquote>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'" cellspacing=0 cellpadding=0 border=0 width="100%">



  <tr valign=bottom>

    <td align=center>&nbsp; </td>
    <td align=center>&nbsp;</td>
    <td align=center colspan="2" rowspan="3"><font size=2>Value at <br>
      </font><font size=2>31-Dec-07 </font></td>
    <td>&nbsp;&nbsp; </td>
    <td align=center rowspan="3"><font size=2>Useful <br>
      </font><font size=2>Life </font></td>
    <td>&nbsp;&nbsp; </td>
    <td align=center colspan=2><font size=2>Amortization at</font><br>
      <font size=2>December 31,</font></td>
    <td>&nbsp;&nbsp;&nbsp;</td>
    <td align=center colspan="2">&nbsp;  </td>
    <td>&nbsp;&nbsp;&nbsp;</td>
    <td align=center colspan=8><font size=2>Estimated Future Amortization</font></td>
    <td>&nbsp;&nbsp;&nbsp;</td>
    <td align=center colspan="3">&nbsp;  </td>
  </tr>


  <tr valign=bottom>
    <td align=center>&nbsp;</td>
    <td align=center>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align=center colspan="2">
      <hr noshade size=1>
    </td>
    <td>&nbsp;</td>
    <td align=center colspan=15>
      <hr noshade size=1>
    </td>
  </tr>

  <tr valign=bottom>

    <td align=center>&nbsp; </td>
    <td align=center>&nbsp;</td>
    <td>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=center colspan="2"> <font size=2>2007</font></td>
    <td>&nbsp; </td>
    <td align=center colspan=2><font size=2>2008</font></td>
    <td>&nbsp; </td>
    <td align=center colspan=2><font size=2>2009</font></td>
    <td>&nbsp;&nbsp;&nbsp; </td>
    <td align=center colspan=2><font size=2>2010</font></td>
    <td>&nbsp;&nbsp;&nbsp; </td>
    <td align=center colspan=2><font size=2>2011</font></td>
    <td>&nbsp; </td>
    <td align=center colspan=3><font size=2>2012</font></td>
  </tr>

  <tr>

    <td align=center>&nbsp; </td>
    <td align=center colspan=24>
      <hr noshade size=1>

</td>
  </tr>

  <tr valign=bottom>

    <td align=left><font size=2>Registered Name Republic</font> </td>
    <td align=left>&nbsp;&nbsp;&nbsp;</td>
    <td align=left><b><font size=2>Ps.</font></b></td>
    <td align=right><b><font size=2> 70,004</font></b> </td>
    <td>&nbsp; </td>
    <td align=center><font size=2>Indefinite</font> </td>
    <td>&nbsp; </td>
    <td align=left><font size=2>Ps.</font> </td>
    <td align=right><font size=2>-</font> </td>
    <td>&nbsp; </td>
    <td align=left><font size=2>Ps.</font> </td>
    <td align=right><font size=2>-</font> </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp;<font size=2>Ps.</font> </td>
    <td align=right><font size=2>-</font> </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; &nbsp;<font size=2>Ps.</font> </td>
    <td align=right><font size=2>-</font> </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp;<font size=2>Ps.</font> </td>
    <td align=right><font size=2>-</font> </td>
    <td>&nbsp; </td>
    <td align=left><font size=2>Ps.</font> </td>
    <td align=right><font size=2>-</font> </td>
    <td align=right>&nbsp;&nbsp;&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=left><font size=2>Union Agreements</font> </td>
    <td align=right>&nbsp;</td>
    <td align=right>&nbsp;</td>
    <td align=right><b><font size=2>112,779</font></b> </td>
    <td>&nbsp; </td>
    <td align=center><font size=2>24.5 months</font> </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>34,527</font> </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>-</font> </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>-</font> </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>-</font> </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>-</font> </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>&#150;</font> </td>
    <td align=right>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=left><font size=2>Kobe Tech</font> </td>
    <td align=right>&nbsp;</td>
    <td align=right>&nbsp;</td>
    <td align=right><b><font size=2>81,660</font></b> </td>
    <td>&nbsp; </td>
    <td align=center><font size=2>144 months</font> </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>6,804</font> </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>6,804</font> </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>6,804</font> </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>6,804</font> </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>6,804</font> </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>6,804</font> </td>
    <td align=right>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=left><font size=2>Listing of customers</font> </td>
    <td align=right>&nbsp;</td>
    <td align=right>&nbsp;</td>
    <td align=right><b><font size=2>42,776</font></b> </td>
    <td>&nbsp; </td>
    <td align=center><font size=2>240 months</font> </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>2,134</font> </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>2,134</font> </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>2,134</font> </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>2,134</font> </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>2,134</font> </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>2,134</font> </td>
    <td align=right>&nbsp;</td>
  </tr>

  <tr>

    <td>&nbsp; </td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>
      <hr noshade size=1>

</td>
    <td>&nbsp; </td>
    <td>&nbsp; </td>
    <td>&nbsp; </td>
    <td colspan=18>
      <hr noshade size=1>

</td>
  </tr>

  <tr valign=bottom>

    <td align=left>&nbsp; </td>
    <td align=right>&nbsp;</td>
    <td align=right>&nbsp;</td>
    <td align=right><b><font size=2>307,219</font></b> </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>43,465</font> </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>8,938</font> </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>8,938</font> </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>8,938</font> </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>8,938</font> </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>8,938</font> </td>
    <td align=right>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=left><font size=2>Preoperating expenses and</font> </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=left><font size=2>deferred charges</font> </td>
    <td align=right>&nbsp;</td>
    <td align=right>&nbsp;</td>
    <td align=right><b><font size=2>626,919</font></b> </td>
    <td>&nbsp; </td>
    <td align=center><font size=2>10 - 20 years</font> </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>41,065</font> </td>
    <td>&nbsp; </td>
    <td align=right colspan=2><font size=2>41,065</font> </td>
    <td>&nbsp; </td>
    <td align=right colspan=2><font size=2>39,484</font> </td>
    <td>&nbsp; </td>
    <td align=right colspan=2><font size=2>38,035</font> </td>
    <td>&nbsp; </td>
    <td align=right colspan=2><font size=2>38,035</font> </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>11,300</font> </td>
    <td align=right>&nbsp;</td>
  </tr>

  <tr>

    <td>&nbsp; </td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>
      <hr noshade size=1>

</td>
    <td>&nbsp; </td>
    <td>&nbsp; </td>
    <td>&nbsp; </td>
    <td colspan=18>
      <hr noshade size=1>

</td>
  </tr>



  <tr valign=bottom>

    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
    <td align=left><b><font size=2>Ps.</font></b></td>
    <td align=right><b><font size=2> 934,138</font></b> </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left><font size=2>Ps.</font> </td>
    <td align=right><font size=2> 84,530</font> </td>
    <td>&nbsp; </td>
    <td align=left><font size=2>Ps.</font> </td>
    <td align=right><font size=2>50,003</font> </td>
    <td>&nbsp; </td>
    <td align=left><font size=2>Ps. </font></td>
    <td align=right><font size=2>48,422</font> </td>
    <td>&nbsp; </td>
    <td align=left><font size=2>Ps. </font> </td>
    <td align=right><font size=2>46,973</font></td>
    <td>&nbsp; </td>
    <td align=left><font size=2>Ps.</font></td>
    <td align=right><font size=2>46,973</font> </td>
    <td>&nbsp; </td>
    <td align=left><font size=2>Ps.</font></td>
    <td align=right><font size=2> 20,238</font>  </td>
    <td align=right>&nbsp;</td>
  </tr>

  <tr>

    <td>&nbsp; </td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>
      <hr noshade size=1>

</td>
    <td>&nbsp; </td>
    <td>&nbsp; </td>
    <td>&nbsp; </td>
    <td colspan=18>



      <hr noshade size=2>

</td>
  </tr>
</table>
<br>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'" cellspacing=0 cellpadding=0 border=0 width="100%">

  <tr>

    <td valign=top nowrap width="40"><b>(9)</b>&nbsp; &nbsp; &nbsp; </td>
    <td><b>Notes Payable, Debt and Medium-term Notes -</b> </td>
  </tr>

  <tr>

    <td colspan=2>&nbsp;</td>
  </tr>

  <tr>

    <td>&nbsp;</td>
    <td><b><i>Debt -</i></b> </td>
  </tr>

  <tr>

    <td colspan=2>&nbsp;</td>
  </tr>

  <tr>

    <td>&nbsp;</td>
    <td><b>(a) Revolving line of credit with General Electric (GE) Capital</b> </td>
  </tr>

  <tr>

    <td colspan=2>&nbsp;</td>
  </tr>

  <tr>

    <td>&nbsp;</td>
    <td>On December 31, 2007, Republic Inc. maintained a US$150.0 million Senior Secured Credit Agreement (GE credit facility) with General Electric Capital Corporation (GE Capital). This facility matures on May 20, 2009. The termination date of the facility can be extended until May 20, 2010, at the option of Republic Inc. upon providing timely written notice. </td>
  </tr>

  <tr>

    <td colspan=2>&nbsp;</td>
  </tr>

  <tr>

    <td>&nbsp;</td>
    <td>At December 31, 2007 and 2006, Republic Inc. had no outstanding borrowings and had issued US$16.4 million and US$8.0 million, respectively, in letters of credit under the GE credit facility. Republic Inc. is required to pay an unused facility fee of 0.50% per annum. The advances under the GE credit facility are limited by the borrowing base, as defined in the GE credit facility as the sum of 85% of eligible accounts receivable plus 65% of eligible inventory. The amount available under the facility was approximately US$133.6 million at December 31, 2007. </td>
  </tr>

  <tr align="left">

    <td colspan=2>&nbsp;</td>
  </tr>

  <tr>

    <td>&nbsp;</td>
    <td>Borrowings, if any, under the GE credit facility are secured by a first priority perfected security interest in all of Republic Inc.&#146;s presently owned and subsequently acquired inventory and accounts receivable. The obligations under the GE credit facility are secured and are unconditionally and irrevocably guaranteed jointly and severally by Republic Inc.&#146;s subsidiaries. </td>
  </tr>

  <tr>

    <td colspan=2>&nbsp;</td>
  </tr>

  <tr>

    <td>&nbsp;</td>
    <td>Borrowings under the GE credit facility bear interest, at Republic Inc.&#146;s option, at an index rate equal to the higher of the &#147;prime rate&#148; published from time to time by The Wall Street Journal, plus the applicable margin, or the federal funds rate plus 50 basis points per annum, plus the applicable margin; or LIBOR plus the applicable margin. Effective January 1, 2006, the applicable margins were adjusted in a range from 0.00% to 0.25% for index rate loans and from 0.875% to 1.25% for LIBOR loans based on the average daily availability in the prior quarter. The amended agreement varies the margins on the unused facility fee from 0.50% to 0.375%. Based on the fourth quarter 2007 average daily availability, the margins for the first quarter of 2008 are 0.00% for the index margin, 0.875% for the LIBOR margin, 0.5% for the unused facility fee margin, and 0.875% for the applicable letter of credit margin.</td>
  </tr>


</table>
<p align="center">F-29</p>
<HR align=center width="100%" noshade SIZE=5>


  <!-- MARKER PAGE="sheet: 1; page: 1" -->

<table style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'" cellspacing=0 cellpadding=0 border=0 width="100%">





  <tr>

    <td>&nbsp;</td>
    <td>The GE credit facility contains customary representations and warranties and covenants including restrictions on the amount of capital expenditures and maintenance of a minimum fixed charge coverage ratio. Capital expenditures for any fiscal year are limited under the GE credit facility to US$100.0 million, excluding capital expenditures financed by proceeds of any insurance recoveries received. Republic Inc. is in compliance with all its covenants under the GE credit facility as of December 31, 2007. </td>
  </tr>

  <tr>

    <td colspan=2>&nbsp;</td>
  </tr>

  <tr>

    <td valign=top nowrap><b>(10)</b>&nbsp; &nbsp; &nbsp; </td>
    <td><b>Seniority Premiums and Termination Payments -</b> </td>
  </tr>

  <tr>

    <td colspan=2>&nbsp;</td>
  </tr>

  <tr>

    <td height="14">&nbsp;</td>
    <td height="14">The cost, obligations and other components of seniority premiums and termination payments were determined based on computations made by independent actuaries at December 31, 2007, 2006 and 2005. </td>
  </tr>

  <tr>

    <td colspan=2>&nbsp;</td>
  </tr>

  <tr>

    <td>&nbsp;</td>
    <td>The components of the net period cost for the years ended December 31, 2007, 2006 and 2005 corresponding to seniority premiums and termination benefits are as follows: </td>
  </tr>


</table>
<br>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'" cellspacing=0 cellpadding=0 border=0 width="700">

  <tr valign=bottom>
    <td align=center width="40">&nbsp;</td>
    <td align=center>&nbsp; </td>
    <td align=center colspan="3"> <b><font size=2>2007</font></b></td>
    <td>&nbsp;&nbsp;&nbsp; </td>
    <td align=center colspan="2"> <font size=2>2006</font></td>
    <td>&nbsp;&nbsp;&nbsp; </td>
    <td align=center colspan="4"> <font size=2>2005</font> </td>
  </tr>

  <tr>
    <td align=center>&nbsp;</td>
    <td align=center>&nbsp; </td>
    <td align=center colspan=11>
      <hr noshade size=1>

</td>
  </tr>

  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=left><font size=2>Net period cost:</font> </td>
    <td align=left>&nbsp;&nbsp;&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;&nbsp;&nbsp;</td>
  </tr>

  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; &nbsp; &nbsp; &nbsp;<font size=2>Labor cost</font> </td>
    <td align=left>&nbsp;</td>
    <td align=left><b><font size=2>Ps.</font></b> </td>
    <td align=right><b><font size=2>2,654</font></b> </td>
    <td>&nbsp; </td>
    <td align=left><font size=2>Ps.</font> </td>
    <td align=right><font size=2>2,877</font> </td>
    <td>&nbsp; </td>
    <td align=left><font size=2>Ps.</font> </td>
    <td align=right><font size=2>3,064</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; &nbsp; &nbsp; &nbsp;<font size=2>Financial cost</font> </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><b><font size=2>755</font></b> </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>996</font> </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>1,134</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; &nbsp; &nbsp; &nbsp;<font size=2>Amortization of transition liability</font> </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><b><font size=2>990</font></b> </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>1,223</font> </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>1,208</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; &nbsp; &nbsp; &nbsp;<font size=2>Amortization of prior service cost</font> </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<font size=2>and plan amendments</font> </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><b><font size=2>176</font></b> </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>155</font> </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>211</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; &nbsp; &nbsp; &nbsp;<font size=2>Effect of cancelled obligations</font> </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><b><font size=2>-</font></b> </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>210</font> </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>(33</font> </td>
    <td align=left><font size=2>)</font> </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr>
    <td>&nbsp;</td>
    <td>&nbsp; </td>
    <td colspan=11>
      <hr noshade size=1>

</td>
  </tr>

  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<font size=2>Net period cost</font> </td>
    <td align=left>&nbsp;</td>
    <td align=left><b><font size=2>Ps.</font></b> </td>
    <td align=right><b><font size=2>4,575</font></b> </td>
    <td>&nbsp; </td>
    <td align=left><font size=2>Ps.</font> </td>
    <td align=right><font size=2>5,461</font> </td>
    <td>&nbsp; </td>
    <td align=left><font size=2>Ps.</font> </td>
    <td align=right><font size=2>5,584</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr>
    <td>&nbsp;</td>
    <td>&nbsp; </td>
    <td colspan="11">



      <hr noshade size=2>

</td>
  </tr>
</table>
<blockquote>
  <p>An analysis of the present value of benefit obligations is as follows:</p>
</blockquote>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'" cellspacing=0 cellpadding=0 border=0 width="740">

  <tr valign=bottom>
    <td align=center width="40">&nbsp;</td>
    <td align=center>&nbsp; </td>
    <td align=center colspan="4"> <b><font size=2>2007</font></b> </td>
    <td>&nbsp;&nbsp;&nbsp; </td>
    <td align=center colspan="4"> <font size=2>2006</font> </td>
  </tr>

  <tr>
    <td align=center>&nbsp;</td>
    <td align=center>&nbsp; </td>
    <td align=center colspan=9>
      <hr noshade size=1>

</td>
  </tr>

  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=left><font size=2>Projected benefit obligations</font> </td>
    <td align=left>&nbsp;&nbsp;&nbsp;</td>
    <td align=left><b><font size=2>Ps.</font></b> </td>
    <td align=right><b><font size=2>18,756</font></b> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left><font size=2>Ps.</font> </td>
    <td align=right><font size=2>24,662</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;&nbsp;&nbsp;</td>
  </tr>

  <tr>

    <td colspan=11>&nbsp; </td>
  </tr>

  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=left><font size=2>Unamortized items:</font> </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; &nbsp; &nbsp; &nbsp;<font size=2>Transition liability</font> </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><b><font size=2>(6,708</font></b> </td>
    <td align=left><b><font size=2>)</font></b> </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>(9,032</font> </td>
    <td align=left><font size=2>)</font> </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; &nbsp; &nbsp; &nbsp;<font size=2>Prior service cost and plan amendments</font> </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><b><font size=2>(398</font></b> </td>
    <td align=left><b><font size=2>)</font></b> </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>(399</font> </td>
    <td align=left><font size=2>)</font> </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; &nbsp; &nbsp; &nbsp;<font size=2>Actuarial gains and losses</font> </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><b><font size=2>1,524</font></b> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>1,616</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; &nbsp; &nbsp; &nbsp;<font size=2>Additional liability</font> </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><b><font size=2>5,248</font></b> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>6,260</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr>
    <td>&nbsp;</td>
    <td>&nbsp; </td>
    <td colspan=9>
      <hr noshade size=1>

</td>
  </tr>

  <tr>

    <td colspan=11>&nbsp; </td>
  </tr>

  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; &nbsp; &nbsp; &nbsp;<font size=2>Net projected liability recognized in consolidated</font> </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=left><font size=2>&nbsp; &nbsp; &nbsp; &nbsp;<font size=2></font>&nbsp; &nbsp; &nbsp; &nbsp;<font size=2></font>balance sheets</font> </td>
    <td align=left>&nbsp;</td>
    <td align=left><b><font size=2>Ps.</font></b> </td>
    <td align=right><b><font size=2>18,422</font></b> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left><font size=2>Ps.</font> </td>
    <td align=right><font size=2>23,107</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr>
    <td>&nbsp;</td>
    <td>&nbsp; </td>
    <td colspan="9">



      <hr noshade size=2>

</td>
  </tr>

  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><b><font size=2>18,422</font></b> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>23,107</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr>
    <td>&nbsp;</td>
    <td>&nbsp; </td>
    <td colspan="9">



      <hr noshade size=2>

</td>
  </tr>
</table>
<blockquote>
  <p>
  The most significant assumptions used in determining the net period cost of the plans are as follows:</p>
</blockquote>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'" cellspacing=0 cellpadding=0 border=0 width="700">

  <tr valign=bottom>
    <td align=center width="40">&nbsp;</td>
    <td align=center>&nbsp; </td>
    <td align=center>&nbsp;&nbsp;&nbsp;</td>
    <td align=center colspan="2" width="18%"><b><font size=2>2007</font></b> </td>
    <td>&nbsp;&nbsp;&nbsp; </td>
    <td align=center colspan="2" width="18%"><font size=2>2006</font> </td>
  </tr>

  <tr>
    <td align=center>&nbsp;</td>
    <td align=center>&nbsp; </td>
    <td align=center>&nbsp;</td>
    <td align=center colspan=5>
      <hr noshade size=1>

</td>
  </tr>

  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=left><font size=2>Actual discount rate used to reflect current value of obligations</font> </td>
    <td align=left>&nbsp;</td>
    <td align=right><b><font size=2>4.5</font></b> </td>
    <td align=left><b><font size=2>%</font></b> </td>
    <td>&nbsp; </td>
    <td align=right><font size=2>4.5</font> </td>
    <td align=left><font size=2>%</font> </td>
  </tr>

  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=left><font size=2>Actual rate of future salary increases</font> </td>
    <td align=left>&nbsp;</td>
    <td align=right><b><font size=2>1</font></b> </td>
    <td align=left><b><font size=2>%</font></b> </td>
    <td>&nbsp; </td>
    <td align=right><font size=2>1</font> </td>
    <td align=left><font size=2>%</font> </td>
  </tr>

  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=left><font size=2>Actual expected return rate of plan assets</font> </td>
    <td align=left>&nbsp;</td>
    <td align=right><b><font size=2>4.5</font></b> </td>
    <td align=left><b><font size=2>%</font></b> </td>
    <td>&nbsp; </td>
    <td align=right><font size=2>4.5</font> </td>
    <td align=left><font size=2>%</font> </td>
  </tr>
</table>
<p align="center">
  F-30
</p>
<HR align=center width="100%" noshade SIZE=5>


  <!-- MARKER PAGE="sheet: 1; page: 1" -->



<table style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'" cellspacing=0 cellpadding=0 border=0 width="100%">
  <tr>
    <td width="40" valign="top"><b>(11)</b></td>
    <td valign="top"><b>Other employee benefit plans -</b></td>
  </tr>
  <tr>
    <td valign="top">&nbsp;</td>
    <td valign="top">&nbsp;</td>
  </tr>
  <tr>
    <td valign="top">&nbsp;</td>
    <td valign="top">
      <p>From the companies of the group only Republic offers other benefit plans for its employees. 83% of the production workers are insured by collective contracting with the United Steelworkers of America (USWA). During the year ended December 31, 2007,
Republic negotiated a new collective bargaining agreement effective August 16, 2007 though August 15, 2012 (new labor agreement). For the Mexican operations, approximately 60% of the employees are under a collective contract. The Mexican collective
contracts expire in periods greater than one year.</p>
      <p>
Both the new and previous labor agreements at Republic provide for a defined contribution program for retirement and pension benefits. Republic is required to make a contribution for every hour worked. Under the previous labor agreement, the
contribution amount was 3.00 U.S. dollars for every hour worked through August 16, 2004; 3.50 U.S. dollars for every hour worked through August 16, 2005, and 3.80 U.S. dollars for every hour worked thereafter until August 16, 2007. The new labor
agreement requires a contribution of 3.00 U.S. dollars for every hour worked, not to be less than 2.85 U.S. million per quarter, but not to exceed 11.4 U.S. million per year. For the year ended December 31, 2007 and 2006, the Company recorded Ps.
176 and Ps. 170 million, respectively, of expense. For the period from July 22 to December 31, 2005, the related expense recorded in the statement of income amounted to Ps. 74 million.</p>
      <p>
The previous labor agreement includes an employee profit sharing plan to which the Company is required to contribute 15% of its quarterly pre-tax income, as defined in the previous labor agreement, in excess of 12.5 million of U.S. dollars. This
plan remained in effect until December 31, 2007 under the new labor agreement. For the years ended December 31, 2007 and 2006, the Company recorded Ps. 80 million and Ps. 93 million, respectively, for the profit sharing obligation under this plan.
For the period from July 22 to December 31, 2005, the related expense recorded in the statement of income amounted to Ps. 7.9 million.</p>
      <p>
The new labor agreement includes a profit sharing plan to which the Company is required to contribute 2.5% of its quarterly pre-tax income, as defined in the new labor agreement. At the end of year, the contribution will be based upon annual pre-tax
income up to 50 million of U.S. dollars multiplied by 2.5%, 50 million of U.S. dollars to 100 million of U.S. dollars multiplied by 3% and above 100 million of U.S. dollars multiplied by 3.5%, less the previous three quarter payouts.</p>
      <p>
Republic has a defined contribution retirement plan that covers substantially all salary and nonunion hourly employees. This plan is designed to provide retirement benefits through Company contributions and voluntary deferrals of employees&#146;
compensation. Republic funds contributions to this plan each pay period based upon the participants age and service as of January first of each year. The amount of the Company&#146;s contribution is equal to the monthly base salary multiplied by the
appropriate percentage based on age and years of service. The contribution becomes 100% vested upon completion of five years of service. Furthermore, employees are permitted to make contributions into a retirement plan (commonly known as 401(k) in
the United States) through payroll deferrals. Republic provides a 25% matching contribution for the first 5% of payroll that an employee elects to contribute. Employees are 100% vested in both their and the Republic&#146;s matching 401(k)
contributions. For the year ended December 31, 2007 and 2006, the Company recorded expense of Ps. 26 million and Ps. 27.1 respectively and for the period from July 22 to December 31, 2005 the related expense amounted to Ps. 12.4 million on
retirement contributions plans and 401(k) contribution plans.</p>
    </td>
  </tr>
</table>
<br>
<div align="center"></div>
<p align="center">F-31</p>
<HR noshade align="center" width="100%" size="5">



  <!-- MARKER PAGE="sheet: 1; page: 1" -->


<TABLE border=0 cellspacing=0 cellpadding=0 style="font-family: 'Times New Roman';font-size: 10pt;" width="100%">
  <TR>
    <TD width="40">&nbsp;</TD>
    <TD>
Effective April 1, 2007, Republic amended the defined contribution retirement plan to include all employees covered by the USWA labor agreement. Employees who are covered by the USWA labor agreement are eligible to participate in the defined
contribution retirement plan via voluntary deferrals of employees&#146; compensation. There are no Company contributions or employer matching contributions.    </TD>
  </TR>
  <TR>
    <TD colspan=2>&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>
Republic has a profit sharing plan for salary and non-union hourly employees, excluding a select group of managers and executives. Republic is required to contribute 3% of its quarterly pre-tax income, as defined in the plan, in excess of 12.5
million of U.S. dollars. For the years ended December 31, 2007 and 2006, the Company recorded expense of Ps. 16 million and Ps. 21.5 million under this plan. For the period from July 22 to December 31, 2005, the related expense recorded in the
statement of income amounted to Ps. 1.1 million.        </TD>
  </TR>
  <TR>
    <TD colspan=2>&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>
The Company has a Key Employee Incentive Plan. The plan is based on attaining the Business Plan earnings Before Income Taxes, Depreciation and Amortization (EBITDA) and individual performance targets. The objectives are measured on an annual basis.
For the years ended December 31, 2007, 2006 and 2005 the related recorded expense in the income statement amounted Ps. 5.8 millions, Ps. 4.2 millions and Ps. 4.7 millions, respectively. In 2007 the executive from Republic were incorporated to this
incentive plan and for the year ended December 31, 2007, the Company did not record any expense related to this plan from the Republic executives due to the lack of exceeding the annual measurement objectives.       </TD>
  </TR>
  <TR>
    <TD colspan=2>&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>
Republic had a 2006 Key Executive Incentive Plan which was in effect for 2006 and January 2007. The plan was based on attaining the 2006 Business Plan EBITDA. For the year ended December 31, 2006, the Company recorded expense under this plan of Ps.
1.1 million. For the period from July 22, 2005 to December 31, 2005, no expense was recorded for this plan.     </TD>
  </TR>
  <TR>
    <TD colspan=2>&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>
Republic has a deferred compensation plan that covering certain key employees. The plan allows for the employee to make annual deferrals of base salary and provides for a fixed annual contribution by Republic based on a percentage of salary. For the
years ended December 31, 2007 and 2006 and for the period from July 22, 2005 to December 31, 2005 the Company recorded an expense of Ps. 1.1 million of U.S. dollars for each period.   </TD>
  </TR>
  <TR>
    <TD colspan=2>&nbsp;</TD>
  </TR>
  <TR>

    <TD nowrap valign=top>
<B>(12)</B>&nbsp; &nbsp; &nbsp;         </TD>
    <TD>
<B>Income tax, asset tax, flat-rate business tax -</B>  </TD>
  </TR>
  <TR>
    <TD colspan=2>&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>
The Flat-Rate Business Tax (FRBT) Law was published in the <I>Official Gazette </I>on October 1, 2007. This Law will come into force as of January 1, 2008 and abolish the Asset Tax Law.       </TD>
  </TR>
  <TR>
    <TD colspan=2>&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>
Current-year FRBT is computed by applying the 17.5% rate (16.5% for 2008 and 17% for 2009) to income determined on the basis of cash flows, net of authorized credits.  </TD>
  </TR>
  <TR>
    <TD colspan=2>&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>
FRBT credits derive mainly from the unamortized negative FRBT base and salary credits and social security contributions, as well as credits derived from the deduction of certain investments, such as those made in inventories and fixed assets, during
the transition period from the date on which the FRBT comes into force. </TD>
  </TR>
  <TR>
    <TD colspan=2>&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>
FRBT shall be payable only to the extent it exceeds income tax for the same period. In other words, to determine FRBT payable, income tax paid in a given period shall first be subtracted from the FRBT of the same period and the difference shall be
the FRBT payable.       </TD>
  </TR>



</TABLE>
<p align="center">F-32</p>
<HR noshade align="center" width="100%" size="5">



  <!-- MARKER PAGE="sheet: 1; page: 1" -->


<blockquote>
  <p> Should a negative FRBT base be determined because deductions exceed taxable income, there will be no FRBT payable. The amount of the negative base multiplied by the FRBT rate results in  a FRBT credit, which may be applied against income tax for the same year or, if applicable, against FRBT payable in the next ten years. Based on financial projections for the next four years and retrospectively, on historical results, the Company considers that it will essentially pay Income Tax in upcoming years. Therefore, at December 31, 2007, the Company has computed its deferred taxes at December 31, 2007 based on the specific Income Tax rules, consistent with prior year.</p>
  <p>I) Income tax</p>
</blockquote>
<table border=0 cellspacing=0 cellpadding=0 style="font-family: 'Times New Roman';font-size: 10pt;" width="100%">
  <tr>
    <td nowrap valign=top width="40">&nbsp;</td>
    <td valign="top" width="40">a)</td>
    <td valign="top">
      <p>The Company consolidates its taxable income through ICH, the parent company. Under Mexican Income Tax Law, ICH and each of its subsidiaries calculate their taxes individually, and have the obligation to pay the minority part of such taxes directly to the Mexican Tax Authorities. The majority interest for consolidated tax purposes is paid through the holding company. The Company computes its tax provision on a stand alone basis.</p>
      <p>Under current tax regulations, companies must pay the greater between income tax and asset tax.</p>
      <p>An analysis of income tax charged to results of operations for the years ended December 31, 2007, 2006 and 2005 is as follows:</p>
    </td>
  </tr>


</table>
<br>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'" cellspacing=0 cellpadding=0 border=0 width="740">

  <tr valign=bottom>
    <td align=center width="80">&nbsp;</td>
    <td align=center>&nbsp; </td>
    <td colspan="3" align="center">   <b><font size=2>2007</font></b></td>
    <td align="center">&nbsp;&nbsp;&nbsp; </td>
    <td align=center colspan="2"> <font size=2>2006</font></td>
    <td align=center>&nbsp; </td>
    <td align="center">&nbsp;&nbsp;&nbsp; </td>
    <td align=center colspan="4">  <font size=2>2005</font> </td>
  </tr>

  <tr>
    <td align=center>&nbsp;</td>
    <td align=center>&nbsp; </td>
    <td colspan="12">
      <hr noshade size=1>

</td>
  </tr>

  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=left><font size=2>Current income tax Mexican subsidiaries</font> </td>
    <td>&nbsp;&nbsp;&nbsp; </td>
    <td align=left><b><font size=2>Ps.</font></b> </td>
    <td align=right><b><font size=2>80,119</font></b> </td>
    <td>&nbsp; </td>
    <td align=left><b><font size=2>Ps.</font></b> </td>
    <td align=right><font size=2>90,305</font> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left><b><font size=2>Ps.</font></b> </td>
    <td align=right><font size=2>133,341</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;&nbsp;&nbsp;</td>
  </tr>

  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=left><font size=2>Current income tax foreign subsidiaries</font> </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><b><font size=2>31,403</font></b> </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>537,307</font> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>(48,384</font> </td>
    <td align=left><font size=2>)</font> </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=left><font size=2>Deferred income tax Mexican subsidiaries</font> </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><b><font size=2>356,059</font></b> </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>177,085</font> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>(28,252</font> </td>
    <td align=left><font size=2>)</font> </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=left><font size=2>Deferred income tax foreign subsidiaries</font> </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><b><font size=2>153,093</font></b> </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>(195,976</font> </td>
    <td align=left><font size=2>)</font> </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>75,975</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr>
    <td>&nbsp;</td>
    <td>&nbsp; </td>
    <td colspan="12">
      <hr noshade size=1>

</td>
  </tr>

  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=left><font size=2>Total income tax</font> </td>
    <td>&nbsp; </td>
    <td align=left><b><font size=2>Ps.</font></b> </td>
    <td align=right><b><font size=2>620,674</font></b> </td>
    <td>&nbsp; </td>
    <td align=left><b><font size=2>Ps.</font></b> </td>
    <td align=right><font size=2>608,721</font> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left><b><font size=2>Ps.</font></b> </td>
    <td align=right><font size=2>132,680</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr>
    <td>&nbsp;</td>
    <td>&nbsp; </td>
    <td colspan="12">



      <hr noshade size=2>

</td>
  </tr>
</table>
<br>
<TABLE style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'" cellSpacing=0 cellPadding=0 border=0 width="100%">

  <TR>
    <TD vAlign=top nowrap width="40">&nbsp;</TD>
    <TD vAlign=top nowrap width="40">b)&nbsp; &nbsp; &nbsp; </TD>
    <TD>At December 31, 2007 and 2006, deferred taxes were analyzed as follows: </TD>
  </TR>


</TABLE>
<br>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'" cellspacing=0 cellpadding=0 border=0 width="740">

  <tr valign=bottom>
    <td align=center width="80">&nbsp;</td>
    <td align=center>&nbsp; </td>
    <td align=center colspan="3"> <b><font size=2>2007</font></b></td>
    <td align=center>&nbsp; </td>
    <td>&nbsp;&nbsp;&nbsp; </td>
    <td align=center colspan="4"> <font size=2>2006</font> </td>
  </tr>

  <tr>
    <td align=center>&nbsp;</td>
    <td align=center>&nbsp; </td>
    <td align=center colspan=9>
      <hr noshade size=1>

</td>
  </tr>

  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=left><font size=2>Deferred tax assets:</font> </td>
    <td align=left>&nbsp;&nbsp;&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;&nbsp;&nbsp;</td>
  </tr>

  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; &nbsp; &nbsp; &nbsp;<font size=2>Allowance for bad debts</font> </td>
    <td align=left>&nbsp;</td>
    <td align=left><b><font size=2>Ps.</font></b> </td>
    <td align=right><b><font size=2>20,250</font></b> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left><font size=2>Ps.</font> </td>
    <td align=right><font size=2>43,093</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; &nbsp; &nbsp; &nbsp;<font size=2>Liability provisions</font> </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><b><font size=2>93,860</font></b> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>110,974</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; &nbsp; &nbsp; &nbsp;<font size=2>Advances from customers</font> </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><b><font size=2>13,967</font></b> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>623</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; &nbsp; &nbsp; &nbsp;<font size=2>Tax loss carryforwards</font> </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><b><font size=2>299,548</font></b> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>632,388</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; &nbsp; &nbsp; &nbsp;<font size=2>Derivative financial instruments</font> </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=center><b><font size=2>-</font></b> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>1,772</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; &nbsp; &nbsp; &nbsp;<font size=2>Recoverable asset tax</font> </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><b><font size=2>99,610</font></b> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>177,025</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr>
    <td>&nbsp;</td>
    <td>&nbsp; </td>
    <td colspan=9>
      <hr noshade size=1>

</td>
  </tr>

  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; &nbsp; &nbsp; &nbsp;<font size=2>Total gross deferred assets</font> </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><b><font size=2>527,235</font></b> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>965,875</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; &nbsp; &nbsp; &nbsp;<font size=2>Less valuation allowance</font> </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><b><font size=2>(389,117</font></b> </td>
    <td align=left><b><font size=2>)</font></b> </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>(724,677</font> </td>
    <td align=left><font size=2>)</font> </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr>
    <td>&nbsp;</td>
    <td>&nbsp; </td>
    <td colspan=9>
      <hr noshade size=1>

</td>
  </tr>

  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=left><font size=2>Deferred assets, net</font> </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><b><font size=2>138,118</font></b> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>241,198</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr>
    <td>&nbsp;</td>
    <td>&nbsp; </td>
    <td colspan=9>
      <hr noshade size=1>

</td>
  </tr>

  <tr>

    <td colspan=11>&nbsp; </td>
  </tr>

  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=left><font size=2>Deferred tax liabilities:</font> </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; &nbsp; &nbsp; &nbsp;<font size=2>Inventories</font> </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><b><font size=2>456,376</font></b> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>428,056</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; &nbsp; &nbsp; &nbsp;<font size=2>Property, plant and equipment</font> </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><b><font size=2>1,602,184</font></b> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>1,465,125</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; &nbsp; &nbsp; &nbsp;<font size=2>Additional liabilities resulting from excess of</font>  <font size=2>book </font></td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>



  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; &nbsp; &nbsp; &nbsp;<font size=2>&nbsp;&nbsp;&nbsp;&nbsp;value of stockholders&#146; equity over its tax</font> <font size=2>value</font> </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><b><font size=2>695,973</font></b> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>353,040</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; &nbsp; &nbsp; &nbsp;<font size=2>Preoperating expenses</font> </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><b><font size=2>55,155</font></b> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>72,233</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; &nbsp; &nbsp; &nbsp;<font size=2>Other</font> </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><b><font size=2>910</font></b> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>4,461</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr>
    <td>&nbsp;</td>
    <td>&nbsp; </td>
    <td colspan=9>
      <hr noshade size=1>

</td>
  </tr>

  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=left><font size=2>Total deferred liabilities</font> </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><b><font size=2>2,810,598</font></b> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>2,322,915</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr>
    <td>&nbsp;</td>
    <td>&nbsp; </td>
    <td colspan=9>
      <hr noshade size=1>

</td>
  </tr>

  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=left><font size=2>Deferred liabilities, net</font> </td>
    <td align=left>&nbsp;</td>
    <td align=left><b><font size=2>Ps.</font></b> </td>
    <td align=right><b><font size=2>2,672,480</font></b> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left><font size=2>Ps.</font> </td>
    <td align=right><font size=2>2,081,717</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr>
    <td>&nbsp;</td>
    <td>&nbsp; </td>
    <td colspan="9">



      <hr noshade size=2>

</td>
  </tr>
</table>
<p align="center">F-33</p>
<HR align=center width="100%" noshade SIZE=5>


  <!-- MARKER PAGE="sheet: 1; page: 1" -->

<table style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'" cellspacing=0 cellpadding=0 border=0 width="100%">

  <tr>
    <td valign=top nowrap width="40">&nbsp;</td>
    <td valign=top nowrap width="40">c)&nbsp; &nbsp; &nbsp; </td>
    <td>At December 31, 2007, 2006 and 2005 the tax expense attributable to income before income tax, employee profit sharing and minority interest differed from the expense computed by applying the income tax rate of 28% in 2007, 29% in 2006 and 30% in 2005 to income before these provisions and minority interest. An analysis is as follows: </td>
  </tr>


</table>
<br>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'" cellspacing=0 cellpadding=0 border=0 width="100%">

  <tr valign=bottom>
    <td align=center width="80">&nbsp;</td>
    <td align=center>&nbsp; </td>
    <td align=center colspan="3"> <b><font size=2>2007</font></b></td>
    <td align=center>&nbsp; </td>
    <td>&nbsp;&nbsp;&nbsp; </td>
    <td align=center colspan="3"> <font size=2>2006</font> </td>
    <td>&nbsp;&nbsp;&nbsp; </td>
    <td align=center>&nbsp; </td>
    <td align=center><font size=2>2005</font></td>
    <td align=center>&nbsp; </td>
    <td align=center>&nbsp;&nbsp;&nbsp;</td>
  </tr>

  <tr>
    <td align=center>&nbsp;</td>
    <td align=center>&nbsp; </td>
    <td align=center colspan=13>
      <hr noshade size=1>

</td>
  </tr>

  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=left><font size=2>Expected tax expense</font> </td>
    <td align=left>&nbsp;&nbsp;&nbsp;</td>
    <td align=left><b><font size=2>Ps.</font></b> </td>
    <td align=right><b><font size=2>628,838</font></b> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left><font size=2>Ps.</font> </td>
    <td align=right><font size=2>872,174</font> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left><font size=2>Ps.</font> </td>
    <td align=right><font size=2>472,042</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=left><font size=2>Increase (decrease) resulting from:</font> </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=left><font size=2>Net effect of inflation</font> </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><b><font size=2>15,541</font></b> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>18,044</font> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>32,787</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=left><font size=2>Cancellation of asset tax</font> </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><b><font size=2>90,889</font></b> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>&#150;</font> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>&#150;</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=left><font size=2>Effect in Republic&#146;s effective income tax rate</font> </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><b><font size=2>80,191</font></b> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>110,271</font> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>7,226</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=left><font size=2>Change in valuation allowance of deferred tax assets </font><sup><font size=2>(1)</font></sup> </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><b><font size=2>(14,612</font></b> </td>
    <td align=left><b><font size=2>)</font></b> </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>41,013</font> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>(141,775</font> </td>
    <td align=left><font size=2>)</font> </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=left><font size=2>Effect of beginning inventory due to change in tax</font> </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=left><font size=2>laws and corporate restructure </font><sup><font size=2>(2)</font></sup> </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><b><font size=2>&#150;</font></b> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>&#150;</font> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>(450,568</font> </td>
    <td align=left><font size=2>)</font> </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=left><font size=2>Change of valuation allowance of NOLs from acquisitions </font><sup><font size=2>(3)</font></sup> </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><b><font size=2>(493,010</font></b> </td>
    <td align=left><b><font size=2>)</font></b> </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>(427,935</font> </td>
    <td align=left><font size=2>)</font> </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>(71,973</font> </td>
    <td align=left><font size=2>)</font> </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=left><font size=2>Additional liability </font><sup><font size=2>(4)</font></sup> </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><b><font size=2>342,933</font></b> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>27,909</font> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>325,131</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=left><font size=2>Others, net</font> </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><b><font size=2>(30,096</font></b> </td>
    <td align=left><b><font size=2>)</font></b> </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>(32,755</font> </td>
    <td align=left><font size=2>)</font> </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>(40,190</font> </td>
    <td align=left><font size=2>)</font> </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr>
    <td>&nbsp;</td>
    <td>&nbsp; </td>
    <td colspan=13>
      <hr noshade size=1>

</td>
  </tr>

  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=left><font size=2>Income tax expense</font> </td>
    <td align=left>&nbsp;</td>
    <td align=left><b><font size=2>Ps.</font></b> </td>
    <td align=right><b><font size=2>620,674</font></b> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left><font size=2>Ps.</font> </td>
    <td align=right><font size=2>608,721</font> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left><font size=2>Ps.</font> </td>
    <td align=right><font size=2>132,680</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr>
    <td>&nbsp;</td>
    <td>&nbsp; </td>
    <td colspan="13">



      <hr noshade size=2>

</td>
  </tr>
</table>
<br>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'" cellspacing=0 cellpadding=0 border=0 width="100%">

  <tr>
    <td valign=top nowrap width="40">&nbsp;</td>
    <td valign=top nowrap width="40"><font size="1">(1)&nbsp; &nbsp; &nbsp; </font></td>
    <td><font size="1">At December 31, 2007, 2006 and 2005 the valuation allowance for deferred assets was Ps. 99,610, Ps. 114,222 and Ps. 73,209, respectively. For the years ended December 31, 2007, 2006 and 2005 the net change in the valuation allowance was a decrease of Ps. (14,612), an increase of Ps. 41,103 and a decrease of Ps. (141,775). In 2004 the Company had a valuation allowance that covered almost the total amount of the recoverable asset tax and lox loss carryforwards due to the uncertainty of their recovery. However, in 2005 the Company recovered part of the asset tax and reduced its deferred tax asset by Ps. 90,045.
As a result of the tax recovery, the Company estimated that a higher amount of deferred tax assets is more likely than not to be recovered,
consequently, it reduced its valuation allowance on its deferred tax asset as of December 31, 2005. For the year 2006, the Company has
determined that part of the recoverable asset tax generated in the period will not be recovered and has increased its reserved. In the
year 2007, due to the new FRBT law and the transition rules regarding the recovery of asset tax from prior years, the Company wrote-off part
of its recoverable asset tax and consequently has reduce its valuation allowance. To evaluate the recoverability of deferred assets,
management considers the probability of not recovering all or a portion of it. The final realization of deferred assets depends on the generation
of taxable profits in the periods when the temporary
differences are deductible. Upon carrying out this evaluation, management considers the expected reversal of deferred liabilities, projected taxable profit and planning strategies. </font></td>
  </tr>

  <tr>

    <td colspan=3><font size="1"></font></td>
  </tr>





  <tr>
    <td valign=top nowrap>&nbsp;</td>
    <td valign=top nowrap><font size="1">(2)&nbsp; &nbsp; &nbsp; </font></td>
    <td><font size="1">In conformity with the Mexican Income Tax Law (MITLA) in force through December 31, 2004, the cost of sales was considered as non-deductible expense and instead, purchases of inventory and production costs were considered as deductible items. This tax treatment in the MITLA gave rise to a deferred tax liability because of the difference in the book value of inventories and its corresponding tax value. Effective January 1, 2005, the MITLA considers cost of sales
as a deductible item instead of inventory purchases and production costs. The MITLA established transitions rules to be followed to accumulate the December 31, 2004 inventory balance into taxable revenue. However, during 2005 the Company recorded a tax benefit of Ps. 450,568, because of the non-accumulation, in the coming years, of its inventory balance at December 31, 2004 in compliance with the specific transition rules of MITLA as a result of a corporate restructuring (liquidation
of its Subsidiary COSICA) of the Company. </font></td>
  </tr>

  <tr>

    <td colspan=3><font size="1"></font></td>
  </tr>





  <tr>
    <td valign=top nowrap>&nbsp;</td>
    <td valign=top nowrap><font size="1">(3)&nbsp; &nbsp; &nbsp; </font></td>
    <td><font size="1">This benefit is the result of the change in valuation allowance for recognition of tax loss carry forwards from acquisitions. During the years 2006 and 2005, it also includes the benefit for the amortization of the deferred credit (Note 2n) for $363,802 and 71,973, respectively. </font></td>
  </tr>

  <tr>

    <td colspan=3><font size="1"></font></td>
  </tr>

  <tr>
    <td valign=top nowrap>&nbsp;</td>
    <td valign=top nowrap><font size="1">(4)&nbsp; &nbsp; &nbsp; </font></td>
    <td><font size="1">For the years ended December 31, 2007 and 2006 the company recorded an additional deferred tax liability for $695,973 and $353,040, respectively, to acknowledge the difference on the net income for those periods for which the company did not pay income tax, principally due to the amortization of tax losses from acquisitions. The deferred tax expense as of December 31, 2007, 2006 and 2005 generated by this liability was $342,933 $27,909 and $325,131, respectively. </font></td>
  </tr>


</table>
<p align="center">F-34</p>
<HR align=center width="100%" noshade SIZE=5>


  <!-- MARKER PAGE="sheet: 1; page: 1" -->


<blockquote>
  <p>The effective tax rates for the fiscal years ended December 31, 2007, 2006 and 2005 were 27.6%, 20% and 8.7% respectively. The effective income tax rate during 2005 had a significant improvement that was the result of a corporate restructure. These changes resulted in favorable tax differences that had a one time impact in the effective income tax rate for the year ended December 31, 2005.</p>
  <p>In December 2004, a decrease in the income tax rate was approved from 33% in 2004, to 30% in 2005, 29% in 2006 and 28% for 2007 and subsequent years.</p>
</blockquote>
<TABLE style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'" cellSpacing=0 cellPadding=0 border=0 width="100%">

  <TR>
    <TD vAlign=top nowrap width="40">&nbsp;</TD>
    <TD vAlign=top nowrap width="40">d)&nbsp; &nbsp; &nbsp; </TD>
    <TD>The Company has available tax loss carryforwards which can be applied against earnings generated in the following ten years, and indexed for inflation, following the procedures established by the Income Tax Law in force. </TD>
  </TR>


</TABLE>
<blockquote>
  <p>At December 31, 2006 there were available tax loss carryforwards and refundable asset tax, restated for inflation, as follows:</p>
</blockquote>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'" cellspacing=0 cellpadding=0 border=0 align="center" width="600">



  <tr valign=bottom>
    <td align=center width="84">&nbsp; </td>
    <td width="25">&nbsp;&nbsp;&nbsp; </td>
    <td align=center width="119">&nbsp; </td>
    <td align=center width="19">&nbsp;&nbsp;&nbsp;</td>
    <td align=center colspan="7"> <b><font size=2>Restated amount at</font></b><br>
      <b><font size=2>December 31, 2007</font></b>  </td>
  </tr>

  <tr>

    <td align=center colspan=3>&nbsp; </td>
    <td align=center width="19">&nbsp;


</td>
    <td align=center colspan=7>
      <hr noshade size=1>
    </td>
  </tr>

  <tr valign=bottom>
    <td align=center width="84"><b><font size=2>Year of</font></b><br>
      <b><font size=2>origin</font></b></td>
    <td width="25">&nbsp; </td>
    <td align=center width="119"><b><font size=2>Year of</font></b><br>
      <b><font size=2>expiration</font></b></td>
    <td align=center width="19"><b></b></td>
    <td align=center colspan=3><b><font size=2>Tax loss carryforwards <br>
      (1)
      </font></b></td>
    <td align=center width="25">&nbsp;&nbsp;&nbsp; </td>
    <td align=center colspan=3><b><font size=2>Recoverable Asset tax <br>
      (2)
      </font></b> </td>
  </tr>




  <tr valign=bottom>
    <td align=center width="84">
      <hr noshade size=1>
    </td>
    <td width="25">&nbsp;</td>
    <td align=center width="119">
      <hr noshade size=1>
    </td>
    <td align=left width="19">&nbsp;</td>
    <td align=left colspan="3">
      <hr noshade size=1>
    </td>
    <td align=left width="25">&nbsp;</td>
    <td align=left colspan="3">
      <hr noshade size=1>
    </td>
  </tr>

