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<SEC-DOCUMENT>0000891092-10-003955.txt : 20100917
<SEC-HEADER>0000891092-10-003955.hdr.sgml : 20100917
<ACCEPTANCE-DATETIME>20100917171648
ACCESSION NUMBER:		0000891092-10-003955
CONFORMED SUBMISSION TYPE:	20-F
PUBLIC DOCUMENT COUNT:		5
CONFORMED PERIOD OF REPORT:	20091231
FILED AS OF DATE:		20100917
DATE AS OF CHANGE:		20100917

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:		101078888

	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>e40100-20f.htm
<DESCRIPTION>FORM 20-F
<TEXT>
<HTML>
<HEAD>
   <TITLE></TITLE>
</HEAD>

<BODY bgcolor="#ffffff" style="font-family: 'Times New Roman';font-size: 10pt;">
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<P style="text-align: center;"> <B><font size="4">UNITED STATES</font></B><font size="4"><BR>
  <B>SECURITIES AND EXCHANGE COMMISSION</B></font></P>
<hr width="120" size="1" noshade>
<div align="center"><B><font size="4">FORM 20-F</font></B> </div>
<hr width="120" size="1" noshade>
<P style="text-align: left;"> <B>(Mark One)</B></P>
<table width="100%" border="0" cellspacing="0" cellpadding="0">
  <tr valign="top">
    <td width="3%"><font size="2"><B>|_| </B>&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
    <td><font size="2"><B>REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR
      (g) OF THE SECURITIES EXCHANGE ACT OF 1934</B></font></td>
  </tr>
  <tr valign="top">
    <td width="3%">&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font size="2">&nbsp;</font></td>
    <td><div align="center"><font size="2"><B>OR</B></font></div></td>
  </tr>
  <tr valign="top">
    <td width="3%">&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font size="2">|X|</font></td>
    <td><font size="2"><b>ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
      SECURITIES EXCHANGE ACT OF 1934</b></font></td>
  </tr>
  <tr valign="top">
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font size="2">&nbsp;</font></td>
    <td><p align="center"><font size="2"><b>For the fiscal year ended December
        31, 2009 </b></font></p>
      <p align="center"><font size="2"><b>OR</b></font></p></td>
  </tr>
  <tr valign="top">
    <td width="3%">&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font size="2"><B>|_| </B></font></td>
    <td><font size="2"><b>TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
      THE SECURITIES </b><b>EXCHANGE ACT OF 1934</b></font></td>
  </tr>
</table>
<div align="center"><B><br>
  Commission File Number 1-11176</B> </div>
<hr align="center" width="500" size="1" noshade>
<div align="center"><B> </B><B><font size="4">GRUPO SIMEC, S.A.B. de C.V.</font></B><BR>
  <font size="1">(Exact name of Registrant as specified in its charter)</font>
  <br>
  <br>
</div>
<div align="center"><B><font size="4">GROUP SIMEC</font></B> <font size="1"><br>
  (Translation of Registrant&#146;s name into
  English)</font> </div>
<hr align="center" width="500" size="1" noshade>
<div align="center"><br>

</div>
<div align="center"><B><font size="4">UNITED MEXICAN STATES</font></B> <br>
  <font size="1">(Jurisdiction of incorporation or organization)</font>
</div>
<hr align="center" width="500" size="1" noshade>
<br>
<div align="center">
</div>
<P style="text-align: center;"> <B>Calzada Lazaro Cardenas 601</B><BR>
  <B>Colonia La Nogalera, Guadalajara,</B><BR>
  <B>Jalisco, Mexico 44440</B><BR>
  <font size="1">(Address of principal executive offices)</font></P>
<div align="center"><B>Adolfo Luna Luna, telephone number 011-52-33 3770-6700,
  e-mail aluna@gruposimec.com.mx</B> </div>
<div align="center"><font size="1">(Name, Telephone, E-mail and/or Facsimile number
  and Address of Company Contact Person)</font> </div>
<hr align="center" width="500" size="1" noshade>

<P style="text-align: center;">Securities registered or to be registered pursuant
  to Section 12(b) of the Act.</P>
<TABLE width=100% border=0 cellspacing=0 style="font-family: 'Times New Roman';font-size: 10pt;">
<TR>
     <TD width=51%></TD>
     <TD width=49%></TD></TR>
<TR valign="bottom">
     <TD width="50%" align=center> <B><FONT size=2>Title of Each Class</FONT></B></TD>
     <TD width="50%" align=center> <B><FONT size=2>Name of Each Exchange on Which Registered</FONT></B></TD> </TR>
<TR>
     <TD>
<HR align="center" width="120" size=1 noshade>
</TD>