  <tr valign=bottom>
    <td align=center width="84"><font size=2>1998</font> </td>
    <td width="25">&nbsp; </td>
    <td align=center width="119"><font size=2>2008</font> </td>
    <td align=left width="19">&nbsp;</td>
    <td align=right width="77"><font size=2>Ps.</font> </td>
    <td align=right width="76"><font size=2>4,813</font> </td>
    <td align=right width="21">&nbsp;&nbsp;&nbsp;</td>
    <td align=left width="25">&nbsp; </td>
    <td align=left width="59">&nbsp; </td>
    <td align=left width="64">&nbsp; </td>
    <td align=left width="31">&nbsp;&nbsp;&nbsp; </td>
  </tr>

  <tr valign=bottom>
    <td align=center width="84"><font size=2>1999</font> </td>
    <td width="25">&nbsp; </td>
    <td align=center width="119"><font size=2>2009</font> </td>
    <td align=left width="19">&nbsp;</td>
    <td align=right width="77">&nbsp; </td>
    <td align=right width="76"><font size=2>40,860</font> </td>
    <td align=right width="21">&nbsp;</td>
    <td align=left width="25">&nbsp; </td>
    <td align=left width="59">&nbsp; </td>
    <td align=left width="64">&nbsp; </td>
    <td align=left width="31">&nbsp; </td>
  </tr>

  <tr valign=bottom>
    <td align=center width="84"><font size=2>2000</font> </td>
    <td width="25">&nbsp; </td>
    <td align=center width="119"><font size=2>2010</font> </td>
    <td align=left width="19">&nbsp;</td>
    <td align=right width="77">&nbsp; </td>
    <td align=right width="76"><font size=2>26,994</font> </td>
    <td align=right width="21">&nbsp;</td>
    <td align=left width="25">&nbsp; </td>
    <td align=left width="59">&nbsp; </td>
    <td align=left width="64">&nbsp; </td>
    <td align=left width="31">&nbsp; </td>
  </tr>

  <tr valign=bottom>
    <td align=center width="84"><font size=2>2001</font> </td>
    <td width="25">&nbsp; </td>
    <td align=center width="119"><font size=2>2011</font> </td>
    <td align=left width="19">&nbsp;</td>
    <td align=right width="77">&nbsp; </td>
    <td align=right width="76"><font size=2>3,326</font> </td>
    <td align=right width="21">&nbsp;</td>
    <td align=left width="25">&nbsp; </td>
    <td align=left width="59">&nbsp; </td>
    <td align=left width="64">&nbsp; </td>
    <td align=left width="31">&nbsp; </td>
  </tr>

  <tr valign=bottom>
    <td align=center width="84"><font size=2>2002</font> </td>
    <td width="25">&nbsp; </td>
    <td align=center width="119"><font size=2>2012</font> </td>
    <td align=left width="19">&nbsp;</td>
    <td align=right width="77">&nbsp; </td>
    <td align=right width="76"><font size=2>12,666</font> </td>
    <td align=right width="21">&nbsp;</td>
    <td align=left width="25">&nbsp; </td>
    <td align=left width="59">&nbsp; </td>
    <td align=left width="64">&nbsp; </td>
    <td align=left width="31">&nbsp; </td>
  </tr>

  <tr valign=bottom>
    <td align=center width="84"><font size=2>2003</font> </td>
    <td width="25">&nbsp; </td>
    <td align=center width="119"><font size=2>2013</font> </td>
    <td align=left width="19">&nbsp;</td>
    <td align=right width="77">&nbsp; </td>
    <td align=right width="76"><font size=2>12,209</font> </td>
    <td align=right width="21">&nbsp;</td>
    <td align=left width="25">&nbsp; </td>
    <td align=left width="59">&nbsp; </td>
    <td align=left width="64">&nbsp; </td>
    <td align=left width="31">&nbsp; </td>
  </tr>

  <tr valign=bottom>
    <td align=center width="84"><font size=2>2004</font> </td>
    <td width="25">&nbsp; </td>
    <td align=center width="119"><font size=2>2014</font> </td>
    <td align=left width="19">&nbsp;</td>
    <td align=right width="77">&nbsp; </td>
    <td align=right width="76"><font size=2>10,165</font> </td>
    <td align=right width="21">&nbsp;</td>
    <td align=left width="25">&nbsp; </td>
    <td align=left width="59">&nbsp; </td>
    <td align=left width="64">&nbsp; </td>
    <td align=left width="31">&nbsp; </td>
  </tr>

  <tr valign=bottom>
    <td align=center width="84"><font size=2>2005</font> </td>
    <td width="25">&nbsp; </td>
    <td align=center width="119"><font size=2>2015</font> </td>
    <td align=left width="19">&nbsp;</td>
    <td align=right width="77">&nbsp; </td>
    <td align=right width="76"><font size=2>933,824</font> </td>
    <td align=right width="21">&nbsp;</td>
    <td align=left width="25">&nbsp; </td>
    <td align=left width="59">&nbsp; </td>
    <td align=left width="64">&nbsp; </td>
    <td align=left width="31">&nbsp; </td>
  </tr>

  <tr valign=bottom>
    <td align=center width="84"><font size=2>2006</font> </td>
    <td width="25">&nbsp; </td>
    <td align=center width="119"><font size=2>2016</font> </td>
    <td align=left width="19">&nbsp;</td>
    <td align=right width="77">&nbsp; </td>
    <td align=right width="76"><font size=2>9,893</font> </td>
    <td align=right width="21">&nbsp;</td>
    <td align=left width="25">&nbsp; </td>
    <td align=right width="59"><font size=2>Ps.</font> </td>
    <td align=right width="64"><font size=2>52,696</font> </td>
    <td align=left width="31">&nbsp; </td>
  </tr>

  <tr valign=bottom>
    <td align=center width="84"><font size=2>2007</font> </td>
    <td width="25">&nbsp; </td>
    <td align=center width="119"><font size=2>2017</font> </td>
    <td align=left width="19">&nbsp;</td>
    <td align=right width="77">&nbsp; </td>
    <td align=right width="76"><font size=2>15,063</font> </td>
    <td align=right width="21">&nbsp;</td>
    <td align=left width="25">&nbsp; </td>
    <td align=right width="59">&nbsp; </td>
    <td align=right width="64"><font size=2>46,914</font> </td>
    <td align=left width="31">&nbsp; </td>
  </tr>


  <tr valign=bottom>
    <td align=left width="84">&nbsp;</td>
    <td width="25">&nbsp;</td>
    <td align=left width="119">&nbsp;</td>
    <td align=left width="19">&nbsp;</td>
    <td align=right width="77">&nbsp;</td>
    <td align=right width="76">
      <hr noshade size=1>
    </td>
    <td align=right width="21">&nbsp;</td>
    <td align=left width="25">&nbsp;</td>
    <td align=right width="59">&nbsp;</td>
    <td align=right width="64">
      <hr noshade size=1>
    </td>
    <td align=left width="31">&nbsp;</td>
  </tr>

  <tr valign=bottom>
    <td align=left width="84">&nbsp; </td>
    <td width="25">&nbsp; </td>
    <td align=left width="119">&nbsp; </td>
    <td align=left width="19">&nbsp;</td>
    <td align=right width="77"><font size=2>Ps.</font> </td>
    <td align=right width="76"><font size=2>1,069,813</font> </td>
    <td align=right width="21">&nbsp;</td>
    <td align=left width="25">&nbsp; </td>
    <td align=right width="59"><font size=2>Ps.</font> </td>
    <td align=right width="64"><font size=2>99,610</font> </td>
    <td align=left width="31">&nbsp; </td>
  </tr>
  <tr valign=bottom>
    <td align=left width="84">&nbsp;</td>
    <td width="25">&nbsp;</td>
    <td align=left width="119">&nbsp;</td>
    <td align=left width="19">&nbsp;</td>
    <td align=right width="77">&nbsp;</td>
    <td align=right width="76">
      <hr noshade size=2>
    </td>
    <td align=right width="21">&nbsp;</td>
    <td align=left width="25">&nbsp;</td>
    <td align=right width="59">&nbsp;</td>
    <td align=right width="64">
      <hr noshade size=2>
    </td>
    <td align=left width="31">&nbsp;</td>
  </tr>


</table>
<blockquote>
  <p>(1) Amortizable tax losses include $1,033,954 derived from acquisitions, for which the tax benefits will be recognized in the year they are amortized.</p>
  <p>(2) With the issuance of the FRBT, the asset tax law is cancelled and the third transitory article of the FRBT law establishes a new procedure for the return of paid asset tax for the ten preceding fiscal years, and under no circumstance may it exceed 10% of asset tax paid during the fiscal years 2005, 2006 and 2007. Based on these changes, the Company has determined that asset tax from those years will not be recovered based on the prospective analysis of their results and therefore, it has created an allowance for them. Asset tax for 2004 and previous years has been cancelled as it is not recoverable under any circumstance.</p>
</blockquote>
<TABLE style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'" cellSpacing=0 cellPadding=0 border=0 width="100%">

  <TR>
    <TD vAlign=top nowrap width="40">&nbsp;</TD>
    <TD vAlign=top nowrap width="40">II)&nbsp; &nbsp; &nbsp; </TD>
    <TD>Asset tax </TD>
  </TR>


</TABLE>
<blockquote>
  <p>Prior to the new FRBT law, asset tax is levied at the rate of 1.25% and is payable on the average value of most assets net of certain liabilities. Asset tax may be credited against income tax and is payable only to the extent that it exceeds this tax. Asset tax paid can be requested for refund to the extent that the income tax exceeds this tax in the following ten years. For the years 2007, 2006 and 2005 the Company determined an asset tax of Ps. 46,914 Ps. 81,983 and Ps. 27,046, respectively.</p>
</blockquote>
<p align="center">F-35</p>
<HR align=center width="100%" noshade SIZE=5>


  <!-- MARKER PAGE="sheet: 1; page: 1" -->



<table border=0 cellspacing=0 cellpadding=0 style="font-family: 'Times New Roman';font-size: 10pt;" width="100%">
  <tr>
    <td valign=top align=left width="40"><b>(13)</b></td>
    <td valign=top align=left colspan="2">
      <p><b> Stockholders&#146; equity - </b></p>
    </td>
  </tr>
  <tr>
    <td valign=top align=right width="40">&nbsp;</td>
    <td valign=top align=left width="40">&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td valign=top align=right width="40">&nbsp;</td>
    <td valign=top align=left colspan="2">
      <p>The most significant characteristics of stockholders&#146;
equity accounts are described below:
</p>
    </td>
  </tr>




  <tr>
    <td nowrap valign=top align=right width="40">&nbsp;</td>
    <td nowrap valign=top align=left width="40">&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td nowrap valign=top align=right width="40">&nbsp;</td>
    <td nowrap valign=top align=left width="40"><b><i>(a)</i></b></td>
    <td><b><i>Structure of capital stock -</i></b></td>
  </tr>

  <tr>
    <td nowrap valign=top align=right width="40">&nbsp;</td>
    <td nowrap valign=top align=left width="40">&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td nowrap valign=top align=right width="40">&nbsp;</td>
    <td nowrap valign=top align=left width="40">
i.)&nbsp; &nbsp; &nbsp;</td>
    <td>
 Article 22 of the Mexican Securities Market Law, which came into effect on June 28, 2006, requires that corporations whose shares are listed on the National Registry of Securities include in their business name the term &#147;Burs&aacute;til&#148;
(that means stock-exchange) or its abbreviation "B". Accordingly, at an extraordinary meeting held on October 24, 2006, the stockholders approved, among other resolutions, to amend clause FIRST of the Company&#146;s by-laws, to conform with the
provisions of the mentioned Article and from such date onwards &#147;GRUPO SIMEC&#148; shall be followed by the expression SOCIEDAD  AN&Oacute;NIMA BURS&Aacute;TIL DE CAPITAL VARIABLE, or the initials &#147;S.A.B. DE C.V.&#148;     </td>
  </tr>
  <tr>
    <td colspan=3>&nbsp;</td>
  </tr>


  <tr>
    <td nowrap valign=top align=right>&nbsp;</td>
    <td nowrap valign=top align=left width="40">
ii.) &nbsp; &nbsp;      </td>
    <td>
At an Extraordinary Meeting held on October 24, 2006, the stockholders&#146; approved to increase the capital stock of the Company through a public offer of 60,000,000 shares in the domestic and international markets. On February 8, 2007 an offer
price per share was established for the primary purchasing offer (the &#147;Offer&#148;) for up to 52,173,915 shares, at &#36;45.70 per share. The offer price for the ADSs (<i>American Depositary Shares</i>) was &#36;12.50 dollars per ADS. Each ADS
represents 3 B Series shares. In addition to the 52,173,915 shares, the Company granted the underwriters an over-allotment option of 7,826,085 additional B series shares.      </td>
  </tr>
  <tr>
    <td colspan=3>&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td width="40" align="left">&nbsp;</td>
    <td>
The Mexican Banking and Securities Commission (<i>Comisi&oacute;n Nacional Bancaria y de Valores</i>) and the Securities and Exchange Commission authorized the Offer in January 2007. The registration of the Offer was performed on February 9, 2007.
On February 13, 2007, the Company received payment of this transaction and it amounted Ps. 1,370 million (after commission) for the international offer and Ps. 995 millions (after commission) for the offer in Mexico. On March 15, 2007 the sale of
the shares for the over-allotment option of 1,232,990 shares was paid. The proceeds amounted to Ps. 27 millions (after commission) for the international offer and Ps. 29 million (after commission) for the Mexican offer.     </td>
  </tr>
  <tr>
    <td colspan=3>&nbsp;</td>
  </tr>
  <tr>
    <td nowrap valign=top align=right>&nbsp;</td>
    <td nowrap valign=top align=left width="40">
iii.) &nbsp; &nbsp;     </td>
    <td>
During the year 2006, some minority stockholders exercised their preemptive rights to subscribe and pay the increase in the variable portion of the capital stock declared on April 29, 2005, and made a contribution of Ps. 38,656 (Ps. 36,110
nominal, value of shares Ps. 14.59) and a stock premium of Ps. 92,244 (Ps. 86,170 nominal, premium of Ps. 34.81 per share) through the subscription and payment of 2,475,303 shares, cancelling 252,367 shares that were not subscribed or paid.        </td>
  </tr>
  <tr>
    <td colspan=3>&nbsp;</td>
  </tr>
  <tr>
    <td nowrap valign=top align=right>&nbsp;</td>
    <td nowrap valign=top align=left width="40">
iv.)&nbsp;  &nbsp;      </td>
    <td>
At an extraordinary meeting held on April 29, 2005, the stockholders agreed to convert 15,000,000 shares owned by ICH, consisting of variable capital stock with a nominal theoretical value of Ps. 218,823, into fixed capital shares. At the same
meeting, the stockholders approved a stock split of the total shares representing the capital stock (3 new shares per each outstanding share) to increase the number of shares and their securitization. The Company&#146;s Board of Directors is
delegated the power to approve, on the date the Board considers appropriate, the terms and conditions under which the Company shall perform the approved split and the Secretary of the Board shall be advised as to how and when to proceed with the
cancellation of the replaced shares received once all the Company&#146;s shares have been exchanged. On May 30, 2006 the Board of Directors effected the 3-for-1 stock split. All the information relating to the shares and outstanding shares has been restated retroactively to reflect the 3-for-1 stock split.       </td>
  </tr>

</table>
<p align="center">F-36</p>
<HR noshade align="center" width="100%" size="5">



  <!-- MARKER PAGE="sheet: 1; page: 1" -->

<TABLE style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'" cellSpacing=0 cellPadding=0 border=0 width="100%">

  <TR>
    <TD width="40">&nbsp;</TD>
    <TD width="40">&nbsp;</TD>
    <TD>&nbsp;</TD>
  </TR>



  <TR>
    <TD vAlign=top nowrap>&nbsp;</TD>
    <TD vAlign=top nowrap>v.) &nbsp; &nbsp; </TD>
    <TD>At an ordinary meeting held on April 29, 2005, the stockholders agreed to increase the variable portion of the capital stock
by Ps. 114,336 (Ps. 103,785 nominal amount) by issuing 7,114,285 ordinary or common series &#147;B&#148; shares, of which 4,386,615
shares were subscribed and paid in by ICH through the capitalization of contributions for future increases in capital of Ps. 72,868
(Ps. 63,992 nominal amount) and a stock Premium of Ps. 174,589 (Ps. 152,707 nominal amount). The remaining 2,727,670 shares are to be
offered to the rest of the Company&#146;s stockholders, with prior authorization of the National Registry of Securities, so as to provide
them the opportunity to exercise their preemptive rights to subscribe and pay in the capital increase in proportion to their stock holding
(see Note 18). It was agreed that the Ps. 34.81 (actual amount) difference between the nominal theoretical value of the shares of Ps. 14.59
(actual amount) and the subscription price of the shares of the
capital increase of Ps. 49.40 (actual amount) would be recorded by the Company as a stock premium. </TD>
  </TR>


</TABLE>
<blockquote>
  <p>Subsequent to the above-mentioned resolutions and activities, the Company&#146;s capital stock aggregates Ps. 4,030,427, represented by 474,621,611 common series &#147;B&#148; shares with no par value. Such shares may be subscribed and paid in by both Mexican and foreign individuals or companies.</p>
  <p>Shares outstanding for 2007, 2006 and 2005 are as follows:</p>
</blockquote>
<TABLE style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'" cellSpacing=0 cellPadding=0 border=0 width="600" align="center">

  <TR vAlign=bottom>

    <TD align=center>&nbsp; </TD>
    <TD>&nbsp;&nbsp;&nbsp;</TD>
    <TD align=center><B><FONT size=2>2006</FONT></B></TD>
    <TD>&nbsp;&nbsp;&nbsp; </TD>
    <TD align=center><FONT size=2>2005</FONT></TD>
    <TD>&nbsp;&nbsp;&nbsp; </TD>
    <TD align=center><FONT size=2>2004</FONT></TD>
  </TR>

  <TR>

    <TD align=center>&nbsp; </TD>
    <TD>&nbsp; </TD>
    <TD align=center colSpan=5>
      <HR noshade SIZE=1>

</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left><FONT size=2>Common series &#147;B&#148;</FONT> <font size=2>shares</font></TD>
    <TD>&nbsp; </TD>
    <TD align=center><B><FONT size=2>474,621,611</FONT></B> </TD>
    <TD>&nbsp; </TD>
    <TD align=center><FONT size=2>421,214,706</FONT> </TD>
    <TD>&nbsp; </TD>
    <TD align=center><FONT size=2>413,788,797</FONT> </TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left>&nbsp; </TD>
    <TD>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
  </TR>
</TABLE>
<br>
<TABLE style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'" cellSpacing=0 cellPadding=0 border=0 width="100%">

  <TR>
    <TD width="40">&nbsp;</TD>
    <TD width="40">&nbsp;</TD>
    <TD>Each share has the right to one vote at stockholders&#146; meeting. Minimum fixed capital not subject to withdrawal is Ps. 441,786 nominal amount. </TD>
  </TR>

  <TR>

    <TD colSpan=3>&nbsp;</TD>
  </TR>

  <TR>
    <TD vAlign=top nowrap>&nbsp;</TD>
    <TD vAlign=top nowrap><B><I>(b)</I></B>&nbsp; &nbsp; &nbsp; </TD>
    <TD><B><I>Comprehensive income -</I></B> </TD>
  </TR>

  <TR>

    <TD colSpan=3>&nbsp;</TD>
  </TR>

  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>Comprehensive income reported on the consolidated statement of changes in stockholders&#146; equity represents the result of all the Company&#146;s activities during the year and includes the following captions, which in conformity with Mexican Financial Reporting Standards, were applied directly to stockholders&#146; equity, except for the net income: </TD>
  </TR>


</TABLE>
<br>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'" cellspacing=0 cellpadding=0 border=0 width="740" align="center">

  <tr valign=bottom>
    <td align=center>&nbsp; </td>
    <td>&nbsp;&nbsp;&nbsp; </td>
    <td align=center colspan="3"> <b><font size=2>2006</font></b></td>
    <td align=center>&nbsp; </td>
    <td>&nbsp;&nbsp;&nbsp; </td>
    <td align=center colspan="2"> <font size=2>2005</font></td>
    <td align=center>&nbsp; </td>
    <td>&nbsp;&nbsp;&nbsp; </td>
    <td align=center colspan="2"> <font size=2>2004</font></td>
    <td align=center>&nbsp;&nbsp;&nbsp; </td>
  </tr>

  <tr>
    <td align=center>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=center colspan=12>
      <hr noshade size=1>

</td>
  </tr>

  <tr valign=bottom>
    <td align=left><font size=2>Net income &#150; majority interest</font> </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp;&nbsp;&nbsp;</td>
    <td align=left><b><font size=2>Ps.</font></b> </td>
    <td align=right><b><font size=2>1,529,057</font></b> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left><font size=2>Ps.</font> </td>
    <td align=right><font size=2>2,178,694</font> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left><font size=2>Ps.</font> </td>
    <td align=right><font size=2>1,371,296</font> </td>
    <td align=left>&nbsp; </td>
  </tr>

  <tr valign=bottom>
    <td align=left><font size=2>Result from holding non-monetary assets (1)</font> </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><b><font size=2>292,936</font></b> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>138,778</font> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>(519,432</font> </td>
    <td align=left><font size=2>)</font> </td>
  </tr>

  <tr valign=bottom>
    <td align=left><font size=2>Deferred taxes applied to result from holding</font> </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
  </tr>

  <tr valign=bottom>
    <td align=left>&nbsp; &nbsp; &nbsp; &nbsp;<font size=2>non-monetary assets</font> </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><b><font size=2>(77,903</font></b> </td>
    <td align=left><b><font size=2>)</font></b> </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>(38,858</font> </td>
    <td align=left><font size=2>)</font> </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>145,441</font> </td>
    <td align=left>&nbsp; </td>
  </tr>

  <tr valign=bottom>
    <td align=left><font size=2>Fair value of derivative financial instruments</font> </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><b><font size=2>6,329</font></b> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>(67,224</font> </td>
    <td align=left><font size=2>)</font> </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>41,411</font> </td>
    <td align=left>&nbsp; </td>
  </tr>

  <tr valign=bottom>
    <td align=left><font size=2>Deferred taxes in fair value of derivative</font> </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
  </tr>

  <tr valign=bottom>
    <td align=left>&nbsp; &nbsp; &nbsp; &nbsp;<font size=2>financial instruments</font> </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><b><font size=2>(1,772</font></b> </td>
    <td align=left><b><font size=2>)</font></b> </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>19,432</font> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>(11,940</font> </td>
    <td align=left><font size=2>)</font> </td>
  </tr>



  <tr valign=bottom>
    <td align=left><font size=2>Effect of translation of foreign subsidiaries,</font> <font size=2>net</font> </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><b><font size=2>(12,226</font></b> </td>
    <td align=left><b><font size=2>)</font></b> </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>(82,925</font> </td>
    <td align=left><font size=2>)</font> </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>16,106</font> </td>
    <td align=left>&nbsp; </td>
  </tr>

  <tr>
    <td>&nbsp; </td>
    <td>&nbsp; </td>
    <td colspan=12>
      <hr noshade size=1>

</td>
  </tr>

  <tr valign=bottom>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><b><font size=2>1,736,421</font></b> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>2,147,897</font> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>1,042,882</font> </td>
    <td align=left>&nbsp; </td>
  </tr>

  <tr valign=bottom>
    <td align=left><font size=2>Minority interest (2)</font> </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><b><font size=2>96,118</font></b> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>220,082</font> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>18,739</font> </td>
    <td align=left>&nbsp; </td>
  </tr>

  <tr>
    <td>&nbsp; </td>
    <td>&nbsp; </td>
    <td colspan=12>
      <hr noshade size=1>

</td>
  </tr>

  <tr valign=bottom>
    <td align=left><font size=2>Total</font> </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp;</td>
    <td align=left><b><font size=2>Ps.</font></b> </td>
    <td align=right><b><font size=2>1,832,539</font></b> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp;<font size=2>Ps.</font> </td>
    <td align=right><font size=2>2,367,979</font> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left><font size=2>Ps.</font> </td>
    <td align=right><font size=2>1,061,621</font> </td>
    <td align=left>&nbsp; </td>
  </tr>

  <tr>
    <td>&nbsp; </td>
    <td>&nbsp; </td>
    <td colspan="12">



      <hr noshade size=2>

</td>
  </tr>
</table>
<br>
<TABLE style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'" cellSpacing=0 cellPadding=0 border=0 width="100%">

  <TR>
    <TD vAlign=top nowrap width="40"><font size="1"></font></TD>
    <TD vAlign=top nowrap width="40"><font size="1"><SUP>(1)</SUP>&nbsp; &nbsp; &nbsp; </font></TD>
    <TD><font size="1">Includes primarily the result from holding nonmonetary assets due to fixed assets. </font></TD>
  </TR>



  <TR>
    <TD vAlign=top nowrap><font size="1"></font></TD>
    <TD vAlign=top nowrap><font size="1"><SUP>(2)</SUP>&nbsp; &nbsp; &nbsp; </font></TD>
    <TD><font size="1">The minority interest is the due to the investment of Industrias CH, S.A.B. de C.V. (Holding Company) in SimRep Corporation. </font></TD>
  </TR>


</TABLE>
<p align="center">F-37</p>
<HR align=center width="100%" noshade SIZE=5>


  <!-- MARKER PAGE="sheet: 1; page: 1" -->


<TABLE border=0 cellspacing=0 cellpadding=0 style="font-family: 'Times New Roman';font-size: 10pt;" width="100%">
  <TR>
    <TD nowrap valign=top width="40">&nbsp;</TD>
    <TD nowrap valign=top width="40">
<B><I>(c)</I></B>&nbsp; &nbsp; &nbsp;   </TD>
    <TD>
<B><I>Restrictions on stockholders&#146; equity -</I></B>       </TD>
  </TR>
  <TR>
    <TD colspan=3>&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>
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 the capital stock issued and outstanding. At December 31, 2007,
the legal reserve aggregates Ps. 454 million.   </TD>
  </TR>
  <TR>
    <TD colspan=3>&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>
Stockholder contributions, which are restated for tax purposes, may be refunded tax-free, provided that the reimbursed amount is equal to or in excess of the Company&#146;s stockholders&#146; equity. </TD>
  </TR>
  <TR>
    <TD colspan=3>&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>
Earnings distributed on which no income tax has been paid, as well as other stockholders&#146; equity account distributions are subject to income tax, payable by the Company, at the rate of 28%, consequently, the stockholders may only receive 72% of
such dividends. </TD>
  </TR>

</TABLE>
<br>
<B> </B>
<table border=0 cellspacing=0 cellpadding=0 style="font-family: 'Times New Roman';font-size: 10pt;" width="100%">
  <tr>
    <td width="3%"><b>(14)</b></td>
    <td valign=top colspan="2"><b>Acquisitions-</b>
</td>
  </tr>
  <tr>
    <td width="3%">&nbsp;</td>
    <td valign=top width="4%">&nbsp;</td>
    <td width="93%">&nbsp;</td>
  </tr>
  <tr>
    <td valign="top" width="3%"><b>a)</b>&nbsp;</td>
    <td valign=top colspan="2">
 On November 24, 2007, the Company acquired 99.95% of the shares of TMM Am&eacute;rica, S.A. de C.V., TMM Continental, S.A. de C.V. and Mutimodal Dom&eacute;stica, S.A. de C.V., subsidiaries of Grupo TMM S.A de C.V., to turn them into three
distribution subsidiaries for the manufacturing plants located in Mexico. The total cost of these acquisitions was &#36;35,901. As of December 31, 2007, the companies have accumulated tax losses for &#36;632,464, which were not recognized as a
deferred tax asset, because based on a prospective analysis of its operations it has determined that those companies would be FRBT payers and pursuant to current fiscal legislation those losses may not be credited against FRBT. The financial
position of these companies as of the date of acquisition is not significant to the Consolidated financial position of Simec; therefore its financial position is not included here. Also, as these companies had no significant operations
before their integration to Grupo Simec, therefore no pro forma information of their results is included here.  </td>
  </tr>
  <tr>
    <td colspan=3>&nbsp;</td>
  </tr>
  <tr>

    <td valign=top width="3%">
<b>b)</b>&nbsp; &nbsp; &nbsp;   </td>
    <td colspan=2>
On July 22, 2005, the Company and ICH acquired the outstanding shares of Republic through their subsidiary, SimRep Corporation (a U.S. corporation). Such transaction was valued at US&#36;245 million, of which US&#36;229 million corresponds to the
purchase price and US&#36;16 million corresponds to the direct cost of the business combination. The Company contributed US&#36;123 million to acquire 50.2% of the representative shares of SimRep Corporation and ICH, the holding company, acquired
the remaining 49.8%. SimRep then acquired all the shares from Republic through a stock purchase agreement. Under the terms of the stock purchase agreement, the Company also acquired the right to a portion of the reimbursement from an insurance claim
unresolved as of the purchase date. On April 24, 2006 a Liquidation resolution was issued and the Company received a payment of approximately USD 39 million (436 million pesos), net of the payment to the former stockholders and professional fees of
USD 20 million (226 million pesos).      Due to this refund, the Company re-allocated the acquisition price to reflect the fair value of the assets acquired and the liabilities assumed. The following table summarizes the related effect. The Company and ICH acquired Republic to increase
their presence in the U.S. market.      </td>
  </tr>
  <tr>
    <td colspan=3>&nbsp;</td>
  </tr>


  <tr>
    <td width="3%">&nbsp;</td>
    <td colspan=2>
The fair value of the assets acquired amounted to &#36;474 million, which was in excess of the acquisition cost of &#36;245 million, giving rise to a negative goodwill of &#36;229 million, which was allocated proportionally to all non-current
assets. The factors that led to the negative goodwill include the fact that the acquisition cost to the Company was favorable since the seller was a    </td>
  </tr>

</table>
<p align="center">F-38</p>
<HR noshade align="center" width="100%" size="5">



  <!-- MARKER PAGE="sheet: 1; page: 1" -->


<blockquote>
  <p>short-term investor who had previously acquired Republic out of bankruptcy. The purchase price paid for Republic was the result of the negotiations carried out with the previous owner based on the business expectations of Republic at that time. This negotiated cost was less than the sum of the net fair values of the individual assets acquired and liabilities assumed. The fair value of the net assets acquired after the allocation of the negative goodwill is as follows:</p>
</blockquote>
<TABLE style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'" cellSpacing=0 cellPadding=0 border=0 width="600" align="center">





  <TR vAlign=bottom>

    <TD align=center>&nbsp; </TD>
    <TD align=center colspan="3"> <FONT size=2>As originally</FONT><BR>
      <FONT size=2>Recorded</FONT></TD>
    <TD>&nbsp;&nbsp;&nbsp; </TD>
    <TD align=center colspan="3"> <FONT size=2>Subsequent</FONT><BR>
      <FONT size=2>to insurance</FONT><BR>
      <FONT size=2>recovery</FONT></TD>
  </TR>

  <TR>

    <TD align=center>&nbsp; </TD>
    <TD align=center colSpan=7>
      <HR noshade SIZE=1>

</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left><FONT size=2>Current assets</FONT> </TD>
    <TD align=left>&nbsp;&nbsp;&nbsp;</TD>
    <TD align=left><FONT size=2>Ps.</FONT> </TD>
    <TD align=right><FONT size=2>4,719,796</FONT> </TD>
    <TD>&nbsp;&nbsp;&nbsp;</TD>
    <TD align=left><FONT size=2>Ps.</FONT> </TD>
    <TD align=right><FONT size=2>5,156,694</FONT> </TD>
    <TD align=right>&nbsp;&nbsp;&nbsp;</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left><FONT size=2>Property, plant and equipment</FONT> </TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right><FONT size=2>1,366,913</FONT> </TD>
    <TD>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right><FONT size=2>1,141,234</FONT> </TD>
    <TD align=right>&nbsp;</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left><FONT size=2>Intangibles and deferred charges</FONT> </TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right><FONT size=2>395,899</FONT> </TD>
    <TD>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right><FONT size=2>332,325</FONT> </TD>
    <TD align=right>&nbsp;</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left><FONT size=2>Other assets</FONT> </TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right><FONT size=2>65,381</FONT> </TD>
    <TD>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right><FONT size=2>63,338</FONT> </TD>
    <TD align=right>&nbsp;</TD>
  </TR>

  <TR>

    <TD>&nbsp; </TD>
    <TD colSpan=7>
      <HR noshade SIZE=1>

</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left><FONT size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total assets</FONT> </TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left><FONT size=2>Ps.</FONT> </TD>
    <TD align=right><FONT size=2>6,547,989</FONT> </TD>
    <TD>&nbsp; </TD>
    <TD align=left><FONT size=2>Ps.</FONT> </TD>
    <TD align=right><FONT size=2>6,693,591</FONT> </TD>
    <TD align=right>&nbsp;</TD>
  </TR>

  <TR>

    <TD>&nbsp; </TD>
    <TD colSpan=7>
      <HR noshade SIZE=1>

</TD>
  </TR>

  <TR>

    <TD colSpan=8>&nbsp; </TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left><FONT size=2>Current liabilities</FONT> </TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right><FONT size=2>1,825,248</FONT> </TD>
    <TD>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right><FONT size=2>1,970,851</FONT> </TD>
    <TD align=right>&nbsp;</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left><FONT size=2>Long-term debt</FONT> </TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right><FONT size=2>744,698</FONT> </TD>
    <TD>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right><FONT size=2>744,698</FONT> </TD>
    <TD align=right>&nbsp;</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left><FONT size=2>Revolving credit facility</FONT> </TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right><FONT size=2>802,016</FONT> </TD>
    <TD>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right><FONT size=2>802,016</FONT> </TD>
    <TD align=right>&nbsp;</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left><FONT size=2>Deferred taxes</FONT> </TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right><FONT size=2>303,074</FONT> </TD>
    <TD>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right><FONT size=2>303,074</FONT> </TD>
    <TD align=right>&nbsp;</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left><FONT size=2>Other long-term debt</FONT> </TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right><FONT size=2>77,461</FONT> </TD>
    <TD>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right><FONT size=2>77,460</FONT> </TD>
    <TD align=right>&nbsp;</TD>
  </TR>

  <TR>

    <TD>&nbsp; </TD>
    <TD colSpan=7>
      <HR noshade SIZE=1>

</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right><FONT size=2>3,752,497</FONT> </TD>
    <TD>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right><FONT size=2>3,898,099</FONT> </TD>
    <TD align=right>&nbsp;</TD>
  </TR>

  <TR>

    <TD>&nbsp; </TD>
    <TD colSpan=7>
      <HR noshade SIZE=1>

</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left><FONT size=2>Net assets acquired</FONT> </TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left><FONT size=2>Ps.</FONT> </TD>
    <TD align=right><FONT size=2>2,795,492</FONT> </TD>
    <TD>&nbsp; </TD>
    <TD align=left><FONT size=2>Ps.</FONT> </TD>
    <TD align=right><FONT size=2>2,795,492</FONT> </TD>
    <TD align=right>&nbsp;</TD>
  </TR>

  <TR>

    <TD>&nbsp; </TD>
    <TD colSpan=7>
      <HR noshade SIZE=2>

</TD>
  </TR>
</TABLE>
<blockquote>
  <p>
  The following combined pro forma financial information (unaudited) for 2005 is based on the Company&#146;s historical financial statements, adjusted to include the effects of the acquisition of Republic and certain accounting adjustments related to the net assets of the acquired company.</p>
  <p>The pro forma information (unaudited) assumes that the acquisition was conducted at the beginning of 2005, respectively, and is based on the available information and certain assumptions that management considered reasonable.</p>
  <p>The pro forma financial information (unaudited) is not intended to present the results of the consolidated operations had the acquisition occurred on such date, nor to anticipate the Company&#146;s results of operations.</p>
</blockquote>
<TABLE style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'" cellSpacing=0 cellPadding=0 border=0 align="center" width="500">



  <TR vAlign=bottom>

    <TD align=center width="355">&nbsp; </TD>
    <TD align=center colspan="4"> <B><FONT size=2>2005</FONT></B><BR>
      <B><FONT size=2>(unaudited)</FONT></B></TD>
  </TR>

  <TR>

    <TD align=center width="355">&nbsp; </TD>
    <TD align=center colSpan=4>
      <HR noshade SIZE=1>

</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left width="355"><FONT size=2>Net sales</FONT> </TD>
    <TD align=left width="14">&nbsp;&nbsp;&nbsp;</TD>
    <TD align=left width="30"><FONT size=2>Ps.</FONT> </TD>
    <TD align=right width="84"><FONT size=2>23,978,935</FONT> </TD>
    <TD align=right width="17">&nbsp;&nbsp;&nbsp;</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left width="355"><FONT size=2>Marginal profit</FONT> </TD>
    <TD align=left width="14">&nbsp;</TD>
    <TD align=left width="30">&nbsp; </TD>
    <TD align=right width="84"><FONT size=2>4,097,752</FONT> </TD>
    <TD align=right width="17">&nbsp;</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left width="355"><FONT size=2>Net income</FONT> </TD>
    <TD align=left width="14">&nbsp;</TD>
    <TD align=left width="30"><FONT size=2>Ps.</FONT> </TD>
    <TD align=right width="84"><FONT size=2>1,566,632</FONT> </TD>
    <TD align=right width="17">&nbsp;</TD>
  </TR>

  <TR>

    <TD width="355">&nbsp; </TD>
    <TD colSpan=4>
      <HR noshade SIZE=1>

</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left width="355"><FONT size=2>Earnings per share (Actual Mexican pesos)</FONT> </TD>
    <TD align=left width="14">&nbsp;</TD>
    <TD align=left width="30">&nbsp; </TD>
    <TD align=right width="84"><FONT size=2>3.78</FONT> </TD>
    <TD align=right width="17">&nbsp;</TD>
  </TR>

  <TR>

    <TD width="355">&nbsp; </TD>
    <TD colspan="4">



      <HR noshade SIZE=2>

</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left width="355"><FONT size=2>Tons sold</FONT> </TD>
    <TD align=left width="14">&nbsp;</TD>
    <TD align=left width="30">&nbsp; </TD>
    <TD align=right width="84"><FONT size=2>2,683,312</FONT> </TD>
    <TD align=right width="17">&nbsp;</TD>
  </TR>

  <TR>

    <TD width="355">&nbsp; </TD>
    <TD colspan="4">



      <HR noshade SIZE=2>

</TD>
  </TR>
</TABLE>
<br>
<TABLE style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'" cellSpacing=0 cellPadding=0 border=0 width="100%">

  <TR>

    <TD vAlign=top nowrap width="40"><B>c)</B>&nbsp; &nbsp; &nbsp; </TD>
    <TD>On July 20, 2005, the Company acquired the shares of OAL, a subsidiary of Grupo TMM, S.A. de C.V. for Ps. 142 million, to make it the operating company of the three plants in Mexico. The transaction resulted in a deferred credit of Ps. 435,776. </TD>
  </TR>

  <TR>

    <TD colSpan=2>&nbsp;</TD>
  </TR>

  <TR>

    <TD>&nbsp;</TD>
    <TD>The consolidated financial position at the date of the acquisition, restated at December 31, 2007 is as follows: </TD>
  </TR>


</TABLE>
<br>
<TABLE style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'" cellSpacing=0 cellPadding=0 border=0 align="center" width="500">

  <TR vAlign=bottom>

    <TD align=left width="354"><FONT size=2>Current assets</FONT> </TD>
    <TD align=left width="14">&nbsp;&nbsp;&nbsp;</TD>
    <TD align=left width="32"><FONT size=2>Ps.</FONT> </TD>
    <TD align=right width="83"><FONT size=2>1,078</FONT> </TD>
    <TD align=right width="17">&nbsp;&nbsp;&nbsp;</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left width="354"><FONT size=2>Deferred tax assets</FONT> </TD>
    <TD align=left width="14">&nbsp;</TD>
    <TD align=left width="32">&nbsp; </TD>
    <TD align=right width="83"><FONT size=2>564,368</FONT> </TD>
    <TD align=right width="17">&nbsp;</TD>
  </TR>

  <TR>

    <TD width="354">&nbsp; </TD>
    <TD colSpan=4>
      <HR noshade SIZE=1>

</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left width="354"><FONT size=2>Net assets acquired</FONT> </TD>
    <TD align=left width="14">&nbsp;</TD>
    <TD align=left width="32"><FONT size=2>Ps.</FONT> </TD>
    <TD align=right width="83"><FONT size=2>565,446</FONT> </TD>
    <TD align=right width="17">&nbsp;</TD>
  </TR>

  <TR>

    <TD width="354">&nbsp; </TD>
    <TD colSpan=4>
      <HR noshade SIZE=2>

</TD>
  </TR>
</TABLE>
<p align="center">F-39</p>
<HR align=center width="100%" noshade SIZE=5>


  <!-- MARKER PAGE="sheet: 1; page: 1" -->

<TABLE style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'" cellSpacing=0 cellPadding=0 border=0 width="100%">

  <TR>

    <TD width="40">&nbsp;</TD>
    <TD>OAL had accumulated NOLs of Ps. 1,427,067 that could be offset against future taxable income. However, the recorded financial effect of this tax benefit was Ps. 564,369. Since OAL had no operations before the acquisition, no pro forma results from operations are included here. </TD>
  </TR>

  <TR>

    <TD colSpan=2>&nbsp;</TD>
  </TR>

  <TR>

    <TD vAlign=top nowrap><B>(15)</B>&nbsp; &nbsp; &nbsp; </TD>
    <TD><B>Segments-</B> </TD>
  </TR>

  <TR>

    <TD colSpan=2>&nbsp;</TD>
  </TR>

  <TR>

    <TD>&nbsp;</TD>
    <TD>The Company segments its information by region, due to the operational and organizational structure of its business. The Company&#146;s sales are made primarily in Mexico and the USA. The Mexican segment includes the plants in Mexicali, Guadalajara and Tlaxcala. The USA segment includes Republic&#146;s seven plants acquired on July 22, 2005, of which six are located in the USA (distributed in the states of Ohio, Indiana and New York) and one in Canada (Ontario). The plant in Canada represents approximately 5% of the segment&#146;s total sales. Both segments are engaged in the manufacturing and sale of long steel products intended primarily for the building and automotive industries. </TD>
  </TR>


</TABLE>
<br>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'" cellspacing=0 cellpadding=0 border=0 width="100%">

  <tr valign=bottom>

    <td align=center>&nbsp; </td>
    <td align=right>&nbsp; </td>
    <td align=center colspan="15">   <b><font size=2>For the year ended December 31, 2007</font></b>     </td>
  </tr>

  <tr>

    <td align=center colspan=2>&nbsp; </td>
    <td align=center colspan=15>
      <hr noshade size=1>

</td>
  </tr>





  <tr valign=bottom>

    <td align=center>&nbsp; </td>
    <td align=right>&nbsp; </td>
    <td align=center><font size=2>Mexico</font> </td>
    <td align=center>&nbsp;</td>
    <td align=center>&nbsp;&nbsp;&nbsp;</td>
    <td align=center>&nbsp; </td>
    <td align=center><font size=2>USA</font> </td>
    <td align=center>&nbsp;</td>
    <td align=center>&nbsp;&nbsp;&nbsp;</td>
    <td align=center>&nbsp; </td>
    <td align=center><font size=2>Operations</font><br>
      <font size=2>between</font><br>
      <font size=2>segments</font> </td>
    <td align=center>&nbsp;</td>
    <td align=center>&nbsp;&nbsp;&nbsp;</td>
    <td align=center>&nbsp; </td>
    <td align=center colspan="3"><font size=2>Total</font> </td>
  </tr>

  <tr>

    <td align=center colspan=2>&nbsp; </td>
    <td align=center colspan=15>
      <hr noshade size=1>

</td>
  </tr>

  <tr valign=bottom>

    <td align=left><font size=2>Net sales</font> </td>
    <td align=right><font size=2>Ps.</font> </td>
    <td align=right><font size=2>8,407,018</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right>&nbsp;</td>
    <td align=right><font size=2>Ps.</font> </td>
    <td align=right><font size=2>16,118,609</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right>&nbsp;</td>
    <td align=right><font size=2>Ps.</font> </td>
    <td align=right><font size=2>(419,533</font> </td>
    <td align=left><font size=2>)</font> </td>
    <td align=right>&nbsp;</td>
    <td align=right><font size=2>Ps.</font> </td>
    <td align=right><font size=2>24,106,094</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;&nbsp;&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=left><font size=2>Cost of sales</font> </td>
    <td align=right>&nbsp; </td>
    <td align=right><font size=2>5,716,571</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right>&nbsp;</td>
    <td align=right>&nbsp; </td>
    <td align=right><font size=2>15,199,112</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right>&nbsp;</td>
    <td align=right>&nbsp; </td>
    <td align=right><font size=2>(416,765</font> </td>
    <td align=left><font size=2>)</font> </td>
    <td align=right>&nbsp;</td>
    <td align=right>&nbsp; </td>
    <td align=right><font size=2>20,498,918</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr>

    <td colspan=2>&nbsp; </td>
    <td colspan=15>
      <hr noshade size=1>

</td>
  </tr>

  <tr>

    <td colspan=17>&nbsp; </td>
  </tr>

  <tr valign=bottom>

    <td align=left><font size=2>Marginal profit</font> </td>
    <td align=right>&nbsp; </td>
    <td align=right><font size=2>2,690,447</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right>&nbsp;</td>
    <td align=right>&nbsp; </td>
    <td align=right><font size=2>919,497</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right>&nbsp;</td>
    <td align=right>&nbsp; </td>
    <td align=right><font size=2>(2,768</font> </td>
    <td align=left><font size=2>)</font> </td>
    <td align=right>&nbsp;</td>
    <td align=right>&nbsp; </td>
    <td align=right><font size=2>3,607,176</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=left><font size=2>Indirect overhead, selling and</font> </td>
    <td align=right>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right>&nbsp;</td>
    <td align=right>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right>&nbsp;</td>
    <td align=right>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right>&nbsp;</td>
    <td align=right>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=left><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;administrative expenses</font> </td>
    <td align=right>&nbsp; </td>
    <td align=right><font size=2>837,246</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right>&nbsp;</td>
    <td align=right>&nbsp; </td>
    <td align=right><font size=2>585,913</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right>&nbsp;</td>
    <td align=right>&nbsp; </td>
    <td align=right><font size=2>-</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right>&nbsp;</td>
    <td align=right>&nbsp; </td>
    <td align=right><font size=2>1,423,159</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr>

    <td colspan=2>&nbsp; </td>
    <td colspan=15>
      <hr noshade size=1>

</td>
  </tr>

  <tr valign=bottom>

    <td align=left><font size=2>Operating income</font> </td>
    <td align=right>&nbsp; </td>
    <td align=right><font size=2>1,853,201</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right>&nbsp;</td>
    <td align=right>&nbsp; </td>
    <td align=right><font size=2>333,584</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right>&nbsp;</td>
    <td align=right>&nbsp; </td>
    <td align=right><font size=2>(2,768</font> </td>
    <td align=left><font size=2>)</font> </td>
    <td align=right>&nbsp;</td>
    <td align=right>&nbsp; </td>
    <td align=right><font size=2>2,184,017</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr>

    <td colspan=17>&nbsp; </td>
  </tr>

  <tr valign=bottom>

    <td align=left><font size=2>Other income, net</font> </td>
    <td align=right>&nbsp; </td>
    <td align=right><font size=2>(8,666</font> </td>
    <td align=left><font size=2>)</font> </td>
    <td align=right>&nbsp;</td>
    <td align=right>&nbsp; </td>
    <td align=right><font size=2>29,995</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right>&nbsp;</td>
    <td align=right>&nbsp; </td>
    <td align=right><font size=2>-</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right>&nbsp;</td>
    <td align=right>&nbsp; </td>
    <td align=right><font size=2>21,329</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=left><font size=2>Financial income (expenses), net</font> </td>
    <td align=right>&nbsp; </td>
    <td align=right><font size=2>291,189</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right>&nbsp;</td>
    <td align=right>&nbsp; </td>
    <td align=right><font size=2>(17,876</font> </td>
    <td align=left><font size=2>)</font> </td>
    <td align=right>&nbsp;</td>
    <td align=right>&nbsp; </td>
    <td align=right><font size=2>-</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right>&nbsp;</td>
    <td align=right>&nbsp; </td>
    <td align=right><font size=2>273,313</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=left><font size=2>Exchange loss, net</font> </td>
    <td align=right>&nbsp; </td>
    <td align=right><font size=2>(37,879</font> </td>
    <td align=left><font size=2>)</font> </td>
    <td align=right>&nbsp;</td>
    <td align=right>&nbsp; </td>
    <td align=right><font size=2>-</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right>&nbsp;</td>
    <td align=right>&nbsp; </td>
    <td align=right><font size=2>-</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right>&nbsp;</td>
    <td align=right>&nbsp; </td>
    <td align=right><font size=2>(37,879</font> </td>
    <td align=left><font size=2>)</font> </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=left><font size=2>Result on monetary position</font> </td>
    <td align=right>&nbsp; </td>
    <td align=right><font size=2>(227,014</font> </td>
    <td align=left><font size=2>)</font> </td>
    <td align=right>&nbsp;</td>
    <td align=right>&nbsp; </td>
    <td align=right><font size=2>32,083</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right>&nbsp;</td>
    <td align=right>&nbsp; </td>
    <td align=right><font size=2>-</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right>&nbsp;</td>
    <td align=right>&nbsp; </td>
    <td align=right><font size=2>(194,931</font> </td>
    <td align=left><font size=2>)</font> </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr>

    <td colspan=2>&nbsp; </td>
    <td colspan=15>
      <hr noshade size=1>

</td>
  </tr>

  <tr valign=bottom>

    <td align=left><font size=2>Income before income tax</font> </td>
    <td align=right>&nbsp; </td>
    <td align=right><font size=2>1,870,831</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right>&nbsp;</td>
    <td align=right>&nbsp; </td>
    <td align=right><font size=2>377,786</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right>&nbsp;</td>
    <td align=right>&nbsp; </td>
    <td align=right><font size=2>(2,768</font> </td>
    <td align=left><font size=2>)</font> </td>
    <td align=right>&nbsp;</td>
    <td align=right>&nbsp; </td>
    <td align=right><font size=2>2,245,849</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr>

    <td colspan=17>&nbsp; </td>
  </tr>

  <tr valign=bottom>

    <td align=left><font size=2>Income tax</font> </td>
    <td align=right>&nbsp; </td>
    <td align=right><font size=2>435,973</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right>&nbsp;</td>
    <td align=right>&nbsp; </td>
    <td align=right><font size=2>184,701</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right>&nbsp;</td>
    <td align=right>&nbsp; </td>
    <td align=right><font size=2>-</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right>&nbsp;</td>
    <td align=right>&nbsp; </td>
    <td align=right><font size=2>620,674</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr>

    <td colspan=2>&nbsp; </td>
    <td colspan=15>
      <hr noshade size=1>

</td>
  </tr>



  <tr valign=bottom>

    <td align=left><font size=2>Net income</font> </td>
    <td align=right><font size=2>Ps.</font> </td>
    <td align=right><font size=2>1,434,858</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right>&nbsp;</td>
    <td align=right><font size=2>Ps.</font> </td>
    <td align=right><font size=2>193,085</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right>&nbsp;</td>
    <td align=right><font size=2>Ps.</font> </td>
    <td align=right><font size=2>(2,768</font> </td>
    <td align=left><font size=2>)</font> </td>
    <td align=right>&nbsp;</td>
    <td align=right><font size=2>Ps.</font> </td>
    <td align=right><font size=2>1,625,175</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr>

    <td colspan=2>&nbsp; </td>
    <td colspan=15>



      <hr noshade size=2>

</td>
  </tr>

  <tr>

    <td colspan=17>&nbsp; </td>
  </tr>

  <tr valign=bottom>

    <td align=left><b><font size=2>Other information</font></b> </td>
    <td align=right>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right>&nbsp;</td>
    <td align=right>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right>&nbsp;</td>
    <td align=right>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right>&nbsp;</td>
    <td align=right>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=left><font size=2>Total assets</font> </td>
    <td align=right><font size=2>Ps.</font> </td>
    <td align=right><font size=2>15,221,534</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right>&nbsp;</td>
    <td align=right><font size=2>Ps.</font> </td>
    <td align=right><font size=2>7,619,723</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right>&nbsp;</td>
    <td align=right><font size=2>Ps.</font> </td>
    <td align=right><font size=2>-</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right>&nbsp;</td>
    <td align=right><font size=2>Ps.</font> </td>
    <td align=right><font size=2>22,841,257</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=left><font size=2>Depreciation and amortization</font> </td>
    <td align=right>&nbsp; </td>
    <td align=right><font size=2>334,010</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right>&nbsp;</td>
    <td align=right>&nbsp; </td>
    <td align=right><font size=2>215,246</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right>&nbsp;</td>
    <td align=right>&nbsp; </td>
    <td align=right><font size=2>-</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right>&nbsp;</td>
    <td align=right>&nbsp; </td>
    <td align=right><font size=2>549,256</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=left><font size=2>Additions of property, plant and</font> </td>
    <td align=right>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right>&nbsp;</td>
    <td align=right>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right>&nbsp;</td>
    <td align=right>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=right>&nbsp;</td>
    <td align=right>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=left><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;equipment, net</font> </td>
    <td align=right>&nbsp; </td>
    <td align=right><font size=2>168,926</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right>&nbsp;</td>
    <td align=right>&nbsp; </td>
    <td align=right><font size=2>316,742</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right>&nbsp;</td>
    <td align=right>&nbsp; </td>
    <td align=right><font size=2>-</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right>&nbsp;</td>
    <td align=right>&nbsp; </td>
    <td align=right><font size=2>485,668</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>
</table>
<p><BR>

</p>
<p align="center">F-40</p>
<HR align=center width="100%" noshade SIZE=5>


  <!-- MARKER PAGE="sheet: 1; page: 1" -->

<table style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'" cellspacing=0 cellpadding=0 border=0 width="100%">

  <tr valign=bottom>

    <td align=center>&nbsp; </td>
    <td align=right>&nbsp; </td>
    <td align=center colspan="15">   <b><font size=2>For the year ended December 31, 2006</font></b>      </td>
  </tr>

  <tr>

    <td align=center colspan=2>&nbsp; </td>
    <td align=center colspan=15>
      <hr noshade size=1>

</td>
  </tr>





  <tr valign=bottom>

    <td align=left><b><font size=2></font></b></td>
    <td align=right>&nbsp; </td>
    <td align=center><font size=2>Mexico</font></td>
    <td align=center>&nbsp; </td>
    <td>&nbsp;&nbsp;&nbsp; </td>
    <td align=right>&nbsp; </td>
    <td align=center><font size=2>USA</font></td>
    <td align=center>&nbsp; </td>
    <td>&nbsp;&nbsp;&nbsp; </td>
    <td align=right>&nbsp; </td>
    <td align=center><font size=2>Operations</font><br>
      <font size=2>between</font><br>
      <font size=2>segments</font></td>
    <td align=center>&nbsp; </td>
    <td>&nbsp;&nbsp;&nbsp; </td>
    <td align=right>&nbsp; </td>
    <td align=center><font size=2>Total</font></td>
    <td align=center>&nbsp; </td>
    <td align=center>&nbsp;</td>
  </tr>

  <tr>

    <td colspan=2>&nbsp; </td>
    <td colspan=15>
      <hr noshade size=1>

</td>
  </tr>

  <tr valign=bottom>

    <td align=left><font size=2>Net sales</font> </td>
    <td align=right><font size=2>Ps.</font> </td>
    <td align=right><font size=2>8,019,635</font> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=right><font size=2>Ps.</font> </td>
    <td align=right><font size=2>15,722,015</font> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=right><font size=2>Ps.</font> </td>
    <td align=right><font size=2>(226,353</font> </td>
    <td align=left><font size=2>)</font> </td>
    <td>&nbsp; </td>
    <td align=right><font size=2>Ps.</font> </td>
    <td align=right><font size=2>23,515,297</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;&nbsp;&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=left><font size=2>Cost of sales</font> </td>
    <td align=right>&nbsp; </td>
    <td align=right><font size=2>4,980,439</font> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=right>&nbsp; </td>
    <td align=right><font size=2>14,377,065</font> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=right>&nbsp; </td>
    <td align=right><font size=2>(225,625</font> </td>
    <td align=left><font size=2>)</font> </td>
    <td>&nbsp; </td>
    <td align=right>&nbsp; </td>
    <td align=right><font size=2>19,131,879</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr>

    <td colspan=2>&nbsp; </td>
    <td colspan=15>
      <hr noshade size=1>

</td>
  </tr>

  <tr valign=bottom>

    <td align=left><font size=2>Marginal profit</font> </td>
    <td align=right>&nbsp; </td>
    <td align=right><font size=2>3,039,196</font> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=right>&nbsp; </td>
    <td align=right><font size=2>1,344,950</font> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=right>&nbsp; </td>
    <td align=right><font size=2>(728</font> </td>
    <td align=left><font size=2>)</font> </td>
    <td>&nbsp; </td>
    <td align=right>&nbsp; </td>
    <td align=right><font size=2>4,383,418</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=left><font size=2>Indirect overhead, selling and</font> </td>
    <td align=right>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=right>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=right>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=right>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=left><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;administrative expenses</font> </td>
    <td align=right>&nbsp; </td>
    <td align=right><font size=2>766,768</font> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=right>&nbsp; </td>
    <td align=right><font size=2>570,564</font> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=right>&nbsp; </td>
    <td align=right><font size=2>14,350</font> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=right>&nbsp; </td>
    <td align=right><font size=2>1,351,682</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr>

    <td colspan=2>&nbsp; </td>
    <td colspan=15>
      <hr noshade size=1>

</td>
  </tr>

  <tr valign=bottom>

    <td align=left><font size=2>Operating income</font> </td>
    <td align=right>&nbsp; </td>
    <td align=right><font size=2>2,272,428</font> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=right>&nbsp; </td>
    <td align=right><font size=2>774,386</font> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=right>&nbsp; </td>
    <td align=right><font size=2>(15,078</font> </td>
    <td align=left><font size=2>)</font> </td>
    <td>&nbsp; </td>
    <td align=right>&nbsp; </td>
    <td align=right><font size=2>3,031,736</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr>

    <td colspan=17>&nbsp; </td>
  </tr>

  <tr valign=bottom>

    <td align=left><font size=2>Other income, net</font> </td>
    <td align=right>&nbsp; </td>
    <td align=right><font size=2>38,235</font> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=right>&nbsp; </td>
    <td align=right><font size=2>970</font> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=right>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=right>&nbsp; </td>
    <td align=right><font size=2>39,205</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=left><font size=2>Financial income (expenses), net</font> </td>
    <td align=right>&nbsp; </td>
    <td align=right><font size=2>47,755</font> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=right>&nbsp; </td>
    <td align=right><font size=2>(823</font> </td>
    <td align=left><font size=2>)</font> </td>
    <td>&nbsp; </td>
    <td align=right>&nbsp; </td>
    <td align=right><font size=2>-</font> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=right>&nbsp; </td>
    <td align=right><font size=2>46,932</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=left><font size=2>Exchange loss, net</font> </td>
    <td align=right>&nbsp; </td>
    <td align=right><font size=2>(37,424</font> </td>
    <td align=left><font size=2>)</font> </td>
    <td>&nbsp; </td>
    <td align=right>&nbsp; </td>
    <td align=right><font size=2>-</font> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=right>&nbsp; </td>
    <td align=right><font size=2>-</font> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=right>&nbsp; </td>
    <td align=right><font size=2>(37,424</font> </td>
    <td align=left><font size=2>)</font> </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=left><font size=2>Result on monetary position</font> </td>
    <td align=right>&nbsp; </td>
    <td align=right><font size=2>(91,773</font> </td>
    <td align=left><font size=2>)</font> </td>
    <td>&nbsp; </td>
    <td align=right>&nbsp; </td>
    <td align=right><font size=2>14,581</font> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=right>&nbsp; </td>
    <td align=right><font size=2>4,240</font> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=right>&nbsp; </td>
    <td align=right><font size=2>(72,952</font> </td>
    <td align=left><font size=2>)</font> </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr>

    <td colspan=2>&nbsp; </td>
    <td colspan=15>
      <hr noshade size=1>

</td>
  </tr>

  <tr valign=bottom>

    <td align=left><font size=2>Income before income tax</font> </td>
    <td align=right>&nbsp; </td>
    <td align=right><font size=2>2,229,221</font> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=right>&nbsp; </td>
    <td align=right><font size=2>789,114</font> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=right>&nbsp; </td>
    <td align=right><font size=2>(10,838</font> </td>
    <td align=left><font size=2>)</font> </td>
    <td>&nbsp; </td>
    <td align=right>&nbsp; </td>
    <td align=right><font size=2>3,007,497</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr>

    <td colspan=17>&nbsp; </td>
  </tr>

  <tr valign=bottom>

    <td align=left><font size=2>Income tax</font> </td>
    <td align=right>&nbsp; </td>
    <td align=right><font size=2>267,390</font> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=right>&nbsp; </td>
    <td align=right><font size=2>341,331</font> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=right>&nbsp; </td>
    <td align=right><font size=2>-</font> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=right>&nbsp; </td>
    <td align=right><font size=2>608,721</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr>

    <td colspan=2>&nbsp; </td>
    <td colspan=15>
      <hr noshade size=1>

</td>
  </tr>

  <tr valign=bottom>

    <td align=left><font size=2>Net income</font> </td>
    <td align=right><font size=2>Ps.</font> </td>
    <td align=right><font size=2>1,961,831</font> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=right><font size=2>Ps.</font> </td>
    <td align=right><font size=2>447,783</font> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=right><font size=2>Ps.</font> </td>
    <td align=right><font size=2>(10,838</font> </td>
    <td align=left><font size=2>)</font> </td>
    <td>&nbsp; </td>
    <td align=right><font size=2>Ps.</font> </td>
    <td align=right><font size=2>2,398,776</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr>

    <td colspan=2>&nbsp; </td>
    <td colspan=15>



      <hr noshade size=2>

</td>
  </tr>

  <tr>

    <td colspan=17>&nbsp; </td>
  </tr>

  <tr valign=bottom>

    <td align=left><b><font size=2>Other information</font></b> </td>
    <td align=right>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=right>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=right>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=right>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=left><font size=2>Total assets</font> </td>
    <td align=right><font size=2>Ps.</font> </td>
    <td align=right><font size=2>10,537,244</font> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=right><font size=2>Ps.</font> </td>
    <td align=right><font size=2>7,505,536</font> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=right><font size=2>Ps.</font> </td>
    <td align=right><font size=2>-</font> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=right><font size=2>Ps.</font> </td>
    <td align=right><font size=2>18,042,780</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=left><font size=2>Depreciation and amortization</font> </td>
    <td align=right>&nbsp; </td>
    <td align=right><font size=2>270,836</font> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=right>&nbsp; </td>
    <td align=right><font size=2>164,556</font> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=right>&nbsp; </td>
    <td align=right><font size=2>14,350</font> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=right>&nbsp; </td>
    <td align=right><font size=2>449,742</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=left><font size=2>Additions of property, plant and</font> </td>
    <td align=right>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=right>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=right>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=right>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=left><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;equipment, net</font> </td>
    <td align=right>&nbsp; </td>
    <td align=right><font size=2>75,885</font> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=right>&nbsp; </td>
    <td align=right><font size=2>341,334</font> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=right>&nbsp; </td>
    <td align=right><font size=2>-</font> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=right>&nbsp; </td>
    <td align=right><font size=2>417,219</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr>

    <td colspan=17>&nbsp; </td>
  </tr>

  <tr valign=bottom>

    <td align=left>&nbsp; </td>
    <td align=right>&nbsp; </td>
    <td align=center colspan="15">   &nbsp; &nbsp;<b><font size=2>For the year ended December 31, 2005</font></b>      </td>
  </tr>

  <tr>

    <td colspan=2>&nbsp; </td>
    <td colspan=15>
      <hr noshade size=1>

</td>
  </tr>





  <tr valign=bottom>

    <td align=left><b></b> </td>
    <td align=right>&nbsp; </td>
    <td align=right><font size=2>Mexico</font> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=right>&nbsp; </td>
    <td align=left>&nbsp; &nbsp;<font size=2>USA</font> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=right>&nbsp; </td>
    <td align=center><font size=2>Operations <br>
      between</font>  <br>
      <font size=2>segments</font> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=right>&nbsp; </td>
    <td align=center>&nbsp; &nbsp;<font size=2>Total</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr>

    <td colspan=2>&nbsp; </td>
    <td colspan=15>
      <hr noshade size=1>

</td>
  </tr>

  <tr valign=bottom>

    <td align=left><font size=2>Net sales</font> </td>
    <td align=right><font size=2>Ps.</font> </td>
    <td align=right><font size=2>7,184,825</font> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=right><font size=2>Ps.</font> </td>
    <td align=right><font size=2>6,707,749</font> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=right><font size=2>Ps.</font> </td>
    <td align=right><font size=2>-</font> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=right><font size=2>Ps.</font> </td>
    <td align=right><font size=2>13,892,574</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=left><font size=2>Cost of sales</font> </td>
    <td align=right>&nbsp; </td>
    <td align=right><font size=2>4,788,553</font> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=right>&nbsp; </td>
    <td align=right><font size=2>6,322,976</font> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=right>&nbsp; </td>
    <td align=right><font size=2>-</font> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=right>&nbsp; </td>
    <td align=right><font size=2>11,111,529</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr>

    <td colspan=2>&nbsp; </td>
    <td colspan=15>
      <hr noshade size=1>

</td>
  </tr>

  <tr valign=bottom>

    <td align=left><font size=2>Marginal profit</font> </td>
    <td align=right>&nbsp; </td>
    <td align=right><font size=2>2,396,272</font> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=right>&nbsp; </td>
    <td align=right><font size=2>384,773</font> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=right>&nbsp; </td>
    <td align=right><font size=2>-</font> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=right>&nbsp; </td>
    <td align=right><font size=2>2,781,045</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=left><font size=2>Indirect overhead, selling and</font> </td>
    <td align=right>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=right>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=right>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=right>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=left><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;administrative expenses</font> </td>
    <td align=right>&nbsp; </td>
    <td align=right><font size=2>800,199</font> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=right>&nbsp; </td>
    <td align=right><font size=2>290,609</font> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=right>&nbsp; </td>
    <td align=right><font size=2>-</font> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=right>&nbsp; </td>
    <td align=right><font size=2>1,090,808</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr>

    <td colspan=2>&nbsp; </td>
    <td colspan=15>
      <hr noshade size=1>

</td>
  </tr>

  <tr valign=bottom>

    <td align=left><font size=2>Operating income</font> </td>
    <td align=right>&nbsp; </td>
    <td align=right><font size=2>1,596,073</font> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=right>&nbsp; </td>
    <td align=right><font size=2>94,164</font> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=right>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=right>&nbsp; </td>
    <td align=right><font size=2>1,690,237</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr>

    <td colspan=17>&nbsp; </td>
  </tr>

  <tr valign=bottom>

    <td align=left><font size=2>Other income, net</font> </td>
    <td align=right>&nbsp; </td>
    <td align=right><font size=2>(24,537</font> </td>
    <td align=left><font size=2>)</font> </td>
    <td>&nbsp; </td>
    <td align=right>&nbsp; </td>
    <td align=right><font size=2>12,017</font> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=right>&nbsp; </td>
    <td align=right><font size=2>-</font> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=right>&nbsp; </td>
    <td align=right><font size=2>(12,520</font> </td>
    <td align=left><font size=2>)</font> </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=left><font size=2>Financial income (expenses), net</font> </td>
    <td align=right>&nbsp; </td>
    <td align=right><font size=2>22,640</font> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=right>&nbsp; </td>
    <td align=right><font size=2>(39,493</font> </td>
    <td align=left><font size=2>)</font> </td>
    <td>&nbsp; </td>
    <td align=right>&nbsp; </td>
    <td align=right><font size=2>-</font> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=right>&nbsp; </td>
    <td align=right><font size=2>(16,853</font> </td>
    <td align=left><font size=2>)</font> </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=left><font size=2>Exchange loss, net</font> </td>
    <td align=right>&nbsp; </td>
    <td align=right><font size=2>(80,655</font> </td>
    <td align=left><font size=2>)</font> </td>
    <td>&nbsp; </td>
    <td align=right>&nbsp; </td>
    <td align=right><font size=2>-</font> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=right>&nbsp; </td>
    <td align=right><font size=2>-</font> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=right>&nbsp; </td>
    <td align=right><font size=2>(80,655</font> </td>
    <td align=left><font size=2>)</font> </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=left><font size=2>Result on monetary position</font> </td>
    <td align=right>&nbsp; </td>
    <td align=right><font size=2>(55,344</font> </td>
    <td align=left><font size=2>)</font> </td>
    <td>&nbsp; </td>
    <td align=right>&nbsp; </td>
    <td align=right><font size=2>(2,150</font> </td>
    <td align=left><font size=2>)</font> </td>
    <td>&nbsp; </td>
    <td align=right>&nbsp; </td>
    <td align=right><font size=2>-</font> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=right>&nbsp; </td>
    <td align=right><font size=2>(57,494</font> </td>
    <td align=left><font size=2>)</font> </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr>

    <td colspan=2>&nbsp; </td>
    <td colspan=15>
      <hr noshade size=1>

</td>
  </tr>

  <tr valign=bottom>

    <td align=left><font size=2>Income before income tax</font> </td>
    <td align=right>&nbsp; </td>
    <td align=right><font size=2>1,458,177</font> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=right>&nbsp; </td>
    <td align=right><font size=2>64,538</font> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=right>&nbsp; </td>
    <td align=right><font size=2>-</font> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=right>&nbsp; </td>
    <td align=right><font size=2>1,522,715</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr>

    <td colspan=17>&nbsp; </td>
  </tr>

  <tr valign=bottom>

    <td align=left><font size=2>Income tax</font> </td>
    <td align=right>&nbsp; </td>
    <td align=right><font size=2>105,089</font> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=right>&nbsp; </td>
    <td align=right><font size=2>27,591</font> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=right>&nbsp; </td>
    <td align=right><font size=2>-</font> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=right>&nbsp; </td>
    <td align=right><font size=2>132,680</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr>

    <td colspan=2>&nbsp; </td>
    <td colspan=15>
      <hr noshade size=1>

</td>
  </tr>

  <tr valign=bottom>

    <td align=left><font size=2>Net income</font> </td>
    <td align=right><font size=2>Ps.</font> </td>
    <td align=right><font size=2>1,353,088</font> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=right><font size=2>Ps.</font> </td>
    <td align=right><font size=2>36,947</font> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=right><font size=2>Ps.</font> </td>
    <td align=right><font size=2>-</font> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=right><font size=2>Ps.</font> </td>
    <td align=right><font size=2>1,390,035</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr>

    <td colspan=2>&nbsp; </td>
    <td colspan=15>



      <hr noshade size=2>

</td>
  </tr>

  <tr>

    <td colspan=17>&nbsp; </td>
  </tr>

  <tr valign=bottom>

    <td align=left><b><font size=2>Other information</font></b> </td>
    <td align=right>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=right>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=right>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=right>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=left><font size=2>Total assets</font> </td>
    <td align=right><font size=2>Ps.</font> </td>
    <td align=right><font size=2>9,176,809</font> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=right><font size=2>Ps.</font> </td>
    <td align=right><font size=2>6,453,518</font> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=right><font size=2>Ps.</font> </td>
    <td align=right><font size=2>-</font> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=right><font size=2>Ps.</font> </td>
    <td align=right><font size=2>15,630,327</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=left><font size=2>Depreciation and amortization</font> </td>
    <td align=right>&nbsp; </td>
    <td align=right><font size=2>274,879</font> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=right>&nbsp; </td>
    <td align=right><font size=2>74,049</font> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=right>&nbsp; </td>
    <td align=right><font size=2>-</font> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=right>&nbsp; </td>
    <td align=right><font size=2>348,928</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=left><font size=2>Additions of property, plant and</font> </td>
    <td align=right>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=right>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=right>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=right>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=left><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;equipment, net</font> </td>
    <td align=right>&nbsp; </td>
    <td align=right><font size=2>139,594</font> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=right>&nbsp; </td>
    <td align=right><font size=2>400,112</font> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=right>&nbsp; </td>
    <td align=right><font size=2>-</font> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=right>&nbsp; </td>
    <td align=right><font size=2>539,706</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>
</table>


<blockquote>
  <p>
For the year ended December 31, 2005 no transactions were conducted between segments.</p>
</blockquote>
<p align="center">
  F-41</p>
<HR align=center width="100%" noshade SIZE=5>


  <!-- MARKER PAGE="sheet: 1; page: 1" -->



<blockquote>
  <p>
The Company&#146;s net sales to foreign or regional customers during 2007, 2006 and 2005 are as follows:</p>
</blockquote>
<table border=0 cellspacing=0 cellpadding=0 style="font-family: 'Times New Roman';font-size: 10pt;" width=650 align="center">
  <tr valign="bottom">

    <td align=left>&nbsp;

        </td>
    <td align=center colspan="10">







<b><font size=2>Sales</font></b>





        </td>
  </tr>
  <tr>

    <td>&nbsp;
        </td>
    <td colspan=10>
      <hr noshade size=1>
        </td>
  </tr>
  <tr valign="bottom">

    <td align=left>&nbsp;

        </td>
    <td align=center colspan="3">


<b><font size=2>2007</font></b>
        </td>
    <td>&nbsp;&nbsp;&nbsp;
        </td>
    <td align=center colspan="2">


<font size=2>2006</font>
        </td>
    <td>&nbsp;&nbsp;&nbsp;
        </td>
    <td align=center colspan="3">


<font size=2>2005</font>
        </td>
  </tr>
  <tr>

    <td>&nbsp;
        </td>
    <td colspan=10>
      <hr noshade size=1>
        </td>
  </tr>
  <tr valign="bottom">

    <td align=left>
<font size=2>Mexico</font>
        </td>
    <td align=left>&nbsp;&nbsp;&nbsp;</td>
    <td align=left>
<b><font size=2>Ps.</font></b>
        </td>
    <td align=right>
<b><font size=2>7,393,755</font></b>
        </td>
    <td>&nbsp;
        </td>
    <td align=left>
<font size=2>Ps.</font>
        </td>
    <td align=right>
<font size=2>7,575,777</font>
        </td>
    <td>&nbsp;
        </td>
    <td align=left>
<font size=2>Ps.</font>
        </td>
    <td align=right>
<font size=2>6,305,292</font> </td>
    <td align=right>&nbsp;&nbsp;&nbsp;</td>
  </tr>
  <tr valign="bottom">

    <td align=left>
<font size=2>USA</font>
        </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;

        </td>
    <td align=right>
<b><font size=2>15,296,430</font></b>
        </td>
    <td>&nbsp;
        </td>
    <td align=left>&nbsp;

        </td>
    <td align=right>
<font size=2>14,797,494</font>
        </td>
    <td>&nbsp;
        </td>
    <td align=left>&nbsp;

        </td>
    <td align=right>
<font size=2>7,215,430</font>
        </td>
    <td align=right>&nbsp;</td>
  </tr>
  <tr valign="bottom">

    <td align=left>
<font size=2>Canada</font>
        </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;

        </td>
    <td align=right>
<b><font size=2>583,917</font></b>
        </td>
    <td>&nbsp;
        </td>
    <td align=left>&nbsp;

        </td>
    <td align=right>
<font size=2>654,725</font>
        </td>
    <td>&nbsp;
        </td>
    <td align=left>&nbsp;

        </td>
    <td align=right>
<font size=2>362,218</font>
        </td>
    <td align=right>&nbsp;</td>
  </tr>
  <tr valign="bottom">

    <td align=left>
<font size=2>Latin America</font>
        </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;

        </td>
    <td align=right>
<b><font size=2>113,058</font></b>
        </td>
    <td>&nbsp;
        </td>
    <td align=left>&nbsp;

        </td>
    <td align=right>
<font size=2>67,185</font>
        </td>
    <td>&nbsp;
        </td>
    <td align=left>&nbsp;

        </td>
    <td align=right>
<font size=2>9,080</font>
        </td>
    <td align=right>&nbsp;</td>
  </tr>
  <tr valign="bottom">

    <td align=left>
<font size=2>Other (Europe and Asia)</font>
        </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;

        </td>
    <td align=right>
<b><font size=2>718,934</font></b>
        </td>
    <td>&nbsp;
        </td>
    <td align=left>&nbsp;

        </td>
    <td align=right>
<font size=2>420,116</font>
        </td>
    <td>&nbsp;
        </td>
    <td align=left>&nbsp;

        </td>
    <td align=right>
<font size=2>554</font>
        </td>
    <td align=right>&nbsp;</td>
  </tr>
  <tr>

    <td>&nbsp;
        </td>
    <td colspan=10>
      <hr noshade size=1>
        </td>
  </tr>
  <tr valign="bottom">

    <td align=left>
<font size=2>Total</font>
        </td>
    <td align=left>&nbsp;</td>
    <td align=left>
<b><font size=2>Ps.</font></b>
        </td>
    <td align=right>
<b><font size=2>24,106,094</font></b>
        </td>
    <td>&nbsp;
        </td>
    <td align=left>
<font size=2>Ps.</font>
        </td>
    <td align=right>
<font size=2>23,515,297</font>
        </td>
    <td>&nbsp;
        </td>
    <td align=left>
<font size=2>Ps.</font>
        </td>
    <td align=right>
<font size=2>13,892,574</font>
        </td>
    <td align=right>&nbsp;</td>
  </tr>
  <tr>

    <td>&nbsp;
        </td>
    <td colspan="10">


      <hr noshade size=2>
        </td>
  </tr>
</table>
<br>
<TABLE border=0 cellspacing=0 cellpadding=0 style="font-family: 'Times New Roman';font-size: 10pt;" width="100%">


  <TR>
    <TD nowrap valign=top><b>(16)</b></TD>
    <TD>
      <p><b>Commitments and contingent liabilities -</b></p>
    </TD>
  </TR>
  <TR>
    <TD nowrap valign=top colspan="2">&nbsp;</TD>
  </TR>
  <TR>
    <TD nowrap valign=top colspan="2"><b><i>Commitments-</i></b></TD>
  </TR>
  <TR>
    <TD nowrap valign=top colspan="2">&nbsp;</TD>
  </TR>
  <TR>
    <TD nowrap valign=top>
<B>(a)</B>&nbsp; &nbsp; &nbsp;  </TD>
    <TD>
During 2007, Republic purchased metallurgical coke from fifteen suppliers, of which three suppliers provided approximately 62% of the Company&#146;s matallurgical coke requirements. Also during 2007, Republic purchased iron ore pellets from four
suppliers, of which two suppliers provided approximately 98% of the Company&#146;s iron ore pellet requirements.        </TD>
  </TR>
  <TR>
    <TD colspan=2>&nbsp;</TD>
  </TR>
  <tr>
    <td nowrap valign=top>
<b>(b)</b>&nbsp; &nbsp; &nbsp;  </td>
    <td>
Republic leases certain equipment, office space and computer equipment, under non-cancelable operating leases. The leases expire at various dates through 2012. During the year ended December 31, 2007 and 2006, and the period from July 22 to December
31, 2005, the rent expense related to such agreements amounted 77 millions of pesos, 88 millions of pesos and 44 million of pesos,, respectively. At December 31, 2007, total minimum lease payments under non-cancelable operating leases are 31.5
millions of pesos in 2008, 27.2 millions of pesos in 2009, 19.6 millions of pesos in 2010, 15.2 millions of pesos in 2011 and 21.7 millions of pesos in subsequent years.       </td>
  </tr>
  <tr>
    <td colspan=2>&nbsp;</td>
  </tr>
  <tr>
    <td nowrap valign=top><b>(c)</b></td>
    <td>As is the case with most steel producers in the USA, Republic could incur significant costs related to environmental issues in the future, including those arising from environmental compliance activities and remediation stemming from
historical waste management practices at the Republic&#146;s facilities. The reserve to cover probable environmental liabilities as well as anticipated compliance activities totaling 42.4 millions of pesos was recorded as of December 31, 2007 The current and non-current portions of the environmental reserve are included
in the attached consolidated balance sheet, as &#147;Other accounts payable and accrued liabilities&#148; and &#147;Other long-term liabilities&#148;, respectively. Republic is not otherwise aware at this time of any additional environmental
remediation liabilities or contingent liabilities relating to environmental matters with respect to Republic&#146;s facilities for which the establishment of an additional reserve would be appropriate at this time. To the extent Republic incurs any
such additional future costs, these costs will most likely be incurred over a number of years. However, future regulatory action regarding historical waste management practices at the Republic&#146;s facilities and future changes in applicable laws
and regulations may require Republic to incur significant costs that have a material adverse effect on the Republic&#146;s future financial performance.</td>
  </tr>
  <tr>
    <td colspan=2>&nbsp;</td>
  </tr>
  <TR>
    <TD nowrap valign=top><b>d)</b></TD>
    <TD>Republic has an agreement with the USWA to administer health insurance benefits to the Company&#146;s USWA employees while on layoff status and to administer payment of monthly contributions to the Steelworker&#146;s Pension Trust on
behalf of local union officials while on the union business. In February 2004, to fund this program, Republic provided an initial cash contribution of 2.5 million of</TD>
  </TR>

</TABLE>
<p align="center">F-42</p>
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<br>
<table border=0 cellspacing=0 cellpadding=0 style="font-family: 'Times New Roman';font-size: 10pt;" width="100%">


  <tr>
    <td nowrap valign=top width="40">&nbsp;</td>
    <td>U.S. dollars to be used to provide health insurance benefits and 0.5 million of U.S. dollars to provide steelworkers pension benefits. As of December 31, 2006, the balance of this cash account totaled 2.6 million of U.S. dollars. The Company has
agreed to administer these programs until the fund is exhausted. Republic will provide the USWA with periodic reports regarding the financial status of the fund. After ratification of the new labor agreement, this fund was returned to Republic in
September 2007.</td>
  </tr>




  <tr>
    <td nowrap valign=top width="40">&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td valign=top colspan="2"><b><i>Contingent liabilities -</i></b></td>
  </tr>
  <tr>
    <td nowrap valign=top width="40">&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td nowrap valign=top width="40">
<b>e)</b>&nbsp; &nbsp; &nbsp;   </td>
    <td>
<b>California Regional Water Control Board, CRWCB</b>   </td>
  </tr>
  <tr>
    <td colspan=2>&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>
In 1987, Pacific Steel, Inc. (&#147;Pacific Steel&#148; or &#147;PS&#148;), a subsidiary of Simec based in National City in San Diego County, California, received a notice from the California Regional Water Control Board, San Diego Region (the
&#147;Regional Board&#148;), which prohibited Pacific Steel from draining into the street waters from spraying borax (waste resulting from the process of the scrap yard). This and other subsequent requirements obligated Pacific Steel to (i) stop
operations in the scrap yard, (ii) send an enclosure of the borax which was stored in its yards and (iii) take samples of the soil where the borax was found. The result of this study was that the residual metal contents represented no significant
threat to the quality of water. The CRWCB approved the program to monitor both the soil and certain layers submitted by Pacific Steel. In December 2002, the CRWCB notified Pacific Steel that the jurisdiction to decide on the case had been
transferred to the DTSC (Department of Toxic Substances Control). Further, the DTSC informed PS that the case would be resolved simultaneously with the other pending issues described below.   </td>
  </tr>
  <tr>
    <td colspan=2>&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>
In 1996 PS discovered a hydrocarbon deposit in its property and the CRWCB determined that PS was responsible. At the end of 2000 the CRWCB approved the remediation plan to treat the contaminated soil submitted by PS, which concluded in November
2001. In August 2002, with the results obtained from the study of the soil, PS successfully presented to CRWCB the final report of the work activities performed. In December 2002 the CRWCB notified PS that the jurisdiction to decide on the case had
been transferred to the DTSC (Department of Toxic Substances Control). Further, the DTSC informed PS that the case would be resolved simultaneously with the other pending issues described below.      </td>
  </tr>
  <tr>
    <td colspan=2>&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>
<b><i>Department of Toxic Substances Control, DTSC</i></b>      </td>
  </tr>
  <tr>
    <td colspan=2>&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>
In September 2002, the Department of Toxic Substances Control inspected Pacific Steel&#146;s (PS) facilities based on an alleged complaint from neighbors due to PS&#146; Steel&#146;s excavating to recover scrap metal on its property and on a
neighbor&#146;s property which it rents from a third party. In this same month, the department issued an enforcement order of imminent and substantial endangerment determination, which alleges that certain soil piles, soil management and metal
recovery operations may cause an imminent and substantial danger to human health and the environment. Consequently, the department sanctioned PS for violating hazardous waste laws and the State of California Security Code and imposed the obligation
to make necessary changes to the location. On July 26, 2004, in an effort to continue with this order, the department filed against PS a Complaint for Civil Penalties and Injunctive Relief in San Diego Superior Court. On July 26, 2004, the court
issued a judgment, whereby PS was obligated to pay US&#36;235.0 (payable in four payments of US&#36;58.75 over the course of one year) for fines of US&#36;131.25, the department's costs of US&#36;45.0 and an environmental project of US&#36;58.75.
All these payments were duly made by PS.        </td>
  </tr>
  <tr>
    <td colspan=2>&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>
In August 2004 PS and the DTSC entered into a corrective action consent agreement. In September 2005 the DTSC approved the Corrective Measures Plan presented by PS, provided it obtained permits from the corresponding local authorities. The
remediation work activities started in November 2006, once the permits were available.  </td>
  </tr>

</table>
<p align="center">F-43</p>
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<TABLE border=0 cellspacing=0 cellpadding=0 style="font-family: 'Times New Roman';font-size: 10pt;" width="100%">
  <TR>
    <TD width="40">&nbsp;</TD>
    <TD>
Due to the fact that the cleanliness levels have not yet been defined by the Department and since the characterization of all the property has not yet been finished, the allowance for the costs for the different remedy options are still subject to
considerable uncertainty.       </TD>
  </TR>
  <TR>
    <TD colspan=2>&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>
The Company has prepared an estimate, based on prior years&#146; experience, considering the same processes, volume costs, use of own equipment and personnel and assuming that an agreement will be reached with the DTSC in respect of defining the
cleanliness levels. The results range from US&#36;0.8 million to US&#36;1.7 million. On such bases, the Company created an allowance for this contingency at December 31, 2002, of approximately US&#36;1.7 million. At December 31, 2007 the allowance
amounts to Ps. 14,727 (US&#36;1.4 million). The obtaining of permits for the remediation of the site from authorities cannot be warranted, nor can the corrective measures being more costly than expected be warranted.        </TD>
  </TR>
  <TR>
    <TD colspan=2>&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>
<B>Community Development Commission, CDC</B>    </TD>
  </TR>
  <TR>
    <TD colspan=2>&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>
The Community Development Commission of National City, California (CDC) has expressed its intention to develop the site. Pacific Steel has informed the CDC that the land will not be voluntarily sold unless there is an alternate property where it
could relocate its business. The CDC, in accordance with the State of California law, has the power to expropriate in exchange for payment at market value and, in the event that there is no other land available to relocate the business, it would
also have to pay Pacific Steel the land&#146;s book value. The CDC made an offer to purchase the land from Pacific Steel for US&#36;6.9 million, based on a business appraisal. The expropriation process was temporarily suspended through an agreement
entered into by both parties in November 2006. This agreement allows Pacific Steel to explore the possibility of finishing the remediation process of the land and to propose an attractive alternative to CDC which would allow the Company to remain in
the area.       </TD>
  </TR>
  <TR>
    <TD colspan=2>&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>
Due to this situation and considering the imminent expropriation of part of the land on which Pacific Steel carries out certain operations, for the year ended December 31, 2002, Pacific Steel recorded its land at realizable value based on an
appraisal prepared by independent experts. Such appraisal caused a decrease in the value of part of the land of Ps. 23,324 (19,750 historical pesos) and a charge to results of operations of 2002 for the same amount. </TD>
  </TR>
  <TR>
    <TD colspan=2>&nbsp;</TD>
  </TR>
  <TR>

    <TD nowrap valign=top>
<B>f)</B>&nbsp; &nbsp; &nbsp;   </TD>
    <TD>
<B>Nullity suit with the Mexican Federal Tax.</B>       </TD>
  </TR>
  <TR>
    <TD colspan=2>&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>
On July 2, 2003, Compa&ntilde;&iacute;a Sider&#250;rgica de Guadalajara, S.A. de C.V. (CSG) filed a nullity suit with the Mexican Federal Tax and Administrative Court of Justice against an official communication issued by the Central International
Fiscal Auditing Office of the Tax Administration Service, whereby CSG is deemed to have unpaid taxes of Ps. 93,045 on alleged omissions of income taxes it should have withheld from third parties on interest payments abroad in 1998, 1999, 2000, and
for the period from January 1, 2001 through June 30, 2001. On October 9, 2007, the Company went under the fiscal amnesty offered by the Federal Government and paid the sum of Ps. 8,512, abandoning the trial and fully paying the tax credit. </TD>
  </TR>
  <TR>
    <TD colspan=2>&nbsp;</TD>
  </TR>
  <TR>

    <TD nowrap valign=top>
<B>g)</B>&nbsp; &nbsp; &nbsp;   </TD>
    <TD>
The Company is involved in a number of lawsuits and claims that have arisen throughout the normal course of business. The Company and its legal advisors do not expect the final outcome of these matters to have any significant adverse effects on the
Company&#146;s financial position and results of operations.    </TD>
  </TR>

</TABLE>
<p align="center">F-44</p>
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<TABLE border=0 cellspacing=0 cellpadding=0 style="font-family: 'Times New Roman';font-size: 10pt;" width="100%">
  <TR>

    <TD nowrap valign=top width="40">
<B>(17)</B>&nbsp; &nbsp; &nbsp;         </TD>
    <TD colspan=2>
<B>Subsequent events &#150;</B> </TD>
  </TR>
  <TR>
    <TD colspan=3>&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD colspan=2>
On February 21, 2008, Simec has entered into a purchase agreement to acquire 100% of the shares of Corporaci&oacute;n Aceros DM, S.A. de C.V. and certain of its affiliates (&#147;Grupo San&#148;) for 850 million U. S. dollars.
    </TD>
  </TR>
  <TR>
    <TD colspan=3>&nbsp;</TD>
  </TR>


  <TR>
    <TD>&nbsp;</TD>
    <TD colspan="2">
Grupo San is a long products steel producer and the second-largest corrugated rebar producer in Mexico. Grupo San&#146;s operations are based in San Luis Potos&iacute;, Mexico. Its plants and its 1,450 employees rely on cutting edge technology to
produce 700 thousand tons of finished products annually.        </TD>
  </TR>
  <TR>
    <TD colspan=3>&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD colspan=2>
      <p>On March 25, 2008 this operation was approved by Simec&#146;s Shareholders Meeting and on May 30, 2008 the acquisition was consummated. Based on the recent consummation date, it is not practical for the Company to disclose further details (e.g. purchase price allocation) of the acquisition. </p>
      <p>On May 29, 2008, we accepted a loan from Banco Inbursa S.A. for U.S.        $120 million (Ps. 1,306 million) at Libor +1.45% that is due on May 29, 2009. We also received U.S. $112.5 million (Ps. 1,224 million) of contribution for future capital stock increases from Industrias CH that we expect to formalize by July 22, 2008. We paid the remaining balance of the purchase price through our own cash reserves.</p>
    </TD>
  </TR>
  <TR>
    <TD colspan=3>&nbsp;</TD>
  </TR>
  <TR>

    <TD nowrap valign=top>
<B>(18)</B>&nbsp; &nbsp; &nbsp;         </TD>
    <TD colspan=2>
<B>Differences between Mexican financial reporting standards and United States accounting principles:</B>       </TD>
  </TR>
  <TR>
    <TD colspan=3>&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD colspan=2>
The Company&#146;s consolidated financial statements are prepared in accordance with Mexican financial reporting standards (Mexican GAAP), which differ in certain significant respects from United States generally accepted accounting principles (US
GAAP).  </TD>
  </TR>
  <TR>
    <TD colspan=3>&nbsp;</TD>
  </TR>
  <TR>
    <TD width="40">&nbsp;</TD>
    <TD width="40">&nbsp;
</TD>
    <TD>
      <p>The Mexican GAAP consolidated financial statements include the effects of inflation as provided for under MFRS B-10, as amended. The following reconciliation to US GAAP does not include the reversal of the adjustments for the effects of inflation,
since the application of MFRS B-10 represents a comprehensive measure of the effects of price level changes in the inflationary Mexican economy and, as such, is considered a more meaningful presentation than historical cost-based financial reporting
for both Mexican and US accounting purposes.    </p>
      <p>Other significant differences between Mexican GAAP and US GAAP and the effects on consolidated net income and consolidated stockholders&#146; equity are presented below, in thousands of constant Mexican pesos as of December 31, 2007, with an
explanation of the adjustments. </p>
    </TD>
  </TR>



</TABLE>
<p align="center">F-45</p>
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  <!-- MARKER PAGE="sheet: 1; page: 1" -->


<p><B>Reconciliation of net income:</B></p>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'" cellspacing=0 cellpadding=0 border=0 width="700" align="center">

  <tr valign=bottom>
    <td align=center>&nbsp; </td>
    <td align=center colspan="2"> <b><font size=2>2007</font></b></td>
    <td align=center>&nbsp; </td>
    <td>&nbsp;&nbsp;&nbsp; </td>
    <td align=center colspan="2"><b><font size=2>2006</font></b> </td>
    <td>&nbsp;&nbsp;&nbsp; </td>
    <td align=center colspan="3"><b><font size=2>2005</font></b> </td>
  </tr>

  <tr>
    <td align=center>&nbsp; </td>
    <td align=center colspan=10>
      <hr noshade size=1>

</td>
  </tr>

  <tr valign=bottom>
    <td align=left><font size=2>Net income as reported under Mexican GAAP</font></td>
    <td align=right><font size=2>Ps.</font></td>
    <td align=right><font size=2>1,625,175</font></td>
    <td align=center>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=right><font size=2>2,398,776</font></td>
    <td align=center>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=right><font size=2>1,390,035</font></td>
    <td align=center>&nbsp; </td>
    <td align=center>&nbsp;&nbsp;&nbsp;</td>
  </tr>

  <tr>
    <td align=center>&nbsp; </td>
    <td align=right colspan=10>
      <hr noshade size=1>

</td>
  </tr>

  <tr valign=bottom>
    <td align=left><font size=2>Inventory indirect costs</font> </td>
    <td align=right>&nbsp; </td>
    <td align=right><font size=2>76,695</font> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=right><font size=2>72,410</font> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=right><font size=2>(4,241</font> </td>
    <td align=left><font size=2>)</font> </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>
    <td align=left><font size=2>Depreciation on restatement of machinery and equipment</font> </td>
    <td align=right>&nbsp; </td>
    <td align=right><font size=2>1,496</font> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=right><font size=2>(13,384</font> </td>
    <td align=left><font size=2>)</font> </td>
    <td>&nbsp; </td>
    <td align=right><font size=2>(26,593</font> </td>
    <td align=left><font size=2>)</font> </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>
    <td align=left><font size=2>Deferred income taxes</font> </td>
    <td align=right>&nbsp; </td>
    <td align=right><font size=2>(32,660</font> </td>
    <td align=left><font size=2>)</font> </td>
    <td>&nbsp; </td>
    <td align=right><font size=2>(27,294</font> </td>
    <td align=left><font size=2>)</font> </td>
    <td>&nbsp; </td>
    <td align=right><font size=2>(6,102</font> </td>
    <td align=left><font size=2>)</font> </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>
    <td align=left><font size=2>Deferred employee profit sharing</font> </td>
    <td align=right>&nbsp; </td>
    <td align=right><font size=2>50</font> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=right><font size=2>50</font> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=right><font size=2>50</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>
    <td align=left><font size=2>Pre-operating expenses, net</font> </td>
    <td align=right>&nbsp; </td>
    <td align=right><font size=2>30,698</font> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=right><font size=2>30,698</font> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=right><font size=2>27,882</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>
    <td align=left><font size=2>Amortization of gain from monetary position and</font> </td>
    <td align=right>&nbsp; </td>
    <td align=right><font size=2>7,755</font> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=right><font size=2>7,755</font> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=right><font size=2>7,755</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>
    <td align=left>&nbsp; &nbsp; &nbsp;<font size=2>exchange loss capitalized under Mexican GAAP</font> </td>
    <td align=right>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>
    <td align=left><font size=2>Minority interest of reconciling items</font> </td>
    <td align=right>&nbsp; </td>
    <td align=right><font size=2>(25,438</font> </td>
    <td align=left><font size=2>)</font> </td>
    <td>&nbsp; </td>
    <td align=right><font size=2>(24,947</font> </td>
    <td align=left><font size=2>)</font> </td>
    <td>&nbsp; </td>
    <td align=right><font size=2>-</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>
    <td align=left><font size=2>Minority interest of the period</font> </td>
    <td align=right>&nbsp; </td>
    <td align=right><font size=2>(96,118</font> </td>
    <td align=left><font size=2>)</font> </td>
    <td>&nbsp; </td>
    <td align=right><font size=2>(220,082</font> </td>
    <td align=left><font size=2>)</font> </td>
    <td>&nbsp; </td>
    <td align=right><font size=2>(18,740</font> </td>
    <td align=left><font size=2>)</font> </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr>
    <td>&nbsp; </td>
    <td colspan=10 align="right">
      <hr noshade size=1>

</td>
  </tr>

  <tr valign=bottom>
    <td align=left><font size=2>Total US GAAP adjustments</font> </td>
    <td align=right>&nbsp; </td>
    <td align=right><font size=2>(37,522</font> </td>
    <td align=left><font size=2>)</font> </td>
    <td>&nbsp; </td>
    <td align=right><font size=2>(174,794</font> </td>
    <td align=left><font size=2>)</font> </td>
    <td>&nbsp; </td>
    <td align=right><font size=2>(19,989</font> </td>
    <td align=left><font size=2>)</font> </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr>
    <td>&nbsp; </td>
    <td colspan=10 align="right">
      <hr noshade size=1>

</td>
  </tr>

  <tr>

    <td colspan=11>&nbsp; </td>
  </tr>

  <tr valign=bottom>
    <td align=left><font size=2>Net income under US GAAP</font> </td>
    <td align=right><font size=2>Ps.</font> </td>
    <td align=right><font size=2>1,587,653</font> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=right><font size=2>2,223,982</font> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=right><font size=2>1,370,046</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr>
    <td>&nbsp; </td>
    <td colspan="10" align="right">



      <hr noshade size=2>

</td>
  </tr>

  <tr>

    <td colspan=11>&nbsp; </td>
  </tr>

  <tr valign=bottom>
    <td align=left><font size=2>Weighted average outstanding basic</font> </td>
    <td align=right>&nbsp; </td>
    <td align=right><font size=2>468,228,497</font> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=right><font size=2>420,339,873</font> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=right><font size=2>137,929,599</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr>
    <td>&nbsp; </td>
    <td colspan=10 align="right">
      <hr noshade size=1>

</td>
  </tr>

  <tr>

    <td colspan=11>&nbsp; </td>
  </tr>

  <tr valign=bottom>
    <td align=left><font size=2>Net earnings per share (actual pesos)</font> </td>
    <td align=right><font size=2>Ps.</font> </td>
    <td align=right><font size=2>3.39</font> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=right><font size=2>5.29</font> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=right><font size=2>9.93</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr>
    <td>&nbsp; </td>
    <td colspan="10" align="right">



      <hr noshade size=2>

</td>
  </tr>

  <tr>

    <td colspan=11>&nbsp; </td>
  </tr>

  <tr valign=bottom>
    <td align=left><font size=2>Weighted average outstanding basic after split (1)</font> </td>
    <td align=right>&nbsp; </td>
    <td align=right><font size=2>468,228,497</font> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=right><font size=2>420,339,873</font> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=right><font size=2>413,788,797</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr>
    <td>&nbsp; </td>
    <td colspan=10 align="right">
      <hr noshade size=1>

</td>
  </tr>

  <tr>

    <td colspan=11>&nbsp; </td>
  </tr>

  <tr valign=bottom>
    <td align=left><font size=2>Net earnings per share (actual pesos) after split</font> </td>
    <td align=right><font size=2>Ps.</font> </td>
    <td align=right><font size=2>3.39</font> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=right><font size=2>5.29</font> </td>
    <td align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td align=right><font size=2>3.31</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr>
    <td>&nbsp; </td>
    <td colspan="10">



      <hr noshade size=2>

</td>
  </tr>
</table>
<br>
<TABLE style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'" cellSpacing=0 cellPadding=0 border=0 width="100%">