    <TD> <HR align="center" width="260" size=1 noshade> </TD>
  </TR>
<TR valign="bottom">
     <TD align=center> <FONT size=2>American Depositary Shares</FONT></TD>
     <TD align=center> <FONT size=2>NYSE Amex LLC</FONT></TD> </TR>
<TR valign="bottom">
     <TD align=center> <FONT size=2>Series B Common Stock</FONT></TD>
     <TD align=center> <FONT size=2>NYSE Amex LLC*</FONT></TD> </TR> </TABLE><BR>
<P style="text-align: center;"> <B>Securities registered or to be registered pursuant to Section 12(g) of the Act:</B></P>
<P style="text-align: center;"> None</P>
<P style="text-align: center;"> <B>Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.</B></P>
<P style="text-align: center;"> None</P>
<P style="text-align: center;"> <B>Indicate the number of outstanding shares of each of the issuer&#146;s classes of common stock as of December 31, 2009 was:</B></P>
<P style="text-align: center;"> Series B Common Stock &#151; 497,709,214 shares</P>
<hr width="120" size="1" noshade>
<P style="text-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 |_| &nbsp;&nbsp;&nbsp;No |X| </P>
<HR noshade align="center" width="100%" size="5">
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<BR>
<P style="text-align: left;"> If this report is an annual or transition report,
  indicate by check mark if the registrant is not required to file
  reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
  Yes |_| &nbsp;&nbsp;&nbsp;No |X| </P>
<P style="text-align: left;">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| &nbsp;&nbsp;&nbsp;No
  |_|</P>
<P style="text-align: left;">Indicate by check mark whether the registrant has
  submitted electronically and posted on its corporate Web site, if any, every
  Interactive Data File required to be submitted and posted pursuant to Rule 405
  of Regulation S-T (&#167;232.405 of this chapter) during the preceding 12 months
  (or for such shorter period that the registrant was required to submit and post
  such files). </P>
<P style="text-align: left;">Yes |_| &nbsp;&nbsp;&nbsp;No |_| </P>
<P style="text-align: left;"> 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): </P>
<P style="text-align: left;">Large accelerated filer |_| &nbsp;&nbsp;&nbsp;Accelerated
  filer |X|&nbsp;&nbsp;&nbsp;Non-accelerated filer |_|</P>
<P style="text-align: left;">Indicate by check mark which basis of accounting
  the registrant has used to prepare the financial statements included in this
  filing: </P>
<P style="text-align: left;">|_| US GAAP &nbsp;&nbsp;&nbsp;|_| International Financial
  Reporting Standards as issued by the International Accounting Standards Board
  &nbsp;&nbsp;&nbsp;|X| Other </P>
<P style="text-align: left;">Indicate by check mark which financial statement
  item the registrant has elected to follow. Item 17 |_|&nbsp;&nbsp;&nbsp;Item
  18 |X|</P>
<P style="text-align: left;">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).</P>
<P style="text-align: left;"> Yes |_| &nbsp;&nbsp;&nbsp;No |X| </P>
<hr size="1" noshade>
<hr size="1" noshade>
<P style="text-align: left;"> _________________________</P>
<P style="text-align: left;"> * Not for trading, but only in connection with the registration of American depositary shares.</P>
<HR noshade align="center" width="100%" size="5">
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<BR>
<P style="text-align: center;"> <B>TABLE OF CONTENTS</B></P>
<TABLE border=0 cellpadding="4" cellspacing=0 style="font-family: 'Times New Roman';font-size: 10pt;" width=100%>
  <TR>
    <TD></TD>
    <TD></TD>
    <TD></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B><FONT size=2>Page</FONT></B></TD>
  </TR>
  <TR>
    <TD colspan=3>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=center colspan=3> <FONT size=2>PART I.</FONT></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <a href="#p2a"><FONT size=2>Item 1.</FONT></a></TD>
    <TD align=left> <a href="#p2a"><FONT size=2>Identity of Directors, Senior
      Management and Advisers</FONT></a></TD>
    <TD align=right> <a href="#p2a"><FONT size=2>2</FONT></a></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <a href="#p2b"><FONT size=2>Item 2.</FONT></a></TD>
    <TD align=left> <a href="#p2b"><FONT size=2>Offer Statistics and Expected
      Timetable</FONT></a></TD>
    <TD align=right> <a href="#p2b"><FONT size=2>2</FONT></a></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <a href="#p2c"><FONT size=2>Item 3.</FONT></a></TD>
    <TD align=left> <a href="#p2c"><FONT size=2>Key Information</FONT></a></TD>
    <TD align=right> <a href="#p2c"><FONT size=2>2</FONT></a></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <a href="#p21"><FONT size=2>Item 4.</FONT></a></TD>
    <TD align=left> <a href="#p21"><FONT size=2>Information on the Company</FONT></a></TD>
    <TD align=right> <a href="#p21"><FONT size=2>21</FONT></a></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <a href="#p49a"><FONT size=2>Item 4A. </FONT></a></TD>
    <TD align=left><a href="#p49a"><font size=2>Unresolved Staff Comments</font></a></TD>
    <TD align=right> <a href="#p49a"><FONT size=2>49</FONT></a></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <a href="#p49b"><FONT size=2>Item 5.</FONT></a></TD>
    <TD align=left> <a href="#p49b"><FONT size=2>Operating and Financial Review
      and Prospects</FONT></a></TD>
    <TD align=right> <a href="#p49b"><FONT size=2>49</FONT></a></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <a href="#p66"><FONT size=2>Item 6.</FONT></a></TD>
    <TD align=left> <a href="#p66"><FONT size=2>Directors, Senior Management and
      Employees</FONT></a></TD>
    <TD align=right> <a href="#p66"><FONT size=2>66</FONT></a></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <a href="#p74"><FONT size=2>Item 7.</FONT></a></TD>
    <TD align=left> <a href="#p74"><FONT size=2>Major Shareholders and Related
      Party Transactions</FONT></a></TD>
    <TD align=right> <a href="#p74"><FONT size=2>74</FONT></a></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <a href="#p76"><FONT size=2>Item 8.</FONT></a></TD>
    <TD align=left> <a href="#p76"><FONT size=2>Financial Information</FONT></a></TD>
    <TD align=right> <a href="#p76"><FONT size=2>76</FONT></a></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <a href="#p78"><FONT size=2>Item 9.</FONT></a></TD>
    <TD align=left> <a href="#p78"><FONT size=2>The Offer and Listing</FONT></a></TD>
    <TD align=right> <a href="#p78"><FONT size=2>78</FONT></a></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <a href="#p79"><FONT size=2>Item 10.</FONT></a></TD>
    <TD align=left> <a href="#p79"><FONT size=2>Additional Information</FONT></a></TD>
    <TD align=right> <a href="#p79"><FONT size=2>79</FONT></a></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <a href="#p94"><FONT size=2>Item 11.</FONT></a></TD>
    <TD align=left> <a href="#p94"><FONT size=2>Quantitative and Qualitative Disclosures
      About Market Risk</FONT></a></TD>
    <TD align=right> <a href="#p94"><FONT size=2>94</FONT></a></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <a href="#p95"><FONT size=2>Item 12.</FONT></a></TD>
    <TD align=left> <a href="#p95"><FONT size=2>Description of Securities Other
      than Equity Securities</FONT></a></TD>
    <TD align=right> <a href="#p95"><FONT size=2>95</FONT></a></TD>
  </TR>
  <TR valign="bottom">
    <TD align=center colspan=3> <FONT size=2>PART II.</FONT></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <a href="#p96"><FONT size=2>Item 13.</FONT></a></TD>
    <TD align=left> <a href="#p96"><FONT size=2>Defaults, Dividends Arrearages
      and Delinquencies</FONT></a></TD>
    <TD align=right> <a href="#p96"><FONT size=2>96</FONT></a></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <a href="#p97a"><FONT size=2>Item 14.</FONT></a></TD>
    <TD align=left> <a href="#p97a"><FONT size=2>Material Modifications to the
      Rights of Security Holders and Use of Proceeds</FONT></a></TD>
    <TD align=right> <a href="#p97a"><FONT size=2>97</FONT></a></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <a href="#p97b"><FONT size=2>Item 15.</FONT></a></TD>
    <TD align=left> <a href="#p97b"><FONT size=2>Controls and Procedures</FONT></a></TD>
    <TD align=right> <a href="#p97b"><FONT size=2>97</FONT></a></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <a href="#p101a"><FONT size=2>Item 16.</FONT></a></TD>
    <TD align=left> <a href="#p101a"><FONT size=2>[Reserved]</FONT></a></TD>
    <TD align=right> <a href="#p101a"><FONT size=2>103</FONT></a></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <a href="#p101b"><FONT size=2>Item 16A. </FONT></a></TD>
    <TD align=left><a href="#p101b"><font size=2>Audit Committee Financial Expert</font></a></TD>
    <TD align=right> <a href="#p101b"><FONT size=2>103</FONT></a></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <a href="#p101c"><FONT size=2>Item 16B. </FONT></a></TD>
    <TD align=left><a href="#p101c"><font size=2>Code of Ethics</font></a></TD>
    <TD align=right> <a href="#p101c"><FONT size=2>103</FONT></a></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <a href="#p102a"><FONT size=2>Item 16C. </FONT></a></TD>
    <TD align=left><a href="#p102a"><font size=2>Principal Accountant Fees and
      Services</font></a></TD>
    <TD align=right> <a href="#p102a"><FONT size=2>104</FONT></a></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <a href="#p102b"><FONT size=2>Item 16D. </FONT></a></TD>
    <TD align=left><a href="#p102b"><font size=2>Exemptions from the Listing Standards
      for Audit Committees</font></a></TD>
    <TD align=right> <a href="#p102b"><FONT size=2>104</FONT></a></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <a href="#p102c"><FONT size=2>Item 16E. </FONT></a></TD>
    <TD align=left><a href="#p102c"><font size=2>Purchases of Equity Securities
      by the Issuer and Affiliated Purchasers</font></a></TD>
    <TD align=right> <a href="#p102c"><FONT size=2>104</FONT></a></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <a href="#p102d"><FONT size=2>Item 16F. </FONT></a></TD>
    <TD align=left><a href="#p102d"><font size=2>Change in Registrant&#146;s Certifying
      Accountant</font></a></TD>
    <TD align=right> <a href="#p102d"><FONT size=2>104</FONT></a></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <a href="#p102e"><FONT size=2>Item 16G. </FONT></a></TD>
    <TD align=left><a href="#p102e"><font size=2>Corporate Governance</font></a></TD>
    <TD align=right> <a href="#p102e"><FONT size=2>104</FONT></a></TD>
  </TR>
  <TR valign="bottom">
    <TD align=center colspan=3> <FONT size=2>PART III.</FONT></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <a href="#p103a"><FONT size=2>Item 17.</FONT></a></TD>
    <TD align=left> <a href="#p103a"><FONT size=2>Financial Statements</FONT></a></TD>
    <TD align=right> <a href="#p103a"><FONT size=2>105</FONT></a></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <a href="#p103b"><FONT size=2>Item 18.</FONT></a></TD>
    <TD align=left> <a href="#p103b"><FONT size=2>Financial Statements</FONT></a></TD>
    <TD align=right> <a href="#p103b"><FONT size=2>105</FONT></a></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <a href="#p104"><FONT size=2>Item 19.</FONT></a></TD>
    <TD align=left> <a href="#p104"><FONT size=2>Exhibits</FONT></a></TD>
    <TD align=right> <a href="#p104"><FONT size=2>106</FONT></a></TD>
  </TR>
</TABLE>
<BR>
<P style="text-align: center;"> i</P>
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<P style="text-align: center;"> <B>CERTAIN TERMS</B></P>
<P style="text-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 style="text-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 style="text-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 style="text-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. 13.0587 per U.S.&#36;1.00,
  the interbank transactions rate in effect on December 31, 2009. On September
  17, 2010, the interbank transactions rate for the Peso was Ps.12.7793 per U.S.&#36;1.00.</P>
<P style="text-align: center;"> <B>FORWARD LOOKING STATEMENTS</B></P>
<P style="text-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 align="left">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 align="left">our inability to operate at high capacity levels;</P>
</LI>
<LI>
<P align="left">the costs of compliance with U.S. and Mexican environmental laws;</P>
</LI>
<LI>
<P align="left">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> </UL>
<P style="text-align: center;"> 1</P>
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<BR>
<UL>
<LI>
<P align="left">future capital expenditures and acquisitions;</P>
</LI>
<LI>
<P align="left">future devaluations of the peso;</P>
</LI>
<LI>
<P align="left">the imposition by Mexico of foreign exchange controls and price controls;</P>
</LI>
<LI>
<P align="left">the influence of economic and market conditions in other countries on Mexican securities; and</P>
</LI>
<LI>
<P align="left">the factors discussed in &#147;Risk Factors&#148; below.</P>
</LI> </UL>
<P style="text-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 style="text-align: center;"> <B>PART I.</B></P>
<P style="text-align: left;"> <B><a name="p2a"></a>Item 1. Identity of Directors,
  Senior Management and Advisers</B></P>
<P style="text-align: left;"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Not applicable.</P>
<P style="text-align: left;"> <B><a name="p2b"></a>Item 2. Offer Statistics and
  Expected Timetable</B></P>
<P style="text-align: left;"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Not applicable.</P>
<P style="text-align: left;"> <B><a name="p2c"></a>Item 3. Key Information</B></P>
<P style="text-align: left;"> <B>A. Selected Financial Data</B></P>
<P style="text-align: left;"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This annual report includes our consolidated financial statements as of December 31, 2009 and 2008 and for each of the three years ended December 31, 2009, 2008 and 2007. 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 (&#147;IMCP&#148;) 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 style="text-align: left;"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;MFRS differ in certain significant respects from generally accepted accounting principles in the United States (&#147;U.S. GAAP&#148;). Note 20 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 style="text-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 align="left">beginning January 1, 2008 and as a result of the adoption of the Mexican Financial Reporting Standard (MFRS) NIF B-10, Effects of inflation, we concluded that during 2008 the economic environment was non-inflationary and ceased recognition of inflation because annual inflation</P>
</LI> </UL>
<P style="text-align: center;"> 2</P>
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<BR>
<blockquote>
  <p> in Mexico published by the Mexican Central Bank (Banco de Mexico) during
    2005, 2006 and 2007 was 3.3%, 4.1% and 3.8 %, respectively, and the cumulatively
    inflation for those years was 11.6%. However, the financial information for
    the year ended December 31, 2007 and prior periods, is presented in Mexican
    pesos with purchasing power as of December 31, 2007, the last date on which
    we recognized the effects of inflation in our financial statements; and </p>
</blockquote>
<ul>
  <li>
    <p>we considered that it was impractical to identify the realized and unrealized
      part of the deficit by holding non-monetary assets included in the Deficit
      on restatement of stockholders&#146; equity at January 1, 2008 and the Ps.
      132,155 related to this amount were reclassified to retained earnings.</p>
  </li>
  <li>
    <p>MFRS B-2 was issued by the CINIF to replace Mexican accounting Bulletin
      B-12, <I>Statement of</I> <I>Changes in Financial Position</I>. This standard
      establishes the replacement of the statement of changes in financial position
      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 shows 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. 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 standard, the statement of cash flows may
      be determined by applying the direct or indirect method. The transitory
      rules of MFRS 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. The company
      opted to prepare and present its cash flow statement under the indirect
      method.</p>
  </li>
  <li>
    <p>MFRS C-8 was issued by the CINIF to replace Mexican accounting Bulletin
      C-8, <I>Intangible</I> <I>Assets</I>. The new rule defines intangible assets
      as non-monetary items and broadens the criteria of identification, indicating
      that an intangible asset must be separable; this means that such asset could
      be sold, transferred, or used by the entity. In addition, intangible assets
      arise from legal or contractual rights, whether those rights are transferable
      or separable from the entity. On the other hand, this standard establishes
      that preoperative costs should be eliminated from the capitalized balance,
      affecting retained earnings, and without restating prior financial statements.<BR>
      This amount should be presented as an accounting change in consolidated
      financial statements. The adoption of this new MFRS was to cancel unamortizated
      preoperative expenses to retained earnings for Ps. 151,826 less its deferred
      income tax liability of Ps. 42,511 in 2009.</p>
  </li>
</ul>
<P style="text-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 until December 31, 2007 has not been reversed in the reconciliation to U.S. GAAP of net income and total stockholders&#146; equity, except with respect to certain information included in the cash flow statement. See Note 20 to our consolidated financial statements included elsewhere herein.</P>
<P style="text-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, 2005, 2006, 2007, 2008 and 2009. The selected financial and operating information as of and for the years ended December 31, 2007, 2008 and 2009 set forth below</P>
<P style="text-align: center;"> 3</P>
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<BR>
<P style="TEXT-ALIGN: left">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 combined financial statements of Corporacion Aceros D.M., S.A. de C.V. and Affiliates, reported on by Moore Stephens Marcelo de los Santos y Cia., S.C, a member firm of Moore Stephens International, for the years ended December 31, 2008 and 2009. The selected financial information as of and for the year ended December 31, 2005 and  2006  set forth below has been derived in part from our consolidated financial statements, which have been reported on by Mancera S.C. and are not included elsewhere herein. In so doing, in  2005 Mancera S.C. has relied on the audited
consolidated financial statements of our subsidiary SimRep Corporation (&#147;SimRep&#148;) and its subsidiaries, which have been reported on by BDO Hern&#225;ndez
Marr&#243;n y C&#237;a., S.C., a member firm of BDO International, an independent, registered public accounting firm, and are not included elsewhere herein. The selected financial 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 border=0 cellpadding="0" cellspacing=0 style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'" width="100%">
  <tr>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
  </tr>
  <tr valign=bottom>
    <td align=center>&nbsp;</td>
    <td colspan="11" align=center><b><font size=2>Year Ended December 31,</font></b></td>
    <td align=center>&nbsp;</td>
  </tr>
  <tr>
    <td align=center>&nbsp;</td>
    <td colspan="11" 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>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;&nbsp;&nbsp;&nbsp;</td>
    <td align=center><b><font size=2>2008</font></b></td>
    <td align=center>&nbsp;</td>
    <td align=center><b><font size=2>2009</font></b></td>
    <td align=center>&nbsp;</td>
    <td align=center><b><font size=2>2009</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>&nbsp;</td>
    <td align=center>&nbsp;</td>
    <td align=center>&nbsp;</td>
    <td align=center>&nbsp;</td>
    <td align=center><font size=2>(Millions <br>
      of </font>
       <font size=2>pesos)</font></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><font size=2>(Millions</font><br>
       <font size=2>of dollars)</font></td>
    <td align=center>&nbsp;</td>
  </tr>
  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td colspan="12" align=center><font size=2>(except per share and per ADS data)</font></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>
    <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>
    <td colspan=13>&nbsp;</td>
  </tr>
  <tr valign=bottom>
    <td align=left><font size=2>&nbsp;&nbsp;&nbsp;Net sales</font></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>35,185</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>19,232</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>1,473</font></td>
    <td align=left>&nbsp;</td>
  </tr>
  <tr valign=bottom>
    <td align=left><font size=2>&nbsp;&nbsp;&nbsp;Direct cost of sales</font></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>29,796</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>17,717</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>1,357</font></td>
    <td align=left>&nbsp;</td>
  </tr>
  <tr valign=bottom>
    <td align=left><font size=2>&nbsp;&nbsp;&nbsp;Gross profit</font></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>5,389</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>1,515</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>116</font></td>
    <td align=left>&nbsp;</td>
  </tr>
  <tr valign=bottom>
    <td align=left><font size=2>&nbsp;&nbsp;&nbsp;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>
    <td align=left>&nbsp;</td>
  </tr>
  <tr valign=bottom>
    <td align=left><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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>
    <td align=left>&nbsp;</td>
  </tr>
  <tr valign=bottom>
    <td align=left><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;expenses</font></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>1,379</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>1,253</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>96</font></td>
    <td align=left>&nbsp;</td>
  </tr>
  <tr valign=bottom>
    <td align=left><font size=2>&nbsp;&nbsp;&nbsp;Depreciation and amortization</font></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>895</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>1,048</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>80</font></td>
    <td align=left>&nbsp;</td>
  </tr>
  <tr valign=bottom>
    <td align=left><font size=2>&nbsp;&nbsp;&nbsp;Operating income (loss)</font></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>3,115</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>(786</font></td>
    <td align=left><font size=2>)&nbsp;&nbsp;&nbsp;</font></td>
    <td align=right><font size=2>(60</font></td>
    <td align=left><font size=2>)</font></td>
  </tr>
  <tr valign=bottom>
    <td align=left><font size=2>&nbsp;&nbsp;&nbsp;Financial (expense) income</font></td>
    <td align=right><font size=2>(155</font></td>
    <td align=left><font size=2>)&nbsp;&nbsp;&nbsp;</font></td>
    <td align=right><font size=2>(63</font></td>
    <td align=left><font size=2>)&nbsp;&nbsp;&nbsp;</font></td>
    <td align=right><font size=2>41</font></td>
    <td align=right>&nbsp;</td>
    <td align=right><font size=2>(175</font></td>
    <td align=left><font size=2>)&nbsp;&nbsp;&nbsp;</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>(7</font></td>
    <td align=left><font size=2>)</font></td>
  </tr>
  <tr valign=bottom>
    <td align=left><font size=2>&nbsp;&nbsp;&nbsp;Other (expense) income, net</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>(4</font></td>
    <td align=left><font size=2>)</font></td>
    <td align=right><font size=2>30</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><font size=2>&nbsp;&nbsp;&nbsp;Impairment of intangible assets</font></td>
    <td align=right><font size=2>-</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>-</font></td>
    <td align=left>&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=right><font size=2>(2,368</font></td>
    <td align=left><font size=2>)</font></td>
    <td align=right><font size=2>(181</font></td>
    <td align=left><font size=2>)</font></td>
  </tr>
  <tr valign=bottom>
    <td align=left><font size=2>&nbsp;&nbsp;&nbsp;Income (loss) before taxes,
      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>
    <td align=left>&nbsp;</td>
  </tr>
  <tr valign=bottom>
    <td align=left><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;profit sharing
      and non-controlling</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><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;interest</font></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>2,936</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>(3,221</font></td>
    <td align=left><font size=2>)</font></td>
    <td align=right><font size=2>(247</font></td>
    <td align=left><font size=2>)</font></td>
  </tr>
  <tr valign=bottom>
    <td align=left><font size=2>&nbsp;&nbsp;&nbsp;Income tax expense (benefit)
      and</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><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;employee profit sharing</font></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>1,036</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>(2,045</font></td>
    <td align=left><font size=2>)</font></td>
    <td align=right><font size=2>(157</font></td>
    <td align=left><font size=2>)</font></td>
  </tr>
  <tr valign=bottom>
    <td align=left><font size=2>&nbsp;&nbsp;&nbsp;Net income (loss)</font></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>1,900</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>(1,175</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>
  </tr>
  <tr valign=bottom>
    <td align=left><font size=2>&nbsp;&nbsp;&nbsp;Non-controlling interest income
      (loss)</font></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=right>&nbsp;</td>
    <td align=right><font size=2>104</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>(852</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>
  </tr>
  <tr valign=bottom>
    <td align=left><font size=2>&nbsp;&nbsp;&nbsp;Controlling interest income
      (loss)</font></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=right>&nbsp;</td>
    <td align=right><font size=2>1,796</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>(323</font></td>
    <td align=left><font size=2>)</font></td>
    <td align=right><font size=2>(25</font></td>
    <td align=left><font size=2>)</font></td>
  </tr>
  <tr valign=bottom>
    <td align=left><font size=2>&nbsp;&nbsp;&nbsp;Net income (loss) per share</font></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=right>&nbsp;</td>
    <td align=right><font size=2>3.70</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>(0.65</font></td>
    <td align=left><font size=2>)</font></td>
    <td align=right><font size=2>(0.05</font></td>
    <td align=left><font size=2>)</font></td>
  </tr>
  <tr valign=bottom>
    <td align=left><font size=2>&nbsp;&nbsp;&nbsp;Net income (loss) per ADS </font><sup><font size=2>(2)</font></sup></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=right>&nbsp;</td>
    <td align=right><font size=2>11.10</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>(1.95</font></td>
    <td align=left><font size=2>)</font></td>
    <td align=right><font size=2>(0.15</font></td>
    <td align=left><font size=2>)</font></td>
  </tr>
  <tr valign=bottom>
    <td align=left><font size=2>&nbsp;&nbsp;&nbsp;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><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(thousands)</font><sup><font size=2>(5)</font></sup></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=right>&nbsp;</td>
    <td align=right><font size=2>484,904</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>497,709</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>497,709</font></td>
    <td align=left>&nbsp;</td>
  </tr>
  <tr valign=bottom>
    <td align=left><font size=2>&nbsp;&nbsp;&nbsp;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><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(thousands)</font></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=right>&nbsp;</td>
    <td align=right><font size=2>161,635</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>165,903</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>165,903</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 until</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><i><font size=2>2007:</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><font size=2>&nbsp;&nbsp;&nbsp;Net sales</font></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>35,185</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>19,232</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>1,473</font></td>
    <td align=left>&nbsp;</td>
  </tr>
  <tr valign=bottom>
    <td align=left><font size=2>&nbsp;&nbsp;&nbsp;Cost of sales</font></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=right>&nbsp;</td>
    <td align=right><font size=2>29,755</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>17,783</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>1,362</font></td>
    <td align=left>&nbsp;</td>
  </tr>
  <tr valign=bottom>
    <td align=left><font size=2>&nbsp;&nbsp;&nbsp;Gross profit</font></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=right>&nbsp;</td>
    <td align=right><font size=2>5,430</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>1,449</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>111</font></td>
    <td align=left>&nbsp;</td>
  </tr>
  <tr valign=bottom>
    <td align=left><font size=2>&nbsp;&nbsp;&nbsp;Operating income (loss)</font><sup><font size=2>(4)</font></sup></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=right>&nbsp;</td>
    <td align=right><font size=2>3,166</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>(3,115</font></td>
    <td align=left><font size=2>)</font></td>
    <td align=right><font size=2>(239</font></td>
    <td align=left><font size=2>)</font></td>
  </tr>
  <tr valign=bottom>
    <td align=left><font size=2>&nbsp;&nbsp;&nbsp;Financial (expense) income</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>(175</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>(7</font></td>
    <td align=left><font size=2>)</font></td>
  </tr>
  <tr valign=bottom>
    <td align=left><font size=2>&nbsp;&nbsp;&nbsp;Other income, net</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=right>&nbsp;</td>
    <td align=right><font size=2>20</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>30</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><font size=2>&nbsp;&nbsp;&nbsp;Income (loss) before taxes,
      employee</font></td>
    <td align=right>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=right>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=right>&nbsp;</td>
    <td align=right>&nbsp;</td>
    <td align=right>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=right>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=right>&nbsp;</td>
    <td align=left>&nbsp;</td>
  </tr>
  <tr valign=bottom>
    <td align=left><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;profit sharing
      and non-controlling</font></td>
    <td align=right>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=right>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=right>&nbsp;</td>
    <td align=right>&nbsp;</td>
    <td align=right>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=right>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=right>&nbsp;</td>
    <td align=left>&nbsp;</td>
  </tr>
  <tr valign=bottom>
    <td align=left><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;interest</font></td>
    <td align=right>1,528</td>
    <td align=left>&nbsp;</td>
    <td align=right>3,105</td>
    <td align=left>&nbsp;</td>
    <td align=right>2,363</td>
    <td align=right>&nbsp;</td>
    <td align=right>3,011</td>
    <td align=left>&nbsp;</td>
    <td align=right>(3,181</td>
    <td align=left>)</td>
    <td align=right>(244</td>
    <td align=left>)</td>
  </tr>
  <tr valign=bottom>
    <td align=left><font size=2>&nbsp;&nbsp;&nbsp;Income tax expense (benefit)</font></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=right>&nbsp;</td>
    <td align=right><font size=2>1,057</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>(2,025</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>
  </tr>
  <tr valign=bottom>
    <td align=left><font size=2>&nbsp;&nbsp;&nbsp;Income (loss) before non-controlling</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><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;interest</font></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=right>&nbsp;</td>
    <td align=right><font size=2>1,954</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>(1,156</font></td>
    <td align=left><font size=2>)</font></td>
    <td align=right><font size=2>(89</font></td>
    <td align=left><font size=2>)</font></td>
  </tr>
  <tr valign=bottom>
    <td align=left><font size=2>&nbsp;&nbsp;&nbsp;Non-controlling interest income
      (loss)</font></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=right>&nbsp;</td>
    <td align=right><font size=2>110</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>(877</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 valign=bottom>
    <td align=left><font size=2>&nbsp;&nbsp;&nbsp;U.S. GAAP adjustment on non-</font></td>
    <td align=right>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=right>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=right>&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>
    <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;&nbsp;controlling
      interest</font></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>0</font></td>
    <td align=right>&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=right>&nbsp;</td>
    <td align=right><font size=2>0</font></td>
    <td align=left>&nbsp;</td>
  </tr>
</table>
<BR>
<P style="TEXT-ALIGN: center">4</P>
<HR align=center width="100%" noshade SIZE=5>
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<DIV title="EE+ Page Break" style="FONT-SIZE: 1pt; PAGE-BREAK-AFTER: always; WIDTH: 100%; HEIGHT: 1px"></DIV>
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<BR>
<table width="100%" border=0 cellpadding="0" cellspacing=0 style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'">
  <tr>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
  </tr>
  <tr valign=bottom>
    <td align=center>&nbsp;</td>
    <td colspan="11" align=center><b><font size=2>Year Ended December 31,</font></b></td>
    <td align=center>&nbsp;</td>
  </tr>
  <tr>
    <td align=center>&nbsp;</td>
    <td colspan="11" 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>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>2008</font></b></td>
    <td align=center>&nbsp;</td>
    <td align=center><b><font size=2>2009</font></b></td>
    <td align=center>&nbsp;</td>
    <td align=center><b><font size=2>2009</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>&nbsp;</td>
    <td align=center>&nbsp;</td>
    <td align=center>&nbsp;</td>
    <td align=center>&nbsp;</td>
    <td align=center><font size=2>(Millions <br>
      of
      pesos) </font></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><font size=2>(Millions</font><br>
       <font size=2>of dollars)</font></td>
    <td align=center>&nbsp;</td>
  </tr>
  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td colspan="12" align=center><font size=2>(except per share and per ADS data)</font></td>
  </tr>