  <TR>
    <TD vAlign=top nowrap width="60">&nbsp;</TD>
    <TD vAlign=top nowrap width="40"><font size="1">(1)</font></TD>
    <TD vAlign=top nowrap colspan="2"><font size="1">As explained in Note 13 a) the Company affected a 3 for 1 stock split on May 30, 2006. This information presents the retrospective effect on the Earnings per Share after the split. </font></TD>
  </TR>


</TABLE>
<blockquote>
  <p>In 2007 and 2006 the Company recorded Ps. 9 million and Ps. 15.8 million, respectively, under other income which was reclassified under operating income for U.S. GAAP purposes.
</p>
  <p>In 2005 the Company recorded Ps. 41 million under other expenses which were reclassified under operating expenses for U.S GAAP purposes.
</p>
</blockquote>
<p><B>Reconciliation of stockholders&#146; equity:</B></p>
<TABLE style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'" cellSpacing=0 cellPadding=0 border=0 width="700" align="center">

  <TR vAlign=bottom>
    <TD align=center>&nbsp; </TD>
    <TD align=center colspan="3"> <B><FONT size=2>2007</FONT></B></TD>
    <TD align=center>&nbsp;</TD>
    <TD align="center">&nbsp;&nbsp;&nbsp;</TD>
    <TD align="center"><b><font size=2>2006</font></b></TD>
    <TD align=center>&nbsp; </TD>
    <TD>&nbsp;&nbsp;&nbsp; </TD>
    <TD align=center colspan="2"><B><FONT size=2>2005</FONT></B> </TD>
  </TR>

  <TR>
    <TD align=center>&nbsp; </TD>
    <TD align=center colSpan=10>
      <HR noshade SIZE=1>

</TD>
  </TR>



  <TR vAlign=bottom>
    <TD align=left><FONT size=2>Total stockholders&#146; equity reported under Mexican</FONT> </TD>
    <TD align=left>&nbsp;&nbsp;&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
  </TR>

  <TR vAlign=bottom>
    <TD align=left>&nbsp; &nbsp; &nbsp;<FONT size=2>GAAP</FONT> </TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left><FONT size=2>Ps.</FONT> </TD>
    <TD align=right><B><FONT size=2>17,252,034</FONT></B> </TD>
    <TD align=left>&nbsp; </TD>
    <TD>&nbsp; </TD>
    <TD align=right><FONT size=2>12,960,333</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD>&nbsp; </TD>
    <TD align=right><FONT size=2>10,316,265</FONT> </TD>
    <TD align=left>&nbsp; </TD>
  </TR>

  <TR>
    <TD>&nbsp; </TD>
    <TD colSpan=10>
      <HR noshade SIZE=1>

</TD>
  </TR>

  <TR>

    <TD colSpan=11>&nbsp; </TD>
  </TR>

  <TR vAlign=bottom>
    <TD align=left><FONT size=2>Minority interest included in stockholders&#146; equity</FONT> </TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
  </TR>

  <TR vAlign=bottom>
    <TD align=left>&nbsp; &nbsp; &nbsp;<FONT size=2>under Mexican GAAP</FONT> </TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right><B><FONT size=2>(2,390,179</FONT></B> </TD>
    <TD align=left><B><FONT size=2>)</FONT></B> </TD>
    <TD>&nbsp; </TD>
    <TD align=right><FONT size=2>(2,252,461</FONT> </TD>
    <TD align=left><FONT size=2>)</FONT> </TD>
    <TD>&nbsp; </TD>
    <TD align=right><FONT size=2>(1,936,770</FONT> </TD>
    <TD align=left><FONT size=2>)</FONT> </TD>
  </TR>

  <TR vAlign=bottom>
    <TD align=left><FONT size=2>Minority interest of reconciling items</FONT> </TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right><B><FONT size=2>(50,385</FONT></B> </TD>
    <TD align=left><B><FONT size=2>)</FONT></B> </TD>
    <TD>&nbsp; </TD>
    <TD align=right><FONT size=2>(24,947</FONT> </TD>
    <TD align=left><FONT size=2>)</FONT> </TD>
    <TD>&nbsp; </TD>
    <TD align=right><FONT size=2>-</FONT> </TD>
    <TD align=left>&nbsp; </TD>
  </TR>

  <TR vAlign=bottom>
    <TD align=left><FONT size=2>Inventory indirect costs</FONT> </TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right><B><FONT size=2>162,450</FONT></B> </TD>
    <TD align=left>&nbsp; </TD>
    <TD>&nbsp; </TD>
    <TD align=right><FONT size=2>85,755</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD>&nbsp; </TD>
    <TD align=right><FONT size=2>13,345</FONT> </TD>
    <TD align=left>&nbsp; </TD>
  </TR>

  <TR vAlign=bottom>
    <TD align=left><FONT size=2>Restatement of machinery and equipment</FONT> </TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right><B><FONT size=2>184,905</FONT></B> </TD>
    <TD align=left>&nbsp; </TD>
    <TD>&nbsp; </TD>
    <TD align=right><FONT size=2>461,632</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD>&nbsp; </TD>
    <TD align=right><FONT size=2>631,225</FONT> </TD>
    <TD align=left>&nbsp; </TD>
  </TR>

  <TR vAlign=bottom>
    <TD align=left><FONT size=2>Accrued vacation costs</FONT> </TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right><FONT size=2>-</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD>&nbsp; </TD>
    <TD align=right><FONT size=2>-</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD>&nbsp; </TD>
    <TD align=right><FONT size=2>(659</FONT> </TD>
    <TD align=left><FONT size=2>)</FONT> </TD>
  </TR>

  <TR vAlign=bottom>
    <TD align=left><FONT size=2>Deferred income taxes</FONT> </TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right><B><FONT size=2>(292</FONT></B> </TD>
    <TD align=left><B><FONT size=2>)</FONT></B> </TD>
    <TD>&nbsp; </TD>
    <TD align=right><FONT size=2>(45,534</FONT> </TD>
    <TD align=left><FONT size=2>)</FONT> </TD>
    <TD>&nbsp; </TD>
    <TD align=right><FONT size=2>(61,919</FONT> </TD>
    <TD align=left><FONT size=2>)</FONT> </TD>
  </TR>

  <TR vAlign=bottom>
    <TD align=left><FONT size=2>Deferred employee profit sharing</FONT> </TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right><B><FONT size=2>700</FONT></B> </TD>
    <TD align=left>&nbsp; </TD>
    <TD>&nbsp; </TD>
    <TD align=right><FONT size=2>750</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD>&nbsp; </TD>
    <TD align=right><FONT size=2>800</FONT> </TD>
    <TD align=left>&nbsp; </TD>
  </TR>

  <TR vAlign=bottom>
    <TD align=left><FONT size=2>Pre-operating expenses</FONT> </TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right><B><FONT size=2>(166,171</FONT></B> </TD>
    <TD align=left><B><FONT size=2>)</FONT></B> </TD>
    <TD>&nbsp; </TD>
    <TD align=right><FONT size=2>(196,869</FONT> </TD>
    <TD align=left><FONT size=2>)</FONT> </TD>
    <TD>&nbsp; </TD>
    <TD align=right><FONT size=2>(227,568</FONT> </TD>
    <TD align=left><FONT size=2>)</FONT> </TD>
  </TR>

  <TR vAlign=bottom>
    <TD align=left><FONT size=2>Gain from monetary position and exchange loss</FONT> </TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
  </TR>

  <TR vAlign=bottom>
    <TD align=left><FONT size=2>&nbsp; &nbsp; &nbsp;<font size=2></font>capitalized, net</FONT> </TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right><B><FONT size=2>(180,141</FONT></B> </TD>
    <TD align=left><B><FONT size=2>)</FONT></B> </TD>
    <TD>&nbsp; </TD>
    <TD align=right><FONT size=2>(187,896</FONT> </TD>
    <TD align=left><FONT size=2>)</FONT> </TD>
    <TD>&nbsp; </TD>
    <TD align=right><FONT size=2>(195,651</FONT> </TD>
    <TD align=left><FONT size=2>)</FONT> </TD>
  </TR>

  <TR>
    <TD>&nbsp; </TD>
    <TD colSpan=10>
      <HR noshade SIZE=1>

</TD>
  </TR>

  <TR>

    <TD colSpan=11>&nbsp; </TD>
  </TR>

  <TR vAlign=bottom>
    <TD align=left><FONT size=2>&nbsp; &nbsp; &nbsp;<font size=2></font>Total US GAAP adjustments</FONT> </TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right><B><FONT size=2>(2,439,113</FONT></B> </TD>
    <TD align=left><B><FONT size=2>)</FONT></B> </TD>
    <TD>&nbsp; </TD>
    <TD align=right><FONT size=2>(2,159,570</FONT> </TD>
    <TD align=left><FONT size=2>)</FONT> </TD>
    <TD>&nbsp; </TD>
    <TD align=right><FONT size=2>(1,777,197</FONT> </TD>
    <TD align=left><FONT size=2>)</FONT> </TD>
  </TR>

  <TR>
    <TD>&nbsp; </TD>
    <TD colSpan=10>
      <HR noshade SIZE=1>

</TD>
  </TR>

  <TR vAlign=bottom>
    <TD align=left><FONT size=2>Total stockholders&#146; equity under US GAAP</FONT> </TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left><FONT size=2>Ps.</FONT> </TD>
    <TD align=right><B><FONT size=2>14,812,921</FONT></B> </TD>
    <TD align=left>&nbsp; </TD>
    <TD>&nbsp; </TD>
    <TD align=right><FONT size=2>10,800,763</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD>&nbsp; </TD>
    <TD align=right><FONT size=2>8,539,068</FONT> </TD>
    <TD align=left>&nbsp; </TD>
  </TR>

  <TR>
    <TD>&nbsp; </TD>
    <TD colspan="10">



      <HR noshade SIZE=2>

</TD>
  </TR>
</TABLE>
<p align="center">
  F-46</p>
<HR align=center width="100%" noshade SIZE=5>


  <!-- MARKER PAGE="sheet: 1; page: 1" -->




<blockquote>
  <p>A summary of changes in stockholders&#146; equity, after the US GAAP adjustments described above, is as follows:</p>
</blockquote>
<TABLE style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'" cellSpacing=0 cellPadding=0 border=0 width="700" align="center">









  <TR vAlign=bottom>
    <TD align=center>&nbsp; </TD>
    <TD align=center>&nbsp; </TD>
    <TD align=center><FONT size=2>Capital</FONT><BR>
      <FONT size=2>Stock and</FONT><BR>
      <FONT size=2>Paid-in</FONT><BR>
      <FONT size=2>Capital</FONT></TD>
    <TD align=center>&nbsp;&nbsp;&nbsp;</TD>
    <TD align=center><FONT size=2>Retained</FONT><BR>
      <FONT size=2>Earnings</FONT></TD>
    <TD align=center>&nbsp;&nbsp;&nbsp;</TD>
    <TD align=center><FONT size=2>Fair Value</FONT><BR>
      <FONT size=2>of</FONT><BR>
      <FONT size=2>Derivative</FONT><BR>
      <FONT size=2>Financial</FONT><BR>
      <FONT size=2>Instruments</FONT></TD>
    <TD align=center>&nbsp;</TD>
    <TD align=center>&nbsp;&nbsp;&nbsp;</TD>
    <TD align=center><FONT size=2>Translation</FONT><BR>
      <FONT size=2>effect of</FONT><BR>
      <FONT size=2>foreign</FONT><BR>
      <FONT size=2>subsidiaries</FONT></TD>
    <TD align=center>&nbsp; </TD>
    <TD align=center>&nbsp;&nbsp;&nbsp;</TD>
    <TD align=center><FONT size=2>Cumulative</FONT><BR>
      <FONT size=2>Restatement</FONT><BR>
      <FONT size=2>Effect</FONT></TD>
    <TD align=center>&nbsp; </TD>
    <TD align=center>&nbsp;&nbsp;&nbsp;</TD>
    <TD align=center><FONT size=2>Total</FONT><BR>
      <FONT size=2>Stockholders&#146;</FONT><BR>
      <FONT size=2>Equity</FONT></TD>
    <TD align=center>&nbsp;</TD>
  </TR>

  <TR>
    <TD align=center>&nbsp; </TD>
    <TD align=center colSpan=16>
      <HR noshade SIZE=1>

</TD>
  </TR>

  <TR vAlign=bottom>
    <TD align=left><FONT size=2>Balances as of</FONT> </TD>
    <TD align=right>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp;&nbsp;&nbsp;</TD>
  </TR>

  <TR vAlign=bottom>
    <TD align=left><FONT size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;December 31, 2005</FONT> </TD>
    <TD align=right><FONT size=2>Ps.</FONT> </TD>
    <TD align=right><FONT size=2>4,050,904</FONT> </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>3,449,163</FONT> </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>43,235</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><FONT size=2>16,106</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><FONT size=2>979,660</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><FONT size=2>8,539,068</FONT> </TD>
    <TD align=right>&nbsp;</TD>
  </TR>

  <TR>

    <TD colSpan=17>&nbsp; </TD>
  </TR>

  <TR>

    <TD colSpan=17>&nbsp; </TD>
  </TR>

  <TR vAlign=bottom>
    <TD align=left><FONT size=2>Increase in capital stock</FONT> </TD>
    <TD align=right>&nbsp; </TD>
    <TD align=right><FONT size=2>130,901</FONT> </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>-</FONT> </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>-</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><FONT size=2>-</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><FONT size=2>-</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><FONT size=2>130,901</FONT> </TD>
    <TD align=right>&nbsp;</TD>
  </TR>

  <TR>

    <TD colSpan=17>&nbsp; </TD>
  </TR>

  <TR vAlign=bottom>
    <TD align=left><FONT size=2>Net comprehensive income</FONT> </TD>
    <TD align=right>&nbsp; </TD>
    <TD align=right><FONT size=2>-</FONT> </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>2,223,982</FONT> </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>(47,792</FONT> </TD>
    <TD align=left><FONT size=2>)</FONT> </TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><FONT size=2>(41,645</FONT> </TD>
    <TD align=left><FONT size=2>)</FONT> </TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><FONT size=2>(3,751</FONT> </TD>
    <TD align=left><FONT size=2>)</FONT> </TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><FONT size=2>2,130,794</FONT> </TD>
    <TD align=right>&nbsp;</TD>
  </TR>

  <TR>
    <TD>&nbsp; </TD>
    <TD colSpan=16 align="right">
      <HR noshade SIZE=1>

</TD>
  </TR>

  <TR vAlign=bottom>
    <TD align=left><FONT size=2>Balances as of</FONT> </TD>
    <TD align=right>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>&nbsp; </TD>
    <TD align=right>&nbsp;</TD>
  </TR>

  <TR vAlign=bottom>
    <TD align=left><FONT size=2>&nbsp;&nbsp;&nbsp;December 31, 2006</FONT> </TD>
    <TD align=right>&nbsp; </TD>
    <TD align=right><FONT size=2>4,181,805</FONT> </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>5,673,145</FONT> </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>(4,557</FONT> </TD>
    <TD align=left><FONT size=2>)</FONT> </TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><FONT size=2>(25,539</FONT> </TD>
    <TD align=left><FONT size=2>)</FONT> </TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><FONT size=2>975,909</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><FONT size=2>10,800,763</FONT> </TD>
    <TD align=right>&nbsp;</TD>
  </TR>

  <TR>

    <TD colSpan=17>&nbsp; </TD>
  </TR>

  <TR vAlign=bottom>
    <TD align=left><FONT size=2>Increase in capital stock</FONT> </TD>
    <TD align=right>&nbsp; </TD>
    <TD align=right><FONT size=2>2,420,726</FONT> </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>-</FONT> </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>-</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><FONT size=2>-</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><FONT size=2>2,420,726</FONT> </TD>
    <TD align=right>&nbsp;</TD>
  </TR>

  <TR>

    <TD colSpan=17>&nbsp; </TD>
  </TR>

  <TR vAlign=bottom>
    <TD align=left><FONT size=2>Net comprehensive income</FONT> </TD>
    <TD align=right>&nbsp; </TD>
    <TD align=right><FONT size=2>-</FONT> </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>1,587,653</FONT> </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>4,557</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><FONT size=2>(6,171</FONT> </TD>
    <TD align=left><FONT size=2>)</FONT> </TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><FONT size=2>5,393</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><FONT size=2>1,591,432</FONT> </TD>
    <TD align=right>&nbsp;</TD>
  </TR>

  <TR>
    <TD>&nbsp; </TD>
    <TD colSpan=16 align="right">
      <HR noshade SIZE=1>

</TD>
  </TR>

  <TR>

    <TD colSpan=17>&nbsp; </TD>
  </TR>

  <TR vAlign=bottom>
    <TD align=left><FONT size=2>Balances as of</FONT> </TD>
    <TD align=right>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>&nbsp; </TD>
    <TD align=right>&nbsp;</TD>
  </TR>

  <TR vAlign=bottom>
    <TD align=left><FONT size=2>&nbsp;&nbsp;&nbsp;December 31, 2007</FONT> </TD>
    <TD align=right><FONT size=2>Ps.</FONT> </TD>
    <TD align=right><FONT size=2>6,602,531</FONT> </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>7,260,798</FONT> </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>-</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><FONT size=2>(31,710</FONT> </TD>
    <TD align=left><FONT size=2>)</FONT> </TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><FONT size=2>981,302</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><FONT size=2>14,812,921</FONT> </TD>
    <TD align=right>&nbsp;</TD>
  </TR>

  <TR>
    <TD>&nbsp; </TD>
    <TD colspan="16">



      <HR noshade SIZE=2>

</TD>
  </TR>
</TABLE>
<blockquote>
  <blockquote>
    <p>
  The cumulative difference between the amounts included under Capital Stock and Paid-in Capital for US GAAP and Capital Stock and Stock Premiums for Mexican GAAP arise from the following items:</p>
  </blockquote>
  <p><B>Issuance of capital stock</B></p>
  <blockquote>
    <p>During 1993 and 1994 the Company recorded Ps. 99,214 and Ps. 31,794, respectively, corresponding to expenses related to the issuance of shares in a simultaneous public offering in the United States and Mexico as a reduction of the proceeds from the issuance of capital stock. In 1993 and 1994, these expenses were deducted for tax purposes resulting in a tax benefit of Ps. 34,478 and Ps. 10,812. These tax benefits were included in the statement of operations for Mexican GAAP purposes. For U.S. GAAP purposes these items were shown as a reduction of cost of issuance of the shares, thereby increasing the net proceeds from the offering.</p>
  </blockquote>
  <p><B>Maritime operations and amortization of negative goodwill:</B></p>
  <blockquote>
    <p>In 1993, Grupo Simec disposed of its maritime operations by spinning- off the two entities acquired in 1992 to Grupo Sidek (former parent company of Grupo Simec) and transferring its remaining maritime subsidiary to Grupo Simek for its approximate book value.</p>
    <p>The operations sold had tax loss carryforward of approximately Ps. 211,193 which were related to operations prior to the date the entities were acquired by the Company. During 1994, Ps. 4,936 of these tax loss carryforwards were realized (resulting in a tax benefit of Ps. 1,701).</p>
    <p>For U.S. GAAP purposes, the retained tax benefit of Ps. 1,701 realized in 1994, had been reflected as an increase to the corresponding paid-in capital rather than in net earnings as done for Mexican GAAP purposes.</p>
  </blockquote>
</blockquote>
<p align="center">F-47</p>
<HR align=center width="100%" noshade SIZE=5>


  <!-- MARKER PAGE="sheet: 1; page: 1" -->



<blockquote>
  <p>
<B>Gain on extinguishment</B></p>
  <blockquote>
    <p>On February 7, 2001, the Company&#146;s Board of Directors approved the issuance of 492,852,025 shares of Series &#147;B&#148; variable capital stock in exchange for the extinguishment of debt amounting to U.S.&#36; 110,257,012. Under Mexican GAAP,
the increase in stockholders&#146; equity resulting from the conversion or extinguishment of debt is equal to the carrying amount of the extinguished debt. The Company assigned a value of U.S. &#36;110,257,012 to the Series &#147;B&#148; capital
stock and, therefore, no difference existed between the equity interest granted and the carrying amount of the debt extinguished. Under U.S. GAAP, the difference between the fair value of equity interest granted and the carrying amount of
extinguished debt is recognized as a gain or loss on extinguishment of debt in the statement of operations. For U.S. GAAP purposes, the fair value of the Series &#147;B&#148; capital stock was determined by reference to the quoted market price on
March 29, 2001, the date the transaction was effected, and the difference between the fair value of the Series &#147;B&#148; capital stock and the carrying amount of the extinguished indebtness was recognized as a gain in the statement of
operations. The related restated effect as of December 31, 2007 is Ps. 626,203.
</p>
  </blockquote>
  <p>
<B>Reconciliation of Net Income and Stockholders&#146; Equity:</B></p>
  <blockquote>
    <p>
The Company&#146;s consolidated financial statements are prepared in accordance with Mexican GAAP, which differ in certain significant respects from US GAAP. The explanations of the related adjustments included in the Reconciliation of the Net
Income and the Reconciliation of stockholders&#146; equity are explained below:
</p>
  </blockquote>
  <p>
<B>Inventory -</B></p>
  <blockquote>
    <p>
As permitted by Mexican GAAP, some inventories are valued under the direct cost system, which includes material, direct labor and other direct costs. For purposes of complying with US GAAP, inventories have been valued under the full absorption cost
method, which includes the indirect cost.
</p>
    <p>
Under Mexican GAAP, inventories include prepaids advance to suppliers. For US GAAP purposes, the prepaids advance to suppliers are considered as prepaid expenses.
</p>
  </blockquote>
  <p>
<B>Restatement of property, machinery and equipment -</B></p>
  <blockquote>
    <p>
As explained in note 2(h), in accordance with Mexican GAAP, imported machinery and equipment has been restated during 2007, 2006 and 2005 by applying devaluation and inflation factors of the country of origin.
</p>
    <p>
Under US GAAP, during 2007, 2006 and 2005 the restatement of all machinery and equipment, both domestic and imported, has been done in constant units of the reporting currency, the Mexican peso, using the inflation rate of Mexico.
</p>
    <p>
Accordingly, a reconciling item for the difference in methodologies of restating imported machinery and equipment is included in the reconciliation of net income and stockholders&#146; equity.
</p>
  </blockquote>
</blockquote>
<p align="center">F-48</p>
<HR noshade align="center" width="100%" size="5">



  <!-- MARKER PAGE="sheet: 1; page: 1" -->



<blockquote>
  <p>
<B>Deferred income taxes and employee profit sharing -</B></p>
  <blockquote>
    <p>
As explained in Note 2(m) under Mexican GAAP, the Company accounts for deferred income tax following the guidelines of Mexican Bulletin D-4. The main differences between SFAS No. 109 and Bulletin D-4, as they relate to the Company, which are
included as reconciling items between Mexican and US GAAP are:
</p>
    <ul>
      <li>
        <p>
the income tax effect of gain from monetary position and exchange loss capitalized that is recorded as an adjustment to stockholders&#146; equity for Mexican GAAP purposes,</p>
      </li>
      <li>
        <p>
the income tax effect of capitalized pre-operating expenses which for US GAAP purposes, are expensed when incurred,</p>
      </li>
      <li>
        <p>
the effect on income tax of the difference between the indexed cost and the restatement through use of specific indexation factors of fixed assets which is recorded as an adjustment to stockholders&#146; equity for Mexican GAAP, and,</p>
      </li>
      <li>
        <p>
the income tax effect of the inventory cost which for Mexican GAAP some inventories are valued under the direct cost system and for US GAAP inventories have been valued under the full absorption cost method.</p>
      </li>
    </ul>
    In Shareholder&#146;s equity, the cumulative deferred income tax for US GAAP purposes is included under Retained Earnings. Under Mexican GAAP such effect is included under the cumulative deferred income tax caption.
    <p>
In addition, the Company is required to pay employee profit sharing in accordance with Mexican labor law. Deferred employee profit sharing under U.S. GAAP has been determined following the guidelines of SFAS N0. 109. Under Mexican GAAP, the deferred
portion of employee profit sharing is determined on temporary non-recurring differences with a known turnaround time.
</p>
    <p>
To determine operating income under US GAAP, deferred employee profit sharing and employee profit sharing expense under Mexican GAAP (included under the caption income tax in the income statement) are considered as operating expenses.
</p>
  </blockquote>
</blockquote>
<p align="center">F-49</p>
<HR noshade align="center" width="100%" size="5">



  <!-- MARKER PAGE="sheet: 1; page: 1" -->




<blockquote>
  <blockquote>
    <p>The effects of temporary differences giving rise to significant portions of the deferred assets and liabilities for Income Tax (IT) and Employee Profit Sharing (ESPS) at December 31, 2007 and 2006, under US GAAP are present below:
</p>
  </blockquote>
</blockquote>
<table border=0 cellspacing=0 cellpadding=0 style="font-family: 'Times New Roman';font-size: 10pt;" width=600 align="center">
  <tr valign="bottom" align="center">

    <td>&nbsp;

        </td>
    <td colspan="5">


<b><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2007</font></b></td>
    <td>&nbsp;</td>
    <td colspan="5">
<b><font size=2>2006</font></b>




        </td>
  </tr>
  <tr align="center">

    <td>&nbsp;
        </td>
    <td colspan=11>
      <hr noshade size=1>
        </td>
  </tr>
  <tr valign="bottom" align="center">

    <td>&nbsp;

        </td>
    <td>&nbsp;

        </td>
    <td>
<b><font size=2>IT</font></b>
        </td>
    <td>&nbsp;&nbsp;&nbsp;</td>
    <td colspan="2">
<b><font size=2>ESPS</font></b>


        </td>
    <td>&nbsp;&nbsp;&nbsp;</td>
    <td>
<b><font size=2>IT</font></b>
        </td>
    <td>&nbsp;&nbsp;&nbsp;</td>
    <td colspan="2">
<b><font size=2>ESPS</font></b>


        </td>
    <td>&nbsp;&nbsp;&nbsp;</td>
  </tr>
  <tr align="center">

    <td>&nbsp;
        </td>
    <td colspan=11>
      <hr noshade size=1>
        </td>
  </tr>
  <tr valign="bottom">

    <td align=left>
<font size=2>Deferred tax assets:</font>
        </td>
    <td align=right>&nbsp;

        </td>
    <td align=left>&nbsp;

        </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;

        </td>
    <td align=left>&nbsp;

        </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;

        </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;

        </td>
    <td align=left>&nbsp;

        </td>
    <td align=left>&nbsp;</td>
  </tr>
  <tr valign="bottom">

    <td align=left>
 &nbsp; &nbsp; &nbsp;<font size=2>Allowance for doubtful receivables</font>
        </td>
    <td align=right>
<font size=2>Ps.</font>
        </td>
    <td align=right>
<font size=2>20,250</font>
        </td>
    <td align=right>&nbsp;</td>
    <td align=right>
<font size=2>-</font>
        </td>
    <td align=left>&nbsp;

        </td>
    <td align=right>&nbsp;</td>
    <td align=right>
<font size=2>43,093</font>
        </td>
    <td align=right>&nbsp;</td>
    <td align=right>
<font size=2>-</font>
        </td>
    <td align=left>&nbsp;

        </td>
    <td align=left>&nbsp;</td>
  </tr>
  <tr valign="bottom">

    <td align=left>
 &nbsp; &nbsp; &nbsp;<font size=2>Accrued expenses</font>
        </td>
    <td align=right>&nbsp;

        </td>
    <td align=right>
<font size=2>93,860</font>
        </td>
    <td align=right>&nbsp;</td>
    <td align=right>
<font size=2>700</font>
        </td>
    <td align=left>&nbsp;

        </td>
    <td align=right>&nbsp;</td>
    <td align=right>
<font size=2>110,974</font>
        </td>
    <td align=right>&nbsp;</td>
    <td align=right>
<font size=2>750</font>
        </td>
    <td align=left>&nbsp;

        </td>
    <td align=left>&nbsp;</td>
  </tr>
  <tr valign="bottom">

    <td align=left>
 &nbsp; &nbsp; &nbsp;<font size=2>Advances from customers</font>
        </td>
    <td align=right>&nbsp;

        </td>
    <td align=right>
<font size=2>13,967</font>
        </td>
    <td align=right>&nbsp;</td>
    <td align=right>
<font size=2>-</font>
        </td>
    <td align=left>&nbsp;

        </td>
    <td align=right>&nbsp;</td>
    <td align=right>
<font size=2>623</font>
        </td>
    <td align=right>&nbsp;</td>
    <td align=right>
<font size=2>-</font>
        </td>
    <td align=left>&nbsp;

        </td>
    <td align=left>&nbsp;</td>
  </tr>
  <tr valign="bottom">

    <td align=left>
 &nbsp; &nbsp; &nbsp;<font size=2>Derivative financial instruments</font>
        </td>
    <td align=right>&nbsp;

        </td>
    <td align=right>
<font size=2>-</font>
        </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;

        </td>
    <td align=left>&nbsp;

        </td>
    <td align=right>&nbsp;</td>
    <td align=right>
<font size=2>1,772</font>
        </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;

        </td>
    <td align=left>&nbsp;

        </td>
    <td align=left>&nbsp;</td>
  </tr>
  <tr valign="bottom">

    <td align=left>
 &nbsp; &nbsp; &nbsp;<font size=2>Net operating loss carryforwards</font>
        </td>
    <td align=right>&nbsp;

        </td>
    <td align=right>
<font size=2>10,041</font>
        </td>
    <td align=right>&nbsp;</td>
    <td align=right>
<font size=2>-</font>
        </td>
    <td align=left>&nbsp;

        </td>
    <td align=right>&nbsp;</td>
    <td align=right>
<font size=2>21,933</font>
        </td>
    <td align=right>&nbsp;</td>
    <td align=right>
<font size=2>-</font>
        </td>
    <td align=left>&nbsp;

        </td>
    <td align=left>&nbsp;</td>
  </tr>
  <tr valign="bottom">

    <td align=left>
 &nbsp; &nbsp; &nbsp;<font size=2>Recoverable AT</font>
        </td>
    <td align=right>&nbsp;

        </td>
    <td align=right>
<font size=2>99,610</font>
        </td>
    <td align=right>&nbsp;</td>
    <td align=right>
<font size=2>-</font>
        </td>
    <td align=left>&nbsp;

        </td>
    <td align=right>&nbsp;</td>
    <td align=right>
<font size=2>177,025</font>
        </td>
    <td align=right>&nbsp;</td>
    <td align=right>
<font size=2>-</font>
        </td>
    <td align=left>&nbsp;

        </td>
    <td align=left>&nbsp;</td>
  </tr>
  <tr>

    <td>&nbsp;
        </td>
    <td colspan=11 align="right">
      <hr noshade size=1>
        </td>
  </tr>
  <tr valign="bottom">

    <td align=left>
<font size=2>Total gross deferred tax assets</font>
        </td>
    <td align=right>&nbsp;

        </td>
    <td align=right>
<font size=2>237,728</font>
        </td>
    <td align=right>&nbsp;</td>
    <td align=right>
<font size=2>700</font>
        </td>
    <td align=left>&nbsp;

        </td>
    <td align=right>&nbsp;</td>
    <td align=right>
<font size=2>355,420</font>
        </td>
    <td align=right>&nbsp;</td>
    <td align=right>
<font size=2>750</font>
        </td>
    <td align=left>&nbsp;

        </td>
    <td align=left>&nbsp;</td>
  </tr>
  <tr>

    <td colspan=12>&nbsp;

        </td>
  </tr>
  <tr valign="bottom">

    <td align=left>
 &nbsp; &nbsp; &nbsp;<font size=2>Less valuation allowance</font>
        </td>
    <td align=right>&nbsp;

        </td>
    <td align=right>
<font size=2>99,610</font>
        </td>
    <td align=right>&nbsp;</td>
    <td align=right>
<font size=2>-</font>
        </td>
    <td align=left>&nbsp;

        </td>
    <td align=right>&nbsp;</td>
    <td align=right>
<font size=2>114,222</font>
        </td>
    <td align=right>&nbsp;</td>
    <td align=right>
<font size=2>-</font>
        </td>
    <td align=left>&nbsp;

        </td>
    <td align=left>&nbsp;</td>
  </tr>
  <tr>

    <td>&nbsp;
        </td>
    <td colspan=11 align="right">
      <hr noshade size=1>
        </td>
  </tr>
  <tr valign="bottom">

    <td align=left>
<font size=2>Net deferred tax assets</font>
        </td>
    <td align=right>&nbsp;

        </td>
    <td align=right>
<font size=2>138,118</font>
        </td>
    <td align=right>&nbsp;</td>
    <td align=right>
<font size=2>700</font>
        </td>
    <td align=left>&nbsp;

        </td>
    <td align=right>&nbsp;</td>
    <td align=right>
<font size=2>241,198</font>
        </td>
    <td align=right>&nbsp;</td>
    <td align=right>
<font size=2>750</font>
        </td>
    <td align=left>&nbsp;

        </td>
    <td align=left>&nbsp;</td>
  </tr>
  <tr>

    <td>&nbsp;
        </td>
    <td colspan=11 align="right">
      <hr noshade size=1>
        </td>
  </tr>
  <tr>

    <td colspan=12>&nbsp;

        </td>
  </tr>
  <tr valign="bottom">

    <td align=left>
<font size=2>Deferred tax liabilities:</font>
        </td>
    <td align=right>&nbsp;

        </td>
    <td align=left>&nbsp;

        </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;

        </td>
    <td align=left>&nbsp;

        </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;

        </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;

        </td>
    <td align=left>&nbsp;

        </td>
    <td align=left>&nbsp;</td>
  </tr>
  <tr valign="bottom">

    <td align=left>
<font size=2>Inventories, net</font>
        </td>
    <td align=right>&nbsp;

        </td>
    <td align=right>
<font size=2>501,862</font>
        </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;

        </td>
    <td align=left>&nbsp;

        </td>
    <td align=right>&nbsp;</td>
    <td align=right>
<font size=2>450,310</font>
        </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;

        </td>
    <td align=left>&nbsp;

        </td>
    <td align=left>&nbsp;</td>
  </tr>
  <tr valign="bottom">

    <td align=left>
<font size=2>Property, plant and equipment</font>
        </td>
    <td align=right>&nbsp;

        </td>
    <td align=right>
<font size=2>1,603,518</font>
        </td>
    <td align=right>&nbsp;</td>
    <td align=right>
<font size=2>-</font>
        </td>
    <td align=left>&nbsp;

        </td>
    <td align=right>&nbsp;</td>
    <td align=right>
<font size=2>1,541,771</font>
        </td>
    <td align=right>&nbsp;</td>
    <td align=right>
<font size=2>-</font>
        </td>
    <td align=left>&nbsp;

        </td>
    <td align=left>&nbsp;</td>
  </tr>
  <tr valign="bottom">

    <td align=left>
 &nbsp; &nbsp; &nbsp;<font size=2>Preoperating expenses</font>
        </td>
    <td align=right>&nbsp;

        </td>
    <td align=right>
<font size=2>8,627</font>
        </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;

        </td>
    <td align=left>&nbsp;

        </td>
    <td align=right>&nbsp;</td>
    <td align=right>
<font size=2>17,110</font>
        </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;

        </td>
    <td align=left>&nbsp;

        </td>
    <td align=left>&nbsp;</td>
  </tr>
  <tr valign="bottom">

    <td align=left>
 &nbsp; &nbsp; &nbsp;<font size=2>Others</font>
        </td>
    <td align=right>&nbsp;

        </td>
    <td align=right>
<font size=2>910</font>
        </td>
    <td align=right>&nbsp;</td>
    <td align=right>
<font size=2>-</font>
        </td>
    <td align=left>&nbsp;

        </td>
    <td align=right>&nbsp;</td>
    <td align=right>
<font size=2>4,461</font>
        </td>
    <td align=right>&nbsp;</td>
    <td align=right>
<font size=2>-</font>
        </td>
    <td align=left>&nbsp;

        </td>
    <td align=left>&nbsp;</td>
  </tr>
  <tr>

    <td>&nbsp;
        </td>
    <td colspan=11 align="right">
      <hr noshade size=1>
        </td>
  </tr>
  <tr valign="bottom">

    <td align=left>
<font size=2>Subtotal</font>
        </td>
    <td align=right>&nbsp;

        </td>
    <td align=right>
<font size=2>2,114,917</font>
        </td>
    <td align=right>&nbsp;</td>
    <td align=right>
<font size=2>-</font>
        </td>
    <td align=left>&nbsp;

        </td>
    <td align=right>&nbsp;</td>
    <td align=right>
<font size=2>2,013,652</font>
        </td>
    <td align=right>&nbsp;</td>
    <td align=right>
<font size=2>-</font>
        </td>
    <td align=left>&nbsp;

        </td>
    <td align=left>&nbsp;</td>
  </tr>
  <tr>

    <td colspan=12>&nbsp;

        </td>
  </tr>
  <tr valign="bottom">

    <td align=left>
<font size=2>Additional liabilities resulting from excess of</font>
        </td>
    <td align=right>&nbsp;

        </td>
    <td align=left>&nbsp;

        </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;

        </td>
    <td align=left>&nbsp;

        </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;

        </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;

        </td>
    <td align=left>&nbsp;

        </td>
    <td align=left>&nbsp;</td>
  </tr>
  <tr valign="bottom">

    <td align=left>
<font size=2>book value of stockholders&#146; equity over its tax</font>
        </td>
    <td align=right>&nbsp;

        </td>
    <td align=left>&nbsp;

        </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;

        </td>
    <td align=left>&nbsp;

        </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;

        </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;

        </td>
    <td align=left>&nbsp;

        </td>
    <td align=left>&nbsp;</td>
  </tr>
  <tr valign="bottom">

    <td align=left>
<font size=2>value</font>
        </td>
    <td align=right>&nbsp;

        </td>
    <td align=right>
<font size=2>695,973</font>
        </td>
    <td align=right>&nbsp;</td>
    <td align=right>
<font size=2>-</font>
        </td>
    <td align=left>&nbsp;

        </td>
    <td align=right>&nbsp;</td>
    <td align=right>
<font size=2>353,040</font>
        </td>
    <td align=right>&nbsp;</td>
    <td align=right>
<font size=2>-</font>
        </td>
    <td align=left>&nbsp;

        </td>
    <td align=left>&nbsp;</td>
  </tr>
  <tr>

    <td>&nbsp;
        </td>
    <td colspan=11 align="right">
      <hr noshade size=1>
        </td>
  </tr>
  <tr valign="bottom">

    <td align=left>
<font size=2>Total deferred liabilities</font>
        </td>
    <td align=right>&nbsp;

        </td>
    <td align=right>
<font size=2>2,810,890</font>
        </td>
    <td align=right>&nbsp;</td>
    <td align=right>
<font size=2>-</font>
        </td>
    <td align=left>&nbsp;

        </td>
    <td align=right>&nbsp;</td>
    <td align=right>
<font size=2>2,366,692</font>
        </td>
    <td align=right>&nbsp;</td>
    <td align=right>
<font size=2>-</font>
        </td>
    <td align=left>&nbsp;

        </td>
    <td align=left>&nbsp;</td>
  </tr>
  <tr>

    <td>&nbsp;
        </td>
    <td colspan=11 align="right">
      <hr noshade size=1>
        </td>
  </tr>
  <tr valign="bottom">

    <td align=left>
<font size=2>Net deferred tax liability (asset)</font>
        </td>
    <td align=right>
<font size=2>Ps.</font>
        </td>
    <td align=right>
<font size=2>2,672,772</font>
        </td>
    <td align=right>&nbsp;</td>
    <td align=right>
<font size=2>(700</font>
        </td>
    <td align=left>
<font size=2>)</font>
        </td>
    <td align=right>&nbsp;</td>
    <td align=right>
<font size=2>2,125,494</font>
        </td>
    <td align=right>&nbsp;</td>
    <td align=right>
<font size=2>(750</font>
        </td>
    <td align=left>
<font size=2>)</font>
        </td>
    <td align=left>&nbsp;</td>
  </tr>
  <tr>

    <td>&nbsp;
        </td>
    <td colspan="11">


      <hr noshade size=2>
        </td>
  </tr>
</table>
<p style="margin-left: 60px;">For the years ended December 31, 2007 and 2006, the classification of deferred income tax under U.S. GAAP is as follows:</p>
<TABLE border=0 cellspacing=0 cellpadding=0 style="font-family: 'Times New Roman';font-size: 10pt;" width=500 align="center">
  <TR valign="bottom">

    <TD align=left>&nbsp;

        </TD>
    <TD align=center colspan="2">


 &nbsp; &nbsp;<B><FONT size=2>2007</FONT></B>
        </TD>
    <TD align=left>&nbsp;&nbsp;&nbsp;</TD>
    <TD align=center colspan="2">
 &nbsp; &nbsp;<FONT size=2>2006</FONT>
        </TD>
  </TR>
  <TR>

    <TD>&nbsp;
        </TD>
    <TD colspan=5>
      <HR noshade size=1>
        </TD>
  </TR>
  <TR valign="bottom">

    <TD align=left>
<FONT size=2>Deferred tax assets:</FONT>
        </TD>
    <TD align=right>&nbsp;

        </TD>
    <TD align=left>&nbsp;

        </TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;

        </TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR valign="bottom">

    <TD align=left>
 &nbsp; &nbsp; &nbsp;<FONT size=2>Current portion of deferred income tax asset</FONT>
        </TD>
    <TD align=right>
<FONT size=2>Ps.</FONT>
        </TD>
    <TD align=right>
<FONT size=2>133,677</FONT>
        </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right>
<FONT size=2>224,757</FONT>
        </TD>
    <TD align=right>&nbsp;&nbsp;&nbsp;</TD>
  </TR>
  <TR valign="bottom">

    <TD align=left>
 &nbsp; &nbsp; &nbsp;<FONT size=2>Non-current portion of deferred income tax asset</FONT>
        </TD>
    <TD align=right>&nbsp;

        </TD>
    <TD align=right>
<FONT size=2>4,441</FONT>
        </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right>
<FONT size=2>16,441</FONT>
        </TD>
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR>

    <TD colspan=6>&nbsp;

        </TD>
  </TR>
  <TR valign="bottom">

    <TD align=left>
<FONT size=2>Deferred tax liabilities:</FONT>
        </TD>
    <TD align=right>&nbsp;

        </TD>
    <TD align=left>&nbsp;

        </TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;

        </TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR valign="bottom">

    <TD align=left>
 &nbsp; &nbsp; &nbsp;<FONT size=2>Current portion of deferred income tax liabilities</FONT>
        </TD>
    <TD align=right>&nbsp;

        </TD>
    <TD align=right>
<FONT size=2>501,862</FONT>
        </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right>
<FONT size=2>450,310</FONT>
        </TD>
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR valign="bottom">

    <TD align=left>
 &nbsp; &nbsp; &nbsp;<FONT size=2>Long-term deferred income tax liability</FONT>
        </TD>
    <TD align=right>&nbsp;

        </TD>
    <TD align=right>
<FONT size=2>2,309,028</FONT>
        </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right>
<FONT size=2>1,916,382</FONT>
        </TD>
    <TD align=right>&nbsp;</TD>
  </TR>
</TABLE>
<p align="center">F-50</p>
<HR noshade align="center" width="100%" size="5">



  <!-- MARKER PAGE="sheet: 1; page: 1" -->



<blockquote>
  <blockquote>
    <p>
The deferred income taxes of Ps. 1,603,518 and Ps. 1,541,771 result from differences between the financial reporting and tax bases of property, plant and equipment at December 31, 2007 and 2006, respectively. Beginning in 1997 the restatement of
property, plant and equipment and the effects thereof on the statement of operations are determined by using factors derived from the NCPI or, in the case of imported machinery and equipment, by applying devaluation and inflation factors of the
country of origin. Until 1996, for financial reporting purposes, property, plant and equipment were stated at net replacement cost based upon annual independent appraisals and depreciation was provided by using the straight-line method over the
estimated remaining useful lives of the assets. For income tax reporting purposes, property, plant, and equipment and depreciation are computed by a method which considers the NCPI.</p>
    <p>
Domestic operations accounted for 96.5% of the Company&#146;s pre-tax income in 2005, 74% in 2006 and 83% in 2007.</p>
    <p>
In accordance with APB Opinion No. 23 it is the policy of the Company to accrue appropriate Mexican and foreign income taxes on earnings of subsidiary companies which are intended to be remitted to the parent company in the near future. Unremitted
earnings of subsidiaries which have been, or are intended to be, permanently reinvested, exclusive of those amounts which if remitted in the near future would result in little or no such tax by operation of relevant statutes currently in effect,
aggregated Ps. 165 million at December 31, 2007.</p>
  </blockquote>
  <p>
<B>Pre-operating expenses -</B></p>
  <blockquote>
    <p>
For Mexican GAAP purposes, the Company capitalized pre-operating expenses related to the production facilities at Mexicali, as well as costs and expenses incurred in the manufacturing and design of new products. For US GAAP purposes, these items are
expensed when incurred.</p>
  </blockquote>
  <p>
<B>Financial expense capitalized -</B></p>
  <blockquote>
    <p>
Under Mexican GAAP, financial expense capitalized during the period required to bring property, plant and equipment into the condition required for their intended use, includes interest, exchange losses and gains from monetary position. Under U.S.
GAAP when financing is in Mexican pesos, the monetary gain is included in this computation; when financing is denominated in U.S. dollars, only the interest is capitalized and exchange losses and monetary position are not included.</p>
  </blockquote>
  <p>
<B>Minority interest -</B></p>
  <blockquote>
    <p>
Under Mexican GAAP, the minority interest in consolidated subsidiaries is presented as a separate component within stockholders&#146; equity on the consolidated balance sheet. For US GAAP purposes, minority interest is not included in
stockholders&#146; equity.</p>
  </blockquote>
</blockquote>
<p align="center">F-51</p>
<HR noshade align="center" width="100%" size="5">



  <!-- MARKER PAGE="sheet: 1; page: 1" -->


<blockquote>
  <p><B>Disclosure about Fair Value of Financial Instruments-</B></p>
  <blockquote>
    <p>In accordance with SFAS No. 107, &#147;Disclosures about Fair Value of Financial Instruments,&#148; under U.S. GAAP it is necessary to provide information about the fair value of certain financial instruments for which it is practicable to estimate that value. The carrying amounts of cash and short-term investments, accounts receivable and accounts payable and accrued liabilities approximate fair values due to the short term maturity of these instruments.</p>
    <p>The fair values of the long term debt obligations are estimated based upon quoted market prices for the same or similar issues or on the current rates offered for debt of the same remaining maturities. At December 31, 2006 and 2007 the Company does not have long term debt.</p>
  </blockquote>
  <p><B>Pension and other retirement benefits-</B></p>
  <blockquote>
    <p>The Company records seniority premiums based on actuarial computations as described in note 2(l).</p>
    <p>For purposes of determining seniority premium costs under US GAAP, the Company utilized SFAS No. 87. Adjustments to US GAAP for seniority premiums were not individually or in the aggregate significant for any period.</p>
    <p>SFAS No. 106, &#147;Employers&#146; Accounting for Post-retirement Benefits Other than Pensions&#148;, requires accrual of post-retirement benefits other than pensions during the employment period. Adjustments to US GAAP for Post-retirement Benefits Other than pensions were not individually or in the aggregate significant for any period.</p>
    <p>SFAS No. 112, &#147;Employers&#146; Accounting for Post-employment Benefits&#148;, requires employers to accrue for post-employment benefits that are provided to former or inactive employees after employment during the employment period. For the purpose of determining Termination Benefits Obligations for U.S. GAAP, the Company utilized SFAS No. 112. Adjustments to U.S. GAAP for these benefits were not individually or in the aggregate significant for any period.</p>
    <p>SFAS No. 158 &#147;Employers&#146; Accounting for Defined Benefit Pension and Other Postretirement Plans&#151;an amendment of FASB Statements No. 87, 88, 106, and 132(R)&#148; requires the employer to recognize the overfunded or underfunded status of a defined benefit postretirement plan (other than a multiemployer plan) as an asset or liability in its statement of financial position and to recognize changes in that funded status in the year in which the changes occur through comprehensive income. Adjustments to U.S. GAAP of adoption were not significant.</p>
    <p>The additional disclosures for U.S. GAAP related to Pension and other retirement benefits are as follows:</p>
  </blockquote>
</blockquote>
<TABLE style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'" cellSpacing=0 cellPadding=0 border=0 width="680">

  <TR vAlign=bottom>
    <TD align=center width="80">&nbsp;</TD>


    <TD align=center>&nbsp; </TD>
    <TD align=center>&nbsp;</TD>
    <TD align=center>&nbsp; </TD>
    <TD align="center"> <B><FONT size=2>2007</FONT></B></TD>
    <TD align=center>&nbsp; </TD>
    <TD>&nbsp;&nbsp;&nbsp; </TD>
    <TD align=center colspan="3"><B><FONT size=2>2006</FONT></B> </TD>
  </TR>

  <TR>
    <TD align=center>&nbsp;</TD>


    <TD align=center>&nbsp; </TD>
    <TD align=center colSpan=8>
      <HR noshade SIZE=1>

</TD>
  </TR>

  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>


    <TD align=left><FONT size=2>Change in projected benefit obligation-</FONT> </TD>
    <TD align=left>&nbsp;&nbsp;&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp;&nbsp;&nbsp;</TD>
  </TR>

  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>


    <TD align=left><FONT size=2>Projected benefit obligation at beginning of year</FONT> </TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left><FONT size=2>Ps.</FONT> </TD>
    <TD align=right><FONT size=2>24,662</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD>&nbsp; </TD>
    <TD align=right><FONT size=2>23,304</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp;</TD>
  </TR>

  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>


    <TD align=left>&nbsp; &nbsp; &nbsp; &nbsp;<FONT size=2>Service cost</FONT> </TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right><FONT size=2>2,654</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD>&nbsp; </TD>
    <TD align=right><FONT size=2>2,877</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp;</TD>
  </TR>

  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>


    <TD align=left>&nbsp; &nbsp; &nbsp; &nbsp;<FONT size=2>Financial cost</FONT> </TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right><FONT size=2>755</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD>&nbsp; </TD>
    <TD align=right><FONT size=2>996</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp;</TD>
  </TR>

  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>


    <TD align=left>&nbsp; &nbsp; &nbsp; &nbsp;<FONT size=2>Actuarial (gain) losses, net</FONT> </TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right><FONT size=2>(334</FONT> </TD>
    <TD align=left><FONT size=2>)</FONT> </TD>
    <TD>&nbsp; </TD>
    <TD align=right><FONT size=2>69</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp;</TD>
  </TR>

  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>


    <TD align=left>&nbsp; &nbsp; &nbsp; &nbsp;<FONT size=2>Benefits paid</FONT> </TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right><FONT size=2>(8,981</FONT> </TD>
    <TD align=left><FONT size=2>)</FONT> </TD>
    <TD>&nbsp; </TD>
    <TD align=right><FONT size=2>(2,584</FONT> </TD>
    <TD align=left><FONT size=2>)</FONT> </TD>
    <TD align=left>&nbsp;</TD>
  </TR>

  <TR>
    <TD>&nbsp;</TD>


    <TD>&nbsp; </TD>
    <TD colSpan=8>
      <HR noshade SIZE=1>

</TD>
  </TR>

  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>


    <TD align=left>&nbsp; &nbsp; &nbsp; &nbsp;<FONT size=2>Projected benefit obligation at end of year</FONT> </TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left><FONT size=2>Ps.</FONT> </TD>
    <TD align=right><FONT size=2>18,756</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD>&nbsp; </TD>
    <TD align=right><FONT size=2>24,662</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp;</TD>
  </TR>

  <TR>
    <TD>&nbsp;</TD>


    <TD>&nbsp; </TD>
    <TD colspan="8">



      <HR noshade SIZE=2>

</TD>
  </TR>
</TABLE>
<p align="center">
  F-52</p>
<HR align=center width="100%" noshade SIZE=5>


  <!-- MARKER PAGE="sheet: 1; page: 1" -->


<blockquote>
  <p><B>No Right of Redemption-</B></p>
  <blockquote>
    <p>The Mexican Securities Market Law and our bylaws provide that our shareholders do not have redemption rights for their shares.</p>
  </blockquote>
  <p><B>Statement of cash flows-</B></p>
  <blockquote>
    <p>Under Mexican GAAP, the Company presents a consolidated statement of changes in financial position in accordance with Bulletin B-12, which identifies the generation and application of resources as representing differences between beginning and ending financial statement balances in constant Mexican pesos. It also requires that monetary and unrealized exchange gains and losses be treated as cash items in the determination of resources generated by operations.</p>
    <p>SFAS No. 95, &#147;Statement of Cash Flows&#148;, requires presentation of a statement of cash flows. The following presents a statement of cash flows under U.S. GAAP:</p>
  </blockquote>
</blockquote>
<TABLE style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'" cellSpacing=0 cellPadding=0 border=0 width="100%">

  <TR vAlign=bottom align="center">
    <TD width="80">&nbsp;</TD>
    <TD>&nbsp; </TD>
    <TD>&nbsp; </TD>
    <TD><B><FONT size=2>2007</FONT></B> </TD>
    <TD>&nbsp; </TD>
    <TD>&nbsp;&nbsp;&nbsp;</TD>
    <TD><B><FONT size=2>2006</FONT></B> </TD>
    <TD>&nbsp; </TD>
    <TD>&nbsp;&nbsp;&nbsp;</TD>
    <TD><B><FONT size=2>2005</FONT></B> </TD>
    <TD>&nbsp; </TD>
  </TR>

  <TR align="center">

    <TD colSpan=3>&nbsp; </TD>
    <TD colSpan=8>
      <HR noshade SIZE=1>

</TD>
  </TR>

  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>
    <TD align=left><B><FONT size=2>Net Income under U.S. GAAP</FONT></B> </TD>
    <TD align=right><B><FONT size=2>Ps.</FONT></B> </TD>
    <TD align=right><B><FONT size=2>1,587,653</FONT></B> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>2,223,982</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>1,370,046</FONT> </TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
  </TR>

  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>
    <TD align=left><FONT size=2>Depreciation and Amortization</FONT> </TD>
    <TD align=right>&nbsp; </TD>
    <TD align=right><B><FONT size=2>509,304</FONT></B> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>424,672</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>339,884</FONT> </TD>
    <TD align=left>&nbsp; </TD>
  </TR>

  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>
    <TD align=left><FONT size=2>Deferred income taxes</FONT> </TD>
    <TD align=right>&nbsp; </TD>
    <TD align=right><B><FONT size=2>541,813</FONT></B> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>372,205</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>125,748</FONT> </TD>
    <TD align=left>&nbsp; </TD>
  </TR>

  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>
    <TD align=left><FONT size=2>Deferred credit amortization</FONT> </TD>
    <TD align=right>&nbsp; </TD>
    <TD align=right><B><FONT size=2>-</FONT></B> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>(363,802</FONT> </TD>
    <TD align=left><FONT size=2>)</FONT> </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>(71,973</FONT> </TD>
    <TD align=left><FONT size=2>)</FONT> </TD>
  </TR>

  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>
    <TD align=left><FONT size=2>Minority Interest</FONT> </TD>
    <TD align=right>&nbsp; </TD>
    <TD align=right><B><FONT size=2>96,118</FONT></B> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>220,082</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>18,739</FONT> </TD>
    <TD align=left>&nbsp; </TD>
  </TR>

  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>
    <TD align=left><FONT size=2>US GAAP Adjustment on minority interest</FONT> </TD>
    <TD align=right>&nbsp; </TD>
    <TD align=right><B><FONT size=2>25,438</FONT></B> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>24,947</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>-</FONT> </TD>
    <TD align=left>&nbsp; </TD>
  </TR>

  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>
    <TD align=left><FONT size=2>Seniority premiums and termination benefits</FONT> </TD>
    <TD align=right>&nbsp; </TD>
    <TD align=right><B><FONT size=2>4,575</FONT></B> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>5,461</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>5,584</FONT> </TD>
    <TD align=left>&nbsp; </TD>
  </TR>

  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>
    <TD align=left><FONT size=2>Monetary position loss</FONT> </TD>
    <TD align=right>&nbsp; </TD>
    <TD align=right><B><FONT size=2>194,931</FONT></B> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>72,952</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>57,494</FONT> </TD>
    <TD align=left>&nbsp; </TD>
  </TR>

  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>
    <TD align=left><FONT size=2>Trade receivable, net</FONT> </TD>
    <TD align=right>&nbsp; </TD>
    <TD align=right><B><FONT size=2>(323,456</FONT></B> </TD>
    <TD align=left><B><FONT size=2>)</FONT></B> </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>112,799</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>(173,164</FONT> </TD>
    <TD align=left><FONT size=2>)</FONT> </TD>
  </TR>

  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>
    <TD align=left><FONT size=2>Other accounts receivable and prepaid expenses</FONT> </TD>
    <TD align=right>&nbsp; </TD>
    <TD align=right><B><FONT size=2>(294,091</FONT></B> </TD>
    <TD align=left><B><FONT size=2>)</FONT></B> </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>213,723</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>(250,945</FONT> </TD>
    <TD align=left><FONT size=2>)</FONT> </TD>
  </TR>

  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>
    <TD align=left><FONT size=2>Inventories</FONT> </TD>
    <TD align=right>&nbsp; </TD>
    <TD align=right><B><FONT size=2>47,140</FONT></B> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>(1,305,457</FONT> </TD>
    <TD align=left><FONT size=2>)</FONT> </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>631,783</FONT> </TD>
    <TD align=left>&nbsp; </TD>
  </TR>

  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>
    <TD align=left><FONT size=2>Accounts payable and accrued expenses</FONT> </TD>
    <TD align=right>&nbsp; </TD>
    <TD align=right><B><FONT size=2>182,579</FONT></B> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>480,419</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>(162,164</FONT> </TD>
    <TD align=left><FONT size=2>)</FONT> </TD>
  </TR>

  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>
    <TD align=left><FONT size=2>Other long-term liabilities</FONT> </TD>
    <TD align=right>&nbsp; </TD>
    <TD align=right><B><FONT size=2>(30,104</FONT></B> </TD>
    <TD align=left><B><FONT size=2>)</FONT></B> </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>(46,344</FONT> </TD>
    <TD align=left><FONT size=2>)</FONT> </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>98,445</FONT> </TD>
    <TD align=left>&nbsp; </TD>
  </TR>

  <TR>

    <TD colSpan=3>&nbsp; </TD>
    <TD colSpan=8>
      <HR noshade SIZE=1>

</TD>
  </TR>

  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>
    <TD align=left><B><FONT size=2>Funds provided by operating activities</FONT></B> </TD>
    <TD align=right>&nbsp; </TD>
    <TD align=right><B><FONT size=2>2,541,900</FONT></B> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>2,435,639</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>1,989,477</FONT> </TD>
    <TD align=left>&nbsp; </TD>
  </TR>

  <TR>

    <TD colSpan=11>&nbsp; </TD>
  </TR>

  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>
    <TD align=left><FONT size=2>Long-term inventory</FONT> </TD>
    <TD align=right>&nbsp; </TD>
    <TD align=right><B><FONT size=2>(8,292</FONT></B> </TD>
    <TD align=left><B><FONT size=2>)</FONT></B> </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>(6,836</FONT> </TD>
    <TD align=left><FONT size=2>)</FONT> </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>(10,806</FONT> </TD>
    <TD align=left><FONT size=2>)</FONT> </TD>
  </TR>

  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>
    <TD align=left><FONT size=2>Acquisition of property, plant and equipment</FONT> </TD>
    <TD align=right>&nbsp; </TD>
    <TD align=right><B><FONT size=2>(485,668</FONT></B> </TD>
    <TD align=left><B><FONT size=2>)</FONT></B> </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>(417,219</FONT> </TD>
    <TD align=left><FONT size=2>)</FONT> </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>(539,706</FONT> </TD>
    <TD align=left><FONT size=2>)</FONT> </TD>
  </TR>

  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>
    <TD align=left><FONT size=2>Effect from the acquisition of Pav Republic</FONT> </TD>
    <TD align=right>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>-</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>(1,403,315</FONT> </TD>
    <TD align=left><FONT size=2>)</FONT> </TD>
  </TR>

  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>
    <TD align=left><FONT size=2>Effect from the OAL acquisition</FONT> </TD>
    <TD align=right>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>-</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>(142,345</FONT> </TD>
    <TD align=left><FONT size=2>)</FONT> </TD>
  </TR>

  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>
    <TD align=left><FONT size=2>Decrease in other non-current assets</FONT> </TD>
    <TD align=right>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>-</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>17,849</FONT> </TD>
    <TD align=left>&nbsp; </TD>
  </TR>

  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>
    <TD align=left><FONT size=2>Proceeds from insurance claim, net</FONT> </TD>
    <TD align=right>&nbsp; </TD>
    <TD align=right><B><FONT size=2>9,779</FONT></B> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>434,186</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>-</FONT> </TD>
    <TD align=left>&nbsp; </TD>
  </TR>

  <TR>

    <TD colSpan=3>&nbsp; </TD>
    <TD colSpan=8>
      <HR noshade SIZE=1>

</TD>
  </TR>

  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>
    <TD align=left><B><FONT size=2>Funds (used for) provided by investing activities</FONT></B> </TD>
    <TD align=right>&nbsp; </TD>
    <TD align=right><B><FONT size=2>(484,181</FONT></B> </TD>
    <TD align=left><B><FONT size=2>)</FONT></B> </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>10,131</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>(2,078,323</FONT> </TD>
    <TD align=left><FONT size=2>)</FONT> </TD>
  </TR>

  <TR>

    <TD colSpan=11>&nbsp; </TD>
  </TR>

  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>
    <TD align=left><FONT size=2>Short-term loans (repaid) obtained</FONT> </TD>
    <TD align=right>&nbsp; </TD>
    <TD align=right><B><FONT size=2>(4</FONT></B> </TD>
    <TD align=left><B><FONT size=2>)</FONT></B> </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>(18,686</FONT> </TD>
    <TD align=left><FONT size=2>)</FONT> </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>(146,258</FONT> </TD>
    <TD align=left><FONT size=2>)</FONT> </TD>
  </TR>

  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>
    <TD align=left><FONT size=2>Financial debt repayment</FONT> </TD>
    <TD align=right>&nbsp; </TD>
    <TD align=right><B><FONT size=2>-</FONT></B> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>(412,736</FONT> </TD>
    <TD align=left><FONT size=2>)</FONT> </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>(1,127,177</FONT> </TD>
    <TD align=left><FONT size=2>)</FONT> </TD>
  </TR>

  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>
    <TD align=left><FONT size=2>Increase Common Stock and related equity accounts</FONT> </TD>
    <TD align=right>&nbsp; </TD>
    <TD align=right><B><FONT size=2>2,403,302</FONT></B> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>129,735</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>702</FONT> </TD>
    <TD align=left>&nbsp; </TD>
  </TR>

  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>
    <TD align=left><FONT size=2>Related parties (payable) financing</FONT> </TD>
    <TD align=right>&nbsp; </TD>
    <TD align=right><B><FONT size=2>(129,038</FONT></B> </TD>
    <TD align=left><B><FONT size=2>)</FONT></B> </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>(240,923</FONT> </TD>
    <TD align=left><FONT size=2>)</FONT> </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>483,534</FONT> </TD>
    <TD align=left>&nbsp; </TD>
  </TR>

  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>
    <TD align=left><FONT size=2>Increase of investment in Pav Republic by ICH</FONT> </TD>
    <TD align=right>&nbsp; </TD>
    <TD align=right><B><FONT size=2>37,895</FONT></B> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>142,844</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>525,562</FONT> </TD>
    <TD align=left>&nbsp; </TD>
  </TR>

  <TR>

    <TD colSpan=3>&nbsp; </TD>
    <TD colSpan=8>
      <HR noshade SIZE=1>

</TD>
  </TR>

  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>
    <TD align=left><B><FONT size=2>Funds obtained from (used for) financing activities</FONT></B> </TD>
    <TD align=right>&nbsp; </TD>
    <TD align=right><B><FONT size=2>2,312,155</FONT></B> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>(399,766</FONT> </TD>
    <TD align=left><FONT size=2>)</FONT> </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>(263,637</FONT> </TD>
    <TD align=left><FONT size=2>)</FONT> </TD>
  </TR>

  <TR>

    <TD colSpan=11>&nbsp; </TD>
  </TR>

  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>
    <TD align=left><FONT size=2>Effects of inflation accounting</FONT> </TD>
    <TD align=right>&nbsp; </TD>
    <TD align=right><B><FONT size=2>(177,737</FONT></B> </TD>
    <TD align=left><B><FONT size=2>)</FONT></B> </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>(66,356</FONT> </TD>
    <TD align=left><FONT size=2>)</FONT> </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>12,496</FONT> </TD>
    <TD align=left>&nbsp; </TD>
  </TR>

  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>
    <TD align=left><FONT size=2>Increase (decrease) in cash</FONT> </TD>
    <TD align=right>&nbsp; </TD>
    <TD align=right><B><FONT size=2>4,369,874</FONT></B> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>2,046,004</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>(352,483</FONT> </TD>
    <TD align=left><FONT size=2>)</FONT> </TD>
  </TR>

  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>
    <TD align=left><FONT size=2>Cash beginning of the year</FONT> </TD>
    <TD align=right>&nbsp; </TD>
    <TD align=right><B><FONT size=2>2,204,018</FONT></B> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>224,370</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>564,357</FONT> </TD>
    <TD align=left>&nbsp; </TD>
  </TR>

  <TR>

    <TD colSpan=3>&nbsp; </TD>
    <TD colSpan=8>
      <HR noshade SIZE=1>

</TD>
  </TR>

  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>
    <TD align=left><B><FONT size=2>Cash end of the year</FONT></B> </TD>
    <TD align=right><B><FONT size=2>Ps.</FONT></B> </TD>
    <TD align=right><B><FONT size=2>6,396,155</FONT></B> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>2,204,018</FONT> </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>224,370</FONT> </TD>
    <TD align=left>&nbsp; </TD>
  </TR>

  <TR>

    <TD colSpan=3>&nbsp; </TD>
    <TD colSpan=8>



      <HR noshade SIZE=2>

</TD>
  </TR>
</TABLE>
<p align="center">
  F-53</p>
<HR align=center width="100%" noshade SIZE=5>


  <!-- MARKER PAGE="sheet: 1; page: 1" -->


<blockquote>
  <blockquote>
    <p>Funds provided by operating activities include cash payments for interest and income taxes as follows:</p>
  </blockquote>
</blockquote>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'" cellspacing=0 cellpadding=0 border=0 width="650">


  <tr valign=bottom>
    <td align=center width="80">&nbsp;</td>
    <td align=center>&nbsp; </td>
    <td align=center colspan="3"> <b><font size=2>2007</font></b>
      <hr noshade size=1>
    </td>
    <td>&nbsp;&nbsp;&nbsp; </td>
    <td align=center><b><font size=2>2006</font></b>
      <hr noshade size=1>
    </td>
    <td>&nbsp;&nbsp;&nbsp; </td>
    <td align=center><b><font size=2>2005</font></b>
      <hr noshade size=1>
    </td>
  </tr>



  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=left><font size=2>Total interest paid</font> </td>
    <td align=left>&nbsp;&nbsp;&nbsp;</td>
    <td align=left><font size=2>Ps.</font> </td>
    <td align=right><font size=2>10,225</font> </td>
    <td>&nbsp; </td>
    <td align=right><font size=2>3,254</font> </td>
    <td>&nbsp; </td>
    <td align=right><font size=2>32,859</font> </td>
  </tr>

  <tr>
    <td>&nbsp;</td>
    <td>&nbsp; </td>
    <td colspan="7">



      <hr noshade size=2>

</td>
  </tr>

  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=left><font size=2>Income taxes paid</font> </td>
    <td align=left>&nbsp;</td>
    <td align=left><font size=2>Ps.</font> </td>
    <td align=right><font size=2>377,281</font> </td>
    <td>&nbsp; </td>
    <td align=right><font size=2>555,357</font> </td>
    <td>&nbsp; </td>
    <td align=right><font size=2>321,917</font> </td>
  </tr>

  <tr>
    <td>&nbsp;</td>
    <td>&nbsp; </td>
    <td colspan="7">



      <hr noshade size=2>

</td>
  </tr>
</table>
<blockquote>
  <p>
  <B>Accounting for uncertainty in income taxes-</B></p>
  <blockquote>
    <p>The Company adopted the provisions of FASB Interpretation No. 48,&#148;Accounting for Uncertainty in Income Taxes&#148; (FIN48) as of January 1,2007. The adoption of FIN 48 did not have an impact on the Company&#146;s financial statements and did not result in a cumulative adjustment to retained earnings at adoption. The Company&#146;s liability for unrecognized tax benefit is not significant. </p>
    <p> Under FIN 48, the Company has to establish reserves to remove some or all of the tax benefit of any of our tax positions when is determine that it becomes uncertain based upon one of the following conditions: (1) the tax position is not &#147;more likely than not&#148; to be sustained, (2) the tax position is &#147;more likely than not&#148; to be sustained, but for a lesser amount, or (3) the tax position is &#147;more likely than not&#148; to be sustained, but not in the financial period in which the tax position was originally taken.</p>
    <p>For purposes of evaluating whether or not a tax position is uncertain, (1) we presume the tax position will be examined by the relevant taxing authority that has full knowledge of all relevant information, (2) the technical merits of a tax position are derived from authorities such as legislation and statutes, legislative intent, regulations, rulings and case law and their applicability to the facts and circumstances of the tax position, and (3) each tax position is evaluated without consideration of the possibility of offset or aggregation with other tax positions taken.</p>
    <p>A number of years may elapse before a particular uncertain tax position is audited and finally resolved or when a tax assessment is raised. The number of years subject to tax assessments varies depending on the tax jurisdiction and is generally five years in Mexico and three years in the U.S. The tax benefit that has been previously reserved because of a failure to meet the &#147;more likely than not&#148; recognition threshold would be recognized in our income tax expense in the first period when the uncertainty disappears under any one of the following conditions: (1) the tax position is &#147;more likely than not&#148; to be sustained, (2) the tax position, amount, and/or timing is ultimately settled through negotiation or litigation, or (3) the statute of limitations for the relevant taxing authority to examine and challenge the tax position has expired.</p>
  </blockquote>
</blockquote>
<p align="center">F-54</p>
<HR align=center width="100%" noshade SIZE=5>


  <!-- MARKER PAGE="sheet: 1; page: 1" -->


<blockquote>
  <p><B>Recent accounting pronouncements in the US</B></p>
  <blockquote>
    <p>In September 2006, the FASB issued SFAS No. 157, <I>Fair Value Measurements</I>. SFAS No. 157 provides a common definition of fair value and establishes a framework to make the measurement of fair value in generally accepted accounting principles more consistent and comparable. SFAS No. 157 also requires expanded disclosures to provide information about the extent to which fair value is used to measure assets and liabilities, the methods and assumptions used to measure fair value, and the effect of fair value measures on earnings. SFAS No. 157 is effective for the Company January 1, 2008, for financial assets and liabilities and January 1, 2009, for nonfinancial assets and liabilities, although early adoption is permitted. SFAS No. 157 is generally to be applied prospectively. The Company does not expect SFAS No. 157 to have a significant impact on its results of operations or financial position.</p>
    <p>In December 2007, the FASB issued SFAS No. 141(revised 2007), <I>Business Combinations </I>(SFAS No. 141(R)). SFAS No. 141(R) provides revised guidance on how acquirers recognize and measure the consideration transferred, identifiable assets acquired, liabilities assumed, noncontrolling interests, and goodwill acquired in a business combination. SFAS No. 141(R) also expands required disclosures surrounding the nature and financial effects of business combinations. SFAS No. 141(R) is effective for the Company beginning January 1, 2009. The Company does not expect SFAS No. 141(R) to have a significant impact on its results of operations or financial position.</p>
    <p>In December 2007, the FASB issued SFAS No. 160, <I>Noncontrolling Interests in Consolidated Financial Statements &#150; an Amendment of ARB No. 51. </I>SFAS No. 160 clarifies that a noncontrolling interest in a subsidiary is an ownership interest of the consolidated entity that should be reported as equity in the consolidated financial statements. SFAS No. 160 applies to all entities that prepare consolidated financial statements, except for not-for-profit organizations, but will affect only those entities that have an outstanding noncontrolling interest in one or more subsidiaries or that deconsolidate a subsidiary. SFAS No. 160 is effective for the Company beginning January 1, 2009. The Company is evaluating the impact that this accounting statement will have on its financial position.</p>
    <p>Other pronouncements issued by the FASB or other authoritative accounting standards groups with future effective dates are either not applicable or not material to the Company&#146;s financial statements.</p>
  </blockquote>

</blockquote>
<p align="center">
  F-55</p>
<HR align=center width="100%" noshade SIZE=5>
<!-- MARKER PAGE="sheet: 1; page: 1" -->

<TABLE style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'" cellSpacing=0 cellPadding=0 width="100%" border=0>
<TR vAlign=bottom>
     <TD align=left width="76%"><B>GRUPO SIMEC, S.A. DE C.V. (PARENT COMPANY ONLY)</B> </TD>

    <TD align=right width="23%"><B>SCHEDULE I</B> </TD>
  </TR></TABLE>
Condensed balance sheets<BR>
December 31, 2007 and 2006<BR>
(Thousands of constant Mexican pesos as of December 31, 2007)
<table style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'" cellspacing=0 cellpadding=0 border=0 width="100%">
  <tr valign=bottom>
    <td align=center>&nbsp;</td>
    <td align=center>&nbsp;</td>
    <td align=center>&nbsp;</td>
    <td align=center>&nbsp;&nbsp;&nbsp;</td>
    <td align=center>&nbsp;&nbsp;&nbsp;</td>
    <td align=center>&nbsp;</td>
    <td align=center>&nbsp;</td>
    <td align=center>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=center valign="top"><b><font size=2>Assets</font></b></td>
    <td align=center colspan="3"> <b><font size=2>2007</font></b>
      <hr noshade size=1>
    </td>
    <td align=center>&nbsp;  </td>
    <td align=center colspan="3"><b><font size=2>2006</font></b>
      <hr noshade size=1>
    </td>
  </tr>
  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
  </tr>



  <tr valign=bottom>

    <td align=left><font size=2>Current assets:</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
  </tr>

  <tr valign=bottom>

    <td align=left>&nbsp; &nbsp;<font size=2>Cash and cash equivalents</font> </td>
    <td align=left><font size=2>$</font> </td>
    <td align=right><font size=2>2,567,396</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
    <td align=left><font size=2>$</font> </td>
    <td align=right><font size=2>4,794</font> </td>
    <td align=left>&nbsp; </td>
  </tr>

  <tr>

    <td>&nbsp; </td>
    <td colspan=3>
      <hr noshade size=1>
    </td>
    <td>&nbsp;


</td>
    <td colspan=3>
      <hr noshade size=1>
    </td>
  </tr>

  <tr>

    <td colspan=8>&nbsp; </td>
  </tr>

  <tr valign=bottom>

    <td align=left><font size=2>Accounts receivable:</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
  </tr>

  <tr valign=bottom>

    <td align=left>&nbsp; &nbsp;<font size=2>Related parties</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>750,181</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>841,380</font> </td>
    <td align=left>&nbsp; </td>
  </tr>

  <tr valign=bottom>

    <td align=left>&nbsp; &nbsp;<font size=2>Prepaid expenses</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>-</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>8,517</font> </td>
    <td align=left>&nbsp; </td>
  </tr>

  <tr valign=bottom>

    <td align=left>&nbsp; &nbsp;<font size=2>Other receivables</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>44,530</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>30,268</font> </td>
    <td align=left>&nbsp; </td>
  </tr>

  <tr>

    <td colspan=8>&nbsp; </td>
  </tr>

  <tr valign=bottom>

    <td align=left>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<font size=2>Total accounts receivable, net</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>794,711</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>880,165</font> </td>
    <td align=left>&nbsp; </td>
  </tr>

  <tr>

    <td colspan=8>&nbsp; </td>
  </tr>

  <tr valign=bottom>

    <td align=left>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<font size=2>Total current assets</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>3,362,107</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>884,959</font> </td>
    <td align=left>&nbsp; </td>
  </tr>

  <tr>

    <td colspan=8>&nbsp; </td>
  </tr>

  <tr valign=bottom>

    <td align=left><font size=2>Long term account receivables to subsidiary companies</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>673,319</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>697,828</font> </td>
    <td align=left>&nbsp; </td>
  </tr>

  <tr valign=bottom>

    <td align=left><font size=2>Investment in subsidiary companies</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>10,680,311</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>8,973,686</font> </td>
    <td align=left>&nbsp; </td>
  </tr>

  <tr>

    <td colspan=8>&nbsp; </td>
  </tr>

  <tr valign=bottom>

    <td align=left><font size=2>Property, net</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>182,017</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>185,614</font> </td>
    <td align=left>&nbsp; </td>
  </tr>

  <tr>

    <td colspan=8>&nbsp; </td>
  </tr>

  <tr valign=bottom>

    <td align=left><font size=2>Deferred income taxes</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>9,207</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>10,470</font> </td>
    <td align=left>&nbsp; </td>
  </tr>
  <tr>

    <td>&nbsp; </td>
    <td colspan=3>
      <hr noshade size=1>
    </td>
    <td>&nbsp;


</td>
    <td colspan=3>
      <hr noshade size=1>
    </td>
  </tr>



  <tr valign=bottom>

    <td align=left>&nbsp; </td>
    <td align=left><font size=2>$</font> </td>
    <td align=right><font size=2>14,906,961</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
    <td align=left><font size=2>$</font> </td>
    <td align=right><font size=2>10,752,557</font> </td>
    <td align=left>&nbsp; </td>
  </tr>
  <tr>

    <td>&nbsp; </td>
    <td colspan=3>
      <hr noshade size=2>
    </td>
    <td>&nbsp;


</td>
    <td colspan=3>
      <hr noshade size=2>
    </td>
  </tr>

  <tr>

    <td colspan=8>&nbsp; </td>
  </tr>

  <tr valign=bottom>

    <td align=center valign="top"><b><font size=2>Liabilities and Stockholders' Equity</font></b> </td>
    <td align=center colspan="3"> <b><font size=2>2007</font></b>
      <hr noshade size=1>
       </td>
    <td align=left>&nbsp;</td>
    <td align=center colspan="3"> <b><font size=2>2006</font></b>
      <hr noshade size=1>
       </td>
  </tr>



  <tr>

    <td colspan=8>&nbsp; </td>
  </tr>

  <tr valign=bottom>

    <td align=left><font size=2>Current liabilities:</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
  </tr>

  <tr valign=bottom>

    <td align=left>&nbsp; &nbsp;<font size=2>Current installments of long-term debt</font> </td>
    <td align=left><font size=2>$</font> </td>
    <td align=right><font size=2>3,282</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
    <td align=left><font size=2>$</font> </td>
    <td align=right><font size=2>3,406</font> </td>
    <td align=left>&nbsp; </td>
  </tr>

  <tr valign=bottom>

    <td align=left>&nbsp; &nbsp;<font size=2>Other accounts payable and accrued expenses</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>7,446</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>19,133</font> </td>
    <td align=left>&nbsp; </td>
  </tr>

  <tr valign=bottom>

    <td align=left>&nbsp; &nbsp;<font size=2>Accounts payable to related parties</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>34,378</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>22,146</font> </td>
    <td align=left>&nbsp; </td>
  </tr>

  <tr>

    <td colspan=8>&nbsp; </td>
  </tr>

  <tr valign=bottom>

    <td align=left>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<font size=2>Total liabilities</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>45,106</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>44,685</font> </td>
    <td align=left>&nbsp; </td>
  </tr>

  <tr>

    <td colspan=8>&nbsp; </td>
  </tr>

  <tr valign=bottom>

    <td align=left><font size=2>Stockholders' equity:</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
  </tr>

  <tr valign=bottom>

    <td align=left>&nbsp; &nbsp;<font size=2>Capital stock</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>4,030,427</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>3,763,412</font> </td>
    <td align=left>&nbsp; </td>
  </tr>

  <tr valign=bottom>

    <td align=left>&nbsp; &nbsp;<font size=2>Additional paid-in capital</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>3,151,317</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>997,606</font> </td>
    <td align=left>&nbsp; </td>
  </tr>

  <tr valign=bottom>

    <td align=left>&nbsp; &nbsp;<font size=2>Retained earnings</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>8,550,179</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>7,021,122</font> </td>
    <td align=left>&nbsp; </td>
  </tr>

  <tr valign=bottom>

    <td align=left>&nbsp; &nbsp;<font size=2>Cumulative deferred income tax</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>(970,513</font> </td>
    <td align=left><font size=2>)</font> </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>(970,513</font> </td>
    <td align=left><font size=2>)</font> </td>
  </tr>

  <tr valign=bottom>

    <td align=left>&nbsp; &nbsp;<font size=2>Equity adjustment for non-monetary assets</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>132,155</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>(73,659</font> </td>
    <td align=left><font size=2>)</font> </td>
  </tr>

  <tr valign=bottom>

    <td align=left>&nbsp; &nbsp;<font size=2>Effect of translation of foreign entities</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>(31,710</font> </td>
    <td align=left><font size=2>)</font> </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>(25,539</font> </td>
    <td align=left><font size=2>)</font> </td>
  </tr>

  <tr valign=bottom>

    <td align=left>&nbsp; &nbsp;<font size=2>Fair value of derivative financial instruments</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>-</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>(4,557</font> </td>
    <td align=left><font size=2>)</font> </td>
  </tr>


  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=left colspan="2">
      <hr noshade size=1>
    </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=left colspan="2">
      <hr noshade size=1>
    </td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=left>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<font size=2>Total stockholders' equity</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>14,861,855</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
    <td align=left valign="top">&nbsp; </td>
    <td align=right><font size=2>10,707,872</font> </td>
    <td align=left>&nbsp; </td>
  </tr>

  <tr valign=bottom>

    <td align=left>&nbsp; </td>
    <td align=left><font size=2>$</font> </td>
    <td align=right><font size=2>14,906,961</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
    <td align=left><font size=2>$</font> </td>
    <td align=right><font size=2>10,752,557</font> </td>
    <td align=left>&nbsp; </td>
  </tr>
  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=left colspan="2">
      <hr noshade size=2>
    </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;

    </td>
    <td align=left colspan="3">
      <hr noshade size=2>
    </td>
  </tr>
</table>
<BR>
See accompanying notes to consolidated financial statements
<P align=center>S-1</P>
<HR align=center width="100%" noshade SIZE=5>


<!-- MARKER PAGE="sheet: 1; page: 1" -->

<P align=left><B>GRUPO SIMEC, S.A. DE C.V. (PARENT COMPANY ONLY)</B><BR>
Condensed statement of income<BR>
Years ended December 31, 2007, 2006 and 2005<BR>
(Thousands of constant Mexican pesos as of December 31, 2007)</P>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'" cellspacing=0 cellpadding=0 border=0 width="100%">

  <tr valign=bottom>

    <td align=center>&nbsp; </td>
    <td align=center colspan="3"> <b><font size=2>2007</font></b> </td>
    <td align=center>&nbsp;&nbsp;&nbsp;</td>
    <td align=center colspan="3"> <b><font size=2>2006</font></b> </td>
    <td align=center>&nbsp;&nbsp;&nbsp;</td>
    <td align=center colspan="3"> <b><font size=2>2005</font></b> </td>
  </tr>
  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=left colspan="3">
      <hr noshade size=1>
    </td>
    <td align=left>&nbsp;</td>
    <td align=left colspan="3">
      <hr noshade size=1>
    </td>
    <td align=left>&nbsp;</td>
    <td align=left colspan="3">
      <hr noshade size=1>
    </td>
  </tr>



  <tr valign=bottom>

    <td align=left><font size=2>Income:</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
  </tr>

  <tr valign=bottom>

    <td align=left>&nbsp; &nbsp;<font size=2>Equity in results of subsidiary companies</font> </td>
    <td align=left><font size=2>$</font> </td>
    <td align=right><font size=2>1,502,425</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
    <td align=left><font size=2>$</font> </td>
    <td align=right><font size=2>2,173,486</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
    <td align=left><font size=2>$</font> </td>
    <td align=right><font size=2>1,271,336</font> </td>
    <td align=left>&nbsp; </td>
  </tr>

  <tr valign=bottom>

    <td align=left>&nbsp; &nbsp;<font size=2>For leasing</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>20,982</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>21,813</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>22,579</font> </td>
    <td align=left>&nbsp; </td>
  </tr>


  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=left colspan="3">
      <hr noshade size=1>
    </td>
    <td align=left>&nbsp;</td>
    <td align=left colspan="3">
      <hr noshade size=1>
    </td>
    <td align=left>&nbsp;</td>
    <td align=left colspan="3">
      <hr noshade size=1>
    </td>
  </tr>

  <tr valign=bottom>

    <td align=left>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<font size=2>Total of income</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>1,523,407</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>2,195,299</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>1,293,915</font> </td>
    <td align=left>&nbsp; </td>
  </tr>


  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=left colspan="3">
      <hr noshade size=1>
    </td>
    <td align=left>&nbsp;</td>
    <td align=left colspan="3">
      <hr noshade size=1>
    </td>
    <td align=left>&nbsp;</td>
    <td align=left colspan="3">
      <hr noshade size=1>
    </td>
  </tr>



  <tr valign=bottom>

    <td align=left><font size=2>Costs and expenses:</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
  </tr>

  <tr valign=bottom>

    <td align=left>&nbsp; &nbsp;<font size=2>Depreciation</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>3,597</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>5,099</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>5,098</font> </td>
    <td align=left>&nbsp; </td>
  </tr>

  <tr valign=bottom>

    <td align=left>&nbsp; &nbsp;<font size=2>Administrative</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>8,680</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>4,468</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>4,935</font> </td>
    <td align=left>&nbsp; </td>
  </tr>
  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=left colspan="3">
      <hr noshade size=1>
    </td>
    <td align=left>&nbsp;</td>
    <td align=left colspan="3">
      <hr noshade size=1>
    </td>
    <td align=left>&nbsp;</td>
    <td align=left colspan="3">
      <hr noshade size=1>
    </td>
  </tr>
  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=right>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=right>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=right>&nbsp;</td>
    <td align=left>&nbsp;</td>
  </tr>



  <tr valign=bottom>

    <td align=left>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<font size=2>Total costs and expenses</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>12,277</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>9,567</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>10,033</font> </td>
    <td align=left>&nbsp; </td>
  </tr>
  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=left colspan="3">
      <hr noshade size=1>
    </td>
    <td align=left>&nbsp;</td>
    <td align=left colspan="3">
      <hr noshade size=1>
    </td>
    <td align=left>&nbsp;</td>
    <td align=left colspan="3">
      <hr noshade size=1>
    </td>
  </tr>



  <tr valign=bottom>

    <td align=left>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<font size=2>Operating income</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>1,511,130</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>2,185,732</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>1,283,882</font> </td>
    <td align=left>&nbsp; </td>
  </tr>
  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=left colspan="3">
      <hr noshade size=1>
    </td>
    <td align=left>&nbsp;</td>
    <td align=left colspan="3">
      <hr noshade size=1>
    </td>
    <td align=left>&nbsp;</td>
    <td align=left colspan="3">
      <hr noshade size=1>
    </td>
  </tr>



  <tr>

    <td colspan=12>&nbsp; </td>
  </tr>

  <tr valign=bottom>

    <td align=left><font size=2>Other income (expenses), net</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>8,568</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>17,020</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>(204</font> </td>
    <td align=left><font size=2>)</font> </td>
  </tr>

  <tr>

    <td colspan=12>&nbsp; </td>
  </tr>

  <tr valign=bottom>

    <td align=left><font size=2>Comprehensive financial result:</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
  </tr>

  <tr valign=bottom>

    <td align=left>&nbsp; &nbsp;<font size=2>Interest expense</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>(949</font> </td>
    <td align=left><font size=2>)</font> </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>(332</font> </td>
    <td align=left><font size=2>)</font> </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>(344</font> </td>
    <td align=left><font size=2>)</font> </td>
  </tr>

  <tr valign=bottom>

    <td align=left>&nbsp; &nbsp;<font size=2>Interest income</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>176,207</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>68,190</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>168,998</font> </td>
    <td align=left>&nbsp; </td>
  </tr>

  <tr valign=bottom>

    <td align=left>&nbsp; &nbsp;<font size=2>Foreign exchange (loss) gain, net</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>(23,115</font> </td>
    <td align=left><font size=2>)</font> </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>(99</font> </td>
    <td align=left><font size=2>)</font> </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>(179</font> </td>
    <td align=left><font size=2>)</font> </td>
  </tr>

  <tr valign=bottom>

    <td align=left>&nbsp; &nbsp;<font size=2>Monetary position loss</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>(105,638</font> </td>
    <td align=left><font size=2>)</font> </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>(50,650</font> </td>
    <td align=left><font size=2>)</font> </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>(64,939</font> </td>
    <td align=left><font size=2>)</font> </td>
  </tr>
  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=left colspan="3">
      <hr noshade size=1>
    </td>
    <td align=left>&nbsp;</td>
    <td align=left colspan="3">
      <hr noshade size=1>
    </td>
    <td align=left>&nbsp;</td>
    <td align=left colspan="3">
      <hr noshade size=1>
    </td>
  </tr>



  <tr valign=bottom>

    <td align=left>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<font size=2>Comprehensive financial result, net</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>46,505</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>17,109</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>103,536</font> </td>
    <td align=left>&nbsp; </td>
  </tr>
  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=left colspan="3">
      <hr noshade size=1>
    </td>
    <td align=left>&nbsp;</td>
    <td align=left colspan="3">
      <hr noshade size=1>
    </td>
    <td align=left>&nbsp;</td>
    <td align=left colspan="3">
      <hr noshade size=1>
    </td>
  </tr>



  <tr>

    <td colspan=12>&nbsp; </td>
  </tr>

  <tr valign=bottom>

    <td align=left>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<font size=2>Income before income tax</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>1,566,203</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>2,219,861</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>1,387,214</font> </td>
    <td align=left>&nbsp; </td>
  </tr>

  <tr>

    <td colspan=12>&nbsp; </td>
  </tr>

  <tr valign=bottom>

    <td align=left><font size=2>Income tax:</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
  </tr>

  <tr valign=bottom>

    <td align=left>&nbsp; &nbsp;<font size=2>Current</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>35,883</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>40,452</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>7,133</font> </td>
    <td align=left>&nbsp; </td>
  </tr>

  <tr valign=bottom>

    <td align=left>&nbsp; &nbsp;<font size=2>Deferred</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>1,263</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>715</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>8,785</font> </td>
    <td align=left>&nbsp; </td>
  </tr>
  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=left colspan="3">
      <hr noshade size=1>
    </td>
    <td align=left>&nbsp;</td>
    <td align=left colspan="3">
      <hr noshade size=1>
    </td>
    <td align=left>&nbsp;</td>
    <td align=left colspan="3">
      <hr noshade size=1>
    </td>
  </tr>



  <tr valign=bottom>

    <td align=left>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<b><font size=2>Net income</font></b> </td>
    <td align=left><b><font size=2>$</font></b> </td>
    <td align=right><b><font size=2>1,529,057</font></b> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
    <td align=left><b><font size=2>$</font></b> </td>
    <td align=right><b><font size=2>2,178,694</font></b> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
    <td align=left><b><font size=2>$</font></b> </td>
    <td align=right><b><font size=2>1,371,296</font></b> </td>
    <td align=left>&nbsp; </td>
  </tr>
  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=left colspan="3">
      <hr noshade size=2>
    </td>
    <td align=left>&nbsp;</td>
    <td align=left colspan="3">
      <hr noshade size=2>
    </td>
    <td align=left>&nbsp;</td>
    <td align=left colspan="3">
      <hr noshade size=2>
    </td>
  </tr>


</table>
<P align=left>See accompanying notes to consolidated financial statements</P>
<P align=center>S-2</P>
<HR align=center width="100%" noshade SIZE=5>


<!-- MARKER PAGE="sheet: 1; page: 1" -->

<P align=left><B>GRUPO SIMEC, S.A. DE C.V. (PARENT COMPANY ONLY)</B><BR>
Condensed Statement of Changes in Financial Position<BR>
Years ended December 31, 2007, 2006 and 2005<BR>
(Thousands of constant Mexican pesos as of December 31, 2007)</P>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'" cellspacing=0 cellpadding=0 border=0 width="100%">

  <tr valign=bottom>

    <td align=center>&nbsp; </td>
    <td align=center colspan="3"> <b><font size=2>2007</font></b> </td>
    <td align=center>&nbsp;&nbsp;&nbsp;</td>
    <td align=center colspan="3"> <b><font size=2>2006</font></b> </td>
    <td align=center>&nbsp;&nbsp;&nbsp;</td>
    <td align=center colspan="3"> <b><font size=2>2005</font></b> </td>
  </tr>
  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=left colspan="3">
      <hr noshade size=1>
    </td>
    <td align=left>&nbsp;</td>
    <td align=left colspan="3">
      <hr noshade size=1>
    </td>
    <td align=left>&nbsp;</td>
    <td align=left colspan="3">
      <hr noshade size=1>
    </td>
  </tr>



  <tr valign=bottom>

    <td align=left><font size=2>Operating activities:</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
  </tr>

  <tr valign=bottom>

    <td align=left>&nbsp; &nbsp; &nbsp;<font size=2>Net income</font> </td>
    <td align=left><font size=2>$</font> </td>
    <td align=right><font size=2>1,529,057</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>2,178,694</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>1,371,296</font> </td>
    <td align=left>&nbsp; </td>
  </tr>

  <tr valign=bottom>

    <td align=left>&nbsp; &nbsp; &nbsp;<font size=2>Add (deduct) items not requiring the use of</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
  </tr>

  <tr valign=bottom>

    <td align=left>&nbsp; &nbsp; &nbsp;<font size=2>resources:</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
  </tr>

  <tr valign=bottom>

    <td align=left>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<font size=2>Depreciation</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>3,597</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>5,099</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>5,098</font> </td>
    <td align=left>&nbsp; </td>
  </tr>

  <tr valign=bottom>

    <td align=left>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<font size=2>Equity in net results of subsidiary companies</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>(1,502,425</font> </td>
    <td align=left><font size=2>)</font> </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>(2,173,486</font> </td>
    <td align=left><font size=2>)</font> </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>(1,271,336</font> </td>
    <td align=left><font size=2>)</font> </td>
  </tr>

  <tr valign=bottom>

    <td align=left>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<font size=2>Gain on sale of subsidiary</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>-</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>(16,892</font> </td>
    <td align=left><font size=2>)</font> </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>-</font> </td>
    <td align=left>&nbsp; </td>
  </tr>

  <tr valign=bottom>

    <td align=left>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<font size=2>Deferred income tax</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>1,263</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>715</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>8,784</font> </td>
    <td align=left>&nbsp; </td>
  </tr>
  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=left colspan="3">
      <hr noshade size=1>
    </td>
    <td align=left>&nbsp;</td>
    <td align=left colspan="3">
      <hr noshade size=1>
    </td>
    <td align=left>&nbsp;</td>
    <td align=left colspan="3">
      <hr noshade size=1>
    </td>
  </tr>



  <tr valign=bottom>

    <td align=left>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<font size=2>Funds provided by operations</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>31,492</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>(5,870</font> </td>
    <td align=left><font size=2>)</font> </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>113,842</font> </td>
    <td align=left>&nbsp; </td>
  </tr>

  <tr>

    <td colspan=12>&nbsp; </td>
  </tr>

  <tr valign=bottom>

    <td align=left><font size=2>Net changes in operating assets and liabilities:</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
  </tr>

  <tr valign=bottom>

    <td align=left>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<font size=2>Short term of subsidiaries companies, net</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>103,431</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>(351,499</font> </td>
    <td align=left><font size=2>)</font> </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>(1,029,860</font> </td>
    <td align=left><font size=2>)</font> </td>
  </tr>

  <tr valign=bottom>

    <td align=left>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<font size=2>Other accounts receivable, net</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>(5,745</font> </td>
    <td align=left><font size=2>)</font> </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>(12,208</font> </td>
    <td align=left><font size=2>)</font> </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>56</font> </td>
    <td align=left>&nbsp; </td>
  </tr>

  <tr valign=bottom>

    <td align=left>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<font size=2>Other accounts payable and accrued expenses</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>(11,687</font> </td>
    <td align=left><font size=2>)</font> </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>(1,629</font> </td>
    <td align=left><font size=2>)</font> </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>(573</font> </td>
    <td align=left><font size=2>)</font> </td>
  </tr>

  <tr valign=bottom>

    <td align=left>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<font size=2>Deferred revenue for leasing</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>-</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>-</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>(22,881</font> </td>
    <td align=left><font size=2>)</font> </td>
  </tr>

  <tr valign=bottom>

    <td align=left>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<font size=2>Funds (used in) provided by operating activities</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>117,491</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>(371,206</font> </td>
    <td align=left><font size=2>)</font> </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>(939,416</font> </td>
    <td align=left><font size=2>)</font> </td>
  </tr>
  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=left colspan="3">
      <hr noshade size=1>
    </td>
    <td align=left>&nbsp;</td>
    <td align=left colspan="3">
      <hr noshade size=1>
    </td>
    <td align=left>&nbsp;</td>
    <td align=left colspan="3">
      <hr noshade size=1>
    </td>
  </tr>



  <tr>

    <td colspan=12>&nbsp; </td>
  </tr>

  <tr valign=bottom>

    <td align=left><font size=2>Financing activities:</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
  </tr>

  <tr valign=bottom>

    <td align=left>&nbsp; &nbsp; &nbsp;<font size=2>Increases in capital stock</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>2,420,726</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>130,900</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>701</font> </td>
    <td align=left>&nbsp; </td>
  </tr>

  <tr valign=bottom>

    <td align=left>&nbsp; &nbsp; &nbsp;<font size=2>Contributions for future capital stock increases</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>-</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>-</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>-</font> </td>
    <td align=left>&nbsp; </td>
  </tr>

  <tr valign=bottom>

    <td align=left>&nbsp; &nbsp; &nbsp;<font size=2>Financial debt</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>(124</font> </td>
    <td align=left><font size=2>)</font> </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>(105</font> </td>
    <td align=left><font size=2>)</font> </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>-</font> </td>
    <td align=left>&nbsp; </td>
  </tr>

  <tr valign=bottom>

    <td align=left>&nbsp; &nbsp; &nbsp;<font size=2>Tax on assets</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>-</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>-</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>-</font> </td>
    <td align=left>&nbsp; </td>
  </tr>

  <tr valign=bottom>

    <td align=left>&nbsp; &nbsp; &nbsp;<font size=2>Long term account receivables to subsidiary</font> <font size=2>companies</font></td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>24,509</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>243,237</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>922,564</font> </td>
    <td align=left>&nbsp; </td>
  </tr>
  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=left colspan="3">
      <hr noshade size=1>
    </td>
    <td align=left>&nbsp;</td>
    <td align=left colspan="3">
      <hr noshade size=1>
    </td>
    <td align=left>&nbsp;</td>
    <td align=left colspan="3">
      <hr noshade size=1>
    </td>
  </tr>





  <tr valign=bottom>

    <td align=left><font size=2>Funds provided by financing activities</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>2,445,111</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>374,032</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>923,265</font> </td>
    <td align=left>&nbsp; </td>
  </tr>
  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=left colspan="3">
      <hr noshade size=1>
    </td>
    <td align=left>&nbsp;</td>
    <td align=left colspan="3">
      <hr noshade size=1>
    </td>
    <td align=left>&nbsp;</td>
    <td align=left colspan="3">
      <hr noshade size=1>
    </td>
  </tr>



  <tr>

    <td colspan=12>&nbsp; </td>
  </tr>

  <tr valign=bottom>

    <td align=left><font size=2>Investing activities:</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
  </tr>

  <tr valign=bottom>

    <td align=left>&nbsp; &nbsp; &nbsp;<font size=2>Acquisition of property</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>-</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>(29</font> </td>
    <td align=left><font size=2>)</font> </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>(1,763</font> </td>
    <td align=left><font size=2>)</font> </td>
  </tr>

  <tr>

    <td colspan=12>&nbsp; </td>
  </tr>

  <tr valign=bottom>

    <td align=left>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<font size=2>Funds used in investing activities</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>-</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>(29</font> </td>
    <td align=left><font size=2>)</font> </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>(1,763</font> </td>
    <td align=left><font size=2>)</font> </td>
  </tr>

  <tr>

    <td colspan=12>&nbsp; </td>
  </tr>

  <tr valign=bottom>

    <td align=left>&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<font size=2>Net increase (decrease) in cash and equivalents</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>2,562,602</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>2,797</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>(17,914</font> </td>
    <td align=left><font size=2>)</font> </td>
  </tr>

  <tr>

    <td colspan=12>&nbsp; </td>
  </tr>

  <tr valign=bottom>

    <td align=left><font size=2>Cash and equivalents:</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp; </td>
  </tr>

  <tr valign=bottom>

    <td align=left>&nbsp; &nbsp; &nbsp;<font size=2>At beginning of year</font> </td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>4,794</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>1,997</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right><font size=2>19,911</font> </td>
    <td align=left>&nbsp; </td>
  </tr>
  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=left colspan="3">
      <hr noshade size=1>
    </td>
    <td align=left>&nbsp;</td>
    <td align=left colspan="3">
      <hr noshade size=1>
    </td>
    <td align=left>&nbsp;</td>
    <td align=left colspan="3">
      <hr noshade size=1>
    </td>
  </tr>



  <tr valign=bottom>

    <td align=left>&nbsp; &nbsp; &nbsp;<font size=2>At end of year</font> </td>
    <td align=left><font size=2>$</font> </td>
    <td align=right><font size=2>2,567,396</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
    <td align=left><font size=2>$</font> </td>
    <td align=right><font size=2>4,794</font> </td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
    <td align=left><font size=2>$</font> </td>
    <td align=right><font size=2>1,997</font> </td>
    <td align=left>&nbsp; </td>
  </tr>
  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=left colspan="3">
      <hr noshade size=2>
    </td>
    <td align=left>&nbsp;</td>
    <td align=left colspan="3">
      <hr noshade size=2>
    </td>
    <td align=left>&nbsp;</td>
    <td align=left colspan="3">
      <hr noshade size=2>
    </td>
  </tr>


</table>
<P align=left>See accompanying notes to consolidated financial statements</P>
<P align=center>S-3</P>
<HR align=center width="100%" noshade SIZE=5>


<!-- MARKER PAGE="sheet: 1; page: 1" -->


<P align="left">
<B>GRUPO SIMEC, S.A. DE C.V. (PARENT COMPANY ONLY)</B><BR>
Condensed statement of changes in financial position<BR>
Years ended December 31, 2007, 2006 and 2005<BR>
(Thousands of constant Mexican pesos as of December 31, 2007)</P>
<TABLE border=0 cellspacing=0 cellpadding=0 style="font-family: 'Times New Roman';font-size: 10pt;" width="100%">
  <tr>

    <td nowrap valign=top width="40">
<b>1.</b>&nbsp; &nbsp; &nbsp;   </td>
    <td>
<b>Organization of the Company and certain other information:</b>       </td>
  </tr>
  <TR>
    <TD nowrap valign=top width="40">&nbsp;</TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD nowrap valign=top width="40">&nbsp;</TD>
    <TD>
      <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The accompanying condensed financial statements reflect the results of operations of the Company since its incorporation in August 1990.</p>
      <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Information with respect to the Company's material contingencies are presented in note 16 of the consolidated financial statements.</p>
    </TD>
  </TR>


</TABLE>
<P align="center">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;S-4</P>
<HR noshade align="center" width="100%" size="5">


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#'__9
`
end
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-8
<SEQUENCE>3
<FILENAME>e32100ex8.txt
<DESCRIPTION>LIST OF SUBSIDIARIES
<TEXT>
                                                                       Exhibit 8

                              LIST OF SUBSIDIARIES

<TABLE>
<CAPTION>
Name                                                                                                 Jurisdiction of Incorporation
- ------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                                 <C>
- - Compania Siderurgica de Guadalajara, S.A. de C.V.                                                             Mexico
   - Arrendadora Simec, S.A. de C.V.                                                                            Mexico
   - Simec International, S.A. de C.V                                                                           Mexico
   - Controladora Simec, S.A. de C.V.                                                                           Mexico
        - SimRep Corporation                                                                                   Delaware
           - PAV Republic, Inc.                                                                                Delaware
                - Republic Engineered Products, Inc.                                                           Delaware
                - Republic Machine, LLC                                                                        Delaware
                - Republic N&T Railroad, Inc.                                                                  Delaware
                - Republic Canadian Drawn, Inc.                                                                 Canada
           - Undershaft Investments, N.V.                                                                Netherlands Antilles
                - Pacific Steel, Inc.                                                                         California
   - Compania Siderurgica del Pacifico, S.A. de C.V.                                                            Mexico
   - Coordinadora de Servicios Siderugicos de Calidad, S.A. de C.V.                                             Mexico
   - Comercializadora Simec, S.A. de C.V (since 2007, before
     Administradora de Servicios de la Industria Siderurgica ICH, S.A. de                                       Mexico
     C.V.)
   - Industrias del Acero y del Alambre, S.A. de C.V.                                                           Mexico
   - Procesadora Mexicali, S.A. de C.V.                                                                         Mexico
   - Servicios Simec, S.A. de C.V.                                                                              Mexico
   - Sistemas de Transporte de Baja California, S.A. de C.V.                                                    Mexico
   - Operadora de Metales, S.A. de C V                                                                          Mexico
   - Operadora de Servicios Siderurgicos de Tlaxcala, S.A. de C.V.                                              Mexico
   - Administradora de Servicios Siderurgicos de Tlaxcala, S.A. de C.V.                                         Mexico
   - Operadora de Servicios de la Industria Siderurgica ICH, S.A. de C.V.                                       Mexico
   - Arrendadora Norte de Matamoros, S.A. de C.V. (since 2007)                                                  Mexico
   - Tenedora CSG, S.A. de C.V. (since 2007)                                                                    Mexico
   - TMM America, S.A. de C.V. (since 2007)                                                                     Mexico
   - TMM Continental, S.A. de C.V. (since 2007)                                                                 Mexico
   - Multimodal Domestic, S.A. de C.V. (since 2007)                                                             Mexico
</TABLE>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.3
<SEQUENCE>4
<FILENAME>e32100ex10-3.txt
<DESCRIPTION>STOCK PURCHASE AGREEMENT
<TEXT>
                                                                    Exhibit 10.3

- --------------------------------------------------------------------------------

                            STOCK PURCHASE AGREEMENT

                  FOR THE ACQUISITION OF 100% OF THE SHARES OF

                       CORPORACION ACEROS DM, S.A. DE C.V.