  <tr valign=bottom>
    <td align=left><font size=2>&nbsp;&nbsp;&nbsp;Net income (loss)</font></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>1,844</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>(279</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>
  </tr>
  <tr valign=bottom>
    <td align=left><font size=2>&nbsp;&nbsp;&nbsp;Net income (loss) per share
      </font><sup><font size=2>(5)</font></sup></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>3.80</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>(0.56</font></td>
    <td align=left><font size=2>)</font></td>
    <td align=right><font size=2>(0.04</font></td>
    <td align=left><font size=2>)</font></td>
  </tr>
  <tr valign=bottom>
    <td align=left><font size=2>&nbsp;&nbsp;&nbsp;Net income (loss) per ADS</font></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>11.41</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>(1.68</font></td>
    <td align=left><font size=2>)</font></td>
    <td align=right><font size=2>(0.13</font></td>
    <td align=left><font size=2>)</font></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><font size=2>&nbsp;&nbsp;&nbsp;Total assets</font></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>30,814</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>26,710</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>2,045</font></td>
    <td align=left>&nbsp;</td>
  </tr>
  <tr valign=bottom>
    <td align=left><font size=2>&nbsp;&nbsp;&nbsp;Total long-term liabilities</font><sup><font size=2>(3)</font></sup></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>4,253</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>2,834</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><font size=2>&nbsp;&nbsp;&nbsp;Total stockholders&#146; equity</font></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>21,305</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>19,982</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>1,530</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 until</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><i><font size=2>2007:</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><font size=2>&nbsp;&nbsp;&nbsp;Total assets</font></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>30,908</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>26,960</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>2,065</font></td>
    <td align=left>&nbsp;</td>
  </tr>
  <tr valign=bottom>
    <td align=left><font size=2>&nbsp;&nbsp;&nbsp;Total long-term liabilities</font><sup><font size=2>(3)</font></sup></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>4,280</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>2,878</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>220</font></td>
    <td align=left>&nbsp;</td>
  </tr>
  <tr valign=bottom>
    <td align=left><font size=2>&nbsp;&nbsp;&nbsp;Total stockholders&#146; equity</font></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>18,182</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>17,965</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>1,376</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><font size=2>&nbsp;&nbsp;&nbsp;Cash 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>
    <td align=right><font size=2>1,845</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>1,159</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>89</font></td>
    <td align=left>&nbsp;</td>
  </tr>
  <tr valign=bottom>
    <td align=left><font size=2>&nbsp;&nbsp;&nbsp;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><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;activities</font></td>
    <td align=right><font size=2>(260</font></td>
    <td align=left><font size=2>)&nbsp;&nbsp;&nbsp;</font></td>
    <td align=right><font size=2>(417</font></td>
    <td align=left><font size=2>)&nbsp;&nbsp;</font></td>
    <td align=right><font size=2>2,324</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>1,334</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>439</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>34</font></td>
    <td align=left>&nbsp;</td>
  </tr>
  <tr valign=bottom>
    <td align=left><font size=2>&nbsp;&nbsp;&nbsp;Cash (used in) provided by 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><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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>)&nbsp;&nbsp;&nbsp;</font></td>
    <td align=right><font size=2>(9,000</font></td>
    <td align=left><font size=2>)&nbsp;&nbsp;</font></td>
    <td align=right><font size=2>(226</font></td>
    <td align=left><font size=2>)&nbsp;&nbsp;&nbsp;</font></td>
    <td align=right><font size=2>(17</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><font size=2>&nbsp;&nbsp;&nbsp;Capital expenditures</font></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>480</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>263</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>20</font></td>
    <td align=left>&nbsp;</td>
  </tr>
  <tr valign=bottom>
    <td align=left><font size=2>&nbsp;&nbsp;&nbsp;Adjusted EBITDA</font><sup><font size=2>(6)</font></sup></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>4,010</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>262</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>20</font></td>
    <td align=left>&nbsp;</td>
  </tr>
  <tr valign=bottom>
    <td align=left><font size=2>&nbsp;&nbsp;&nbsp;Depreciation and amortization</font></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=left>&nbsp;</td>
    <td align=right><font size=2>895</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>1,048</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>80</font></td>
    <td align=left>&nbsp;</td>
  </tr>
  <tr valign=bottom>
    <td align=left><font size=2>&nbsp;&nbsp;&nbsp;Working capital </font><sup><font size=2>(7)</font></sup></td>
    <td align=right><font size=2>4,353</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>6,964</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>11,594</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>7,790</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>8,410</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>644</font></td>
    <td align=left>&nbsp;</td>
  </tr>
  <tr valign=bottom>
    <td align=left><font size=2>&nbsp;&nbsp;&nbsp;Dividends declared</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>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>
  </tr>
  <tr valign=bottom>
    <td align=left><font size=2>&nbsp;&nbsp;&nbsp;Dividends declared per share</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>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>
  </tr>
  <tr valign=bottom>
    <td align=left><font size=2>&nbsp;&nbsp;&nbsp;Dividends declared per ADS</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>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>
  </tr>
  <tr>
    <td colspan=13>&nbsp;</td>
  </tr>
  <tr valign=bottom>
    <td align=left><b><font size=2>Operational information:</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><font size=2>&nbsp;&nbsp;&nbsp;Annual installed capacity</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><font size=2>&nbsp;&nbsp;&nbsp;(thousands of tons)</font></td>
    <td align=right><font size=2>2,847</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>2,902</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>2,902</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>3,522</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>3,522</font></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;Tons shipped</font></td>
    <td align=right><font size=2>1,708</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>2,676</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>2,691</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>2,924</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>2,040</font></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;&nbsp;Mexico</font></td>
    <td align=right><font size=2>899</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>945</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>900</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>1,028</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>1,285</font></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;&nbsp;United States,
      Canada and elsewhere</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><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;outside Mexico</font></td>
    <td align=right><font size=2>809</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>1,731</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>1,791</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>1,896</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>755</font></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;&nbsp;SBQ steel</font></td>
    <td align=right><font size=2>923</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>1,918</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>1,951</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>1,952</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>826</font></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;&nbsp;Structural
      and other steel products</font></td>
    <td align=right><font size=2>785</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>758</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>740</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>972</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>1,214</font></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;Per ton (</font><i><font size=2>Mexican
      GAAP)</font></i><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=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td 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;&nbsp;Net sales
      per ton</font></td>
    <td align=right><font size=2>8,133</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>8,787</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>8,958</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>12,033</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>9,427</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>722</font></td>
    <td align=left>&nbsp;</td>
  </tr>
  <tr valign=bottom>
    <td align=left><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cost of sales
      per ton</font></td>
    <td align=right><font size=2>6,505</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>7,149</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>7,617</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>10,190</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>8,684</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>665</font></td>
    <td align=left>&nbsp;</td>
  </tr>
  <tr valign=bottom>
    <td align=left><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Operating
      (loss) income per ton</font></td>
    <td align=right><font size=2>989</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>1,133</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>812</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>1,065</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>(385</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>
  </tr>
  <tr valign=bottom>
    <td align=left><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Adjusted EBITDA
      per ton</font></td>
    <td align=right><font size=2>1,194</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>1,301</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>1,016</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>128</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>10</font></td>
    <td align=left>&nbsp;</td>
  </tr>
  <tr valign=bottom>
    <td align=left><font size=2>&nbsp;&nbsp;&nbsp;Number of employees</font></td>
    <td align=right><font size=2>4,360</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>4,053</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>4,437</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>4,823</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>4,378</font></td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
  </tr>
</table>
<BR>
<hr align="left" width="90" size="1" noshade>
<TABLE style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'" cellSpacing=0 border=0>
  <TR>
    <TD vAlign=top nowrap width="2%">(1)&nbsp; &nbsp; &nbsp; </TD>
    <TD width="98%"> <P align=left>Peso amounts have been translated into U.S.
        dollars solely for the convenience of the reader, at the rate of Ps. 13.0587
        per $1.00, the interbank transactions rate in effect on December 31, 2009.</P></TD>
  </tr>
  <TR>
    <TD vAlign=top nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD vAlign=top nowrap width="2%">(2)&nbsp; &nbsp; &nbsp; </TD>
    <TD width="98%"> <P align=left>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.</P></TD>
  </tr>
  <TR>
    <TD vAlign=top nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD vAlign=top nowrap width="2%">(3)&nbsp; &nbsp; &nbsp; </TD>
    <TD width="98%"> <P align=left>Total long-term liabilities include amounts
        relating to deferred taxes.</P></TD>
  </TR>
</TABLE>
<P style="TEXT-ALIGN: center">5</P>
<HR align=center width="100%" noshade SIZE=5>
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<BR>
<TABLE style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'" cellSpacing=0 border=0>
  <TR>
    <TD vAlign=top nowrap height="79">(4)&nbsp; &nbsp; &nbsp; </TD>
    <TD height="79">
      <P align=left>In 2009 for U.S. GAAP purposes the impairment loss of intangible
        assets of Ps. 2,266 millions was included as an operating expense. In
        2009 we recorded other expense of Ps. 7 million for employee profit sharing,
        which were reclassified to operating expenses for U.S. GAAP purposes.
        In 2008 we recorded other expense of Ps. 24 million for employee profit
        sharing, which were reclassified to operating expenses for U.S. GAAP purposes.
        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.</P>
    </TD>
  </tr>