              AND CERTAIN SHARES OF THE SUBSIDIARIES LISTED HEREIN

                                  by and among

                        Miguel Fernando Valladares Garcia
                          Juan Carlos Valladares Garcia
                             Pablo Valladares Garcia
                          Rosa Maria Valladares Garcia
                    Maria Josefina Victoria Valladares Garcia
                       Maria del Rosario Valladares Garcia
                        Rafael Modesto del Blanco Garrido
                      Encarnacion Sofia del Blanco Garrido
                        Marina Amalia del Blanco Garrido
                    and Margarita Gabriela del Blanco Garrido

                                   as Sellers

                                       and

                          Grupo Simec, S.A.B. de C.V.,

                                    as Buyer

                             Dated February 21, 2008

- --------------------------------------------------------------------------------

<PAGE>

                                                               Execution Version

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
<S>                                                                                                                             <C>
RECITALS.........................................................................................................................1
ARTICLE I. Definitions...........................................................................................................1
    1.1        Definitions.......................................................................................................1
ARTICLE II. Purchase and Sale of Shares..........................................................................................9
    2.1        Purchase and Sale of Shares.......................................................................................9
    2.2        Payment of Purchase Price.........................................................................................9
    2.3        Working Capital Adjustment........................................................................................9
    2.4        Escrow...........................................................................................................13
    2.5        Sellers' Representative..........................................................................................14
    2.6        Appointment of Tax Representative................................................................................15
    2.7        Settlement of Inter-Company Accounts.............................................................................15
ARTICLE III. The Closing: Closing Obligations...................................................................................16
    3.1        The Closing......................................................................................................16
    3.2        Deliveries by the Sellers........................................................................................16
    3.3        Deliveries by the Buyer..........................................................................................18
    3.4        Company Shareholders' Meeting....................................................................................18
    3.5        Subsidiaries' Shareholders' Meetings.............................................................................19
    3.6        Buyer's Shareholders Meeting.....................................................................................19
ARTICLE IV. Representations and Warranties of Each Seller.......................................................................19
    4.1        Capacity; Authorization and Authority............................................................................19
    4.2        Due Execution and Delivery; Enforceability.......................................................................19
    4.3        Consents and Approvals; No Violation to Result...................................................................19
    4.4        Ownership of Shares and Subsidiary Shares........................................................................20
    4.5        Brokers..........................................................................................................20
ARTICLE V. Representations and Warranties of the Sellers........................................................................20
    5.1        Corporate Organization and Authority.............................................................................21
    5.2        Subsidiaries of the Company......................................................................................21
    5.3        Consents and Approvals; No Violation to Result...................................................................21
    5.4        Authorized and Outstanding Capital Stock.........................................................................21
    5.5        No Commitment to Issue Capital Stock or Rights to Acquire Capital Stock..........................................22
    5.6        Financial Statements.............................................................................................22
    5.7        Undisclosed and Contingent Liabilities...........................................................................23
    5.8        Absence of Certain Changes.......................................................................................23
    5.9        Permits..........................................................................................................25
    5.10       Litigation.......................................................................................................25
    5.11       Inventory........................................................................................................25
    5.12       Real Property; Leases............................................................................................26
    5.13       Assets Other than Real Property..................................................................................26
    5.14       Contracts........................................................................................................26
</TABLE>


                                       i

<PAGE>

                                                               Execution Version

<TABLE>
<CAPTION>
<S>                                                                                                                             <C>
    5.15       Environmental Matters............................................................................................27
    5.16       Compliance with Laws; Generally..................................................................................28
    5.17       Employees; Labor Relations; Compliance and Related Matters.......................................................28
    5.18       Intellectual Property; Software..................................................................................29
    5.19       Tax Matters......................................................................................................30
    5.20       Transactions with Affiliates and Related Parties.................................................................31
    5.21       Books and Records................................................................................................31
    5.22       Insurance........................................................................................................31
    5.23       Banking and Securities Accounts..................................................................................31
    5.24       Brokers..........................................................................................................31
    5.25       Accuracy.........................................................................................................31
    5.26       No Other Representations.........................................................................................32
ARTICLE VI. Representations and Warranties of the Buyer.........................................................................32
    6.1        Corporate Organization...........................................................................................32
    6.2        Authorization and Approval of Agreement..........................................................................32
    6.3        Consents and Approvals; No Violation to Result...................................................................32
    6.4        Compliance with Laws.............................................................................................33
    6.5        No Governmental Order............................................................................................33
    6.6        Litigation.......................................................................................................33
    6.7        Credit-Worthiness................................................................................................33
    6.8        Source of Funds..................................................................................................33
    6.9        Simec Shares.....................................................................................................33
    6.10       Brokers..........................................................................................................33
ARTICLE VII. Covenants..........................................................................................................34
    7.1        Affirmative Covenants of the Sellers.............................................................................34
    7.2        Negative Covenants of the Sellers................................................................................34
    7.3        Confidentiality..................................................................................................35
    7.4        Competition; Other Regulatory Filing(s)..........................................................................36
    7.5        Updating Schedules...............................................................................................36
    7.6        Resignations.....................................................................................................37
    7.7        Buyer's Shareholders Meeting.....................................................................................37
ARTICLE VIII. Post-Closing Covenants............................................................................................37
    8.1        Buyer's Post-Closing Covenants...................................................................................37
    8.2        [Intentionally Omitted]..........................................................................................37
    8.3        Indemnification of Officers, Directors, Secretaries and Statutory Auditors.......................................37
    8.4        Non-Compete; Non-Solicitation; Transition........................................................................38
    8.5        Cancellation of Liens............................................................................................38
    8.6        Translation......................................................................................................39
ARTICLE IX. Conditions Precedent to Obligations of the Buyer....................................................................39
    9.1        Conditions Precedent.............................................................................................39
    9.2        Waiver...........................................................................................................39
ARTICLE X. Conditions Precedent to Obligations of the Sellers...................................................................40
    10.1       Conditions Precedent.............................................................................................40
</TABLE>


                                       ii
<PAGE>

                                                               Execution Version

<TABLE>
<CAPTION>
<S>                                                                                                                             <C>
    10.2       Waiver...........................................................................................................40
ARTICLE XI. Termination.........................................................................................................40
    11.1       Termination......................................................................................................40
    11.2       Effect of Termination............................................................................................41
ARTICLE XII. Indemnification....................................................................................................42
    12.1       Indemnification by the Sellers...................................................................................42
    12.2       Indemnification by the Buyer.....................................................................................43
    12.3       Termination of Indemnification...................................................................................43
    12.4       Procedures.......................................................................................................43
    12.5       Holdback.........................................................................................................45
    12.6       Survival of Representations......................................................................................46
    12.7       Exclusive Remedy.................................................................................................46
    12.8       Limitation on Damages............................................................................................46
    12.9       Indemnification Currency.........................................................................................47
    12.10      Tax Status of Indemnification Payments...........................................................................47
    12.11      Representation of the Sellers....................................................................................47
ARTICLE XIII. Expenses..........................................................................................................47
    13.1       Expenses.........................................................................................................47
    13.2       Transfer and Other Taxes.........................................................................................47
ARTICLE XIV. Miscellaneous......................................................................................................48
    14.1       Issuance of Press Releases.......................................................................................48
    14.2       Cooperation Following the Closing................................................................................48
    14.3       Benefits and Burdens; Assignment.................................................................................48
    14.4       Notices..........................................................................................................48
    14.5       Entire Understanding.............................................................................................50
    14.6       Amendments; Waivers..............................................................................................50
    14.7       Interpretation; Exhibits and Schedules...........................................................................50
    14.8       Counterparts.....................................................................................................51
    14.9       Severability.....................................................................................................51
    14.10      Governing Law....................................................................................................51
    14.11      Consent to Jurisdiction..........................................................................................51
</TABLE>

Exhibits
- --------
Exhibit A            Ownership Proportions


                                      iii

<PAGE>

                                                               Execution Version

Schedules
- ---------

Schedule 3.4         Powers-of-Attorney
Schedule 3.5         Powers-of-Attorney
Schedule 4.3         Consents and Approvals; No Violation to Result
Schedule 5.2(a)      Subsidiaries of the Company
Schedule 5.2(b)      Ownership Structure
Schedule 5.3(b)      Consents and Approvals; No Violation to Result
Schedule 5.4         Authorized and Outstanding Capital Stock
Schedule 5.6(a)      Financial Statements
Schedule 5.6(b)      Financial Statements
Schedule 5.6(c)(i)   Financial Statements
Schedule 5.6(c)(ii)  Financial Statements
Schedule 5.6(d)(i)   Financial Statements
Schedule 5.6(d)(ii)  Financial Statements
Schedule 5.7         Financial Statements
Schedule 5.8         Absence of Certain Changes
Schedule 5.9         Licenses, Permits and Authorizations
Schedule 5.10        Litigation
Schedule 5.11        Inventory
Schedule 5.12(a)(i)  Real Property; Leases
Schedule 5.12(a)(ii) Real Property; Leases
Schedule 5.13        Assets Other than Real Property
Schedule 5.14(a)     Contracts
Schedule 5.14(b)     Contracts
Schedule 5.14(c)     Contracts
Schedule 5.15(a)     Environmental Matters
Schedule 5.15(b)     Environmental Matters
Schedule 5.15(c)     Environmental Matters
Schedule 5.17(a)     Employees; Labor Relations; Compliance and Related Matters
Schedule 5.17(b)     Employees; Labor Relations; Compliance and Related Matters
Schedule 5.17(c)     Employees; Labor Relations; Compliance and Related Matters
Schedule 5.17(d)     Employees; Labor Relations; Compliance and Related Matters
Schedule 5.17(e)     Employees; Labor Relations; Compliance and Related Matters
Schedule 5.17(f)     Employees; Labor Relations; Compliance and Related Matters
Schedule 5.17(g)     Employees; Labor Relations; Compliance and Related Matters
Schedule 5.18(a)     Intellectual Property; Software


                                       iv

<PAGE>

                                                               Execution Version

Schedule 5.18(b)     Intellectual Property; Software
Schedule 5.18(c)     Intellectual Property; Software
Schedule 5.19        Tax Matters
Schedule 5.20(a)     Transactions with Affiliates and Related Parties
Schedule 5.22        Insurance
Schedule 5.23        Banking and Securities Accounts
Schedule 7.1         Affirmative Covenants of the Sellers
Schedule 7.2         Affirmative Covenants of the Sellers
Schedule 7.6         Resignations

            [The remainder of this page is intentionally left blank]


                                       v

<PAGE>

                                                               Execution Version

                            STOCK PURCHASE AGREEMENT

      This Stock Purchase Agreement ("Agreement"), dated February 21, 2008, by
and among Miguel Fernando Valladares Garcia, Juan Carlos Valladares Garcia,
Pablo Valladares Garcia, Rosa Maria Valladares Garcia, Maria Josefina Victoria
Valladares Garcia, Maria del Rosario Valladares Garcia, Rafael Modesto del
Blanco Garrido, Encarnacion Sofia del Blanco Garrido, Marina Amalia del Blanco
Garrido and Margarita Gabriela del Blanco Garrido (collectively, the "Sellers"),
and Grupo Simec, S.A.B. de C.V., a sociedad anonima bursatil de capital variable
organized under the Laws of Mexico (the "Buyer").

1.    RECITALS

      WHEREAS, the Sellers are the beneficial and record owners of all of the
issued and outstanding shares of common stock of Corporacion Aceros DM, S.A. de
C.V. (the "Company"), a sociedad anonima de capital variable organized and
existing under the Laws of Mexico. Additionally, the Sellers and the Company
hold, directly or indirectly, all of the outstanding shares of common stock of
the Subsidiaries.

      WHEREAS, the Buyer desires to purchase from the Sellers, and the Sellers
desire to sell to the Buyer, (i) the total of the Company's issued and
outstanding shares representing 100% (one hundred percent) of the Company's
outstanding capital stock (the "Shares"), and (ii) any shares representing
outstanding capital stock of the Subsidiaries held by the Sellers (the
"Subsidiary Shares") for the Closing Date Purchase Price, pursuant to the terms
and conditions set forth in this Agreement and in the proportions set forth in
Exhibit A.

      WHEREAS, it is the intention of the parties hereto (the "Parties") that,
upon consummation of the purchase and sale of the Shares and the Subsidiary
Shares pursuant to this Agreement, the Buyer shall control directly or
indirectly 100% (one hundred percent) of the issued and outstanding shares of
the Company and the Subsidiaries on a fully diluted basis.

      NOW, THEREFORE, in consideration of the mutual covenants, agreements,
representations and warranties herein contained, the adequacy of which is hereby
acknowledged, and intending to be legally bound, the Parties agree as follows:

2.    ARTICLE I. DEFINITIONS

      1.1 DEFINITIONS. (a) As used in this Agreement (including its Exhibits and
Schedules), the following terms shall have the meanings set forth or as
referenced below:

      "2006 Audited Financial Statements" has the meaning set forth in Section
5.6(c).

      "2006 Combined Financial Statements" has the meaning set forth in Section
5.6(a).

      "2006 Financial Statement Date" has the meaning set forth in Section
5.6(a).

<PAGE>

                                                               Execution Version

      "2006 Financial Statements" has the meaning set forth in Section 5.6(c).

      "2007 Audited Financial Statements" has the meaning set forth in Section
3.2(iv)(x).

      "2007 Combined Financial Statements" has the meaning set forth in Section
3.2(iv)(y).

      "Adjusted Net Working Capital" means the combined current assets of the
Company less the combined current liabilities of the Company and the
Subsidiaries, determined as of the close of business on the Closing Date and in
accordance with Mexican GAAP; provided, however, that for purposes of
determining Adjusted Net Working Capital, the combined current assets and
current liabilities of the Company and the Subsidiaries shall not include (a)
any cash or cash equivalents or (b) any Debt.

      "Aerolineas Morelia" shall mean Aerolineas de Morelia, S.A. de C.V.

      "Affiliate" means, (i) with respect to any Person that is a legal entity,
any other Person directly or indirectly controlling, controlled by or under
common control with such Person, and (ii) with respect to any Person who is an
individual, his or her spouse or relatives within the second degree of kinship
(parentesco consanguineo).

      "Affiliated and Related-Party Agreements" has the meaning set forth in
Section 5.20(a).

      "Aggregate Net Debt" means, as of any date, the aggregate amount of Debt
of the Company as of such date, less the aggregate amount of unencumbered cash
and cash equivalents of the Company, on a combined basis, as of such date, in
each case, determined in accordance with Mexican GAAP.

      "Agreement" has the meaning set forth in the preamble hereof.

      "Available Escrow Amount" means, as of any date, the aggregate amount
available of the Escrow Amount, as adjusted, released or depleted pursuant to
the terms of Section 2.4 and the Escrow Agreement.

      "Banamex Liens" has the meaning set forth in Section 8.5.

      "Business Day" means a day other than Saturday, Sunday or other day on
which commercial banks in Mexico City, Mexico are authorized or required by Law
to close.

      "Buyer" has the meaning set forth in the recitals.

      "Buyer Indemnified Party" has the meaning set forth in Section 12.1.

      "Buyer's Shareholders' Meeting" means the Buyer's shareholders' meeting to
be held in connection with the acquisition of the Shares and all matters related
with this Agreement pursuant to article 47 of the Mexican Securities Market Law
(Ley del Mercado de Valores).


                                                                               2
<PAGE>

                                                               Execution Version

      "Buyer Voting Control Trust" means the voting control trust (fideicomiso
de voto) created by Industrias CH, S.A.B. de C.V. and Tuberias Procarsa, S.A. de
C.V., in which such entities will transfer the Simec Shares and give irrevocable
instructions to the corresponding trustee (fiduciario) to vote the Simec Shares
in the Buyer's Shareholders' Meeting, which shall be executed in form and
substance reasonably acceptable to the Sellers.

      "Claim Notice" has the meaning set forth in Section 12.3.

      "Closing" has the meaning set forth in Section 3.1.

      "Closing Balance Sheet" has the meaning set forth in Section 2.3(c).

      "Closing Date" has the meaning set forth in Section 3.1.

      "Closing Date Financial Statements" has the meaning set forth in Section
2.3(c).

      "Closing Date Purchase Price" has the meaning set forth in Section 2.3(b).

      "Counter Notice" has the meaning set forth in Section 12.5(a).

      "Combined Interim Financial Statements" has the meaning set forth in
Section 5.6(b).

      "Company" has the meaning set forth in the recitals.

      "Company Material Adverse Effect" means any event, change, circumstance or
occurrence which has had or would reasonably be expected to have a material
adverse effect on the business, assets or liabilities (financial, operative or
otherwise), or results of operations of the Company and the Subsidiaries,
considered as a whole.

      "Competitive Business" means any business in the steel industry conducted
in the territory of Mexico.

      "Consent" means any consent, waiver, approval, authorization, exemption,
registration, license or declaration by any Person or any Governmental
Authority.

      "Contracts" means any and all contracts, agreements, commitments or other
binding undertakings, including those that are warranties, understandings,
arrangements, guarantees, leases, mortgages, bonds, notes and other instruments
(whether written, oral, express or implied).

      "Damages" means damages and losses (danos y perjuicios) in accordance with
applicable Laws in Mexico, which any Party actually, directly and immediately
suffers, incurs or becomes subject to.

      "Debt" means the principal amount (including interest, penalty, fees or
otherwise) of all indebtedness for borrowed money of the Company and the
Subsidiaries on a combined basis including capitalized leases, short term and
long term bank loans, and other financial liabilities


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                                                               Execution Version

or similar interest-bearing liabilities outstanding of the Company and any of
the Subsidiaries (without duplication), determined in accordance with Mexican
GAAP.

      "Determination Date" means the earlier to occur of (a) if the Sellers'
Representative does not timely deliver a Dispute Notice, the date that is
forty-five (45) calendar days following the date on which the Buyer delivers the
Closing Date Financial Statements to the Sellers' Representative (plus such
number of days during which the Sellers' Representative has not received the
supporting documentation and been granted access to the Company and the
Subsidiaries' books and records, following written request therefore from the
Sellers' Representative to the Buyer, which request must be made within fifteen
(15) calendar days from the date of receipt of the Closing Date Financial
Statements), and (b) if the Sellers' Representative timely delivers a Dispute
Notice, the earlier to occur of (i) the date of which the Buyer and the Sellers'
Representative finally and conclusively resolve any and all disputes set forth
in the Dispute Notice, and (ii) the date of the Final Report of the Independent
Accounting Firm.

      "Dispute Notice" has the meaning set forth in Section 2.3(d).

      "Dollars" or "US$" means the legal currency of the United States of
America.

      "Enterprise Value" means US$850,000,000.00 (eight hundred fifty million
Dollars 00/100), or its Peso equivalent as at the relevant date, which is the
total enterprise value of the Company and the Subsidiaries, considered as a
whole.

      "Environmental Claim" means any claim, action, investigation or written
notice to the Company or any of the Subsidiaries by any Person alleging
potential liability (including, without limitation, potential ability for
investigatory costs, cleanup costs, governmental response costs, natural
resource damages, personal injuries, or penalties) arising out of, based on, or
resulting from (a) the presence, or release into the environment, of any
Hazardous Substance at any Owned Real Property or (b) circumstances forming the
basis of any violation, or alleged violation of any applicable Environmental
Law.

      "Environmental Laws" means any Law of Mexico regulating or relating to
pollution prevention, protection of the environment (including ambient air and
surface or subsurface strata), the use of natural resources, the use of water
(including surface water, groundwater, drinking water supplies and aquifer),
including without limitation, those relating to manufacture, processing,
distribution, use, treatment, emissions, discharges, releases or threatened
releases of Hazardous Substances, or otherwise relating to the storage,
disposal, transport or handling of Hazardous Substances.

      "Environmental Permits" means all Permits from any Governmental Authority
required pursuant to any Environmental Law for the operations of the Company or
any of the Subsidiaries as currently conducted.

      "Escrow Agent" has the meaning set forth in the Escrow Agreement.


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                                                               Execution Version

      "Escrow Agreement" has the meaning set forth in Section 2.4(a).

      "Escrow Amount" has the meaning set forth in 2.4(a).

      "Estimated Adjusted Net Working Capital" has the meaning set forth in
Section 2.3(a).

      "Estimated Adjustment Statement" has the meaning set forth in Section
2.3(a).

      "Estimated Aggregate Net Debt" has the meaning set forth in Section
2.3(a).

      "Estimated Closing Balance Sheet" has the meaning set forth in Section
2.3(a).

      "Estimated Financial Statements" has the meaning set forth in Section
2.3(a).

      "Estimated Purchase Price" means the amount resulting from subtracting (i)
the JPMorgan Loan outstanding as at the date of this Agreement, from (ii) the
Enterprise Value.

      "Exhibits" means each of the exhibits to this Agreement which is delivered
by the Sellers or by the Buyer, as the case may be, and which is attached
hereto.

      "FCC" means the Mexican Federal Competition Commission (Comision Federal
de Competencia).

      "Final Aggregate Debt" means the amount of the Aggregate Net Debt of the
Company, on a combined basis, as of the close of the business on the Closing
Date, as finally determined in accordance with the provisions of Section 2.4.

      "Final Adjusted Working Capital" means the amount of Adjusted Net Working
Capital, as finally determined in accordance with the provisions of Section 2.4.

      "Final Report" has the meaning set forth in Section 2.3(e).

      "Final Resolution" has the meaning set forth in Section 2.4(d).

      "Firm Holdback Amount" means a final and definitive amount to be held by
the Escrow Agent in connection with a dispute related to a certain Requested
Holdback, pursuant to Section 12.5.

      "Governmental Authority" means any judicial, legislative or executive
authority (whether federal, state or municipal) or any subdivision, agency,
bureau, court, commission, board, office, instrumentality or other judicial,
administrative or regulatory authority thereof.

      "Hazardous Substance" means (a) any pollutant or contaminant or toxic
chemical, material, substance or waste with corrosive, reactive, toxic,
explosive, flammable characteristics or which presents or contains infectious
agents, (including without limitation, any petroleum products, by-products or
breakdown products, radioactive materials, asbestos-containing materials,
polychlorinated biphenyls and radon gas) and (b) any other chemicals, persistent
organic compounds, materials, wastes or substances or the mixture or those,


                                                                               5
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                                                               Execution Version

regarded, classified or regulated as hazardous or toxic or as a pollutant or
contaminant under any Environmental Law.

      "Indemnified Executives" has the meaning set forth in Section 8.3.

      "Indemnified Party" has the meaning set forth in Section 12.4.

      "Independent Accounting Firm" has the meaning set forth in Section 2.3(e).

      "Individual Interim Financial Statements" has the meaning set forth in
Section 5.6(d).

      "Intellectual Property" means any patents, patent applications,
trademarks, trademark registrations, applications for trademark registrations,
trade secrets, service marks, service mark registrations, applications for
service mark registrations, trade names, labels, slogans, claims of copyright,
copyright registrations, applications for copyright registrations, copyrights,
domain names, drawings, designs and proprietary know-how or information.

      "Interim Financial Statement Date" has the meaning set forth in Section
5.6(b).

      "Interim Financial Statements" has the meaning set forth in Section
5.6(d).

      "Inventory" has the meaning set forth in Section 5.11.

      "IT Assets" has the meaning set forth in Section 5.18(d)

      "JPMorgan Loan" means any and all amounts owed by the Company under a
certain US$720'000,000.00 (seven hundred twenty million Dollars 00/100) Loan
Agreement, dated as of February 5, 2008, entered into by and between the
Company, as borrower, and JPMorgan Chase Bank, N.A., as lender, as of the
Closing Date.

      "Judgment" means any judgment, order, ruling or award of any court,
arbitrator or other Governmental Authority arising out of any Proceeding.

      "Knowledge" shall mean, with respect to the Sellers, the actual knowledge
of a fact or matter by any of Juan Carlos Valladares Garcia, Juan de Dios
Herrera Gonzalez, Leonor Rivera Vicario or any of the individuals listed as
Sellers listed in Exhibit A; provided, however, that for purposes of the
representations and warranties included in Article IV, it shall mean, with
respect to each Seller, his or her actual knowledge of a fact or matter, as the
case may be.

      "Law" means any and all applicable statutes, laws, rules, regulations,
official standards or norms (normas oficiales), ordinances, codes or decrees,
whether federal, state or municipal.

      "Leased Real Property" has the meaning set forth in Section 5.12(a).

      "Liens" has the meaning set forth in Section 5.12(a).


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                                                               Execution Version

      "Mexican GAAP" means generally accepted accounting principles or financial
information standards (normas de informacion financiera), as the case may be, as
in effect from time to time in Mexico.

      "Mexico" means the United Mexican States.

      "Monthly Financial Statements" has the meaning set forth in Section
3.2(iv)(z).

      "Ordinary Course of Business" means, with respect to the Company and the
Subsidiaries, the ordinary performance or execution of any action necessary or
convenient for the adequate and normal development of their corporate purposes
or business activities, which action is consistent in all material respects with
the customs, practices and activities previously performed, executed or carried
out by the Company and the Subsidiaries, as applicable, excluding, consequently,
any act which, based upon the customs, practices and activities previously
conducted by the Company and the Subsidiaries, may be reasonably construed as
extraordinary.

      "Owned Real Property" has the meaning set forth in Section 5.12(a).

      "Parties" has the meaning set forth in the recitals.

      "Permit" means all applicable material permits, authorizations, approvals,
registrations or licenses granted by or obtained from any Governmental
Authority, which are required to operate and conduct the business of the Company
and the Subsidiaries.

      "Permitted Liens" has the meaning set forth in Section 5.12(b).

      "Person" means an individual, corporation, partnership, limited liability
company, association, trust or other entity or organization, including a
government or political subdivision or an agency or instrumentality thereof.

      "Peso" means the lawful currency of Mexico.

      "Plans" has the meaning set forth in Section 5.17(f).

      "Proceeding" means any action, arbitration, audit, examination,
investigation, hearing, litigation, or suit (whether civil, criminal,
administrative, judicial or investigative and whether public or private)
commenced, brought, conducted, or heard by or before, or otherwise involving,
any Governmental Authority.

      "Real Property" has the meaning set forth in Section 5.12(a).

      "Referee" has the meaning set forth in Section 12.5(b).

      "Related Party" means (i) the Sellers, (ii) any director, officer or
employee in the first level of seniority of the Company or the Subsidiaries,
(iii) any director, officer or employee in the two first levels of seniority of
the company or the Subsidiaries, (iv) any relative within the


                                                                               7
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                                                               Execution Version

second degree, whether by consanguinity or marriage, of the individuals referred
to in (i) and (ii) above, or (v) any Person with which any of the individuals
referred to in (i) and (ii) above hold a majority interest in his or her
capacity as shareholder, partner or associate thereof, or of which any of the
individuals referred to in (i) and (ii) above is a director or officer in the
first level of seniority, whom shall for purposes of this definition mean the
chief executive officer, the chief financial officer, the chief operating
officer or other similar officer thereof.

      "Representatives" means, with respect to any Person, its directors,
officers, employees, counsel, representatives, accountants and auditors, as the
case may be.

      "Requested Holdback" means the amount established in a Claim Notice, or if
not then reasonably determinable, the estimated amount, determined in good
faith, of the Damages arising from the claim related to such Claim Notice.

      "Seller Indemnified Party" has the meaning set forth in Section 12.2.

      "Sellers" has the meaning set forth in the recitals.

      "Sellers' Representative" has the meaning set forth in Section 2.5.

      "Schedules" means each of the disclosure schedules to this Agreement which
are delivered by the Sellers to the Buyer on the date hereof and which are
attached hereto.

      "Shares" has the meaning set forth in the recitals.

      "Simec Shares" means the shares representing 75% (seventy five percent) of
the capital stock of the Buyer owned by each of Industrias CH, S.A.B. de C.V.
and Tuberias Procarsa, S.A. de C.V.

      "Subsidiaries" has the meaning set forth in Schedule 5.2(a).

      "Subsidiary Shares" has the meaning set forth in the recitals.

      "Target Aggregate Net Debt" means US$0.00 (zero Pesos 00/100), excluding
the JPMorgan Loan.

      "Target Adjusted Net Working Capital" means US$60'000,000.00 (sixty
million Dollars 00/100), or its Peso equivalent as at the relevant date.

      "Tax" and "Taxes" shall mean all Mexican taxes, duties, contributions,
imposts, levies, fees, or withholdings recognized as such pursuant to the
applicable tax Laws.

      "Tax Authority" means any governmental authority having jurisdiction over
Taxes.

      "Third-Party Claim" has the meaning set forth in Section 12.4.

      (b) In this Agreement (including its Exhibits and Schedules): (i) words
denoting the singular include the plural and vice versa, and words denoting any
gender include all genders;


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                                                               Execution Version

(ii) the words "include," "includes" or "including" as used in this Agreement
shall be deemed to be followed by the words "without limitation;" and (iii) the
words "hereof," "hereby," "herein," "hereunder" and similar terms in this
Agreement refer to this Agreement as a whole and not only to a particular
section in which such words appear.

3.    ARTICLE II. PURCHASE AND SALE OF SHARES

      2.1 PURCHASE AND SALE OF SHARES. (a) Upon the terms and subject to the
conditions set forth in this Agreement, the Sellers hereby sell, assign,
transfer and deliver to the Buyer and its designee the Shares and the Subsidiary
Shares, in the proportions set forth in Exhibit A. The parties acknowledge and
agree that the Buyer shall be bound to the Sellers for any obligations of its
designee under this Agreement.

      (b) Upon the terms and subject to the conditions set forth in this
Agreement, the Buyer and its designee hereby purchase the Shares and the
Subsidiary Shares from the Sellers and, in full consideration therefore, shall
pay the Closing Date Purchase Price, in cash, to the Sellers, in the proportions
set forth in Exhibit A and subject to the adjustment as provided under Section
2.3.

      2.2 PAYMENT OF PURCHASE PRICE. At the Closing, the Buyer shall pay Sellers
the Closing Date Purchase Price by wire transfer to an account or accounts
designated by the Sellers in writing at least two (2) Business Days prior to the
Closing, in immediately available funds. Each Seller shall receive its allocable
portion of the Purchase Price in the proportions set forth in Exhibit A. The
Parties acknowledge and agree that the Escrow Amount shall not be deducted by
the Buyer from the Estimated Purchase Price; conversely, the Escrow shall be
created by the Sellers (whether directly or by means of an Affiliate) pursuant
to Section 2.4 on or before the Closing Date.

      2.3 WORKING CAPITAL ADJUSTMENT. (a) Not more than seven (7) Business Days,
but in no event less than three (3) Business Days, before the Closing Date, the
Sellers' Representative shall deliver to the Buyer (i) an estimated unaudited
combined balance sheet of the Company and the Subsidiaries as at the close of
business on the Closing Date (the "Estimated Closing Balance Sheet") prepared
using its estimate of the changes since the month end immediately preceding the
anticipated Closing Date, and (ii) a statement (the "Estimated Adjustment
Statement" and, together with the Estimated Closing Balance Sheet, the
"Estimated Financial Statements"), which Estimated Adjustment Statement shall
set forth the Sellers' good faith estimate of (x) the Aggregate Net Debt (such
estimated amount, the "Estimated Aggregate Net Debt") and (y) the Adjusted Net
Working Capital (such estimated amount, the "Estimated Adjusted Net Working
Capital"), in each case as of the close of business on the Closing Date, with
such amounts being derived from the Estimated Closing Balance Sheet.
Contemporaneously with the delivery of the Estimated Financial Statements, the
Sellers' Representative shall also deliver to the Buyer copies of supporting
calculations that the Sellers used in preparing the Estimated Financial
Statements.


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                                                               Execution Version

      (b) The Estimated Purchase Price shall be subject to adjustment on the
Closing Date as follows:

            (i) If the Estimated Adjusted Net Working Capital is less than the
      Target Adjusted Net Working Capital, the Estimated Purchase Price shall be
      decreased by an amount equal to the amount by which the Target Adjusted
      Net Working Capital exceeds the Estimated Adjusted Net Working Capital. If
      the Estimated Adjusted Net Working Capital is greater than the Target
      Adjusted Net Working Capital, the Estimated Purchase Price shall be
      increased by an amount equal to the amount by which the Estimated Adjusted
      Net Working Capital exceeds the Target Adjusted Net Working Capital.

            (ii) If the Estimated Aggregate Net Debt is less than the Target
      Aggregate Net Debt, the Estimated Purchase Price shall be increased by an
      amount equal to the amount by which the Target Aggregate Net Debt exceeds
      the Estimated Aggregate Debt. If the Estimated Aggregate Net Debt is
      greater than the Target Aggregate Net Debt, the Estimated Purchase Price
      shall be decreased by an amount equal to the amount by which the Estimated
      Aggregate Net Debt exceeds the Target Aggregate Net Debt.

      The Estimated Purchase Price as adjusted pursuant to this Section 2.3(b)
shall be referred to as the "Closing Date Purchase Price".

      (c) Within forty five (45) calendar days after the Closing Date, the Buyer
shall prepare and deliver to the Sellers' Representative (i) an unaudited
combined balance sheet statement of the Company and the Subsidiaries as at the
Closing Date (the "Closing Balance Sheet") and (ii) a statement (the "Closing
Adjustment Statement") and, together with the Closing Balance Sheet, the
"Closing Date Financial Statements"), which Closing Adjustment Statement shall
set forth (x) the Aggregate Net Debt and (y) the Adjusted Net Working Capital,
in each case as of the close of business on the Closing Date, with such amounts
being derived from the Closing Balance Sheet. The Closing Date Financial
Statements shall be prepared using the same principles and policies used by the
Sellers to prepare the Estimated Financial Statements but without giving effect
to any purchase accounting adjustments or adjustments resulting from actions
taken by the Buyer after the Closing not otherwise contemplated in this
Agreement. Contemporaneously with the delivery of the Closing Date Financial
Statements, the Buyer shall also deliver to the Sellers' Representative copies
of supporting calculations that the Buyer used in preparing the Closing Date
Financial Statements. The Buyer shall (i) grant the Sellers and their
Representatives, including its independent certified public accountants, access
during normal business hours and upon reasonable notice during the period
between the Closing Date and the Determination Date, to those books and records
used in conjunction with, and those officers and employees primarily involved
in, the preparation of the Closing Date Financial Statements and (ii) otherwise
furnish access to the Sellers and their Representatives to such other financial,
operating and other information relating to the business and operations of the
Company or the Subsidiaries (other than the work papers of independent certified
public


                                                                              10
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                                                               Execution Version

accountants) as the Sellers or any of their Representatives may reasonably
request during the period between the Closing Date and the Determination Date in
order to review and evaluate the Closing Date Financial Statements and determine
the amount of Sellers' objections thereto, if any.

      (d) In the event that the Sellers' Representative either (i) have no
objections to the Closing Date Financial Statements as prepared by the Buyer and
do not deliver a Dispute Notice to the Buyer, or (ii) the Sellers'
Representative otherwise fail to deliver a Dispute Notice to the Buyer within
the time period required by the immediately following sentence, then, on the
date that is forty-five (45) calendar days following the date on which the Buyer
delivers the Closing Date Financial Statements to the Sellers' Representative
(plus such number of days during which the Sellers and their Representatives
have not received the required supporting documentation and been granted access
to the books and records of the Company and the Subsidiaries in accordance with
the terms hereof and following a written request therefore from the Sellers'
Representative to the Buyer), the Closing Date Financial Statements prepared by
the Buyer, including the Aggregate Net Debt and Adjusted Net Working Capital set
forth therein, shall be deemed to be and shall become final, binding and
conclusive on the Sellers. In the event that the Sellers' Representative dispute
the amount of Aggregate Net Debt or the amount of Adjusted Net Working Capital
as set forth in the Closing Date Financial Statements, the Sellers'
Representative shall, within forty-five (45) calendar days following the date on
which the Buyer delivers the Closing Date Financial Statements to the Sellers,
prepare and deliver to the Buyer a written notice of dispute (the "Dispute
Notice"), which Dispute Notice shall (i) specifically identify, and provide a
reasonably detailed explanation of, the basis upon which the Sellers'
Representative have delivered such Dispute Notice, including, without
limitation, the applicable provisions of this Agreement on which the dispute set
forth in such Dispute Notice is based, and (ii) set forth the amount of
Aggregate Net Debt and/or Adjusted Net Working Capital, as applicable, that the
Sellers' Representative believes existed as of the close of business on the
Closing Date, together with supporting documents and information that the
Sellers' Representative has utilized in connection with making such
determinations and calculations.

      (e) In the event that the Sellers' Representative timely delivers a
Dispute Notice to the Buyer in accordance with the terms hereof, the Buyer and
the Sellers' Representative shall attempt in good faith to reconcile their
differences, and any resolution by them as to any such disputes shall be final,
binding and conclusive on all of the Parties. If the Buyer and the Sellers'
Representative are unable to resolve any such dispute within fifteen (15)
Business Days of the Buyer's receipt of the Dispute Notice from the Sellers'
Representative, the Buyer and the Sellers' Representative shall submit the items
remaining in dispute for resolution to the financial transaction's services
section of the Mexican affiliates of PricewaterhouseCoopers or, in the event
PricewaterhouseCoopers shall not be available to act, of Deloitte (the
"Independent Accounting Firm"). Upon the selection of the Independent Accounting
Firm, and in any event within five (5) Business Days following such selection,
the Buyer and the Sellers' Representative shall submit to such Independent
Accounting Firm (and the other Party) all


                                                                              11
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                                                               Execution Version

documentary materials and analyses that the Buyer or the Sellers'
Representative, as the case may be, believes to be relevant to a resolution of
the dispute set forth in the Dispute Notice but excluding any work papers of
independent certified public accountants. The Independent Accounting Firm shall,
within thirty (30) Business Days after receipt of all such submissions by the
Buyer and the Sellers, make a determination in accordance with standards
provided herein and deliver to the Buyer and the Sellers' Representative a
written report (the "Final Report") containing such Independent Accounting
Firm's determination of the disputed matters that were so submitted to it (and
only such matters). The determination of the Independent Accounting Firm that is
contained in the Final Report shall be final, binding and conclusive on the
Buyer and the Sellers. The fees and expenses of the Independent Accounting Firm
shall be borne by the Buyer, on the one hand, and the Sellers, on the other
hand, in such proportion as shall be determined by the Independent Accounting
Firm giving consideration to the Buyer's and Sellers' initial positions with
respect to the Closing Date Financial Statement and how far their respective
positions were from the Independent Accounting Firm's decision.

      (f) No later than three (3) Business Days following the Determination
Date, the Sellers or the Buyer, as the case may be, shall make the following
payments, after netting against each other all payments required to be made by
the Sellers and/or the Buyer, as the case may be, pursuant to paragraphs (i) to
(iv) immediately below, with all such payments being made to the applicable
Person(s) via wire transfer of immediately available funds to the account or
accounts designated in writing by the Person(s) entitled to receive such
payment:

            (i) If the Estimated Adjusted Net Working Capital is less than the
      Final Adjusted Net Working Capital, the Buyer shall pay to the Sellers an
      amount equal to the amount by which the Final Adjusted Net Working Capital
      exceeds the Estimated Adjusted Net Working Capital, in the proportions set
      forth in Exhibit A;

            (ii) If the Estimated Adjusted Net Working Capital is greater than
      the Final Adjusted Net Working Capital, the Sellers shall pay (on a
      pro-rata basis, considering each Sellers' ownership percentage of the
      Company immediately prior to the Closing) to the Buyer an amount equal to
      the amount by which the Estimated Adjusted Net Working Capital exceeds the
      Final Adjusted Net Working Capital;

            (iii) If the Estimated Aggregate Net Debt is less than the Final
      Aggregate Net Debt, the Sellers shall pay (on a pro-rata basis,
      considering each Sellers' ownership percentage of the Company immediately
      prior to the Closing) to the Buyer an amount equal to the amount by which
      the Final Aggregate Net Debt exceeds Estimated Aggregate Net Debt; and

            (iv) If the Estimated Aggregate Net Debt is greater than the Final
      Aggregate Net Debt, the Buyer shall pay to the Sellers an amount equal to
      the amount by which the Estimated Aggregate Net Debt exceeds Final
      Aggregate Net Debt.

      (g) Any payments made by the Parties pursuant to this Section 2.3 shall
constitute adjustments to the Closing Date Purchase Price.


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                                                               Execution Version

      (h) The Parties acknowledge and agree that each of the Adjusted Net
Working Capital, the Estimated Adjusted Net Working Capital, the Final Adjusted
Net Working Capital and the Target Adjusted Net Working Capital shall be
determined in conformity with Mexican GAAP, in a manner consistent with the
Company's or the Subsidiaries' historical accounting practice, as the case may
be, applied on a consistent basis, except as set forth in Schedule 5.6(d)(ii).

      2.4 ESCROW. (a) On the Closing Date, the Sellers (directly or indirectly)
shall transfer (on a pro-rata basis, in the proportions set forth in Exhibit A)
an amount equal to 10% (ten percent) of the Enterprise Value (the "Escrow
Amount"), to the Escrow Agent, to secure, on a joint and several basis and
without distinction among the Sellers, payment of any amounts that may be due by
any of the Sellers to the Buyer pursuant to Article XII. The Escrow Amount shall
remain subject to the escrow agreement entered into by each of the Escrow Agent,
the Sellers and the Buyer, which shall be executed in form and substance
reasonably acceptable to the Buyer (the "Escrow Agreement"), until the date
which occurs two (2) years and six (6) months from the date hereof.

      (b) Subject to any unresolved claims arising pursuant to the provisions of
Article XII, the Escrow Amount shall be released to the Sellers (on the basis
and to the bank accounts specified in writing by the Sellers' Representative) in
four (4) installments, as follows:

            (i) On the first (1st) anniversary of the Closing Date, the Sellers
      shall be entitled to receive forty percent (40%) of the Escrow Amount,
      minus (1) any amount paid to the Buyer from the Escrow Amount as payment
      of any claim under Article XII during the year preceding the first (1st)
      anniversary of the Closing Date, minus (2) any Requested Holdback or Firm
      Holdback Amount, as applicable, with respect to unresolved Claim Notices,
      plus (3) any interest accrued in respect of the Escrow Amount.

            (ii) Eighteen (18) months after the Closing Date, the Sellers shall
      be entitled to receive twenty (20%) of the Escrow Amount, minus (1) any
      amount paid to the Buyer from the Escrow Amount as payment of any claim
      under Article XII that either corresponds to the period from the first
      (1st) anniversary of the Closing Date to the date in which eighteen (18)
      months from the Closing Date have elapsed or, if pertaining to the prior
      period, was not already deducted under (i) above, minus (2) any Requested
      Holdback or Firm Holdback Amount, as applicable, with respect to
      unresolved Claim Notices submitted prior to the date in which eighteen
      (18) months from the Closing Date have elapsed, plus (3) any interest
      accrued in respect of the Escrow Amount.

            (iii) On the second (2nd) anniversary of the Closing Date, the
      Sellers shall be entitled to receive twenty (20%) of the Escrow Amount,
      minus (1) any amount paid to the Buyer from the Escrow Amount as payment
      of any claim under Article XII that either corresponds to the period from
      the date in which eighteen (18) months from the Closing Date have elapsed
      to the second (2nd) anniversary of the Closing Date or, if


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                                                               Execution Version

      pertaining to the prior period, was not already deducted under (i) above,
      minus (2) any Requested Holdback or Firm Holdback Amount, as applicable,
      with respect to unresolved Claim Notices submitted prior to the second
      (2nd) anniversary of the Closing Date, plus (3) any interest accrued in
      respect of the Escrow Amount.

            (iv) Thirty (30) months after the Closing Date, the Sellers shall be
      entitled to receive any Available Escrow Amount as of such date, minus (1)
      any Requested Holdback or Firm Holdback Amount, as applicable, with
      respect to unresolved Claim Notices submitted prior to the date in which
      thirty (30) months from the Closing Date have elapsed, plus (2) any
      interest accrued in respect of the Escrow Amount.