  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
  </tr>
  <TR>
    <TD vAlign=top nowrap>(5)&nbsp; &nbsp; &nbsp; </TD>
    <TD>
      <P align=left>For U.S. GAAP and Mexican GAAP purposes, the weighted average
        shares outstanding were calculated to give effect to the stock split mentioned
        in note (2) above.</P>
    </TD>
  </tr>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
  </tr>
  <TR>
    <TD vAlign=top nowrap>(6)&nbsp; &nbsp; &nbsp; </TD>
    <TD>
      <P align=left>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,
        amortization and impairment loss (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.</P>
    </TD>
  </tr>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
  </tr>
  <TR>
    <TD>&nbsp;</TD>
    <TD>
      <P align=left>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.</P>
    </TD>
  </tr>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
  </tr>
  <TR>
    <TD>&nbsp;</TD>
    <TD>
      <P align=left>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, amortization
        and impairment loss 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:</P>
      <ul>
        <li>
          <p align=left>it does not include taxes, which are a necessary and recurring
            part of our operations;</p>
        <li>
          <p align=left>it does not include depreciation, amortization and impairment
            loss 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>
          <p align=left>it does not include comprehensive cost of financing, which
            reflects our cost of capital structure and assisted us in generating
            revenue; and</p>
        <li>
          <p align=left>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.</p>
        </li>
      </ul>
    </TD>
  </tr>
  <TR>
    <TD vAlign=top nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
  </tr>
  <TR>
    <TD vAlign=top nowrap>(7)&nbsp; &nbsp; &nbsp; </TD>
    <TD>
      <P align=left>Working capital is defined as excess of current assets
        over current liabilities.</P>
    </TD>
  </tr>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
  </tr>
  <TR>
    <TD vAlign=top nowrap>(8)&nbsp; &nbsp; &nbsp; </TD>
    <TD>
      <P align=left>Installed capacity is determined at December 31 of the
        relevant year.</P>
    </TD>
  </tr>
</TABLE>
<P style="TEXT-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'" width="100%">
  <tr>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
  </tr>
  <tr valign=bottom>
    <td align=center>&nbsp;</td>
    <td colspan="11" align=center><b><font size=2>Year Ended December 31,</font></b></td>
    <td align=center>&nbsp;</td>
  </tr>
  <tr>
    <td align=center>&nbsp;</td>
    <td colspan="11" 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>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>2008</font></b></td>
    <td align=center>&nbsp;</td>
    <td align=center><b><font size=2>2009</font></b></td>
    <td align=center>&nbsp;</td>
    <td align=center><b><font size=2>2009</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;&nbsp;&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 colspan="5" valign="top"><font size=2>(Millions of pesos)</font></td>
    <td align=center>&nbsp;</td>
    <td align=center>&nbsp;</td>
    <td align=center>&nbsp;</td>
    <td align=center>&nbsp;</td>
    <td align=center><font size=2>(Millions</font><br>
       <font size=2>of dollars)</font></td>
    <td align=center>&nbsp;</td>
  </tr>
  <tr>
    <td colspan=13>&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><font size=2>&nbsp;&nbsp;&nbsp;Net income (loss)</font></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>1,900</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>(1,175</font></td>
    <td align=left><font size=2>)&nbsp;&nbsp;&nbsp;</font></td>
    <td align=right><font size=2>(90</font></td>
    <td align=left><font size=2>)</font></td>
  </tr>
  <tr valign=bottom>
    <td align=left><font size=2>&nbsp;&nbsp;&nbsp;Depreciation and amortization</font></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>895</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>1,048</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>80</font></td>
    <td align=left>&nbsp;</td>
  </tr>
  <tr valign=bottom>
    <td align=left><font size=2>&nbsp;&nbsp;&nbsp;Financial income (expense)</font></td>
    <td align=right><font size=2>(155</font></td>
    <td align=left><font size=2>)&nbsp;&nbsp;&nbsp;</font></td>
    <td align=right><font size=2>(63</font></td>
    <td align=left><font size=2>)&nbsp;&nbsp;&nbsp;</font></td>
    <td align=right><font size=2>41</font></td>
    <td align=right>&nbsp;</td>
    <td align=right><font size=2>(175</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>(7</font></td>
    <td align=left><font size=2>)</font></td>
  </tr>
  <tr valign=bottom>
    <td align=left><font size=2>&nbsp;&nbsp;&nbsp;Income tax expense and employee
      profit sharing</font></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>1,036</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>(2,045</font></td>
    <td align=left><font size=2>)</font></td>
    <td align=right><font size=2>(157</font></td>
    <td align=left><font size=2>)</font></td>
  </tr>
  <tr valign=bottom>
    <td align=left><font size=2>&nbsp;&nbsp;&nbsp;Other income (expense)</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>(4</font></td>
    <td align=left><font size=2>)&nbsp;&nbsp;&nbsp;</font></td>
    <td align=right><font size=2>30</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><font size=2>&nbsp;&nbsp;&nbsp;Impairment of intangibles assets</font></td>
    <td align=right><font size=2>-</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>-</font></td>
    <td align=left>&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=right><font size=2>2,368</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>181</font></td>
    <td align=left>&nbsp;</td>
  </tr>
  <tr valign=bottom>
    <td align=left><font size=2>&nbsp;&nbsp;&nbsp;Adjusted EBITDA</font></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>4,010</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>262</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>20</font></td>
    <td align=left>&nbsp;</td>
  </tr>
</table>
<BR>
<P style="TEXT-ALIGN: center">6</P>
<HR align=center width="100%" noshade SIZE=5>
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<BR>
<P style="TEXT-ALIGN: left"><B>Exchange Rates</B></P>
<P style="TEXT-ALIGN: left">&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.</P>
<TABLE width="100%" border=0 cellpadding="0" cellSpacing=0 style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'">
  <TR>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=center colSpan=9><B><FONT size=2>Exchange Rates</FONT></B></TD>
  </TR>
  <TR>
    <TD colSpan=9> <HR noshade SIZE=1> </TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left><B><FONT size=2>Year Ended December 31</FONT></B></TD>
    <TD align=center>&nbsp;&nbsp;&nbsp;</TD>
    <TD width="12%" align=center><B><FONT size=2>High</FONT></B></TD>
    <TD align=center>&nbsp;&nbsp;&nbsp;</TD>
    <TD width="12%" align=center><B><FONT size=2>Low</FONT></B></TD>
    <TD align=center>&nbsp;&nbsp;&nbsp;</TD>
    <TD width="12%" align=center><B><FONT size=2>Average </FONT></B><B><SUP><FONT size=2>(1)</FONT></SUP></B></TD>
    <TD align=center>&nbsp;&nbsp;&nbsp;</TD>
    <TD width="12%" align=center><B><FONT size=2>Period End</FONT></B></TD>
  </TR>
  <TR>
    <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>
  </TR>
  <TR>
    <TD colSpan=9>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left><FONT size=2>2005</FONT></TD>
    <TD align=center>&nbsp;</TD>
    <TD align=center><FONT size=2>11.41</FONT></TD>
    <TD align=center>&nbsp;</TD>
    <TD align=center><FONT size=2>10.41</FONT></TD>
    <TD align=center>&nbsp;</TD>
    <TD align=center><FONT size=2>10.89</FONT></TD>
    <TD align=center>&nbsp;</TD>
    <TD align=center><FONT size=2>10.63</FONT></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left><FONT size=2>2006</FONT></TD>
    <TD align=center>&nbsp;</TD>
    <TD align=center><FONT size=2>11.46</FONT></TD>
    <TD align=center>&nbsp;</TD>
    <TD align=center><FONT size=2>10.43</FONT></TD>
    <TD align=center>&nbsp;</TD>
    <TD align=center><FONT size=2>10.91</FONT></TD>
    <TD align=center>&nbsp;</TD>
    <TD align=center><FONT size=2>10.80</FONT></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left><FONT size=2>2007</FONT></TD>
    <TD align=center>&nbsp;</TD>
    <TD align=center><FONT size=2>11.27</FONT></TD>
    <TD align=center>&nbsp;</TD>
    <TD align=center><FONT size=2>10.67</FONT></TD>
    <TD align=center>&nbsp;</TD>
    <TD align=center><FONT size=2>10.93</FONT></TD>
    <TD align=center>&nbsp;</TD>
    <TD align=center><FONT size=2>10.92</FONT></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left><FONT size=2>2008</FONT></TD>
    <TD align=center>&nbsp;</TD>
    <TD align=center><FONT size=2>13.94</FONT></TD>
    <TD align=center>&nbsp;</TD>
    <TD align=center><FONT size=2>9.92</FONT></TD>
    <TD align=center>&nbsp;</TD>
    <TD align=center><FONT size=2>11.14</FONT></TD>
    <TD align=center>&nbsp;</TD>
    <TD align=center><FONT size=2>13.83</FONT></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left><FONT size=2>2009</FONT></TD>
    <TD align=center>&nbsp;</TD>
    <TD align=center><FONT size=2>13.94</FONT></TD>
    <TD align=center>&nbsp;</TD>
    <TD align=center><FONT size=2>13.17</FONT></TD>
    <TD align=center>&nbsp;</TD>
    <TD align=center><FONT size=2>13.51</FONT></TD>
    <TD align=center>&nbsp;</TD>
    <TD align=center><FONT size=2>13.06</FONT></TD>
  </TR>
  <TR>
    <TD colSpan=9>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left><B><FONT size=2>Month</FONT></B></TD>
    <TD align=center>&nbsp;</TD>
    <TD align=center><B><FONT size=2>High</FONT></B></TD>
    <TD align=center>&nbsp;</TD>
    <TD align=center><B><FONT size=2>Low</FONT></B></TD>
    <TD align=center>&nbsp;</TD>
    <TD align=center><B><FONT size=2>Average </FONT></B><B><SUP><FONT size=2>(1)</FONT></SUP></B></TD>
    <TD align=center>&nbsp;</TD>
    <TD align=center><B><FONT size=2>Period End</FONT></B></TD>
  </TR>
  <TR>
    <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>
  </TR>
  <TR vAlign=bottom>
    <TD align=left><FONT size=2>March 2010</FONT></TD>
    <TD align=center>&nbsp;</TD>
    <TD align=center><FONT size=2>12.74</FONT></TD>
    <TD align=center>&nbsp;</TD>
    <TD align=center><FONT size=2>12.30</FONT></TD>
    <TD align=center>&nbsp;</TD>
    <TD align=center><FONT size=2>12.57</FONT></TD>
    <TD align=center>&nbsp;</TD>
    <TD align=center><FONT size=2>12.30</FONT></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left><FONT size=2>April 2010</FONT></TD>
    <TD align=center>&nbsp;</TD>
    <TD align=center><FONT size=2>12.41</FONT></TD>
    <TD align=center>&nbsp;</TD>
    <TD align=center><FONT size=2>12.16</FONT></TD>
    <TD align=center>&nbsp;</TD>
    <TD align=center><FONT size=2>12.24</FONT></TD>
    <TD align=center>&nbsp;</TD>
    <TD align=center><FONT size=2>12.23</FONT></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left><FONT size=2>May 2010</FONT></TD>
    <TD align=center>&nbsp;</TD>
    <TD align=center><FONT size=2>13.14</FONT></TD>
    <TD align=center>&nbsp;</TD>
    <TD align=center><FONT size=2>12.27</FONT></TD>
    <TD align=center>&nbsp;</TD>
    <TD align=center><FONT size=2>12.73</FONT></TD>
    <TD align=center>&nbsp;</TD>
    <TD align=center><FONT size=2>12.86</FONT></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left><FONT size=2>June 2010</FONT></TD>
    <TD align=center>&nbsp;</TD>
    <TD align=center><FONT size=2>12.92</FONT></TD>
    <TD align=center>&nbsp;</TD>
    <TD align=center><FONT size=2>12.46</FONT></TD>
    <TD align=center>&nbsp;</TD>
    <TD align=center><FONT size=2>12.71</FONT></TD>
    <TD align=center>&nbsp;</TD>
    <TD align=center><FONT size=2>12.84</FONT></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left><FONT size=2>July 2010</FONT></TD>
    <TD align=center>&nbsp;</TD>
    <TD align=center><FONT size=2>13.08</FONT></TD>
    <TD align=center>&nbsp;</TD>
    <TD align=center><FONT size=2>12.64</FONT></TD>
    <TD align=center>&nbsp;</TD>
    <TD align=center><FONT size=2>12.80</FONT></TD>
    <TD align=center>&nbsp;</TD>
    <TD align=center><FONT size=2>12.64</FONT></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left><FONT size=2>August 2010</FONT></TD>
    <TD align=center>&nbsp;</TD>
    <TD align=center><FONT size=2>13.17</FONT></TD>
    <TD align=center>&nbsp;</TD>
    <TD align=center><FONT size=2>12.54</FONT></TD>
    <TD align=center>&nbsp;</TD>
    <TD align=center><FONT size=2>12.77</FONT></TD>
    <TD align=center>&nbsp;</TD>
    <TD align=center><FONT size=2>13.17</FONT></TD>
  </TR>
</TABLE>
<BR>
<hr align="left" width="90" size="1" noshade>
<TABLE style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'" cellSpacing=0 border=0>
<TR>
     <TD vAlign=top nowrap width="2%">(1)&nbsp; &nbsp; &nbsp; </TD>
     <TD width="98%">
<P align=left>Average of month-end, period-end or daily rates, as applicable.</P>
</TD></tr></TABLE>
<P style="TEXT-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 style="TEXT-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 style="TEXT-ALIGN: left"><B>B. Capitalization and Indebtedness</B></P>
<P style="TEXT-ALIGN: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Not applicable.</P>
<P style="TEXT-ALIGN: left"><B>C. Reasons for the Offer and Use of Proceeds</B></P>
<P style="TEXT-ALIGN: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Not applicable.</P>
<P style="TEXT-ALIGN: left"><B>D. Risk Factors</B></P>
<P style="TEXT-ALIGN: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Investing in our 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</P>
<P style="TEXT-ALIGN: center">7</P>
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<P style="TEXT-ALIGN: left">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 significantly, and you could lose all or substantially all of your investment.</P>
<P style="TEXT-ALIGN: left"><B>Risks Related to Our Business</B></P>
<P style="TEXT-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 style="TEXT-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. In 2008 prices of scrap metal increased approximately 57% and decreased 24% in 2009, prices of ferroalloys increased approximately 19% in 2008 and decreased 43% in 2009, electricity prices increased approximately 36% in 2008 and 17% in 2009 and gas prices increased in real terms approximately 28% in 2008 and 10% in 2009.</P>
<P style="TEXT-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 materially and 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 style="TEXT-ALIGN: left"><B><I>Implementing our growth strategy, which may include additional acquisitions, may adversely affect our operations.</I></B></P>
<P style="TEXT-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 align=left>disruption of our ongoing business;</P>
<LI>
<P align=left>diversion of our resources and of management&#146;s time;</P>
<LI>
<P align=left>decreased ability to maintain uniform standards, controls, procedures and policies;</P>
<LI>
<P align=left>difficulty managing the operations of a larger company;</P>
<LI>
<P align=left>increased likelihood of involvement in labor, commercial or regulatory disputes or litigation related to the new enterprise;</P>
<LI>
<P align=left>potential liability to joint venture participants or to third parties;</P>
<LI>
<P align=left>difficulty competing for acquisitions and other growth opportunities with companies having greater financial resources; and</P>
<LI>
<P align=left>difficulty integrating the acquired operations and personnel into our existing business.</P>
</LI></UL>
<P style="TEXT-ALIGN: center">8</P>
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<p style="TEXT-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 style="TEXT-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 style="TEXT-ALIGN: left"><b><i>We may not be able to integrate successfully our recently acquired steel facilities into our operations.</i></b></p>
<p style="TEXT-ALIGN: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In May 2008, we acquired 100% of the shares of Corporaci&#243;n Aceros DM, S.A. de C.V. and certain of its affiliates (&#147;Grupo San&#148;). Grupo San is a long products steel mini-mill and the second-largest corrugated rebar producer in Mexico in terms of production volume. Grupo San&#146;s 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   Grupo San successfully into our historic operations. Furthermore, we cannot assure you that we will not encounter unexpected problems related to these acquired businesses, and if we do, the unbudgeted costs of addressing any such problems could be significant.</p>
<p style="TEXT-ALIGN: left"><b><i>We and our auditors recently identified  &#147;material weaknesses&#148; in our internal controls over financial reporting, and if we fail to remediate these material weaknesses and achieve an effective system of internal controls, we may not be able to accurately report our financial results and current and potential stockholders could lose confidence in our reporting, which would harm our business and the trading price of the ADSs or the Series B Shares.</i></b></p>
<p style="TEXT-ALIGN: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In connection with the preparation of our financial statements as of and for the year ended December 31, 2009, we and our auditors identified  material weaknesses (as defined under standards established by the Public Company Accounting Oversight Board) in our internal controls over financial reporting. A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.</p>
<p style="TEXT-ALIGN: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Specifically, due to the growth of our operations in Mexico during 2008 primarily as a result of our acquisition in May 2008 of Corporaci&#243;n Aceros D.M. S.A. de C.V., the structure of our finance department proved to be insufficient insofar as it did not allow for adequate segregation of duties with respect to the supervision and review procedures for the  assessment of deferred taxes and for the closing of our financial statements. The personnel of our finance department also lacked the requisite level of knowledge and specialization to calculate asset impairments and conversion between MFRS and U.S. GAAP and the conversion of the financial statements of our foreign subsidiaries to MFRS. Our continuing growth also had an adverse impact on our ability to maintain adequate control over our preparation of consolidated financial information
which had become more complex. The preparation of consolidated financial information was carried out through the use of electronic Excel sheets and a partially integrated system which relied on the use of different software by various subsidiaries, rather than through a company-wide, integrated consolidation system. The situation did not allow a proper supervision of the consolidation process during 2009.</p>
<p style="TEXT-ALIGN: center">9</p>
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<p style="TEXT-ALIGN: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We invoiced in Mexico certain materials that were paid for in 2009 but shipped in 2010. This occurred due to a failure of a manual key control regarding our revenue recognition process. See Item 15.B &#147;Controls and Procedures&#151;Management&#146;s Annual Report on Internal Control Over Financial Reporting&#148; below.</p>
<p style="TEXT-ALIGN: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On April 29, 2010, our external auditor notified our Audit and Corporate Practices Committee (&#147;Audit Committee&#148;) and certain members of the management of Republic Engineered Products, Inc. that it had identified, during its audit of the financial statements of SimRep and its subsidiaries for the year ended December 31, 2009, what it considered, under standards established by the Public Company Accounting Oversight Board, to be material weaknesses in internal control over financial reporting at the SimRep evaluation level. Specifically, our external auditor noted material weaknesses with regard to what it characterized as &#147;management override of internal controls.&#148; See Item 15.B &#147;Controls
and Procedures&#151;Management&#146;s Annual Report on Internal Control Over Financial Reporting&#148; below.</p>
<p style="TEXT-ALIGN: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On April 29, 2010, our external auditor also noted material weaknesses in internal control over financial reporting with regard to SimRep&#146;s adherence to its written policies with regard to accounting for working capital and fixed asset accounts. See Item 15.B &#147;Controls and Procedures&#151;Management&#146;s Annual Report on Internal Control Over Financial Reporting&#148; below.</p>
<p style="TEXT-ALIGN: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In response to the notification from our external auditor described above, our Audit Committee engaged outside counsel to conduct an internal investigation concerning these matters. Following the completion of this internal investigation, our outside counsel discussed with our outside auditor the types of remedial measures that would be appropriate to address these material weaknesses in internal controls over financial reporting. After consulting with our outside auditor, our outside counsel reported the findings and conclusions of its internal investigation to our Audit Committee and recommended that the Audit Committee adopt certain remedial measures to address these matters.</p>
<p style="TEXT-ALIGN: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On September 3, 2010, our Audit Committee adopted the following remedial measures to address these material weaknesses, which measures are reasonably likely to materially affect our internal controls over financial reporting: </P>

<ul>
  <li>
    <p>Republic&#146;s senior management will now report directly to our CFO on all general accounting and financial reporting matters. </p>
  </li>
  <li>
    <p>Republic&#146;s CFO will continue to report to and collaborate with Republic&#146;s CEO on other matters. </p>
  </li>
  <li>
    <p>Republic&#146;s CEO and the Director General of Industrias C.H. S.A.B. de C.V. will certify annually that they understand that Republic&#146;s accounting staff is obligated to adhere to U.S. GAAP and that they are not permitted to instruct Republic&#146;s accounting personnel about the accounting treatment of any matter. </p>
  </li>
  <li>
    <p>
Republic will hire a professional to oversee testing of internal controls for purposes of the Sarbanes-Oxley Act of 2002, including testing related to
information technologies, and a member of our audit team will perform an on-site review of Republic&#146;s internal controls at least twice a year. </p>
  </li>
  <li>
    <p>We will retain a third party consultant to evaluate what additional resources are needed by Republic&#146;s accounting department. </p>
  </li>
  <li>
    <p>Republic will revamp its current</p>
  </li>
</ul>
<p style="TEXT-ALIGN: center">10</p>
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<p style="TEXT-ALIGN: left">whistleblower procedures to enable members of Republic&#146;s accounting staff to anonymously report problems directly to our internal audit department. </P>