      (c) Subject to the terms hereof, the Buyer shall have no responsibility in
respect of the allocation of the amounts released from the Available Escrow
Account or in connection with whether the applicable Sellers receive the
released amounts, other than, if applicable, causing the transfer of the
released amounts to the relevant accounts by the Escrow Agent.

      (d) If on the dates in which an amount is scheduled to be released under
the Escrow Agreement, as set forth in clause (b) of this Section 2.3, including
on the date in which the thirty (30) months from the Closing Date have elapsed,
there are one (1) or several claims hereunder that remain unresolved, the
applicable portions of the Escrow Amount shall remain in escrow pursuant to the
Escrow Agreement, but the Buyer may only collect the applicable amounts (i) as a
result of agreement between the Buyer and the Sellers' Representative, or (ii)
if a final judgment, not subject to appeal, resolves such claim (either (i) or
(ii), a "Final Resolution"), provided that upon Final Resolution of a claim, any
excess amount (not subject to any other claim), shall be released to the
Sellers.

      (e) The Parties acknowledge and agree that if any of the Requested
Holdbacks referred to in item (b) above are reduced pursuant to Section 12.5
when becoming Firm Holdback Amounts, then the Escrow Agent shall immediately
release to the Sellers an amount equal to the difference between (i) the
relevant Requested Holdback, minus (ii) the corresponding Firm Holdback Amount.

      2.5 SELLERS' REPRESENTATIVE. (a) For purposes of this Agreement, the
Sellers hereby appoint Ms. Maria Josefina Victoria Valladares Garcia as their
representative (the "Sellers' Representative"), with authority to act for
Sellers and to bind any and all Sellers, including any absent Seller or any
Seller not in agreement with an action to be taken or omitted to be taken by the
other Sellers or by the Sellers' Representative, in connection with any action
taken or expected to be taken under Articles II and XII and Section 14.4.
Additionally, the Sellers hereby appoint Mr. Pablo Valladares Garcia as
alternate Seller's Representative, who shall be entitled to act solely in the
event that Ms. Maria Josefina Victoria Valladares Garcia is deceased or becomes
physically or mentally incapable to act as Seller's Representative. Under such
circumstances, Mr. Pablo Valladares Garcia shall have the same authority as the
Seller's Representative and will be considered Seller's Representative for
purposes of this Agreement. In connection with the designation of the Sellers'
Representative and its alternate, the Sellers


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                                                               Execution Version

shall grant a power-of-attorney to Ms. Maria Josefina Victoria Valladares Garcia
and Mr. Pablo Valladares Garcia, in terms reasonably satisfactory to the Buyer,
which shall be formalized before a notary public in Mexico. Sellers shall
deliver a copy of such powers-of-attorney to the Buyer pursuant to Section
3.2(v).

      (b) References in this Agreement to the Sellers' Representative shall also
apply to its alternate, in the event that Mr. Pablo Valladares assumes such role
under the circumstances described in item (a) above.

      2.6 APPOINTMENT OF TAX REPRESENTATIVE. (a) All payments made to each of
the Sellers (all of whom are individuals and residents of Mexico for tax
purposes) shall be made after deduction of all applicable Mexican withholding
Taxes, which shall be remitted to the appropriate Tax Authority and shall be
deemed part of the Closing Date Purchase Price (which shall be thus reduced and
delivered to the relevant Sellers, after such Mexican withholding Taxes);
provided, however, that all of the Sellers hereby elect to file a tax report
(dictamen fiscal) in order to avoid such withholding requirement, pursuant to
Article 154 of the Mexican Income Tax Law (Ley del Impuesto sobre la Renta) and
Article 204 of the Mexican Income Tax Law Regulations (Reglamento de la Ley del
Impuesto sobre la Renta). Each of the Sellers shall deliver to the Buyer, within
sixty (60) calendar days following the Closing Date, a copy of the notice
(aviso) to which such Article 204 refers, and a copy of the relevant tax report
(dictamen fiscal) and tax return, in both cases stamped as filed with the
Mexican Tax Authorities. For the avoidance of doubt, the Parties acknowledge and
agree that the Buyer shall not withhold any Taxes to any of the Sellers in
connection with the payments made pursuant to this Agreement, including but not
limited to the Closing Date Purchase Price.

      (b) Notwithstanding the foregoing, if any electing Seller shall not timely
comply with any of its obligations set forth in paragraph (a) above, then the
Buyer shall be entitled to (i) pay the applicable taxes (and all related
amounts) on behalf of such Seller to the Mexican Tax Authorities, and (ii)
collect such amount from the relevant Seller, plus interest on the amount paid
by the Buyer, at a rate of one percent (1.00%) per month elapsed, prior to
payment by such Seller to the Buyer.

      2.7 SETTLEMENT OF INTER-COMPANY ACCOUNTS. Except as set forth in Section
5.20, at or prior to the Closing, the Sellers shall cause the Company to pay to
the Sellers, their Affiliates or Related Parties all amounts anticipated to be
then due as of the Closing, including merchandise purchased or services provided
which have not been billed to the Company as of the Closing, under stated terms
by the Company to the respective Sellers, their Affiliates or Related Parties,
under inter-company accounts for merchandise purchased through, or services
provided by, the Sellers, their Affiliates or Related Parties, or otherwise owed
by the Company to the Sellers, their Affiliates or Related Parties. Likewise, at
or prior to the Closing, the Sellers shall pay and shall cause any and all of
their Affiliates and Related Parties to pay to the Company or the Subsidiaries
all amounts owed and outstanding to the Company or the Subsidiaries (including,
without limitation, any amounts due and payable between the Company or any of
the Subsidiaries and Aerolineas Morelia).


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                                                               Execution Version

4.    ARTICLE III. THE CLOSING: CLOSING OBLIGATIONS

      3.1 THE CLOSING. (a) The Closing will take place at 8:00 a.m. (Mexico City
time), at the offices of Galicia y Robles, S.C., located at Blvd. Manuel Avila
Camacho No. 24, 7th floor, Lomas de Chapultepec, C.P. 11000, Mexico City,
Federal District, Mexico, or at such other time and location as the Parties may
agree in writing, on the third (3rd) Business Day following the fulfillment of
(i) all the conditions set forth in Article IX which have not been waived by the
Buyer, and (ii) all the conditions set forth in Article X which have not been
waived by the Sellers. The date on which the Closing is held is sometimes
referred to herein as the "Closing Date." Subject to the provisions of Article
XI, failure to consummate the purchase and sale provided in this Agreement on
the date and time and at the place determined pursuant to this Section 3.1 shall
not result in the termination of this Agreement and shall not relieve any Party
of any of its obligations under this Agreement.

      (b) The Parties acknowledge and agree that the Closing (and, therefore,
the transfer of title of the Shares and the Subsidiary Shares by the Sellers and
the payment of the Closing Date Purchase Price by the Buyer), shall occur if and
only when (i) the conditions precedent provided in Articles IX and X have been
fully satisfied or waived pursuant to this Agreement and (ii) the Parties have
delivered each and every one of the items identified in Sections 3.2 and 3.3
(the "Closing").

      3.2 DELIVERIES BY THE SELLERS. At the Closing, the Sellers shall deliver
the Buyer (unless delivered previously) the following:

            (i) Stock certificates representing the Shares and the Subsidiary
      Shares duly endorsed (endosados en propiedad) in favor of the Buyer and
      its designee, as the case may be, accompanied by a certificate issued by
      the Secretary of the Company and a notation made on the Company's or the
      relevant Subsidiary's shares registry (libro de registro de acciones),
      setting forth that the Buyer and its designee have been registered as
      owners of the Shares and the Subsidiary Shares, as the case may be;

            (ii) Certificates executed by each of the Sellers (y) certifying to
      the validity, accuracy and completeness on the Closing Date of such
      Seller's representations and warranties set forth in this Agreement, and
      (z) stating that such Seller is not in default under any obligation or
      provision of this Agreement;

            (iii) As to each Seller that is a married individual, a copy of his
      or her marriage certificate under separate assets regime (regimen de
      separacion de bienes) under the Laws of Mexico;

            (iv) Original executed counterpart of the Escrow Agreement by the
      Sellers and the Escrow Agent, which shall be executed in form and
      substance reasonably


                                                                              16
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                                                               Execution Version

      acceptable to the Buyer, and documents evidencing the transfer of the
      Escrow Amount to the Escrow Agent pursuant to Section 2.4;

            (v) Original executed counterpart of the put/call agreement
      regarding the shares of Acero Transportes SAN, S.A. de C.V., or any other
      agreement reasonably satisfactory to the parties for (y) effectively
      transferring the business of such company to the Buyer and (z) providing
      for the subsequent transfer of the shares representing the capital stock
      of Acero Transportes SAN, S.A. de C.V. from the relevant Sellers to the
      Buyer within a reasonable period of time;

            (vi) Copies of the following financial statements: (x) unaudited
      combined balance sheet of the Company and the Subsidiaries as at December
      31, 2007, together with the corresponding unaudited combined income
      statement of the Company and the Subsidiaries for the fiscal year ended
      December 31, 2007 (the "2007 Combined Financial Statements"); (y) audited
      balance sheet of each of the Company and the Subsidiaries as at December
      31, 2007, together with the corresponding audited income statement of each
      of the Company and the Subsidiaries for the fiscal year ended December 31,
      2007 (the "2007 Audited Financial Statements"); and (z) within the first
      fifteen (15) days of each calendar month that follows the execution of
      this Agreement, a copy of the Company and the Subsidiaries monthly
      internal financial statements with respect to any monthly period elapsed
      after December 31, 2007 (reflecting the annual information to such period)
      and concluded at least fifteen (15) calendar days prior to the Closing
      Date (the "Monthly Financial Statements");

            (vii) Originals of the corporate books (including, the shareholders'
      meetings minutes book, the board of directors' minutes book (only with
      respect to the Company), the stock registry book and the capital
      variations book, as applicable) and other material records of the Company
      and the Subsidiaries;

            (viii) Copy of the powers-of-attorney in favor of the Sellers'
      Representative and its alternate, pursuant to Section 2.5;

            (ix) Copy of the shareholders' meeting minutes evidencing the
      Company's Shareholders' Meeting and the Subsidiaries' Shareholders'
      Meeting held pursuant to Sections 3.4 and 3.5, respectively;

            (x) Copy of the documents evidencing any spin-off and/or separation
      of the Company's current assets or subsidiaries, as the case may be,
      pursuant to Sections 7.1 and 7.2;

            (xi) Copies of third party Consents required or necessary for the
      execution, performance, validity or enforceability of this Agreement, if
      any;

            (xii) Originals of the public deeds or other documents evidencing
      the Owned Real Property and certificates of existence or non-existence of
      liens (certificado de


                                                                              17
<PAGE>

                                                               Execution Version

      libertad o existencia de gravamenes), dated any day between the date of
      execution of this Agreement and the Closing Date, evidencing that each of
      those properties are free of any Liens (except for Permitted Liens or the
      Banamex Liens);

            (xiii) Copies of the commercial folios (folio mercantiles) of the
      Company and the Subsidiaries, issued by the Public Registry of Commerce
      not earlier than December 1, 2007, evidencing that the Company and the
      Subsidiaries are free of any Liens (except for Permitted Liens or the
      Banamex Liens);

            (xiv) Copies of the documents evidencing the settlement of
      inter-company accounts between the Sellers, their Affiliates and Related
      Parties pursuant to Section 2.7, if any;

            (xv) Original executed counterpart of the advisory agreement or
      comparable arrangement entered between the Company or any of the
      Subsidiaries and Mr. Juan Carlos Valladares Garcia; and

            (xvi) Such other documents as the Buyer may reasonably request.

      3.3 DELIVERIES BY THE BUYER. At the Closing, the Buyer shall deliver to
the Sellers' Representative (unless delivered previously and except in the case
of 3.3(i), which shall be delivered to each of the Sellers as described therein)
the following:

            (i) The full Closing Date Purchase Price pursuant to Sections 2.2
      and 2.3, in the proportions set forth in Exhibit A;

            (ii) A certificate executed by an authorized officer of the Buyer
      (i) certifying to the validity, accuracy and completeness on the Closing
      Date of the Buyer's representations and warranties set forth in this
      Agreement, and (z) stating that the Buyer is not in default under any
      obligation or provision of this Agreement;

            (iii) A certificate executed by an authorized officer of the Buyer
      evidencing its authority for the execution, delivery and performance of
      this Agreement and the consummation by the Buyer of the transactions
      contemplated hereby;

            (iv) A certified copy of the power-of-attorney (or the relevant
      document evidencing sufficient authority) granted to the individual
      signing this Agreement on behalf of the Buyer, evidencing sufficient
      authority of such individual to execute this Agreement;

            (v) Adequate evidence of the authorization by the FCC for the
      consummation of the transactions provided in this Agreement; and

            (vi) Such other items as the Sellers' Representative may reasonably
      request.

      3.4 COMPANY SHAREHOLDERS' MEETING. The Sellers shall cause a meeting of
the shareholders of the Company to be convened prior to the Closing at which,
effective as


                                                                              18
<PAGE>

                                                               Execution Version

of Closing: (i) the executive officers, directors, secretaries and statutory
auditors (comisarios) of the Company listed in Schedule 7.6 shall resign and
such resignations shall be accepted; (ii) new executive officers, directors,
secretaries and statutory auditors shall be appointed, as per instructions of
the Buyer; (iii) those certain powers of attorney granted by the Company listed
on Schedule 3.4 shall be revoked and new powers of attorney will be granted to
those executive officers, directors and secretaries referred to in item (ii)
above, as per instructions of the Buyer; and (iv) the current executive
officers, directors, secretaries and statutory auditors referred to in item (i)
above shall be released and indemnified in accordance with Section 8.3.

      3.5 SUBSIDIARIES' SHAREHOLDERS' MEETINGS. The Sellers shall cause a
meeting of the shareholders of each of the Subsidiaries to be convened prior to
the Closing at which, effective as of Closing: (i) the executive officers,
directors, secretaries and statutory auditors listed in Schedule 7.6 shall
resign and such resignations shall be accepted; (ii) new executive officers,
directors and statutory auditors shall be appointed, as per instructions of the
Buyer; (iii) those certain powers of attorney granted by the Subsidiaries listed
on Schedule 3.5 shall be revoked and new powers of attorney will be granted to
those executive officers, directors and secretaries referred to in item (ii)
above, as per instructions of the Buyer; and (iv) the current executive
officers, directors, secretaries and statutory auditors referred to in item (i)
above shall be released and indemnified in accordance with Section 8.3.

      3.6 BUYER'S SHAREHOLDERS MEETING. The Buyer shall cause a meeting of the
shareholders of the Buyer to be convened prior to the Closing at which (i) the
acquisition of the Shares and the Subsidiary Shares and any other transactions
and matters related to this Agreement shall be discussed, and (ii) the Simec
Shares shall be voted in favor of such acquisition pursuant to the Buyer Voting
Control Trust. The Buyer shall deliver to the Seller's Representative an
executed copy of the Buyer Voting Control Trust within ten (10) calendar days as
of the execution of this Agreement.

5.

6.    ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF EACH SELLER

      Each Seller, severally and not jointly, represents and warrants to the
Buyer with respect to such Seller and the Shares owned by such Seller as
follows:

      4.1 CAPACITY; AUTHORIZATION AND AUTHORITY. Each Seller is a natural
person, has sufficient legal capacity and, if married, is married under separate
assets regime under the Laws of Mexico.

      4.2 DUE EXECUTION AND DELIVERY; ENFORCEABILITY. Each Seller has duly
executed and delivered this Agreement and it constitutes its legal, valid and
binding obligation, enforceable against each such Seller in accordance with its
terms.

      4.3 CONSENTS AND APPROVALS; NO VIOLATION TO RESULT. (a) Except as set
forth in Schedule 4.3, neither the execution and delivery of this Agreement nor
the


                                                                              19
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                                                               Execution Version

consummation of the transactions contemplated hereby shall (i) violate any
Judgment or Law applicable to such Seller, (ii) violate, or result in a breach
of, or constitute a default under (or would result in or constitute such a
breach or default with notice or lapse of time or both) any provision of any
Contract or Permit to which such Seller is a party, (iii) require the Consent of
any party to any of the items described in subsection (ii) above, or (iv)
require any Consent from a Governmental Authority; other than such violations,
breaches, defaults or failures to obtain Consents which, individually or in the
aggregate, would not have a material adverse effect on the ability of such
Seller to consummate the transactions contemplated hereby.

      (b) Except for (i) the authorization required from the FCC, and (ii) the
consent from each of the relevant Seller's spouse referred to in Section
3.2(iii), as applicable, which have been duly obtained at or prior to Closing,
no material consent, approval, order or authorization of, or registration or
filing with, any federal, state or municipal authority or any court of competent
jurisdiction is required to be obtained or made by or with respect to the Seller
in connection with the execution and delivery of this Agreement or the
consummation of the other transactions contemplated hereby.

      4.4 OWNERSHIP OF SHARES AND SUBSIDIARY SHARES. (a) Each Seller is, and
will be, immediately prior to the Closing, the record and beneficial owner of
the number Shares and Subsidiary Shares set forth opposite to its name in
Exhibit A. Such Shares and Subsidiary Shares shall be delivered to the Buyer or
its designee (in the proportions set forth in Exhibit A) at the Closing free and
clear of all pledges, security interests, put or call options, liens,
encumbrances and claims or rights of every kind therein or thereto, and the
delivery of such Shares and Subsidiary Shares by such Seller to the Buyer
pursuant to this Agreement shall transfer lawful, valid, marketable and
indefeasible title thereto to the Buyer. Such Seller has not entered into any
contract or agreement, other than this Agreement, to sell or otherwise transfer
any such Shares and Subsidiary Shares or grant any subscription, conversion,
exchange or issuance of warrants, rights or interests therein to any other
party. All legal and other steps necessary for such Seller to transfer and
deliver such Shares of Subsidiary Shares to the Buyer and perform its
obligations hereunder pursuant to all applicable jurisdictions have been, or
will have been, taken as of the Closing.

      4.5 BROKERS. The Seller has not engaged any broker, finder or agent with
respect to the transactions contemplated by this Agreement nor with respect to
the Company's sale or merger or any other transaction relating to the
disposition of the Company's assets. Neither the Buyer nor the Company will have
any obligation to pay any broker's, finder's, investment banker's, financial
advisor' s or similar fees, in connection with this Agreement or the
transactions contemplated hereby, by reason of any action taken by or on behalf
of the Seller.

7.    ARTICLE V. REPRESENTATIONS AND WARRANTIES OF THE SELLERS

      Each Seller, severally and not jointly, represents and warrants to the
Buyer as follows:


                                                                              20
<PAGE>

                                                               Execution Version

      5.1 CORPORATE ORGANIZATION AND AUTHORITY. The Company is a sociedad
anonima de capital variable duly organized and validly existing under the Laws
of Mexico and has all requisite corporate power and authority to own, operate
and lease its properties and to carry on its business as now being conducted and
as heretofore been conducted. The Sellers have delivered to the Buyer true,
complete and accurate copies of the bylaws and amendments to the Company's
bylaws.

      5.2 SUBSIDIARIES OF THE COMPANY. (a) Except for the subsidiaries set forth
in Schedule 5.2(a), the Company does not own stock of or any equity interest in
any other corporation or legal entity. All of the Subsidiary Shares are directly
or indirectly owned by the Company free and clear of any Liens. Upon Closing,
Seller will not own any right, asset, property or interest used in the business
of the Subsidiaries.

      (b) Schedule 5.2(b) sets forth an organizational chart indicating the
equity participation of the Company and each Subsidiary as of the date hereof,
indicating for each Subsidiary its jurisdiction of incorporation and the
ownership interest of the Company and any Person therein.

      (c) Each Subsidiary is a corporation duly organized and validly existing
under the Laws of Mexico and each Subsidiary has all requisite corporate power
and authority to own, operate and lease its properties and to carry on its
business as now being conducted and as heretofore been conducted. The Sellers
have delivered to the Buyer true, complete and accurate copies of the bylaws and
amendments to the Subsidiary's bylaws.

      5.3 CONSENTS AND APPROVALS; NO VIOLATION TO RESULT. (a) Except for (i) the
authorization required from the FCC, and (ii) the consent from the Seller's
spouse, as applicable, which shall be obtained at or prior to Closing, no
material Consent of any Governmental Authority is required to be obtained or
made by or with respect to the Company or the Subsidiaries in connection with
the execution and delivery of this Agreement or the consummation of the
transactions hereunder.

      (b) Except as set forth in Schedule 5.3(b), neither the execution and
delivery of this Agreement by the Seller nor the consummation of the
transactions contemplated hereby shall (i) violate or result in a breach of any
provision of the Company's or the Subsidiaries' bylaws, as applicable, (ii)
violate any Judgment or Law applicable to the Company or the Subsidiaries, (iii)
violate, or result in a breach of, or constitute a default under (or would
result in or constitute such a breach or default with notice or lapse of time or
both) any provision of any Contract or Permit to which the Company or any of the
Subsidiaries is a party, (iv) require the Consent of any party to any of the
items described in subsection (iii) above, or (v) require any Consent from a
Governmental Authority; other than with respect to clauses (ii), (iii), (iv) or
(v) above, such violations, breaches, defaults or failures to obtain Consents
which, individually or in the aggregate, would not cause a Company Material
Adverse Effect.

      5.4 AUTHORIZED AND OUTSTANDING CAPITAL STOCK. Except as set forth in
Schedule 5.4, the Company and the Subsidiaries, respectively, have no other
class or series


                                                                              21
<PAGE>

                                                               Execution Version

of capital stock authorized, issued or outstanding. As of the date of this
Agreement, there is no transfer of shares pending registration in the stock
registry of the Company and the Subsidiaries.

      5.5 NO COMMITMENT TO ISSUE CAPITAL STOCK OR RIGHTS TO ACQUIRE CAPITAL
STOCK. The Company has not entered into any Contract or made any commitment to
sell or otherwise transfer or issue any shares of the Company's or any of the
Subsidiaries capital stock, nor are there any outstanding options,
subscriptions, warrants, conversion rights or similar rights of any kind
convertible into any shares of the Company's or any of the Subsidiaries' capital
stock. As of the date of this Agreement, there is no outstanding contribution
towards future capital increases (aportaciones para futuros aumentos de capital)
in the Company or the Subsidiaries.

      5.6 FINANCIAL STATEMENTS. (a) The unaudited combined balance sheet of the
Company and the Subsidiaries as at December 31, 2006, together with the
corresponding unaudited combined income statement of the Company and the
Subsidiaries for the fiscal year ended December 31, 2006 (the "2006 Financial
Statement Date"), a copy of which are attached as Schedule 5.6(a), are referred
to herein as the "2006 Combined Financial Statements." The 2006 Combined
Financial Statements were prepared in conformity with Mexican GAAP, except for
the exclusion of inflation accounting effects. The 2006 Combined Financial
Statements were prepared (x) using historical Pesos (i.e., inflation accounting
effects are excluded) and (y) in a manner consistent with the Company's
historical accounting practice applied on a consistent basis

      (b) The unaudited combined balance sheet of the Company and the
Subsidiaries as at June 30, 2007, together with the corresponding unaudited,
combined income statement of the Company and the Subsidiaries for the six-month
period ended June 30, 2007 (the "Interim Financial Statement Date"), a copy of
which are attached as Schedule 5.6(b), are referred to herein as the "Combined
Interim Financial Statements." The Combined Interim Financial Statements were
prepared in conformity with Mexican GAAP, except for the exclusion of inflation
accounting effects. The Combined Interim Financial Statements were prepared (x)
using historical Pesos (i.e., inflation accounting effects are excluded) and (y)
in a manner consistent with the Company's historical accounting practice applied
on a consistent basis

      (c) The audited balance sheet of each of the Company and the Subsidiaries
as at December 31, 2006, together with the corresponding audited income
statement of each of the Company and the Subsidiaries for the 2006 Financial
Statement Date, copies of which are attached as Schedule 5.6(c)(i), are referred
to herein as the "2006 Audited Financial Statements" (and, together with the
2006 Company Financial Statements, the "2006 Financial Statements"). The 2006
Audited Financial Statements (i) present fairly, in all material respects, the
financial position of each of the Company and the Subsidiaries, as the case may
be, at the 2006 Financial Statement Date, and (ii) were prepared in conformity
with Mexican GAAP, in a manner consistent with the Company's or the
Subsidiaries' historical accounting practice, as the case may be, applied on a
consistent basis, except as set forth in Schedule 5.6(c)(ii).


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                                                               Execution Version

      (d) The unaudited balance sheet of each of the Company and the
Subsidiaries as at June 30, 2007, together with the corresponding unaudited
income statement of each of the Company and the Subsidiaries for the Interim
Financial Statement Date, copies of which are attached as Schedule 5.6(d)(i),
are referred to herein as the "Individual Interim Financial Statements" (and,
together with the Combined Interim Financial Statements, the "Interim Financial
Statements"). The Individual Interim Financial Statements (i) present fairly, in
all material respects, the financial position of the Company and the
Subsidiaries, as the case may be, at the Interim Financial Statement Date, and
(ii) were prepared in conformity with Mexican GAAP, in a manner consistent with
the Company's historical accounting practice applied on a consistent basis,
subject to year-end closing adjustments, as the case may be, applied on a
consistent basis, except as set forth in Schedule 5.6(d)(ii).

      5.7 UNDISCLOSED AND CONTINGENT LIABILITIES. Except (i) as set forth in the
Interim Financial Statements, (ii) for liabilities that have arisen in the
Ordinary Course of Business subsequent to the Interim Financial Statement Date,
(iii) for obligations and liabilities arising under Contracts entered into by
the Company or the Subsidiaries in the Ordinary Course of Business, in each case
of items (ii) and (iii) which could not be reasonably expected to have a Company
Material Adverse Effect, according to Mexican GAAP, and (iv) as set forth in
Schedules 5.7 and 5.8, the Company and the Subsidiaries have no material
liabilities or obligations of a type required to be reflected on the Interim
Financial Statements.

      5.8 ABSENCE OF CERTAIN CHANGES. Except as set forth in Schedule 5.8, since
the Interim Financial Statement Date, the business of the Company and the
Subsidiaries has been conducted in the Ordinary Course of Business, and there
has not been:

            (i) any Company Material Adverse Effect, other than changes caused
      by events in the Mexican economy, none of which either individually or in
      the aggregate has been materially adverse or could reasonably be expected
      to be materially adverse to the Company and the Subsidiaries taken as a
      whole;

            (ii) any damage, destruction, casualty or other similar occurrence
      or event (whether or not insured against), which either individually or in
      the aggregate has caused or could reasonably be expected to cause a
      Company Material Adverse Effect;

            (iii) any material mortgage or pledge of or encumbrance attached to
      any of the properties or assets of the Company or any of the Subsidiaries;

            (iv) any material change in the terms or conditions of employment of
      any director, executive officer or first or second level management
      employee, including, without limitation, any material increase in the
      compensation payable or to become payable by the Company or any of the
      Subsidiaries to any of their present or former management employees or any
      material bonus or severance payment or arrangement with respect to any of
      the foregoing;


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                                                               Execution Version

            (v) any material strike, labor dispute, apparent or threatened union
      organizing activities involving the Company's or any of the Subsidiaries'
      employees;

            (vi) any audit, outstanding assessments or inspection visits by any
      taxing or other Governmental Authority pending or, to the Knowledge of
      such Seller, threatened, or any Proceedings against the Company or any of
      the Subsidiaries or any of their respective officers, employees or
      shareholders;

            (vii) any declaration, setting aside or payment of any dividend, or
      any other distribution on or in respect of the capital stock of the
      Company or any of the Subsidiaries, or any capital reduction or redemption
      or other acquisition by the Company or any of the Subsidiaries of any such
      stock;

            (viii) any capital increase, issuance of shares of capital stock of
      the Company or any of the Subsidiaries or any rights, options or
      commitments issued by the Company or any such Subsidiary relating to
      shares of their capital stock;

            (ix) any material change in the accounting methods or practices
      followed by the Company or any of the Subsidiaries, including any change
      in depreciation or amortization policies or rates adopted by the Company
      or any such Subsidiary;

            (x) any material obligation or liability, except for liabilities and
      obligations incurred under arrangements or agreements entered into in the
      Ordinary Course of Business and Taxes not yet due and payable;

            (xi) any Debt, encumbrance or guarantee (whether accrued or
      contingent, including the entering into any mortgage or pledge, incurred
      by the Company or any Subsidiary) of any obligation of another party for
      borrowed money;

            (xii) any sale, lease, transfer or other disposition by the Company
      or any of the Subsidiaries of any assets other than in the Ordinary Course
      of Business and in accordance with past practices;

            (xiii) any loss of property or waiver of any right or claim, other
      than in the Ordinary Course of Business;

            (xiv) any amendment to the bylaws of any of the Company or any of
      the Subsidiaries;

            (xv) any entry into, termination of, or receipt of notice of
      termination of any material Contract or Permit;

            (xvi) any incurrence or creation of any liability, commitment or
      obligation in excess of $4,000,000.00 (four million Pesos 00/100) by the
      Company or any of the Subsidiaries, except unsecured trade payables and
      other unsecured liabilities incurred in the Ordinary Course of Business,
      and capital expenditures or contracts and


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                                                               Execution Version

      commitments for capital expenditures made or entered into in the Ordinary
      Course of Business, which in any such case do not exceed $2,500,000.00
      (two million five hundred thousand Pesos 00/100) in the aggregate;

            (xvii) any sale, transfer or other disposition by the Company or any
      of the Subsidiaries of any of its operating assets in excess of
      $2,500,000.00 (two million five hundred thousand Pesos 00/100) in the
      aggregate, except for inventory (whether billets or finished product) sold
      in the Ordinary Course of Business; or

            (xviii) any agreement, whether oral or written, to carry out any of
      the actions provided in the preceding items of this Section 5.8.

      5.9 PERMITS. Except as set forth in Schedule 5.9, the Company and the
Subsidiaries hold all Permits necessary to conduct their businesses as now
operated and such Permits are valid and in full force and effect. No action or
claim is pending, or, to the Knowledge of such Seller, threatened, to revoke or
terminate any such Permits or to declare any of them void or invalid in any
respect. To the Knowledge of such Seller, the Company and each of the
Subsidiaries is in compliance with the Permits and has exercised all the rights
necessary to preserve the validity of such Permits, except to the extent that
any failure to comply with such Permits or exercise such rights could not be
reasonably expected to have a Company Material Adverse Effect.

      5.10 LITIGATION. Except as set forth in Schedule 5.10, there is not
pending against the Company or any of the Subsidiaries, or to the Knowledge of
such Seller, threatened against the Company or any of the Subsidiaries, any
Proceeding of any character, including Proceedings (a) demanding money damages
from the Company or any of the Subsidiaries, or (b) demanding a temporary
restraining order, preliminary injunction or a permanent injunction or order of
specific performance against the Company or any of the Subsidiaries, that could
reasonably be expected to (x) cause any Company Material Adverse Effect, or (y)
prevent, hinder or delay consummation of the transaction contemplated by this
Agreement, declare the same unlawful, or cause the rescission thereof. None of
the Company or the Subsidiaries is subject to any outstanding injunction (medida
precautoria) or Judgment, except to the extent that any such injunction or
Judgment could not be reasonably expected to have a Company Material Adverse
Effect.

      5.11 INVENTORY. Except as provided in Schedule 5.11, all of the Company's
and the Subsidiaries' inventory and supplies held for sale or use in connection
with the business of the Company and the Subsidiaries (the "Inventory") was
purchased in the Ordinary Course of Business and is owned by the Company or the
Subsidiaries, free and clear of any liens, security interests and encumbrances,
subject only to such encumbrances which, individually or in the aggregate, do
not materially impair the value of the Inventory or materially impair the
operations of the Company and the Subsidiaries taken as a whole. The Inventory
is recorded in the financial statements of the Company using historical cost
valuation methods and practices consistent with those used in preparing the 2006
Financial Statements.


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                                                               Execution Version

      5.12 REAL PROPERTY; LEASES. (a) Schedule 5.12(a) sets forth the real
estate property currently owned by the Company or the Subsidiaries, including
property held for resale and property currently leased by the Company or the
Subsidiaries to third parties (the "Owned Real Property"), as well as the real
estate property currently leased by the Company and the Subsidiaries from third
parties (the "Leased Real Property" and together with the Owned Real Property,
the "Real Property").

      (b) The Company and the Subsidiaries have good and marketable title to the
Owned Real Property, free and clear of all mortgages, liens, security interests,
easements, rights of way, options, claims or encumbrances of any kind
(collectively, "Liens"), except for (i) such Liens as are set forth in Schedule
5.12(a), and (ii) Liens that secure obligations that are reflected in the
Interim Financial Statements (the Liens described in clause (ii) above are
referred to collectively as "Permitted Liens").

      (c) The leases of the Leased Real Property are in full force and effect.
The Company and the Subsidiaries have neither sent nor received written notice
of any default under the leases of the Leased Real Property, and the Company and
the Subsidiaries have not breached any material covenant, agreement or condition
contained on any lease of the Leased Real Property, nor has there occurred any
event which the passage of time or the giving of notice or both would constitute
such a breach by the Company or the Subsidiaries.

      5.13 ASSETS OTHER THAN REAL PROPERTY. The Company and the Subsidiaries
have title to all the assets (other than real property interests, which are
subject to Section 5.12) material and related to their respective businesses, in
each case free and clear of all Liens, except for (i) such Liens as are set
forth in Schedule 5.13 or (ii) any Permitted Liens.

      5.14 CONTRACTS. (a) Except as set forth in Schedule 5.14(a), neither the
Company nor any Subsidiary is a party to or bound by any:

            (i) Contract or series of Contracts to acquire or sell goods (other
      than inventory), material assets or properties during calendar years 2007
      or 2008, having a value in excess of $4,000,000.00 (four million Pesos
      00/100);

            (ii) Indenture, note, loan or credit agreement or other Contract
      relating to indebtedness of the Company or a Subsidiary or to the direct
      or indirect guarantee or assumption of the obligations of any other Person
      for borrowed money;

            (iii) Any Contract or other currently outstanding instrument under
      which the Company or any Subsidiary has, directly or indirectly, made or
      entitled to make any advance, loan, extension of credit (other than
      accounts receivable) or capital contribution to, or other investment in,
      any Person or entity, having a value in excess of $4,000,000 (four million
      Pesos 00/100);


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                                                               Execution Version

            (iv) Contract resulting in material liens, charges, claims and other
      encumbrances of any assets of the Company or any Subsidiary, except for
      Permitted Liens;

            (v) Non-compete or confidentiality Contract;

            (vi) Collective bargaining agreement with any labor union;

            (vii) Contract containing any provision that provides for a default
      thereof as a result of the transactions contemplated by this Agreement,
      which would result in a Company Material Adverse Effect; or

            (viii) Contract not made in the Ordinary Course of Business of the
      Company or the Subsidiaries, as the case may be.

      (b) Except as set forth in Schedule 5.14(b), all Contracts listed in
Schedule 5.14(a) and any other material contracts or agreements to which the
Company or any Subsidiary is a party (the "Company Contracts") are valid,
binding and in full force and effect and are enforceable against the Company or
any applicable Subsidiary, and to the Knowledge of such Seller, of each other
party thereto, in accordance with their respective terms.

      (c) Except as set forth in Schedule 5.14(c), (i) the Company and any
applicable Subsidiary has performed all material obligations required to be
performed by it under the Company Contracts, and it is not (with or without the
lapse of time or the giving of notice, or both) in breach or default in any
material respect thereunder and, to the Knowledge of such Seller no other party
to any Company Contract is (with or without the lapse of time or the giving of
notice, or both) in breach or default in any material respect thereunder, and
(ii) none of the Company or any applicable Subsidiary has received any notice,
or has Knowledge, of the intention of any party to renegotiate, terminate or
cancel any Company Contract.

      (d) Complete and correct copies of all Company Contracts, together with
all modifications and amendments thereto, have been made available to the Buyer
for review prior to the execution of this Agreement.

      5.15 ENVIRONMENTAL MATTERS. (a) Except as disclosed in Schedule 5.15(a),
the Company and the Subsidiaries are in compliance in all material respects with
the applicable Environmental Laws relating to the operations of the Company.

      (b) Except as disclosed on Schedule 5.15(b), the Company and its
subsidiaries have obtained all Environmental Permits, which are in full force
effect and are in compliance with the terms and conditions thereof, except where
the lack of an Environmental Permit or such non-compliance would not cause or
would not reasonably be expected to cause a Company Material Adverse Effect.

      (c) Except as disclosed on Schedule 5.15(c), there are no Environmental
Claims pending or, to the Knowledge of such Seller, threatened, against the
Company or any of the


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                                                               Execution Version

Subsidiaries that would cause or reasonably be expected to cause a Company
Material Adverse Effect.

      (d) The representations and warranties contained in this Section 5.15 are
the only representations and warranties being made by the Sellers with respect
to compliance with, or liability or claims under, Environmental Laws or with
respect to Permits issued or required under Environmental Laws, and no other
representation or warranty, express or implied, is being made with respect to
environmental matters whatsoever.

      5.16 COMPLIANCE WITH LAWS; GENERALLY. Except as set forth in Section 5.16,
the business of the Company and the Subsidiaries is being conducted in material
compliance with all applicable Laws, other than for any such failures which,
individually or on the aggregate, would not cause a Company Material Adverse
Effect.

      5.17 EMPLOYEES; LABOR RELATIONS; COMPLIANCE AND RELATED MATTERS. (a)
Schedule 5.17(a) contains a list of the name, position, seniority, salary and
labor benefits of all employees of the first three levels of the Company and the
Subsidiaries with an annual salary in excess of $500,000.00 (five hundred
thousand Pesos 00/100) as of the Closing Date. Except as described in Schedule
5.17(a), such individuals are not entitled to receive any other salaries,
benefits, bonuses, premiums, incentives and/or compensation from the Company and
the Subsidiaries.

      (b) Except as set forth in Schedule 5.17(b), none of the Company or the
Subsidiaries has made any arrangements with their respective employees that
would have the effect of depriving any of the Company or the Subsidiaries of the
continued service of any such employee following the Closing.

      (c) Except as set forth in Schedule 5.17(c), neither the Company nor any
of the Subsidiaries is a party to any collective bargaining or other similar
labor Contract and, as of the date of execution of this Agreement, none of the
Company or the Subsidiaries is negotiating with the unions mentioned in Schedule
5.17(c) or any other unions any matters different from those arising from and
necessary under any such contracts referred to in Schedule 5.17(c).

      (d) Except as set forth in Schedule 5.17(d), since January 1, 2003, there
has not been, there is not presently pending or existing and, to the Knowledge
of such Seller, there is not threatened (i) any strike or work stoppage
proceeding, (ii) any Proceeding against any of the Company or the Subsidiaries
relating to the alleged violation of any material Law pertaining to labor
relations or employment matters of a collective nature against any of the
Company or the Subsidiaries, or (iii) any organizational efforts with respect to
any employees of any of the Company or the Subsidiaries.

      (e) Each of the Company and the Subsidiaries has substantially complied
with all material Laws relating to employees and employment. Except as disclosed
in Schedule 5.17(e), none of the Company or the Subsidiaries is liable for the
payment of any compensation, fines, penalties or other amounts, however
designated, for failure to comply with any of the foregoing


                                                                              28
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                                                               Execution Version

material Laws. Each of the Company and the Subsidiaries have complied with and
is current in the payment of all contributions to the Mexican Institute of
Social Security (Instituto Mexicano del Seguro Social), the Retirement Savings
System (Sistema de Ahorro para el Retiro) and the Institute of the Workers'
Housing National Fund (Instituto del Fondo Nacional para la Vivienda de los
Trabajadores), except where the failure to make any such payment would not
reasonably be expected to have a Company Material Adverse Effect.

      (f) Schedule 5.17(f) sets forth a description of the benefit plans of the
Company and the Subsidiaries. With respect to each employee benefit plan or
arrangement sponsored or maintained by the Company or any of the Subsidiaries
for the benefit of the employees of the Company and the Subsidiaries (the
"Plans"): (i) any employer and employee contributions to each Plan required by
applicable Law or the terms of such Plan have been made, or if applicable,
accrued in accordance with applicable accounting practices in Mexico, and (ii)
each Plan required to be registered has been registered and has been maintained
in good standing with applicable regulatory authorities.

      (g) As of the date hereof, the executive officers, directors, secretaries
and statutory auditors of the Company and each of the Subsidiaries are as set
forth in Schedule 5.17(g).

      5.18 INTELLECTUAL PROPERTY; SOFTWARE. (a) Except as set forth in Schedule
5.18(a), neither the Company nor any of the Subsidiaries own Intellectual
Property (the "Owned Intellectual Property") that is material to their
respective businesses. The Company and the Subsidiaries have good and marketable
title to the Owned Intellectual Property, free and clear of any liens, charges,
claims and other encumbrances, subject only to such encumbrances of record and
such other imperfections of title, encumbrances, and encroachments which,
individually or on the aggregate, would not have a material adverse effect on
the value of such Owned Intellectual Property or cause any Company Material
Adverse Effect.

      (b) Except as set forth in Schedule 5.18(b), to the Knowledge of such
Seller, no event has occurred which causes, or after notice or lapse of time or
both would cause, the revocation or termination of any right to use the Owned
Intellectual Property, and neither the Company nor the Subsidiaries are liable,
in any material respect, to any Person for infringement with respect to any such
rights or Intellectual Property as a result of its business operations.

      (c) Schedule 5.18(c) sets forth all the software that the Company and its
subsidiaries use, employ, exploit or utilize in the conduction of their
respective businesses.

      (d) The Company and the Subsidiaries' computers, computer software and all
other information technology equipment and all associated documentation
(collectively, the "IT Assets"), operate and perform in all material respects as
currently used to conduct and carry on the business of the Company and the
Subsidiaries, and the Company and the Subsidiaries have implemented on-site
backup in respect of the IT Assets in accordance with past practices.


                                                                              29
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                                                               Execution Version

      (e) The Company and the Subsidiaries use and operate the IT Assets under
agreements and/or licenses granted by third parties which are, to the Knowledge
of such Seller, authorized for that purpose.

      5.19 TAX MATTERS. Except as set forth in Schedule 5.19:

      (a) All material returns, declarations and reports in respect of Taxes
required to be filed with respect to the Company or any of the Subsidiaries or
any of their income, properties, franchises or operations as of the date hereof
have been timely and properly filed (taking into account all extensions of due
dates) with, withheld and paid to all appropriate governmental authorities, and
all such returns properly reflect the Taxes due by the Company and the
Subsidiaries for the periods thereby covered. The Company and the Subsidiaries
have made adequate reserves for all Taxes accrued but not yet payable and have
delivered or made available to the Buyer copies of all such Tax returns filed
since January 1, 2002. All Taxes attributable to the Company and each of the
Subsidiaries that are due and payable have been paid or otherwise discharged,
except to the extent such Taxes are being contested in good faith and for which
adequate reserves have been set aside on the applicable Company or Subsidiary
books in accordance with Mexican GAAP.

      (b) There is no claim or assessment pending against the Company or any of
the Subsidiaries for any alleged deficiency in Taxes.

      (c) The Company and the Subsidiaries have on a timely basis filed all
material Tax returns required to be filed by it pursuant to any Tax Laws and any
such Tax returns were true and accurate in all material respects as of the date
of filing. There is no Tax sharing agreement that will require any payment by
the Company or any of the Subsidiaries (other than to, or on behalf of, another
Subsidiary of the Company).

      (d) Neither the Company nor any of the Subsidiaries is currently the
beneficiary of any extension of time within which to file any Tax return and no
claim has been made to the Company or any such Subsidiary by any Governmental
Authority in a jurisdiction where the Company or any such Subsidiary does not
file Tax returns that it is or may be subject to taxation by that jurisdiction
in any material respect.

      (e) Neither the Company nor any of the Subsidiaries has waived any statute
of limitations in respect of Taxes or has agreed to any extension of time with
respect to a Tax assessment or deficiency.

      (f) There are no Liens on any of the Company's or any of the Subsidiaries'
properties or assets with respect to any unpaid Taxes, and neither the Company
nor any such Subsidiary has received any notice of assessment by any Tax
Authority in connection with any Tax returns and there are no pending Tax
examinations of or Tax claims asserted against the Company or any such
Subsidiary, or against Seller that would have a Company Material Adverse Effect,
except for Taxes that are being contested in good faith by appropriate


                                                                              30
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                                                               Execution Version

proceedings and for which adequate reserves have been set aside on the
applicable Company or Subsidiary books in accordance with Mexican GAAP.

      5.20 TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES. Except as set forth
in Schedule 5.20 or for purchase orders for merchandise entered into the
Ordinary Course of Business, neither the Company nor any of the Subsidiaries is
a party to any agreement with any of the Sellers, any of their Affiliates or
Related Parties (the "Affiliated and Related Party Agreements"). The Affiliated
and Related Party Agreements will be terminated as of the Closing Date and the
Company and the Subsidiaries will have no further liabilities or obligations
under such Affiliated and Related Party Agreements, except for services
performed prior to the Closing or as specifically contemplated herein.

      5.21 BOOKS AND RECORDS. Except for any failure which is not reasonably
expected to have a Company Material Adverse Effect, each of the Company's and
the Subsidiaries' corporate books and records, including the shareholders minute
book, board of directors minute book, the shares registry book and the capital
variations book (i) are kept complete, accurate and current, and (ii) since
January 1, 2002, such books have been duly prepared and maintained materially in
accordance with all applicable Laws and reflect in all respects all formal
actions taken at the shareholders' meetings and board of directors' meetings.

      5.22 INSURANCE. Each of the Company and the Subsidiaries maintains with
financially sound and responsible insurance companies, insurance on all their
material properties in at least such amounts and against at least such risks as
consistent with past practices of the Company and the Subsidiaries, as
applicable. The Company and the Subsidiaries have obtained the insurance
coverage provided by the policies described in Schedule 5.22.

      5.23 BANKING AND SECURITIES ACCOUNTS. Schedule 5.25 sets forth all bank
accounts, broker-dealer accounts (contratos de intermediacion) and investment
accounts that the Company and the Subsidiaries currently hold with financial
institutions, securities dealers and other financial institutions, including the
number of the account or agreement, the balance thereof as of the Closing Date,
and the authorized signature and withdrawal provisions under each account.
Except as provided in Schedule 5.25, the funds in such accounts are not subject
to any kind of attachment or lien or encumbrance.

      5.24 BROKERS. Except for Lehman Brothers Inc., which fees shall be paid by
the Company (or any or its Affiliates) on or before the Closing Date, the
Company has not engaged any broker, finder or agent with respect to the
transactions contemplated by this Agreement nor with respect to the Company's
sale or merger or any other transaction relating to the disposition of the
Company's assets. Neither the Buyer nor the Company (except as set forth in the
preceding sentence) will have any obligation to pay any broker's, finder's,
investment banker's, financial advisor' s or similar fees, in connection with
this Agreement or the transactions contemplated hereby, by reason of any action
taken by or on behalf of the Seller.


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                                                               Execution Version

      5.25 ACCURACY. Any liability, fact, circumstance, act or omission or
generally any matter that could give rise to indemnification hereunder not
included in the 2006 Financial Statements or in the Interim Financial
Statements, but otherwise referred to in this Agreement or its Schedules shall
be considered as disclosed by the Sellers to the Buyer for all purposes under
this Agreement and to the extent such reference is true, valid, accurate and
complete in all material respects, shall not give rise to any liability of the
Sellers hereunder.

      5.26 NO OTHER REPRESENTATIONS. Except as and to the extent expressly set
forth in this Agreement and subject to the limitations and restrictions
contained in this Agreement, the Buyer acknowledges that neither the Sellers,
nor the Company, the Subsidiaries or any of their respective agents,
representatives, employees or Affiliates, makes any representation or warranty,
either express or implied.

8.    ARTICLE VI. REPRESENTATIONS AND WARRANTIES OF THE BUYER

      The Buyer represents and warrants to the Sellers that:

      6.1 CORPORATE ORGANIZATION. The Buyer is a corporation duly organized and
validly existing under the Laws of Mexico.

      6.2 AUTHORIZATION AND APPROVAL OF AGREEMENT. The Buyer has the legal
capacity and all requisite corporate power and authority to enter into this
Agreement and to perform the obligations required to be performed by it
hereunder. Except for the approval of the Buyer's Shareholders' Meeting, which
approval shall be obtained prior to Closing, all corporate proceedings required
by the Buyer's organizational or charter documents or otherwise required by Law
for the execution and delivery of this Agreement and for the consummation of the
transactions provided for herein have been duly taken. Except as set forth in
the preceding sentence, this Agreement has been duly executed and delivered by
the Buyer and constitutes the legal, valid and binding obligation of the Buyer,
enforceable against it in accordance with its terms.

      6.3 CONSENTS AND APPROVALS; NO VIOLATION TO RESULT. (a) Except for (i) the
authorization required from the FCC, which shall have been duly obtained at or
prior to Closing, no material Consent of any Governmental Authority is required
to be obtained or made by or with respect to the Buyer in connection with the
execution and delivery of this Agreement or the consummation of the transactions
hereunder.

      (b) Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby shall (i) violate or result
in a breach of any provision of the Buyer's organizational or charter documents,
(ii) violate any Judgment or Law applicable to the Buyer, (iii) violate, or
result in a breach of, or constitute a default under (or would result in or
constitute such a breach or default with notice or lapse of time or both) any
provision of any Contract or Permit to which such Buyer is a party, (iv) require
the Consent of any party to any


                                                                              32
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                                                               Execution Version

of the items described in subsection (iii) above, or (v) to the Knowledge of the
Buyer, require any Consent from a Governmental Authority; other than with
respect to clauses (ii), (iii), (iv) or (v) above, such violations, breaches
defaults or failures to obtain Consents which, individually or in the aggregate,
would not have a material adverse effect on the ability of the Buyer to
consummate the transactions contemplated hereby.

      6.4 COMPLIANCE WITH LAWS. To the Knowledge of the Buyer, its business is
not being conducted in violation of any Law, except for possible violations that
would not reasonably be expected to have a material adverse effect on the
ability of the Buyer to perform its obligations under this Agreement or to
consummate the transactions hereunder.