<p style="TEXT-ALIGN: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For further information,
  see Item 15.D &#147;Controls and Procedures&#151;Changes in Internal Control
  Over Financial Reporting&#148; below.</p>
<p style="TEXT-ALIGN: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Furthermore, also as a result of our evaluation of the effectiveness of our internal controls in Mexico for the year ended December 31, 2009 and the material weakness and deficiencies identified during that period, we have conducted an analysis of functions and workloads in our finance department and we are implementing additional changes that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting. For further information, see Item 15.D &#147;Controls and Procedures&#151;Changes in Internal Control Over Financial Reporting&#148; below.</p>
<p style="TEXT-ALIGN: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Any failure to implement and maintain the needed improvements in the controls over our financial reporting, or difficulties encountered in the implementation of these improvements in our controls, could result in a material misstatement in our annual or interim financial statements that would not be prevented or detected or cause us to fail to meet our reporting obligations under applicable securities laws. Any failure to improve our internal controls to address the identified weakness could result in our incurring substantial liability for not having met our legal obligation and could also cause investors to lose confidence in our reported financial information, which could have a negative impact on the trading price of the ADSs or the Series B Shares.</p>
<p style="TEXT-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 style="TEXT-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 style="TEXT-ALIGN: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Until 2008, most of our sales were in the United States and Canada. However, in 2009 approximately 63% of our sales   were in Mexico (which include 6% 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 style="TEXT-ALIGN: left"><b><i>Tariffs, anti-dumping and countervailing duty claims imposed in the future could harm our ability to export our products outside of Mexico, and changes in Mexican tariffs on steel imports could adversely affect the profitability and market share of our Mexican steel business.</i></b></p>
<p style="TEXT-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</p>
<p style="TEXT-ALIGN: center">11</p>
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<p style="TEXT-ALIGN: left">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, and if this were to occur it could materially and adversely affect our results of operations.</p>
<p style="TEXT-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 eliminated or that countries seeking to export steel products to Mexico will not impose similar tariffs on Mexican exports to those countries, and in either case such developments could have a material adverse effect on our financial condition and results of operations.</p>
<p style="TEXT-ALIGN: left"><b><i>We depend on distributions from our Mexican operating subsidiaries to finance our operations.</i></b></p>
<p style="TEXT-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 style="TEXT-ALIGN: left"><b><i>The operation of our facilities depends on good labor relations with our employees.</i></b></p>
<p style="TEXT-ALIGN: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At December 31, 2009, approximately 82% of our non-Mexican and 52% 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 style="TEXT-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 Tecumseh Redevelop Inc. owns, and the termination of any such rights would interrupt our operations and have a material adverse effect on our results of operations and financial condition.</i></b></p>
<p style="TEXT-ALIGN: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The operations of our Lackawanna facility depend on certain easements and other recorded agreements relating to, among other things, our use of industrial water, compressed air, sanitary sewer and electrical power. These service and utility arrangements, initially entered into with the Mittal Steel Company N.V. (&#147;Mittal Steel&#148;), were effective through April 30, 2009. In 2009, however, Mittal Steel transferred its Lackawanna Plant to Tecumseh Redevelopment, Inc. (&#147;Tecumseh&#148;), and as a result we are currently negotiating with Tecumseh to extend these services and utility arrangements. These services and utility arrangements are currently scheduled on a month-to-month basis. If Tecumseh completely ceases to
supply a particular utility service prior to the end of the current term, Tecumseh shall notify Republic sixty days prior to their intent to send</p>
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<p style="TEXT-ALIGN: left">a discontinuation notice and must deliver such written notice at least ninety days prior to such cessation. Within thirty days of the receipt of any such discontinuation notice, Republic can exercise its right to purchase the Tecumseh water system, in which event Republic agrees to pay Tecumseh the fair market value of the water system as determined by the average fair market value established by three independent appraisers. These rights are essential to the use and operation of our Lackawanna facility. In the event of a termination of any of these rights, due to a failure to negotiate a satisfactory outcome with Tecumseh or an inability to pay the value assigned by the independent appraisers, or for any other reason, we could be required to cease all or substantially all of our operations at the Lackawanna facility.
Because we produce 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 style="TEXT-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 style="TEXT-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, 2008, direct sales of our products to one of our customers, United States Steel Corporation (&#147;U.S. Steel&#148;), accounted for approximately 20% of our revenues in the U.S., while in 2009 the sales to this customer represented less than 1% of our U.S. revenues. Sales to U.S. Steel represented approximately 11% of our consolidated revenues for 2008. In 2009, sales to U.S. Steel were immaterial to our consolidated revenues. During the years ended December 31, 2008 and 2009, sales to our ten largest customers in the U.S. accounted for approximately 54% and 39% of
our consolidated revenues in the U.S., respectively, and approximately 16% and 31% of our total consolidated revenues, respectively. A disruption in sales
to one or more of our largest customers would adversely affect our cash flow and results of operations. Starting in the fourth quarter of 2008, due to the U.S. financial crisis and the ensuing worldwide economic recession, all of our top ten customers have suffered reduced demand for their products. This reduction in demand has in turn adversely affected our cash flow and results of operations. During 2009 the sales to the automotive industry dropped by 37%, and the collapse of the energy market had the largest impact on our business as the energy market accounted for 22% of our business in 2008 and less than 1% in 2009 as sales dropped by over $350 million to U.S. Steel alone.</p>
<p style="TEXT-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 style="TEXT-ALIGN: left"><b><i>Unanticipated problems with our manufacturing equipment and facilities could have an adverse impact on our business.</i></b></p>
<p style="TEXT-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 style="TEXT-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 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</p>
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<p style="TEXT-ALIGN: left">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 style="TEXT-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 style="TEXT-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, TS 16949 and ISO 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 style="TEXT-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 style="TEXT-ALIGN: left"><b><i>In the event of environmental violations at our facilities we may incur significant liabilities.</i></b></p>
<p style="TEXT-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 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;Item 8. Financial Information&#151;Legal Proceedings.&#148;</p>
<p style="TEXT-ALIGN: left"><b><i>If we are required to remediate contamination at our facilities we may incur significant liabilities.</i></b></p>
<p style="TEXT-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>
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<p style="TEXT-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 style="TEXT-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 style="TEXT-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 style="TEXT-ALIGN: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of December 31, 2009, Industrias CH, which the chairman of our board of directors, Rufino Vigil Gonz&#225;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 style="TEXT-ALIGN: left"><b><i>We have had a number of transactions with our affiliates.</i></b></p>
<p style="TEXT-ALIGN: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Historically, we have engaged a number and variety of transactions  on market terms  or better 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 style="TEXT-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 style="TEXT-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 style="TEXT-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 style="TEXT-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</p>
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<p style="TEXT-ALIGN: left">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 style="TEXT-ALIGN: left"><b>Risk Factors Concerning the Current Global Recession</b></p>
<p style="TEXT-ALIGN: left"><b><i>The global recession has significantly impacted our business.</i></b></p>
<p style="TEXT-ALIGN: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The economic downturn that began in the United States in late 2007 led to a worldwide economic recession following the financial crisis precipitated by the collapse of Lehman Brothers Holdings Inc. in September of 2008. Since this time period overall economic activity has decreased across the world generally and in North America in particular. The corresponding reduction in demand across the economy in general and in the automotive, manufacturing and construction sectors in particular has reduced demand for steel products in North America and globally. The volatile global economic climate is having significant negative effects on our business and our forward view is limited because of low order backlogs and short lead times. All parts  of our business have been impacted and such impacts
have created certain new risks and have also affected the other risks set forth below.</p>
<p style="TEXT-ALIGN: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In 2009, the decreased demand in the construction sector had an negative impact in the San Luis facilities, since these facilities produce mostly rebar and mesh. When assessing the recoverability of the goodwill and other intangibles, we must make assumptions regarding estimated future cash flows and other factors to determine the fair value of the respective assets. As of December 31, 2009, this reporting unit did not exceed its respective carrying value; therefore, we determined there was an impairment of goodwill in the amount of Ps. 2,368 million in the Grupo San unit. We believe that this was generally caused  by the general economic environment. Assumptions used in the analysis considered the current market conditions in developing short and long-term growth expectations.  A
key assumption made is that, in general, business activity was lower in 2009 and 2008 and will recover somewhat in 2010.</p>
<p style="TEXT-ALIGN: left"><b><i>Our end product markets have been severely affected.</i></b></p>
<p style="TEXT-ALIGN: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We sell our products to the automotive and construction-related industries, both of which have reported substantially lower customer demand due to the ongoing global recession. As a result, our operating levels have fallen and will remain at depressed levels until our customers&#146; demand increases. In addition to slackening demand by end customers, we believe that some of our customers are experiencing difficulty in obtaining credit or maintaining their ability to qualify for trade credit insurance, resulting in a further reduction in purchases and an increase in our credit risk exposure. The duration of the recession and the trajectory of the recovery for these industries may have a significant impact on our operations.</p>
<p style="TEXT-ALIGN: left"><b><i>We may face increased risks of customer and supplier defaults.</i></b></p>
<p style="TEXT-ALIGN: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;There is an increased risk of insolvency and other credit related issues of our customers, particularly those in hard hit industries such as automotive, construction and appliance. Also, there is the</p>
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<p style="TEXT-ALIGN: left">possibility that our suppliers may face similar risks. This decrease in available credit may increase the risk of our customers defaulting on their payment obligations to us and may cause some of our suppliers to be delayed in filling or to be unable to fill our needs.</p>
<p style="TEXT-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 style="TEXT-ALIGN: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Direct sales of products to automotive assemblers and manufacturers accounted for approximately 37% of our net sales of SBQ in 2009. 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. In addition, two of the largest U.S. automobile manufacturers have recently filed for bankruptcy. Chrysler LLC filed for Chapter 11 bankruptcy protection on April 30, 2009 and emerged from Chapter 11 protection on
June 10, 2009.  General Motors Corporation filed for Chapter 11 bankruptcy protection on June 1, 2009 and emerged from  Chapter 11 protection on July 10, 2009. While both companies have  emerged from bankruptcy
protection, they have  significantly reduced their  manufacturing and sales capacities. 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. 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 style="TEXT-ALIGN: left"><b><i>Our customers in the automotive industry continually seek to obtain price reductions from us. These price reductions may adversely affect our results of operations and financial condition.</i></b></p>
<p style="TEXT-ALIGN: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A challenge that we and other suppliers of intermediary products used in the manufacture of automobiles currently face is continued price reduction pressure from our customers in the automobile manufacturing business. Downward pricing pressure has been a characteristic of the automotive industry in recent years and it is migrating to all our vehicular markets. Virtually all automobile manufacturers have aggressive price reduction initiatives that they impose upon their suppliers, and such actions are expected to continue in the future. In the face of lower prices to customers, we must reduce our operating costs in order to maintain profitability. We have taken and continue to take steps to reduce our operating costs to offset customer price reductions; however, price reductions are adversely
affecting our profit margins and are expected to do so in the future. If we are unable to offset customer price reductions through improved operating
efficiencies, new manufacturing processes, sourcing alternatives, technology enhancements and other cost reduction initiatives, or if we are unable to avoid price reductions from our customers, our results of operations and financial condition could be adversely affected.</p>
<p style="TEXT-ALIGN: left"><b>Risks Related to the Steel Industry</b></p>
<p style="TEXT-ALIGN: left"><b><i>Our results of operations are significantly influenced by the cyclical nature of steel industry.</i></b></p>
<p style="TEXT-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. In 2008, global steel prices increased during the first three quarters of 2008, but weakened in the last quarter of 2008 and 2009. In 2010, global steel prices increased again. In the first quarter of 2010, these prices increase by 5% compared to the first quarter
of 2009 and 11% compared to the fourth quarter of 2009. We cannot predict or give any assurance as to prices of steel in the future.</p>
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<p style="TEXT-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 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 and 2008. In 2009, scrap prices decreased significantly. 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 style="TEXT-ALIGN: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We purchased 50% of our iron ore pellet and 100% 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. Iron ore and coke prices increased significantly in 2008. 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. In 2009 we
did not purchase any coke or pellets, since our Lorain, Ohio blast furnace facility was idle during 2009.</p>
<p style="TEXT-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 style="TEXT-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 9.40% for the year ended December 31, 2009 and 9% for the first quarter of 2010. 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 style="TEXT-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&#243;n Federal de Electricidad </i>or &#147;CFE&#148;) for electricity. We also pay special rates to Pemex, Gas y Petroqu&#237;mica B&#225;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, 2009, the Company has contracted derivative financial instruments in Mexico for hedging purposes to cover the risk of fluctuations in the price of natural gas (swaps) with PEMEX Gas and Basic Petrochemicals (PGBP), Gas Natural TETCO (TETCO) Natgasmex, SA of C.V. (Natgasmex) Ecogas Mexico, S of the R. L C. V. (ECOGAS).</p>
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<p style="TEXT-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 style="TEXT-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 style="TEXT-ALIGN: left"><b>Risks Related to Mexico</b></p>
<p style="TEXT-ALIGN: left"><b><i>Mexican governmental, political and economic factors may adversely impact our business.</i></b></p>
<p style="TEXT-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 style="TEXT-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 style="TEXT-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 style="TEXT-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 style="TEXT-ALIGN: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On July 2, 2006, Mexico held presidential and federal congressional elections, and Felipe Calder&#243;n Hinojosa, the PAN candidate, won by a very narrow margin. However, the <i>Partido de la Revoluci&#243;n Democr&#225;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&#243;n </i>(the Federal Electoral Chamber) unanimously declared Mr. Calder&#243;n to be the president-elect whose term as president will run from December 1, 2006 until November 30, 2012. </p>
<p style="TEXT-ALIGN: left"><b><i>High incidences of crime in Mexico, and drug trafficking in particular, could adversely affect our business.</i></b></p>
<p style="TEXT-ALIGN: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Beginning in early 2007, following the election of Felipe Calder&#243;n Hinojosa, there has been a national government policy which has involved a concentrated effort on the part of the Mexican Federal Police and military to combat narco-trafficking cartels within Mexico. This increase in government pressure in turn led to a response in violence from well armed narco-traffickers, and the result has been an overall increase in narcotics related violence during 2008 and 2009. A recent travel alert issued by the</p>
<p style="TEXT-ALIGN: center">19</p>
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<p style="TEXT-ALIGN: left">U.S. Department of State (Bureau of Consular Affairs) on May 6, 2010 (the &#147;Travel Alert&#148;), provides information for U.S. citizens on security issues in Mexico. According to the Travel Alert, violent criminal activity fueled by an increasingly violent conflict (both among Mexican drug cartels and between such cartels and Mexican security services) for control of narcotics trafficking routes continues along the U.S.-Mexico border and throughout other parts of Mexico. The Travel Alert reports that large firefights, involving the Mexican army, police and the drug cartels, have taken place in many towns and cities across Mexico and most recently in northern Mexico, including Tijuana, Chihuahua, Ciudad Juarez, Monterrey, Reynosa and other cities. Although attacks are aimed primarily at members of drug trafficking organizations
and Mexican police forces, Mexican and foreign bystanders, including U.S. citizens, have been among the victims of violent attacks, homicides and
kidnappings across Mexico. According to the Travel Alert, moreover, a number of areas along the border are experiencing rapid growth in the rates of many types of crime such as robberies, homicides, petty thefts, and carjackings.</p>
<p style="TEXT-ALIGN: left"><b><i>We face risks related to health epidemics and other outbreaks.</i></b></p>
<p style="TEXT-ALIGN: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our business could be adversely affected by the effects of swine flu or another epidemic or outbreak. In April 2009, an outbreak of swine flu occurred in Mexico and the United States and there have also been  cases reported in China and elsewhere in Asia. Any prolonged occurrence or recurrence of swine flu or other adverse public health developments in Mexico may have a material adverse effect on our business operations. Our operations may be impacted by a number of health-related factors, including, among other things, quarantines or closures of our facilities, which could severely disrupt our operations, the sickness or death of our key officers and employees, and a general slowdown in the Mexican economy. Any of the foregoing events or other unforeseen consequences of public health problems could
adversely affect our business and results of operations. We have not adopted any written preventive measures or contingency plans to combat any future
outbreak of swine flu or any other epidemic. </p>
<p style="TEXT-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 style="TEXT-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 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 style="TEXT-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 style="TEXT-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 style="TEXT-ALIGN: center">20</p>
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<p style="TEXT-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 style="TEXT-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. 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 20 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 style="TEXT-ALIGN: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In March 2010, the National Banking and Securities Commission in Mexico, (CNBV), required a work plan to evaluate the incorporation of International Financial Reporting Standards (IFRS) into the financial reporting for public companies in Mexico beginning with periods ending December 31, 2012. We have decided on an advisor for this project.</p>
<p style="TEXT-ALIGN: left"><b><i>We are subject to different corporate disclosure and accounting standards than U.S. companies.</i></b></p>
<p style="TEXT-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 style="TEXT-ALIGN: left"><b><a name="p21"></a>Item 4. Information on the Company</b><br>
  <br>
  <b>A. History and Development of the Company</b><br>
  <br>
  <b>Overview</b></p>
<p style="TEXT-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 in 2009 we were the largest producer of SBQ products in both the United States and Mexico, in each case in terms of sales volume. We also believe that in 2009 we were the largest producer of structural and light structural steel products in Mexico in terms of sales volume.</p>
<p style="TEXT-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 style="TEXT-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 cost benefits 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 an advantage in the cost of freight over competitors which do not have production facilities in such regions.</p>
<p style="TEXT-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 a <i>sociedad an&#243;nima burs&#225;til de capital variable</i>, organized under the laws of the United Mexican States.</p>
<p style="TEXT-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&#225;zaro C&#225;rdenas 601, Guadalajara, Jalisco, Mexico 44440. Our telephone number is 011-52-33-3770-6700.</p>
<p style="TEXT-ALIGN: center">21</p>
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<p><b>Our History</b></p>
<p>&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>
<p style="text-align: left;"> &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 style="text-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 style="text-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 style="text-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 <i>Instituto de Protecci&oacute;n al Ahorro Bancario </i>in Mexico.</p>
<p style="text-align: left;"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On November 24, 2007 we 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 style="text-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 style="text-align: left;"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On May 30, 2008, we acquired all the capital stock of Corporaci&oacute;n Aceros DM, S. A. de C. V. and certain affiliated companies (Grupo San) for a total cost of approximately Ps. 8,730 million (US&#36;844 million dollars). 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 style="text-align: center;"> 22</p>
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<p style="text-align: left;"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On July 29, 2008, the Company acquired 100% of the shares of Aroproc, S. A. de C. V., Del-Ucral, S. A. de C. V., Qwer, S. A. de C. V. and Transporte Integral Dom&eacute;stico, S.A. de C.V., subsidiaries of Grupo TMM, S. A. de C. V., to convert them into the operating manager of the iron and steel plants located in Mexico. On July 30 2008, these companies were renamed to Promotora de Aceros San Luis, S. A. de C. V., Comercializadora Aceros DM, S.A. de C.V., Comercializadora Msan, S.A. de C.V. and Productos Sider&#250;rgicos de Tlaxcala, S.A. de C.V. respectively.</p>
<p style="text-align: left;"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On December 26, 2008, the Company acquired 99.95% of the shares of Northarc Express, S. A. de C. V., a subsidiary corporation of Grupo TMM, S. A. de C. V., to convert this company into the operating manager of iron and steel plants located in Mexico. On January 6, 2009, this company changed its name to Simec International 2, S. A. de C. V.</p>
<p style="text-align: left;"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On February 5, 2009, Simec International 2, S.A. de C.V. divested assets and liabilities to three new wholly owned Mexican subsidiaries. As a consequence of such reorganization, Simec International 3, S.A. de C.V. now operates the Tlaxcala and Puebla facilities, Simec International 4, S.A. de C.V. and Simec International 5, S.A. de C.V jointly operate the San Luis de Potos&iacute; facilities, and Simec International 2, S.A. de C.V. kept the operation of the Guadalajara and Mexicali facilities.</p>
<p style="text-align: left;"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In 2009 we incorporated two new wholly owned subsidiaries. Simec Acero, S.A. de C.V. distributes all Grupo Simec products in Mexico and Simec USA, Corp. is in charge of distribution of our products outside of Mexico.</p>
<p style="text-align: left;"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On May 12, 2009, we incorporated Pacific Steel Projects, Inc., a wholly owned subsidiary organized under the laws of the State of California whose purpose is to develop technology improvement projects for our Mexican facilities.</p>
<p style="text-align: left;"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On August 10, 2009, Simec International, S.A. de C.V. divested assets and liabilities to four new wholly owned Mexican subsidiaries named Siminsa A, S.A. de C.V., Siminsa B, S.A. de C.V., Siminsa C, S.A. de C.V. and Siminsa D, S.A. de C.V. After the divesture, Siminsa A was merged into Simec International 2, Siminsa B was merged into Simec International 3, Siminsa C was merged into Simec International 4 and Siminsa D was merged into Simec International 5.</p>
<p style="text-align: left;"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On November 10, 2009, Simec International 2, Simec International 3, Simec International 4 and Simec International 5 divested assets and liabilities to Simec Steel, Inc., a new wholly owned subsidiary organized under the laws of the State of California whose purpose is to provide financing to the Mexican companies of the group and to seek new investment opportunities.</p>
<p style="text-align: left;"> <b>Principal Capital Expenditures and Divestitures</b></p>
<p style="text-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 style="text-align: left;"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We currently estimate capital expenditures for the year 2010 will be approximately &#36;45.6 million (Ps. 596 million), consisting of &#36;7.9 million (Ps. 103 million) of estimated capital expenditures in our Republic facilities and &#36;37.7 million (Ps. 493 million) of capital expenditures in our facilities in Mexico. Nevertheless, this estimate is subject to certain uncertainties and actual capital expenditures in 2010 may differ significantly from such estimate.</p>
<p style="text-align: left;"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In 2009, we spent &#36;6.4 million (Ps. 84 million) on capital investments at our Republic facilities, including &#36;0.5 million (Ps. 7 million) at the Lorain, Ohio facility, &#36;5.7 million (Ps. 74 million) at the Lackawanna, New York facility, and &#36;0.2 million (Ps. 3 million) at the Hamilton, Ontario, Canada facility. We spent &#36;13.7 million (Ps. 179 million) on capital improvements at our facilities in Mexico, including &#36;5.8 million (Ps. 77 million) at the Apizaco facility, &#36;0.3 million (Ps. 4 million) at the Mexicali</p>
<p style="text-align: center;"> 23</p>
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<p style="text-align: left;"> facility, &#36;1.6 million (Ps. 21 million) at the Guadalajara facility, and &#36;6 million (Ps. 78 million) at the San Luis facilities.</p>
<p style="text-align: left;"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In 2008, we spent &#36;28 million (Ps. 331 million) on capital investments at our Republic facilities, including &#36;13.8 million (Ps. 163 million) at the Canton, Ohio facility, &#36;2.5 million (Ps. 30 million) at the Lorain, Ohio facility, &#36;9.5 million (Ps. 112 million) at the Lackawanna, New York facility, &#36;1 million (Ps. 12 million) at the Massillon, Ohio facility, &#36;0.1 million (Ps. 1 million) at the Gary, Indiana facility and &#36;1.1 million (Ps. 13 million) at our corporate location in Fairlawn, Ohio. We spent &#36;13 million (Ps. 149 million) on capital improvements at our facilities in Mexico, including &#36;2 million (Ps. 24 million) at the Apizaco facility, &#36;6 million (Ps. 71 million) at the Mexicali facility, &#36;1 million (Ps. 15 million) at the Guadalajara facility,
&#36;3 million (Ps. 32 million) at the San Luis facilities and &#36;1 million (Ps. 7 million) in the acquisition of land in the state of
Tamaulipas, M&eacute;xico.</p>
<p style="text-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 style="text-align: left;"> <b>B. Business Overview</b></p>
<p style="text-align: left;"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In the United States and Mexico, we own and operate twelve state-of-the-art steel making, processing and/or finishing facilities with a combined annual crude steel installed production capacity of 4.5 million tons and a combined annual installed rolling capacity of 3.5 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 style="text-align: left;"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We currently own and
  operate:</p>
<ul>

  <li>
    <p align="left">Mexico&#146;s largest non-flat structural steel mini-mill, located in Guadalajara, Jalisco;</p>
  </li>
  <li>
    <p align="left">a mini-mill in Mexicali, Baja California Norte;</p>
  </li>
  <li>
    <p align="left">a mini-mill in Apizaco, Tlaxcala;</p>
  </li>
  <li>
    <p align="left">a cold finishing facility in Cholula, Puebla; all of these facilities are owned through our indirect wholly-owned subsidiary, Simec International, S.A. de C.V. (&#147;SI&#148;);</p>
  </li>
  <li>
    <p align="left">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; and</p>
  </li>
  <li>
    <p align="left">two mini-mills in San Luis Potos&iacute;, San Luis Potos&iacute;, M&eacute;xico both of which we own through our wholly-owned subsidiary, Grupo San.</p>
  </li>
</ul>
<p style="text-align: left;"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In 2009, we had net sales of Ps. 19.2 billion, gross profit of Ps. 1.5 billion and net loss attributable to majority interest of Ps. 323 million. In 2009, approximately 43% of our consolidated sales were in the</p>
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<p style="text-align: left;"> United States and Canada, approximately 56% were in Mexico, and approximately 1% were exports to other markets outside North America.</p>
<p style="text-align: left;"> <b>Business Strategy</b></p>
<p style="text-align: left;"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We seek 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 seek to expand our presence in the steel industry by identifying and pursuing growth opportunities and value enhancing initiatives. Our strategy includes:</p>
<p style="text-align: left;"> <i>Further integrating our operations.</i></p>
<p style="text-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, the acquisition of Republic in 2005 and of the acquisition of Grupo San in 2008.</p>
<p style="text-align: left;"> <i>Improving our cost structure.</i></p>
<p style="text-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 style="text-align: left;"> <i>Focusing on high margin and value-added products.</i></p>
<p style="text-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 style="text-align: left;"> <i>Building on our strong customer relationships.</i></p>
<p style="text-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 style="text-align: left;"> <i>Pursuing strategic growth opportunities.</i></p>
<p style="text-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 style="text-align: left;"> <b>Our Products</b></p>
<p style="text-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, cold finished bars and wire rods. 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 align="left">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>
</ul>
<p style="text-align: center;"> 25</p>
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<br>

<ul>

  <li>
    <p align="left">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 align="left">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 align="left">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 align="left">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 align="left">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 align="left">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>
    <p align="left">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.</p>
  </li>
</ul>
<p style="text-align: center;"> 26</p>
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<p style="text-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 San Luis facilities
  since June 1, 2008.</p>
<p style="text-align: center;"> <b>Steel Product Sales Volume</b></p>
<table width=100% border=0 cellpadding="0" cellspacing=0 style="font-family: 'Times New Roman';font-size: 10pt;">
  <tr>
    <td></td>
    <td></td>
    <td></td>
    <td></td>
    <td></td>
    <td></td>
    <td></td>
    <td></td>
  </tr>
  <tr valign="bottom">
    <td align=left>&nbsp; </td>
    <td colspan="7" align=center> <b><font size=2>Years ended December 31,</font></b>
    </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=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>2008</font></b></td>
    <td align=center>&nbsp;</td>
    <td align=center> <b><font size=2>2009</font></b></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>
  </tr>
  <tr valign="bottom">
    <td align=left>&nbsp; </td>
    <td colspan="7" align=center> <font size=2>(thousands of tons)</font> </td>
  </tr>
  <tr valign="bottom">
    <td align=left> <font size=2>I-Beams</font></td>
    <td align=right> <font size=2>75.7</font></td>
    <td align=right>&nbsp;</td>
    <td align=right> <font size=2>74.5</font></td>
    <td align=right>&nbsp;</td>
    <td align=right> <font size=2>66.2</font></td>
    <td align=right>&nbsp;</td>
    <td align=right> <font size=2>76.8</font></td>
  </tr>
  <tr valign="bottom">
    <td align=left> <font size=2>Channels</font></td>
    <td align=right> <font size=2>70.3</font></td>
    <td align=right>&nbsp;</td>
    <td align=right> <font size=2>79.5</font></td>
    <td align=right>&nbsp;</td>
    <td align=right> <font size=2>61.4</font></td>
    <td align=right>&nbsp;</td>
    <td align=right> <font size=2>51.0</font></td>
  </tr>
  <tr valign="bottom">
    <td align=left> <font size=2>Angles</font><sup><font size=2>(1)</font></sup></td>
    <td align=right> <font size=2>231.2</font></td>
    <td align=right>&nbsp;</td>
    <td align=right> <font size=2>145.2</font></td>
    <td align=right>&nbsp;</td>
    <td align=right> <font size=2>131.0</font></td>
    <td align=right>&nbsp;</td>
    <td align=right> <font size=2>168.0</font></td>
  </tr>
  <tr valign="bottom">
    <td align=left> <font size=2>Hot-rolled bars (round, square and hexagonal
      rods)</font></td>
    <td align=right> <font size=2>1,141.9</font></td>
    <td align=right>&nbsp;</td>
    <td align=right> <font size=2>1,189.0</font></td>
    <td align=right>&nbsp;</td>
    <td align=right> <font size=2>1,210.8</font></td>
    <td align=right>&nbsp;</td>
    <td align=right> <font size=2>724.6</font></td>
  </tr>
  <tr valign="bottom">
    <td align=left> <font size=2>Flat bar</font></td>
    <td align=right> <font size=2>154.4</font></td>
    <td align=right>&nbsp;</td>
    <td align=right> <font size=2>182.9</font></td>
    <td align=right>&nbsp;</td>
    <td align=right> <font size=2>106.8</font></td>
    <td align=right>&nbsp;</td>
    <td align=right> <font size=2>67.2</font></td>
  </tr>
  <tr valign="bottom">
    <td align=left> <font size=2>Rebar</font></td>
    <td align=right> <font size=2>265.2</font></td>
    <td align=right>&nbsp;</td>
    <td align=right> <font size=2>250.8</font></td>
    <td align=right>&nbsp;</td>
    <td align=right> <font size=2>467.6</font></td>
    <td align=right>&nbsp;</td>
    <td align=right> <font size=2>590.0</font></td>
  </tr>
  <tr valign="bottom">
    <td align=left> <font size=2>Cold finished bars</font></td>
    <td align=right> <font size=2>201.0</font></td>
    <td align=right>&nbsp;</td>
    <td align=right> <font size=2>216.2</font></td>
    <td align=right>&nbsp;</td>
    <td align=right> <font size=2>190.9</font></td>
    <td align=right>&nbsp;</td>
    <td align=right> <font size=2>131.9</font></td>
  </tr>
  <tr valign="bottom">
    <td align=left> <font size=2>Semi-finished tube rounds</font></td>
    <td align=right> <font size=2>352.8</font></td>
    <td align=right>&nbsp;</td>
    <td align=right> <font size=2>216.2</font></td>
    <td align=right>&nbsp;</td>
    <td align=right> <font size=2>350.3</font></td>
    <td align=right>&nbsp;&nbsp;&nbsp;</td>
    <td align=right> <font size=2>51.7</font></td>
  </tr>
  <tr valign="bottom">
    <td align=left> <font size=2>Other semi-finished trade products</font><sup><font size=2>(2)</font></sup></td>
    <td align=right> <font size=2>174.0</font></td>
    <td align=left>&nbsp;&nbsp;&nbsp;</td>
    <td align=right> <font size=2>326.4</font></td>
    <td align=right>&nbsp;&nbsp;&nbsp;</td>
    <td align=right> <font size=2>262.0</font></td>
    <td align=right>&nbsp;</td>
    <td align=right> <font size=2>6.9</font></td>
  </tr>
  <tr valign="bottom">
    <td align=left> <font size=2>Electro-Welded wire mesh.</font></td>
    <td align=right> <font size=2>-</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>16.7</font></td>
    <td align=right>&nbsp;</td>
    <td align=right> <font size=2>48.9</font></td>
  </tr>
  <tr valign="bottom">
    <td align=left> <font size=2>Wire rod</font></td>
    <td align=right> <font size=2>-</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>14.9</font></td>
    <td align=right>&nbsp;</td>
    <td align=right> <font size=2>64.2</font></td>
  </tr>
  <tr valign="bottom">
    <td align=left> <font size=2>Electro-Welded wire mesh panel</font></td>
    <td align=right> <font size=2>-</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>5.6</font></td>
    <td align=right>&nbsp;</td>
    <td align=right> <font size=2>0.0</font></td>
  </tr>
  <tr valign="bottom">
    <td align=left> <font size=2>Other</font></td>
    <td align=right> <font size=2>9.6</font></td>
    <td align=right>&nbsp;</td>
    <td align=right> <font size=2>10.4</font></td>
    <td align=right>&nbsp;</td>
    <td align=right> <font size=2>40.0</font></td>
    <td align=right>&nbsp;</td>
    <td align=right> <font size=2>58.8</font></td>
  </tr>
  <tr>
    <td height="21">&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>
  </tr>
  <tr valign="bottom">
    <td align=left> <font size=2>&nbsp;&nbsp;&nbsp;Total steel sales</font></td>
    <td align=right> <font size=2>2,676.1</font></td>
    <td align=right>&nbsp;</td>
    <td align=right> <font size=2>2,691.1</font></td>
    <td align=right>&nbsp;</td>
    <td align=right> <font size=2>2,924.2</font></td>
    <td align=right>&nbsp;</td>
    <td align=right> <font size=2>2,040.0</font></td>
  </tr>
  <tr>
    <td>&nbsp; </td>
    <td>
      <hr noshade size=2>
       </td>
    <td>&nbsp;</td>
    <td>
      <hr noshade size=2>
       </td>
    <td>&nbsp;</td>
    <td>
      <hr noshade size=2>
       </td>
    <td>&nbsp;</td>
    <td>
      <hr noshade size=2>
       </td>
  </tr>
</table>
<br>
<hr align="left" width="90" size="1" noshade>
<table border=0 cellspacing=0 style="font-family: 'Times New Roman';font-size: 10pt;">