      6.5 NO GOVERNMENTAL ORDER. No Governmental Authority has issued any Law or
Judgment or any other restriction of any kind or character that is in effect and
that has the effect of making any of the transactions contemplated by this
Agreement illegal or otherwise prohibits their consummation.

      6.6 LITIGATION. There is not pending against the Buyer, or to the
Knowledge of the Buyer, threatened against the Buyer, any Proceeding of any
character, that could reasonably be expected to (a) cause any material adverse
change in the condition (financial or otherwise), assets, liabilities, business
or operations of the Buyer, or (b) prevent, hinder or delay consummation of the
transactions contemplated by this Agreement, declare the same unlawful, or cause
the rescission thereof.

      6.7 CREDIT-WORTHINESS. The Buyer has heretofore provided to the Sellers
its unaudited financial statements prepared under Mexican GAAP as of and for the
period ending on December 31, 2007. The Buyer (i) has the financial resources to
pay in full the Closing Date Purchase Price at Closing, (ii) has sufficient
financial resources to comply with its other obligations under this Agreement,
(iii) is not insolvent, and (iv) there is no event or action that with notice,
the passage of time or both would reasonably be expected to turn the Buyer
insolvent on or before the Closing Date.

      6.8 SOURCE OF FUNDS. The funds used by the Buyer for its business and the
funds that the Buyer shall use to pay the Closing Date Purchase Price have
legitimate origins.

      6.9 SIMEC SHARES. To its knowledge, the Simec Shares are owned by
Industrias CH, S.A.B. de C.V. and Tuberias Procarsa, S.A. de C.V., as the case
may be, free and clear of any liens, security interests, options, claims or
encumbrances of any kind, and such parties have full and unrestricted voting
rights with respect to their respective Simec Shares.

      6.10 BROKERS. The Buyer has not engaged any broker, finder or agent with
respect to the transactions contemplated by this Agreement. None of the Sellers,
the Company or the Subsidiaries will have obligations to pay any broker's,
investment banker's, financial advisor' s or similar fees in connection with
this Agreement or the transactions contemplated hereby, by reason of any action
taken by or on behalf of the Buyer.


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                                                               Execution Version

9.    ARTICLE VII. COVENANTS

      7.1 AFFIRMATIVE COVENANTS OF THE SELLERS. Except as provided in Schedule
7, the Sellers covenant and agree that from the date of this Agreement to the
Closing Date, they shall cause the Company and the Subsidiaries (except as may
otherwise be contemplated by this Agreement or consented to in writing by the
Buyer) to:

            (i) Carry on its business in a manner consistent with prior practice
      and only in the Ordinary Course of Business, and use reasonable efforts to
      preserve its business organization intact and preserve the goodwill and
      relationships of its customers, suppliers and others having business
      relations with it;

            (ii) Maintain its corporate existence in its jurisdiction of
      organization plus in each jurisdiction in which the ownership or leasing
      of its property or the conduct of its business requires such
      qualification;

            (iii) Duly and timely file or cause to be filed all reports and
      returns required to be filed with any Governmental Authority and promptly
      pay or cause to be paid when due all Taxes, including interest and
      penalties levied or assessed, unless diligently contested in good faith by
      appropriate proceedings;

            (iv) Maintain in existing condition and repair, consistent with past
      practice, all buildings, offices, shops and other structures located on
      the Real Property, and any equipment, fixtures and other tangible personal
      property located on the Real Property;

            (v) Give the Buyer and the Buyer's employees, counsel, accountants
      and advisors, full access upon reasonable notice during normal business
      hours to any of the properties, personnel, financial and operating data,
      books, Tax returns, contracts, commitments, and records of the Company in
      connection with reviewing the Company and its properties and operations;
      and

            (vi) Maintain in full force and effect any material insurance
      policies existing as of this date, including replacements or renewals in
      the Ordinary Course of Business.

      7.2 NEGATIVE COVENANTS OF THE SELLERS. Except as provided in Schedule 7,
the Sellers covenant and agree that from the date of this Agreement to the
Closing Date, they shall not permit the Company or any of the Subsidiaries
(except as may otherwise be contemplated by this Agreement), without the Buyer's
prior written consent, to:

            (i) Amend its bylaws;

            (ii) Authorize for issuance, issue or deliver any additional shares
      of its capital stock or securities convertible into or exchangeable for
      shares of its capital stock, or issue or grant any right, option or other
      commitment for the issuance of shares


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                                                               Execution Version

      of its capital stock or of such securities, or split, combine or
      reclassify any shares of its capital stock;

            (iii) Declare or pay any dividends or other distributions of any
      kind to the Sellers, or directly or indirectly purchase, retire or redeem
      or otherwise acquire from the Sellers any shares of its capital stock;

            (iv) Incur any liability, commitment or obligation, except unsecured
      current and trade liabilities and other unsecured liabilities incurred in
      the Ordinary Course of Business;

            (v) Borrow, or agree to borrow, any funds other than pursuant to its
      existing loan agreements for an amount not to exceed the maximum amount
      provided under the JPMorgan Loan;

            (vi) Sell, transfer or otherwise dispose of assets, except for the
      sale or disposition of obsolete or damaged tangible personal property, the
      sale of inventory and other assets in the Ordinary Course of Business and
      property held for resale;

            (vii) Except for amounts committed for emergency repairs, amounts
      contemplated by budgets previously made available to the Buyer, make any
      material capital commitments, which shall not exceed $55,000,000.00 (fifty
      five million Pesos 00/100);

            (viii) Mortgage, pledge or encumber any of its assets or guaranty
      the obligations of any party;

            (ix) Make any adjustments in the salary rate of, or authorize any
      bonus payments to any executive officer or management employee, or enter
      into consulting arrangements (except as set forth in Schedule 5.8);

            (x) File any claim or any lawsuit, except for claims or lawsuits in
      the Ordinary Course of Business consistent with prior practice; and

            (xi) Take any action with the intention of causing any of the
      representations and warranties made herein to be invalid, inaccurate,
      false or incomplete on the Closing Date.

      7.3 CONFIDENTIALITY. Each of the Parties agrees that it will treat in
confidence all documents, materials and other information which it shall have
obtained regarding the other Parties during the course of the negotiations
leading to the consummation of the transactions contemplated hereby (whether
obtained before or after the date of this Agreement), the investigation provided
for herein and the preparation of this Agreement and other related documents.
Such documents, materials and information shall not be communicated to any third
Person (other than, in the case of the Buyer, to its counsel, accountants,
financial advisors or lenders, and in the case of Sellers, to their counsel,
accountants or financial advisors). The


                                                                              35
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                                                               Execution Version

obligation of each Party to treat such documents, materials and other
information in confidence shall not apply to any information which is (i)
previously known on a non-confidential basis by such Party, (ii) in the public
domain through no fault of such Party, (iii) later lawfully acquired by such
Party from sources other than the Parties, (iv) is required to be disclosed
under applicable Law or judicial process, or to any governmental authority
having regulatory authority over such Party or its Affiliates, but only to the
extent it must be disclosed, or (v) such Party reasonably deems necessary to
disclose to obtain any of the consents or approvals contemplated hereby. The
provisions of this Section 7.4 shall not restrict any Party from using
confidential information in performing its obligations under, or enforcing the
terms of, this Agreement or in exercising its rights relating thereto.

      7.4 COMPETITION; OTHER REGULATORY FILING(S). (a) The filing with the FCC
for obtaining the authorization from such governmental authority for the
consummation of the transactions provided under this Agreement shall be the
responsibility of the Buyer. The Sellers shall cooperate, and shall cause the
Company and the Subsidiaries to cooperate, with the Buyer and use all
commercially reasonable efforts to provide information required for purposes of
such filing, as well as to obtain such authorization. The Parties acknowledge
and agree that, in the event that the authorization from the FCC imposes any
requirements or conditions to perform or consummate the transactions
contemplated in this Agreement, then the Buyer shall be the sole responsible, at
its own cost and expense, for taking any and all commercially reasonable actions
or remedies in order to comply with any of such conditions or requirements,
provided that such actions or remedies shall in no event reduce the Closing
Purchase Price payable to the Sellers.

      (b) For any regulatory filings in addition to the filing provided in the
preceding paragraph of this Section 7.4 that may be required or convenient for
the consummation of the transactions provided under this Agreement, each of the
Sellers and the Buyer shall cooperate with each other and use all commercially
reasonable efforts to obtain any regulatory approvals and/or obtain any consents
which may be required in connection with the transactions contemplated hereby,
including by making any governmental filings which may be required hereunder as
promptly as practicable following the Closing and seeking early termination of
any waiting periods required by Law.

      7.5 UPDATING SCHEDULES. If on or after the date of this Agreement and
prior to Closing, the Sellers identify, discover or become aware that by reason
of the occurrence of events or circumstances subsequent to the execution of this
Agreement or otherwise: (i) an item should have been included on a schedule to
this Agreement, or (ii) a representation or warranty becomes inaccurate or
obsolete in a material respect, the Sellers shall promptly inform the Buyer
thereof and provide the Buyer with an appropriately revised schedule or
representation; provided, that if the changes reflected in the supplemented
Schedules would reasonably be expected to result in a Company Material Adverse
Change, then the Buyer may either (x) accept the supplemented Schedules (in
which case it will be substituted in place of the appropriate original Schedules
and thereafter be part of this Agreement), or (y) reject the supplemented
Schedules by written notice to Seller (in which case the Buyer may terminate
this


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                                                               Execution Version

Agreement under Article XI). In the case of (x) above, such schedule or
representation shall be deemed revised for any purposes of this Agreement.

      7.6 RESIGNATIONS. The Sellers shall obtain effective as of the Closing,
the resignations of each of the members of the board of directors, the
secretaries, the statutory auditors and certain executive officers of the
Company and the Subsidiaries listed in Schedule 7.6.

      7.7 BUYER'S SHAREHOLDERS MEETING. The Buyer shall cause that the
shareholders' meeting referred to in Section 3.6 and for the purposes described
thereunder is convened.

10.

11.   ARTICLE VIII. POST-CLOSING COVENANTS

      8.1 BUYER'S POST-CLOSING COVENANTS. The Buyer covenants and agrees that,
from and after the Closing, it shall and shall cause the Company and the
Subsidiaries to:

            (i) Maintain and not dispose any records of the Taxes paid or
      payable by the Company (including but not limited to returns, reports,
      books, records, financial data, receipts, notices, assessments,
      reassessments, earnings and profits data, and work papers) prior to the
      tenth (10th) anniversary of the Closing Date, unless the Buyer shall first
      have received the written consent of each of the Sellers; and

            (ii) Give the Sellers and the Sellers' employees, counsel,
      accountants and advisors with all the information and documents that they
      reasonably request in writing in connection with the preparation of any
      Tax returns, Tax credits, Tax elections or financial statements, or any
      judicial, quasi-judicial, administrative, Tax audit or arbitration
      proceeding; it being understood that the Sellers shall reimburse all
      reasonable and documented expenses incurred by the Buyer in connection
      with the provision of information and documentation for purposes of this
      item (ii).

      8.2 [INTENTIONALLY OMITTED].

      8.3 INDEMNIFICATION OF OFFICERS, DIRECTORS, SECRETARIES AND STATUTORY
AUDITORS. The Buyer agrees that it shall cause the Company to indemnify and hold
harmless, each officer, director, secretary and statutory auditor who resigned
in connection with the transactions provided under this Agreement (the
"Indemnified Executives") against any damages, liabilities and associated costs
and expenses arising out of or pertaining to acts or omissions or alleged acts
or omissions (other than illegal acts or acts of fraud), executed, carried out
or omitted by the Indemnified Executive as a result of the lawful performance of
his or her activities as an executive officer, director, secretary or statutory
auditor of the Company or any Subsidiary, to the fullest extent permitted by
applicable Law. No Indemnified Executive may settle any such claim without the
prior written approval of the


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                                                               Execution Version

Buyer, unless such approval is unreasonably withheld or delayed. Further, an
Indemnified Executive will not be entitled to indemnification the extent a court
of competent jurisdiction determines that such Indemnified Executive acted with
bad faith, or willful misconduct. The indemnification granted to the Indemnified
Executives pursuant to this Section 8.3 shall not affect or limit in any manner
the Seller's indemnification obligations provided in Article XII.

      8.4 NON-COMPETE; NON-SOLICITATION; TRANSITION. (a) Except with the Buyer's
consent, each of the Sellers agrees that, from the Closing Date and for a period
of four (4) years from the such date, it shall not directly or indirectly, (i)
own, manage, operate, control, invest, make loans or acquire an interest in, or
otherwise exploit, engage or participate in, any Competitive Business, or (ii)
promote, facilitate, contribute to, support or otherwise assist or advise any
Person engaged in, or that intends to engage in, any act related to any
Competitive Business that would be prohibited under (i) above, except, in both
cases, for portfolio investments in the equity of listed companies which are
Competitive Businesses not to exceed, in any such case, five percent (5%) of the
aggregate outstanding equity or equity-like securities of each such company.

      (b) Except with the Buyer's consent, each of the Sellers agrees that, from
the Closing Date and for a period of three (3) years from such date, it shall
not directly or indirectly, offer employment or employ any of the employees or
officers of the Company and any of the Subsidiaries; provided, however, that the
foregoing shall not prohibit (i) employment of persons accepting employment
through a general solicitation to the public and that have not, in any way, been
contacted independently (provided, however, that the exception in this clause
(i) shall not apply to those employees referred to in Schedule 5.17(a) with an
annual salary in excess of $1,000,000.00 (one million Pesos 00/100)), (ii)
employment of employees fired or terminated by the Company or any of the
Subsidiaries, and (ii) employment of employees which have ceased to be employed
by the Company or by any Subsidiary for a period of six (6) months.

      (c) For a period of two (2) years following the Closing Date, the Sellers
will not take any action with the purpose, of or intended to, have the effect of
discouraging any customer, supplier, or other business associate of any of the
Company and the Subsidiaries to maintain the same relationship with the Company
and the Subsidiaries after the Closing as it was maintained prior to the
Closing.

      8.5 CANCELLATION OF LIENS. (a) Each of the Sellers hereby represents and
warranties that certain Liens set forth in Schedules 5.12(a) and Schedule
5.13(a) in favor of Banamex (either referred to as Banco Nacional de Mexico,
S.N.C., Banco Nacional de Mexico, S.A, or Banamex, S.A. or by any other similar
corporate name) (the "Banamex Liens"), are (i) not associated to outstanding
obligations (whether of payment of monies or otherwise) of the Company or the
Subsidiaries and have been paid in full, and (ii) suitable for cancellation with
the Public Registry of Property or the Public Registry of Commerce, as
applicable, upon official request of the interested parties.


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                                                               Execution Version

      (b) Each of the Sellers hereby agrees and covenants to employ commercially
reasonable efforts in any action required or convenient for cancelling the
Banamex Liens with the Public Registry of Property or the Public Registry of
Commerce, either (i) prior to the Closing Date, and (ii) if not practicable, as
promptly as possible, but in no event in later than one hundred twenty (120)
calendar days as of the Closing Date.

      8.6 TRANSLATION. The Parties hereto agree to employ good faith efforts to
cause a Spanish translation of this Agreement to be made and agreed upon, within
sixty (60) calendar days following the Closing Date. Such translation shall be
expressly acknowledged in writing by the Parties indicating that each of the
Parties irrevocably agrees to be bound by such translation for any legal effects
whatsoever and waives any right it may have to challenge or invalidate the
translation or any term thereof.

12.

13.   ARTICLE IX. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE BUYER

      9.1 CONDITIONS PRECEDENT. The Buyer's obligation to purchase the Shares
and to take the other actions required to be taken by the Buyer at the Closing
is subject to the satisfaction, at or prior to the Closing, of each of the
following conditions (any of which may be waived by Buyer, in whole or in part):

      (a) Representations, Warranties and Covenants. The representations and
warranties of the Sellers set forth in Sections 4.1 to 4.4 and 5.4 herein shall
be true, valid, accurate and complete on and as of the Closing Date, to the same
extent as if made on and as of such date, and the Sellers shall have complied
with or performed any and all of the provisions and obligations set forth in
Articles III and VII.

      (b) Legal Actions. No Judgment has been issued by any Governmental
Authority prohibiting the consummation of the transactions contemplated under
this Agreement.

      (c) Authorizations; Consents. The Buyer shall have received (i) a
favorable resolution regarding the transactions provided hereunder by the FCC,
and (ii) duly executed copies of any Consent required for the consummation of
the transactions contemplated by this Agreement with respect to the Sellers, if
any.

      (d) Shareholders' Meeting Authorization. The Buyer shall have received the
authorization of its shareholders' meeting to consummate the transactions
contemplated under this Agreement.

      (e) Enactment of Laws. No Law preventing the consummation of the
transactions subject matter to this Agreement shall have been enacted or issued,
which continues in full force and effect.

      9.2 WAIVER. The Buyer shall have the right to waive the foregoing
conditions, or any of them, wholly or in part; provided, however, that no such
waiver shall be deemed to have


                                                                              39
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                                                               Execution Version

occurred unless the same is set out in writing and executed by the Buyer. Any
waiver made by the Buyer hereunder shall also constitute a waiver with respect
to any rights or remedies that the Buyer may otherwise have against the Sellers
in respect of or relating to the specific conditions waived.

14.   ARTICLE X. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE SELLERS

      10.1 CONDITIONS PRECEDENT. The Sellers' obligation to sell the Shares and
the Seller's obligations to take the actions required to be taken by them at the
Closing is subject to the satisfaction, at or prior to the Closing, of each of
the following conditions (any of which may be waived by the Sellers, in whole or
in part):

      (a) Covenants. The Buyer shall have complied with or performed any and all
of the provisions and obligations set forth in Articles III and VII.

      (b) Legal Actions. No Judgment has been issued by any Governmental
Authority prohibiting the consummation of the transactions contemplated under
this Agreement.

      (c) Authorizations; Consents. The Sellers shall have received (i) evidence
of the authorization of the transactions provided hereunder by the FCC in terms
reasonably satisfactory to the Sellers, and (ii) duly executed copies of any
other Consent required for the consummation of the transactions contemplated by
this Agreement with respect to the Buyer, if any.

      (d) Enactment of Laws. No Law preventing the consummation of the
transactions subject matter to this Agreement shall have been enacted or issued,
which continues in full force and effect.

      10.2 WAIVER. The Sellers shall have the right to waive the foregoing
conditions, or any of them, wholly or in part; provided, however, that no such
waiver shall be deemed to have occurred unless the same is set out in writing
and executed by the Sellers. Any waiver made by the Sellers hereunder shall also
constitute a waiver with respect to any rights or remedies that the Sellers may
otherwise have against the Buyer in respect of or relating to the specific
conditions waived.

15.   ARTICLE XI. TERMINATION

      11.1 TERMINATION. (a) This Agreement and the transactions contemplated
hereby may be terminated and abandoned at any time prior to the Closing Date:

            (i) by the mutual written consent of the Buyer and the Sellers,


                                                                              40
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                                                               Execution Version

            (ii) either by the Sellers or by the Buyer if the Closing has not
      occurred by June 1, 2008, or by such other date as the Parties may agree
      in writing, and the Party terminating this Agreement is not in breach, in
      any material respect, of any of its obligations under this Agreement, or

            (iii) by the Buyer in the event that the Buyer rejects any revised
      Schedule or representation pursuant to Section 7.5,

            (iv) by the Buyer if, at any time prior to the Closing, there shall
      have occurred a breach of (y) any of the representations and warranties of
      the Sellers set forth in Sections 4.1 to 4.4 and 5.4, or (z) any of the
      provisions and obligations set forth in Articles III and VII; or

            (v) by the Sellers if, at any time prior to the Closing, there shall
      have occurred a breach of any of the provisions and obligations set forth
      in Articles III and VII.

      (b) This Agreement may also be terminated by either the Buyer or the
Sellers if (i) any Judgment or other order of a Governmental Authority
preventing the Closing shall have become final and non-appealable, or (ii) there
shall be a Law which makes the transactions provided hereunder illegal.

      (c) Notwithstanding the foregoing items (a) and (b), the Parties
acknowledge and agree that if the authorization of the transactions provided
hereunder by the FCC is obtained on or before April 25, 2008, the Closing shall
occur on or before April 30, 2008.

      11.2 EFFECT OF TERMINATION. Upon the termination of this Agreement under
the provisions of Section 11.1, no Party shall have any obligation to the other
Party thereafter arising out of this Agreement; provided, however, that: (i) if
the Sellers fail or unreasonably refuse to tender full performance of their
obligations under this Agreement other than a failure of a condition set forth
in Article X and as a result thereof the Buyer terminates this Agreement, the
Buyer shall be entitled to exercise and pursue all legal or equitable rights or
remedies which it may have against the Sellers by reason of any breach of this
Agreement by the Sellers; and (ii) if the Buyer fails or unreasonably refuses to
tender full performance of its obligations under this Agreement other than a
failure of a condition set forth in Article IX and as a result thereof the
Sellers terminate this Agreement, the Sellers shall be entitled to exercise and
pursue any legal or equitable rights or remedies which they may have against the
Buyer by reason of any breach of this Agreement by the Buyer. Notwithstanding
the foregoing, the termination of this Agreement shall not effect the respective
Parties' obligations under Sections 13.1, 13.2, 14.1, 14.10 and 14.11.


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                                                               Execution Version

16.   ARTICLE XII. INDEMNIFICATION

      12.1 INDEMNIFICATION BY THE SELLERS. (a) From and after the Closing,
subject to the terms set forth in this Article XII, the Sellers shall indemnify
the Buyer, its Affiliates and each of their respective officers, directors,
employees, stockholders, agents and representatives (the "Buyer Indemnified
Party") against and hold them harmless from, any Damages suffered or incurred by
such Buyer Indemnified Party to the extent arising from:

            (i) any material breach of any representation or warranty of any of
      the Sellers set forth in Articles IV and V of this Agreement or in any
      Schedule or certificate delivered hereunder; and

            (ii) any material breach of any covenant of any of the Sellers
      contained in this Agreement.

            (b) The Sellers shall not be required to indemnify any Buyer
      Indemnified Party:

            (i) until the aggregate of all Damages exceeds one percent (1.0%) of
      the Enterprise Value, and

            (ii) with respect to any Damages indemnifiable at any time after the
      Buyer shall have filed a claim that shall have resulted in payment
      pursuant to (i) above, any Damages in an amount exceeding, on a cumulative
      basis, an amount equal to zero point zero five percent (0.05%) of the
      Enterprise Value each; provided, however, that this provision shall not
      apply to any claim for indemnification of Damages arising out of a breach
      of Sections 4.1 to 4.4, and 5.4;

      (c) The Sellers shall only be liable for any Damages up to the Available
Escrow Amount (and under no circumstances in excess of the Escrow Amount),
except for (i) claims arising out of a breach of Sections 5.17 and 5.19, in
which case the Sellers shall only be liable for any Damages up to twenty percent
(20%) of the Enterprise Value (such twenty percent (20%), for the avoidance of
doubt, shall include any amounts paid from the Escrow Account), and (ii) claims
arising out of a breach or Sections 4.1 to 4.4 and 5.4, in which case the
Sellers shall only be liable for any Damages up to the Enterprise Value.

      (d) The Sellers shall not be liable for any Damages unless a claim is
timely asserted pursuant to this Agreement during the two (2) years and six (6)
months period following the date hereof, except for (i) claims arising out of a
breach of Sections 5.17 and 5.19, in which case the Sellers shall not be liable
for any Damages unless a claim is timely asserted pursuant to this Agreement
during the five (5) year period following the date hereof, and (ii) claims
arising out of a breach of Sections 4.1 to 4.4 and 5.4, in which case the
Sellers shall not be liable for any Damages unless a claim is timely asserted
pursuant to this Agreement during the statute of limitations period (plazo de
prescripcion) established in accordance with the Laws of Mexico with respect to
such matters.


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                                                               Execution Version

      (e) The Parties acknowledge and agree that the Sellers' obligation to
indemnify under this Article XII shall be (i) joint and several among all the
Sellers, without any distinction, up to the Available Escrow Amount, and (ii)
several (and not jointly), after the application or distribution of the
Available Escrow Amount, on a pro-rata basis, considering each Sellers'
ownership percentage of the Company immediately prior to the Closing, as set
forth in Exhibit A.

      (f) In the event that the Buyer makes a claim for indemnification which
remains unresolved or disputed by the Parties for a period of twelve (12) months
from the date the claim is asserted, for amounts that continue to be withheld as
Available Escrow Amounts to secure such claim, the Buyer shall be required to
file a formal lawsuit associated with such claim against all or a portion of the
Sellers, within a period of thirty (30) calendar days counted from the date of
expiration of such twelve (12)-month period, being all expenses related to such
lawsuit recoverable as Damages, to the extent such claims shall be payable under
this Article XII, provided that, a failure to file the relevant lawsuit within
the specified period, shall entitle Sellers to withdraw the applicable Available
Escrow Amounts, as if no such claim had been submitted.

      12.2 INDEMNIFICATION BY THE BUYER. From and after the Closing, the Buyer
and the Company, jointly and severally, shall indemnify, defend and hold the
Sellers, their Affiliates and each of their respective officers, directors,
employees, stockholders, agents and representatives and their permitted
successors and assigns (each, a "Seller Indemnified Party") harmless from and
against all Damages resulting from (i) any breach of a representation and
warranty contained in Article VI during the period when such representation and
warranty is in existence under Section 12.6, and (ii) any breach or default in
the performance of any of the covenants and agreements made by the Buyer in this
Agreement or in any schedule, certificate, instrument or agreement delivered
pursuant hereto including, without limitation, the documents attached hereto as
Schedules.

      12.3 TERMINATION OF INDEMNIFICATION. The obligations of the Sellers and
the Buyer to indemnify and hold harmless any Indemnified Party pursuant to
Sections 12.1 and 12.2 shall terminate when the applicable representation or
warranty terminates pursuant to Section 12.6; provided, however, that such
obligations to indemnify and hold harmless shall not terminate with respect to
any item as to which the relevant Indemnified Party shall have, before the
expiration of the applicable period (provided under Section 12.6) previously
made a claim by delivering a notice of such claim (stating in reasonable detail
the basis of such claim) (a "Claim Notice") to the Party to be providing the
indemnification and such claim remains unresolved upon expiration of the
applicable period under Section 12.6.

      12.4 PROCEDURES. (a) Third-Party Claims. For a Person to be entitled to
any indemnification (the "Indemnified Party") provided for in Sections 12.1 and
12.2 in respect of, arising out of, or involving, a claim made by any Person
against any such Indemnified Party (a "Third-Party Claim"), such Indemnified
Party must deliver a Claim Notice to the indemnifying party in writing (and in
reasonable detail) of the Third-Party Claim within five (5) Business


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                                                               Execution Version

Days after receipt by such Indemnified Party of notice of the Third-Party Claim,
together with copies of all notices and documents (including court papers, if
any) received by the Indemnified Party relating to the Third-Party Claim.
Thereafter, the Indemnified Party shall deliver to the indemnifying party,
within five (5) Business Days after the Indemnified Party's receipt thereof,
copies of all notices and documents (including court papers) received by the
Indemnified Party relating to the Third-Party Claim. Failure by any Indemnified
Party so to notify the indemnifying party shall relieve the indemnifying party
from any liability that it may have to such Indemnified Party under Section
12.1.

      (b) Assumption of Defense against Third-Party Claims. If a Third-Party
Claim is made against an Indemnified Party, the indemnifying party shall be
entitled to participate in the defense thereof and, if it so chooses, to assume
the defense thereof with counsel selected by the indemnifying party; provided,
however, that such counsel is not reasonably objected to by the Indemnified
Party. Should the indemnifying party so elect to assume the defense of a
Third-Party Claim, the indemnifying party shall not be liable to the Indemnified
Party for any legal expenses subsequently incurred by the Indemnified Party in
connection with the defense thereof. If the indemnifying party assumes such
defense, the Indemnified Party shall have the right to participate in the
defense thereof and to employ counsel (not reasonably objected to by the
indemnifying party), at its own expense, separate from the counsel employed by
the indemnifying party, it being understood that the indemnifying party shall
control such defense, unless, in both cases, the Indemnified Party shall have an
interest conflicting with that of the indemnifying party. The indemnifying party
shall be liable for reasonable and documented fees and expenses of counsel (for
a total amount not exceeding $1,000,000.00 (one million Pesos 00/100), in the
aggregate) employed by the Indemnified Party for any period during which the
indemnifying party has not assumed the defense thereof. If the indemnifying
party chooses to defend or prosecute a Third-Party Claim, all the Indemnified
Parties shall cooperate in the defense or prosecution thereof. Such cooperation
shall include the engagement and (upon the indemnifying party's request) the
access and delivery to the indemnifying party of records and information that
are reasonably relevant to such Third-Party Claim, and making employees
available on a mutually convenient basis to provide additional information and
explanation of any material provided hereunder. Whether or not the indemnifying
party assumes the defense of a Third-Party Claim, the Indemnified Party shall
not admit any liability with respect to, or settle, compromise or discharge,
such Third-Party Claim without the indemnifying party's prior written consent
(which consent shall not be unreasonably withheld). If the indemnifying party
assumes the defense of a Third-Party Claim, the Indemnified Party shall agree to
any settlement, compromise or discharge of a Third-Party Claim that the
indemnifying party may recommend and that by its terms obligates the
indemnifying party to pay the full amount of the liability in connection with
such Third-Party Claim, which releases the Indemnified Party completely in
connection with such Third-Party Claim and that would not otherwise adversely
affect the indemnified party.

      (c) Other Claims. In the event any Indemnified Party should have a claim
against any indemnifying party under Section 12.1 different from a Third-Party
Claim being asserted


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                                                               Execution Version

against or sought to be collected from such Indemnified Party, the Indemnified
Party shall deliver a Claim Notice with reasonable promptness to the
indemnifying party, which in no event shall be delivered in a period exceeding
three (3) calendar months from the date in which the Indemnified Party gained
knowledge of the fact or circumstance giving rise to such claim. If the
indemnifying party does not notify the Indemnified Party within fifteen (15)
Business Days following its receipt of such Claim Notice that the indemnifying
party disputes its liability to the Indemnified Party under Section 12.1, such
claim specified by the Indemnified Party in such Claim Notice shall be deemed a
liability of the indemnifying party under Section 12.1, unless otherwise
evidenced by the indemnifying party, and the indemnifying party shall pay the
amount of such liability to the indemnified party on demand or, in the case of
any Claim Notice in which the amount of the claim (or any portion thereof) is
estimated, on such later date when the amount of such claim (or such portion
thereof) becomes finally determined.

      12.5 HOLDBACK. (a) If the Buyer notifies a claim to the Sellers'
Representative, the Sellers' Representative may elect to dispute the Requested
Holdback specified in connection with the claim, by delivering a notice (a
"Counter Notice") to the Buyer within ten (10) Business Days of receipt of such
notice. If no Counter Notice is received by the Buyer within such ten (10)
Business Day period, then the Requested Holdback claimed by the Buyer in the
Claim Notice shall be a Final Holdback Amount.

      (b) If a Counter Notice is duly delivered by the Sellers' Representative
with respect to a Claim Notice, after discussions shall have been held by the
Buyer and the Sellers' Representative for a period of no less than sixty (60)
calendar days and no agreement shall have been reached, then the dispute, but
only in respect of the Requested Holdback, shall be submitted for resolution to
the financial transaction's services section of the Mexican affiliates of
PricewaterhouseCoopers or, in the event PricewaterhouseCoopers shall not be
available to act, of Deloitte (the "Referee"). The Referee shall determine the
Firm Holdback Amount within thirty (30) calendar days after the dispute is
submitted to it, by:

            (i) establishing whether the Requested Holdback is a reasonable sum
      of money to be held in the Escrow Agreement in relation to the nature and
      description of the claims contained in the Claim Notice, and

            (ii) if applicable, reducing the Requested Holdback to an amount the
      Referee determines, in its discretion, to be reasonable considering the
      nature and description of the claims contained in the Claim Notice.

      (c) The Buyer shall cause the Company to, and the Buyer and the Sellers'
Representative shall, provide the Referee, with any information required by the
Referee and reasonably available, during the aforementioned thirty (30) calendar
day period, so that the Referee may reach a final decision. The Referee shall
issue its final decision in the form of a written notice delivered to the Buyer
and the Sellers' Representative, which decision shall be binding and conclusive
with respect to the Firm Holdback Amount.


                                                                              45
<PAGE>

                                                               Execution Version

      (d) The Sellers and the Buyer expressly acknowledge and agree that the
Referee (i) may only verify the reasonableness of the Requested Holdback in
connection with the claims set forth in the Claim Notice and may not, and is not
directed to, make any assessment or determination as to the merits of any such
claim, and (ii) may not increase the amount of the Requested Holdback.
Furthermore, the Sellers and the Buyer expressly acknowledge and agree that (1)
a submission of a dispute to the Referee pursuant to this Section 12.1 shall
not, in any way, limit the ability of the Buyer to submit the claim underling
the Claim Notice to a competent court pursuant to this Article XII or otherwise
initiate an action against the Sellers, to resolve the merits of such claim, and
(2) the determination of the Firm Holdback Amount does not impose any limitation
on the amounts to be indemnified under this Article XII or otherwise shall be
deemed to have any impact on the merits of the relevant claim.

      (e) In the event the Sellers' Representative decides to submit a Counter
Notice, then:

            (i) if the Requested Holdback is reduced by the Referee, the Buyer
      shall pay such Referee's fees and expenses, and

            (ii) if the Requested Holdback is confirmed by the Referee, the
      Referees' fees and expenses shall be paid by the Sellers.

      12.6 SURVIVAL OF REPRESENTATIONS. The representations, warranties and
covenants of Sellers shall survive the Closing solely for purposes of this
Article XII as follows (i) the representations and warranties in Article IV and
Article V (except for Section 5.19) shall survive for a two (2) years and six
(6) months period from the date hereof, (ii) the representations and warranties
contained in Section 5.19 shall survive for five (5) years from the date hereof,
and (iii) the representations and warranties contained in Sections 4.1 to 4.4
and 5.4 shall survive for the statute of limitations period established in
accordance with the Laws of Mexico with respect to such matters; except as set
forth in Section 12.3.

      12.7 EXCLUSIVE REMEDY. The Buyer acknowledges and agrees that the
indemnification provided in this Article XII shall be the sole and exclusive
remedy against the Sellers with respect to any and all Damages arising under
this Agreement or any of the transactions contemplated hereunder, other than
claims of, or causes of action arising from, fraud (fraude) or willful
misconduct (dolo) under the Laws of Mexico. The Parties acknowledge and agree
that no Person who was an officer, director, secretary, statutory auditor or
stockholder of the Company or the Subsidiaries, as the case may be, prior to the
Closing, nor any of their Affiliates, shall have any liability to make any
payment with respect to any breach of any representation or warranty made in
this Agreement, except for Seller's indemnification obligations under this
Article XII.

      12.8 LIMITATION ON DAMAGES. Notwithstanding anything herein to the
contrary, any Damages incurred by any Indemnified Party shall be calculated
after considering any insurance proceeds and other benefits received or
receivable by the Indemnified Party.


                                                                              46
<PAGE>

                                                               Execution Version

      12.9 INDEMNIFICATION CURRENCY. All indemnification payments under this
Agreement shall be payable in Pesos. If any indemnification claims are incurred
in a currency other than Pesos, then such amount denominated in such foreign
currency shall be converted into an amount denominated in Pesos pursuant to
applicable Law, at the time of payment thereof.

      12.10 TAX STATUS OF INDEMNIFICATION PAYMENTS. Any indemnification made in
respect of a breach of representation or warranty hereunder shall constitute an
adjustment of the Enterprise Value and the Parties shall, within a reasonable
time of payment and receipt of such payment, as applicable, and in any event
within two (2) months of such payment, file any amendments to their respective
current and past income Tax returns as may be necessary to reflect the
foregoing.

      12.11 REPRESENTATION OF THE SELLERS. In addition to the matters set forth
in Article II, Sellers' Representative shall be vested with any necessary power
and authority that may be required and is hereby authorized to act on behalf of
any and all Sellers in connection with the indemnification provisions set forth
in this Article XII, it being understood that such Sellers' Representative shall
be the sole person authorized to (i) give any instruction or take any action
(including acceptance and settlement of claims) in connection with the
provisions of this Article XII, and (ii) receive and deliver notices under
Sections 12.4 and 12.5. Independent actions taken by any of the Sellers without
being undertaken through, or accepted by, the Sellers' Representative, shall be
understood not to have any legal force or effect. Furthermore, each of the
Sellers hereby expressly and absolutely releases the Sellers' Representative and
the Buyer from any and all liabilities that may be associated with its role as
Sellers' Representative hereunder and expressly agree and ratify any action
taken by the Sellers' Representative and from taking any actions agreed with or
instructed by the Sellers' Representative, respectively, except in the event of
fraud or willful misconduct (dolo). Nothing to the contrary herein set forth
shall preclude the right of the Buyer to notify any of the Sellers through a
representative of each such Seller, different from the Sellers' Representative.

17.   ARTICLE XIII. EXPENSES

      13.1 EXPENSES. Except as provided in Sections 5.24 and 13.2, the Sellers
and the Buyer shall each pay its own expenses in connection with the
negotiations leading up to and the preparation of this Agreement and the
consummation of the transactions provided for herein (collectively, "Expenses"),
including without limitation fees and expense of their respective investment
advisors, brokers, legal counsel, accountants and, in the case of the Buyer,
other outside experts retained by it to conduct due diligence.

      13.2 TRANSFER AND OTHER TAXES. Any and all transfer, withholding, stamp,
sales, use and excise Taxes and other similar charges, fees and assessments
resulting from or imposed with respect to the transactions contemplated by this
Agreement by any applicable jurisdiction shall be borne by the Party responsible
under applicable Law.


                                                                              47
<PAGE>

                                                               Execution Version

18.   ARTICLE XIV. MISCELLANEOUS

      14.1 ISSUANCE OF PRESS RELEASES. Neither the Buyer nor any of the Sellers
shall, without the approval of the other Parties, make any press release or
other public announcement concerning the transactions contemplated by this
Agreement, except as and to the extent that any such Party shall be so required
by Law, in which case the other Parties shall be advised and the Parties shall
use their commercially reasonable efforts to cause a mutually agreeable release
or announcement to be issued. Notwithstanding the foregoing, after the Closing,
each of the Buyer and the Sellers shall be authorized to issue a customary press
release or other public announcements with respect to the Closing, provided that
the other Parties shall have been given a reasonable opportunity to review and
comment on such press release or public announcement prior to its issuance and,
provided, further that under no circumstance may the Buyer make public in any
announcement or otherwise, the price or other material terms of the transaction
contemplated by this Agreement nor the name or identity of the Sellers, without
their prior written consent.

      14.2 COOPERATION FOLLOWING THE CLOSING. Following the Closing, the Sellers
and the Buyer shall deliver to the other such further information and documents
and shall execute and deliver to the other such further information and
documents and shall execute and deliver such further instruments and agreements
as the other shall reasonably request in order to consummate or confirm the
transactions provided hereunder, to accomplish the purpose of this Agreement or
to assure to the other the benefits of this Agreement.

      14.3 BENEFITS AND BURDENS; ASSIGNMENT. (a) This Agreement shall inure to
the benefit of and shall be binding upon the Sellers and the Buyer, and the
respective successors and permitted assigns of the Sellers and the Buyer.

      (b) No assignment of this Agreement or any rights or obligations hereunder
may be made by either the Seller or the Buyer without the prior written consent
of the other parties hereto and any attempted assignment without the required
consents shall be void..

      14.4 NOTICES. All notices, requests, demands and other communications
which are required or may be given under this Agreement shall be in writing
(including telecommunications) and shall be deemed to have been duly given if
personally delivered or sent by (i) telecopy or other wire transmission with
request for assurance of receipt, or (ii) Federal Express or other overnight air
express and receipted for by the recipient or an agent of the recipient. Any
notices delivered to a Party to this Agreement or to legal counsel for such
Party shall be sent to the following addresses:


                                                                              48
<PAGE>

                                                               Execution Version

      If to the Sellers' Representative:
      ----------------------------------

      Original:
      Ms. Maria Josefina Victoria Valladares Garcia
      Bucareli No. 103 Esq. Nicolas Fdo. Torres
      Las Aguilas  C.P. 78279
      San Luis Potosi, S.L.P.
      Telephone: +52 (444) 816-0013
      Facsimile: +52 (444) 816-0013

      Substitute:
      Mr. Pablo Valladares Garcia
      Cordillera Grey No. 290 Int. 113
      Lomas 3a. Secc.  C.P. 78210
      San Luis Potosi, S.L.P.
      Telephone: +52 (444) 816-0013
      Facsimile: +52 (444) 812-6961

      In any case, with a copy to (which copy shall not constitute notice):

      Galicia y Robles, S.C.
      Torre del Bosque
      Blvd. Manuel Avila Camacho No. 24, Piso 7
      Lomas de Chapultepec C.P. 11000
      Mexico, D.F.
      Telephone: +52 (55) 5540-9200
      Facsimile: +52 (55) 5540-9202 ext. 2215
      Attention: Ignacio Pesqueira T. and/or Pablo Jimenez Z.

      If to the Buyer:
      ----------------

      Agustin Melgar No. 23
      Fraccionamiento Industrial Ninos Heroes
      54030 Tlalnepantla, Estado de Mexico
      Telephone: + 52 (55) 1165-1000
      Facsimile: + 52 (55) 1165-1001
      Attention: Sergio Vigil Gonzalez


                                                                              49
<PAGE>

                                                               Execution Version

      With a copy to (which copy shall not constitute notice):

      Mijares, Angoitia, Cortes y Fuentes, S.C.
      Montes Urales 505, 3er Piso
      Lomas de Chapultepec, C.P. 11000
      Mexico, D.F.
      Telephone: +52 (55) 5201-7447
      Facsimile: +52 (55) 5520-1065
      Attention: Ricardo Maldonado Yanez

or to such other address or to such other Person or Persons designated in
writing by such Party or counsel, as the case may be. Notices delivered pursuant
to this Section 14.4 shall be deemed to have been received on the Business Day
following their actual delivery.

      14.5 ENTIRE UNDERSTANDING. This Agreement and any Exhibit and Schedules
referred to herein represent the entire understanding of the Parties with
respect to the subject matter herein and supersede any correspondence,
memoranda, conversations or other communications with respect thereto.

      14.6 AMENDMENTS; WAIVERS. This Agreement may be amended only by an
instrument in writing signed by the Sellers and the Buyer. Subject to the
provisions set forth in Sections 9.2 and 10.2, any term or provision of this
Agreement may be waived, or the time for its performance may be extended, by the
Party or Parties entitled to the benefit thereof. Any such waiver shall be
validly and sufficiently authorized for the purposes of this Agreement if, as to
any party, it is authorized in writing by an authorized representative of such
Party. The failure of any Party hereto to enforce at any time any provision of
this Agreement shall not be construed to be a waiver of such provision, nor in
any way to affect the validity of this Agreement or any part hereof or the right
of any Party thereafter to enforce each and every such provision. No waiver of
any breach of this Agreement shall be held to constitute a waiver of any other
or subsequent breach.

      14.7 INTERPRETATION; EXHIBITS AND SCHEDULES. The headings contained in
this Agreement, in any Exhibit or Schedule hereto and in the table of contents
to this Agreement are for reference purposes only and shall not affect in any
way the meaning or interpretation of this Agreement. All Exhibits and Schedules
annexed hereto or referred to herein are hereby incorporated in and made a part
of this Agreement as if set forth in full herein. Any capitalized terms used in
any Exhibit or Schedule but not otherwise defined therein, shall have the
meaning as defined in this Agreement. When a reference is made in this Agreement
to a Section, Exhibit or Schedule, such reference shall be to a Section of, or
an Exhibit or Schedule to, this Agreement unless otherwise indicated.


                                                                              50
<PAGE>

                                                               Execution Version

      14.8 COUNTERPARTS. This Agreement may be executed in two (2) or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same instrument, and, when signed by any
of the Parties, shall become legally binding on such Parties effective as of the
date set forth at the beginning of this Agreement.

      14.9 SEVERABILITY. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement.

      14.10 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the Laws of Mexico.

      14.11 CONSENT TO JURISDICTION. Each Party irrevocably submits to the
exclusive jurisdiction of the federal courts located in Mexico City, Federal
District, for the purposes of any suit, action or other proceeding arising out
of this Agreement or any transaction contemplated hereby. Each Party irrevocably
and unconditionally waives any objection to the laying of venue of any action,
suit or proceeding arising out of this Agreement or the transactions
contemplated hereby and further irrevocably and unconditionally waives and
agrees not to plead or claim in any such court that any such action, suit or
proceeding brought in any such court has been brought in an inconvenient forum,
and further waives any right to which it may be entitled on account of place of
residence or domicile.

            [The remainder of this page is intentionally left blank]


                                                                              51
<PAGE>

                                                               Execution Version

      IN WITNESS WHEREOF, the Parties have executed or caused to be executed
this Agreement as of the date first written above.

SELLERS:

By: ________________________________        By: ________________________________
Name:                                       Name:

By: ________________________________        By: ________________________________
Name:                                       Name:

By: ________________________________        By: ________________________________
Name:                                       Name:

By: ________________________________        By: ________________________________
Name:                                       Name:

By: ________________________________        By: ________________________________
Name:                                       Name:


                                                                              52
<PAGE>

                                                               Execution Version

BUYER:

By: ________________________________
    Name:
    Title:

            [The remainder of this page is intentionally left blank]

[Signature page of the Stock Purchase Agreement for the Acquisition of 100% of
the shares of Corporacion Aceros DM, S.A. de C.V. and certain subsidiaries
listed herein, by and among Miguel Fernando Valladares Garcia, Juan Carlos
Valladares Garcia, Pablo Valladares Garcia, Rosa Maria Valladares Garcia, Maria
Josefina Victoria Valladares Garcia, Maria del Rosario Valladares Garcia, Rafael
Modesto del Blanco Garrido, Encarnacion Sofia del Blanco Garrido, Marina Amalia
del Blanco Garrido and Margarita Gabriela del Blanco Garrido, as Sellers, and
Grupo Simec, S.A.B. de C.V., as Buyer, dated as of February 21, 2008.]


                                                                              53
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-12.1
<SEQUENCE>5
<FILENAME>e32100ex12_1.txt
<DESCRIPTION>ANNUAL CERTIFICATIONS
<TEXT>
                                                                    Exhibit 12.1

                              Annual Certifications

            Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

      I, Jose Flores Flores, certify that:

      1. I have reviewed this annual report on Form 20-F of Grupo Simec, S.A.B.
de C.V.;

      2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this report;

      3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the company as of,
and for, the periods presented in this report;

      4. The company's other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) for the company and have:

      (a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the company, including its
consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;

      (b) Evaluated the effectiveness of the company's disclosure controls and
procedures and presented in this report our conclusions about the effectiveness
of the disclosure controls and procedures, as of the end of the period covered
by this report based on such evaluation; and

      (c) Disclosed in this report any change in the company's internal control
over financial reporting that occurred during the period covered by the annual
report that has materially affected, or is reasonably likely to materially
affect, the company's internal control over financial reporting; and

      5. The company's other certifying officer(s) and I have disclosed, based
on our most recent evaluation of internal control over financial reporting, to
the company's auditors and the audit committee of the company's board of
directors (or persons performing the equivalent functions):

      (a) All significant deficiencies and material weakness in the design or
operation of internal control over financial reporting which are reasonably
likely to adversely affect the company's ability to record, process, summarize
and report financial information; and

      (b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the company's internal control over
financial reporting.

Dated: June 30, 2008

                                       By: /s/ Jose Flores Flores
                                           --------------------------
                                           Jose Flores Flores
                                           Chief Financial Officer
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-12.2
<SEQUENCE>6
<FILENAME>e32100ex12_2.txt
<DESCRIPTION>ANNUAL CERTIFICATIONS
<TEXT>
                                                                    Exhibit 12.2

                              Annual Certifications

            Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

      I, Luis Garcia Limon, certify that:

      1. I have reviewed this annual report on Form 20-F of Grupo Simec, S.A.B.
de C.V.;

      2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this report;

      3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the company as of,
and for, the periods presented in this report;

      4. The company's other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) for the company and have:

      (a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the company, including its
consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;

      (b) Evaluated the effectiveness of the company's disclosure controls and
procedures and presented in this report our conclusions about the effectiveness
of the disclosure controls and procedures, as of the end of the period covered
by this report based on such evaluation; and

      (c) Disclosed in this report any change in the company's internal control
over financial reporting that occurred during the period covered by the annual
report that has materially affected, or is reasonably likely to materially
affect, the company's internal control over financial reporting; and

      5. The company's other certifying officer(s) and I have disclosed, based
on our most recent evaluation of internal control over financial reporting, to
the company's auditors and the audit committee of the company's board of
directors (or persons performing the equivalent functions):

      (a) All significant deficiencies and material weakness in the design or
operation of internal control over financial reporting which are reasonably
likely to adversely affect the company's ability to record, process, summarize
and report financial information; and

      (b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the company's internal control over
financial reporting.

Dated: June 30, 2008

                                         By: /s/ Luis Garcia Limon
                                             ---------------------------
                                             Luis Garcia Limon
                                             Chief Executive Officer

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-13
<SEQUENCE>7
<FILENAME>e32100ex13.txt
<DESCRIPTION>ANNUAL CERTIFICATIONS
<TEXT>
                                                                      Exhibit 13

                              Annual Certifications

            Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

      Pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a)
and (b) of Section 1350, Chapter 63 of Title 18, United States Code), each of
the undersigned officers of Grupo Simec, S.A.B. de C.V. (the "Company"), does
hereby certify, to such officer's knowledge, that:

      The Annual Report on Form 20-F for the year ended December 31, 2007 of the
Company fully complies with the requirements of Section 13(a) or 15(d) of the
Securities Exchange Act of 1934 and the information contained in the Form 20-F
fairly presents, in all material respects, the financial condition and results
of operations of the Company.

Dated: June 30, 2008

                                                   /s/ Luis Garcia Limon
                                                   -----------------------------
                                                   Luis Garcia Limon
                                                   Chief Executive Officer

                                                   /s/ Jose Flores Flores
                                                   -----------------------------
                                                   Jose Flores Flores
                                                   Chief Financial Officer


</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
-----END PRIVACY-ENHANCED MESSAGE-----