  <tr>

    <td nowrap valign=top width="2%"> (1)&nbsp; &nbsp; &nbsp;  </td>
    <td width="98%">
      <p align="left">Angles include structural angles and commercial angles.</p>
    </td>
  </tr>
  <tr>

    <td nowrap valign=top width="2%"> (2)&nbsp; &nbsp; &nbsp;  </td>
    <td width="98%">
      <p align="left">Includes billets and blooms (wide section square and round bars).</p>
    </td>
  </tr>
</table>
<p style="text-align: left;"> <b>Sales and Distribution</b></p>
<p style="text-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 2009, approximately 41% of our steel product sales represented SBQ steel products, of which we sold 37% to the auto part industry, 29% to service centers, 1% for energy related products, 1% for hand tools, 3% for mining equipment and the remaining 29% to other industries.</p>
<p style="text-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 our San Luis facilities starting since June 1, 2008.</p>
<p style="text-align: center;"> 27</p>
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<p style="text-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>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
  </tr>
  <tr valign=bottom>
    <td align=center>&nbsp;</td>
    <td colspan="8" align=center><b><font size=2>Mexico</font></b></td>
    <td colspan="8" align=center><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="8" align=center>
      <hr width="98%" size=1 noshade>
       </td>
    <td colspan="8" align=center>
      <hr width="98%" size=1 noshade>
       </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 colspan=8><b><font size=2>Years 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>
  </tr>
  <tr>
    <td align=center>&nbsp;</td>
    <td colspan="16" align=center>
      <hr width="99%" size=1 noshade>
       </td>
  </tr>
  <tr valign=bottom>
    <td align=center>&nbsp;</td>
    <td align=center colspan=2><b><font size=2>2006</font></b></td>
    <td align=center colspan=2><b><font size=2>2007</font></b></td>
    <td align=center colspan=2><b><font size=2>2008</font></b></td>
    <td align=center colspan=2><b><font size=2>2009</font></b></td>
    <td align=center colspan=2><b><font size=2>2006</font></b></td>
    <td align=center colspan=2><b><font size=2>2007</font></b></td>
    <td align=center colspan=2><b><font size=2>2008</font></b></td>
    <td align=center colspan=2><b><font size=2>2009</font></b></td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td colspan=2>
      <hr width="90%" size=1 noshade>
       </td>
    <td colspan=2>
      <hr width="90%" size=1 noshade>
       </td>
    <td colspan=2>
      <hr width="90%" size=1 noshade>
       </td>
    <td colspan=2>
      <hr width="90%" size=1 noshade>
       </td>
    <td colspan=2>
      <hr width="90%" size=1 noshade>
       </td>
    <td colspan=2>
      <hr width="90%" size=1 noshade>
       </td>
    <td colspan=2>
      <hr width="90%" size=1 noshade>
       </td>
    <td colspan=2>
      <hr width="90%" size=1 noshade>
       </td>
  </tr>
  <tr valign=bottom>
    <td align=left><font size=2>I-Beams</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>92</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>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>
    <td align=right><font size=2>8</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>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>58</font></td>
    <td align=left><font size=2>%</font></td>
    <td align=right><font size=2>69</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>
    <td align=right><font size=2>42</font></td>
    <td align=left><font size=2>%</font></td>
    <td align=right><font size=2>31</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>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>77</font></td>
    <td align=left><font size=2>%</font></td>
    <td align=right><font size=2>78</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>
    <td align=right><font size=2>23</font></td>
    <td align=left><font size=2>%</font></td>
    <td align=right><font size=2>22</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=left><font size=2>&nbsp;&nbsp;&nbsp;and hexagonal rods)</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>19</font></td>
    <td align=left><font size=2>%</font></td>
    <td align=right><font size=2>32</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>
    <td align=right><font size=2>81</font></td>
    <td align=left><font size=2>%</font></td>
    <td align=right><font size=2>68</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>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>81</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>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>
    <td align=right><font size=2>19</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>
  </tr>
  <tr valign=bottom>
    <td align=left><font size=2>Flat bar</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>86</font></td>
    <td align=left><font size=2>%</font></td>
    <td align=right><font size=2>77</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>
    <td align=right><font size=2>14</font></td>
    <td align=left><font size=2>%</font></td>
    <td align=right><font size=2>23</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>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>29</font></td>
    <td align=left><font size=2>%</font></td>
    <td align=right><font size=2>24</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>
    <td align=right><font size=2>71</font></td>
    <td align=left><font size=2>%</font></td>
    <td align=right><font size=2>76</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>-</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>-</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>-</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>-</font></td>
    <td align=left>&nbsp;</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>

  <tr valign=bottom>
    <td align=left><font size=2>Other semi-finished trade products</font></td>
    <td align=right><font size=2>-</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>-</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>-</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>-</font></td>
    <td align=left>&nbsp;</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>
  <tr valign=bottom>
    <td align=left><font size=2>Electro-Welded wire mesh</font></td>
    <td align=right><font size=2>-</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>-</font></td>
    <td align=left>&nbsp;</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>-</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>-</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>-</font></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><font size=2>Wire rod</font></td>
    <td align=right><font size=2>-</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>-</font></td>
    <td align=left>&nbsp;</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>-</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>-</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>-</font></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><font size=2>Electro-Welded wire mesh panel</font></td>
    <td align=right><font size=2>-</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>-</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>100</font></td>
    <td align=left><font size=2>%</font></td>
    <td align=right><font size=2>-</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>-</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>-</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>-</font></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><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>99</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>59</font></td>
    <td align=left><font size=2>%</font></td>
    <td align=right><font size=2>-</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>1</font></td>
    <td align=left><font size=2>%</font></td>
    <td align=right><font size=2>-</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>41</font></td>
    <td align=left><font size=2>%</font></td>
  </tr>
  <tr>
    <td align="left">&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><font size=2>Total (weighted average)</font></td>
    <td align=right><font size=2>35</font></td>
    <td align=left><font size=2>%&nbsp;&nbsp;&nbsp;</font></td>
    <td align=right><font size=2>33</font></td>
    <td align=left><font size=2>%&nbsp;&nbsp;&nbsp;</font></td>
    <td align=right><font size=2>35</font></td>
    <td align=left><font size=2>%&nbsp;&nbsp;&nbsp;</font></td>
    <td align=right><font size=2>63</font></td>
    <td align=left><font size=2>%&nbsp;&nbsp;&nbsp;</font></td>
    <td align=right><font size=2>65</font></td>
    <td align=left><font size=2>%&nbsp;&nbsp;&nbsp;</font></td>
    <td align=right><font size=2>67</font></td>
    <td align=left><font size=2>%&nbsp;&nbsp;&nbsp;</font></td>
    <td align=right><font size=2>65</font></td>
    <td align=left><font size=2>%&nbsp;&nbsp;&nbsp;</font></td>
    <td align=right><font size=2>37</font></td>
    <td align=left><font size=2>%</font></td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>
      <hr noshade size=2>
       </td>
    <td>&nbsp; </td>
    <td>
      <hr noshade size=2>
       </td>
    <td>&nbsp; </td>
    <td>
      <hr noshade size=2>
       </td>
    <td>&nbsp; </td>
    <td>
      <hr noshade size=2>
    </td>
    <td>&nbsp; </td>
    <td>
      <hr noshade size=2>
       </td>
    <td>&nbsp; </td>
    <td>
      <hr noshade size=2>
       </td>
    <td>&nbsp; </td>
    <td>
      <hr noshade size=2>
       </td>
    <td>&nbsp; </td>
    <td>
      <hr noshade size=2>
       </td>
    <td>&nbsp; </td>
  </tr>
</table>
<br>
<hr align="left" width="90" size="1" noshade>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'" cellspacing=0 border=0>

  <tr>

    <td valign=top nowrap width="2%">(1)&nbsp; &nbsp; &nbsp; </td>
    <td width="98%">
      <p align=left>Includes sales principally into the United States and Canada.</p>
    </td>
  </tr>
</table>
<p style="TEXT-ALIGN: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During the year ended December 31, 2009, approximately 37% 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 63% of our sales by volume, with SBQ products representing approximately 14% of such sales and the remainder representing commercial steel products. Approximately 15% 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 prices 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 style="TEXT-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>
<p style="TEXT-ALIGN: left">&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 style="TEXT-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 four full-time employees in Mexico dedicated exclusively to exports.</p>
<p style="TEXT-ALIGN: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During 2009 and 2008, 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</p>
<p style="TEXT-ALIGN: center">28</p>
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<p style="text-align: left;"> ordered by our customers prior to production. There can be no assurance that significant levels of preproduction sales orders will continue.</p>
<p style="text-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 customers 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.; 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 2009, direct sales to the automotive industry dropped by 37%, as we were able to offset some the reduction in demand with the addition of new customers. The collapse of the energy market had the largest
impact on our business as the energy market accounted for 22% of our business in 2008 and less than 1% in 2009 as sales dropped by &#36;350 million to US Steel alone.</p>
<p style="text-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 style="text-align: left;"> <b>Competition</b></p>
<p style="text-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 style="text-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 63% of our sales in 2009 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 products  at a higher cost to
us, which could materially reduce our gross margins and net income.</p>
<p style="text-align: center;"> 29</p>
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<P style="text-align: left;"> <I>Mexico</I></P>
<P style="text-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. 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 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, is competitive in terms of production and transportation costs in northwestern Mexico and southern California.</P>
<P style="text-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 we have an advantage over certain competitors due to the labor cost in our Mexican operations.</P>
<P style="text-align: left;"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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;), we believe that in 2009 we were the sole Mexican producer of 5 inch, 6 inch and 200 mm I-beams, and that during such period there was one other producer of 4-inch I-beams. These products accounted for approximately 70,648 tons, or approximately 3.4%, and approximately 66,239 tons, or approximately 2%, of our total finished product sales in 2009 and 2008, respectively. The revenue that we derived from I-beam products represented approximately 2% and 3.5% of our net sales in 2008 and 2009, respectively.</P>
<P style="text-align: left;"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In 2009, we sold approximately 181,173 tons of I-beams, channels and angles at least three inches in width (including the 70,648 tons of I-beams described above) which represented approximately 9% of our total finished product sales for the year. In 2008, we sold approximately 180,576 tons of I-beams, channels and angles at least three inches in width (including the 66,239 tons of I-beams described above) which represented approximately 6% 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 2009 and 45% in 2008.</P>
<P style="text-align: left;"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In 2009, we sold approximately 855,216 tons of hot rolled and cold finished steel bar, compared to 1,398,445 tons in 2008. 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 19% and 70%, respectively, in 2009 compared to 14% and 51%, respectively, in 2008. Rebar and light structural steel together accounted for approximately 784,339 tons, or 38%, of our total production of finished steel products in Mexico and the United States in 2009, compared to approximately 670,131 tons, or 23%, in 2008. 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, Deacero, S.A. de C.V., Talleres y Acero, Nucor
Corporation and Bayou Steel Corporation.</P>
<P style="text-align: left;"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We distributed our
  sales of SBQ steel in Mexico as of December 31, 2009 as follows:</P>
<UL>
<LI>
<P align="left">auto parts industry, 37.4%,</P>
</LI>
<LI>
<P align="left">service centers, 29.4%,</P>
</LI>
<LI>
<P align="left">mining equipment, 3%,</P>
</LI> </UL>
<P style="text-align: center;"> 30</P>
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<UL>
<LI>
<P align="left">hand tools, 1%, and</P>
</LI>
<LI>
<P align="left">bar processing industry, 29.2%.</P>
</LI> </UL>
<P style="text-align: left;"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We believe that 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 certain 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 style="text-align: left;"> <I>United States and Canada</I></P>
<P style="text-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 style="text-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. 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 style="text-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, Arcelor Mittal, Charter Steel, Steel Dynamics, Inc., The Timken Company and Gerdau Macsteel.</P>
<P style="text-align: left;"> <B>Certifications</B></P>
<P style="text-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 July 18, 2010. This certification was renewed in January 2010 and will expire on March 11, 2013. We are in the process of
obtaining the ISO/TS 16949 certification.</P>
<P style="text-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 style="text-align: left;"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our Republic facilities are currently ISO 14001 and OHSAS 18001 certified. Through these certifications, Republic&#146;s Environmental, Health &amp; Safety Management System is structured upon</P>
<P style="text-align: center;"> 31</P>
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<P style="text-align: left;"> training, communication, employee participation, document control, objective and target setting, and management&#146;s periodic reviews to implement our commitments to environmental protection and providing a safe and clean workplace. Most of the automotive customers of our Republic facilities require ISO 14001 certification, however, OHSAS 18001 is voluntary. The ISO 14001 certification is effective until November 2010 and the OHSAS 18001 is effective until February 2012.</P>
<P style="text-align: left;"> <B>Raw Materials</B></P>
<P style="text-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 style="text-align: left;"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In 2009, our cost of sales in Mexico, as a percentage of sales in Mexico, was 70% compared to our U.S. operations where our cost of sales, as a percentage of sales in the U.S., was 125%, and our consolidated cost of sales, as a percentage of consolidated sales, was 92%. 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 costs of the raw materials that our U.S. operations use in the production of SBQ steel.</P>
<P style="text-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 style="text-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 54% of our consolidated direct cost of sales in 2009 (63% of the direct cost in our Mexico operations and 45% of the direct cost in our U.S. operations) and 42% of our direct cost of sales in 2008 (51% of the direct cost in our Mexico operations and 27% 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 style="text-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, San Luis, 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 8% and 7% of our refined scrap tonnage in 2009 and 2008, respectively, and (ii) purchases from third party scrap processors in Mexico and the southwestern United States, which, in the aggregate, provided us with approximately 92% and 1%, respectively, in 2009 and approximately 91% and 2%, respectively, in 2008 of our refined ferrous scrap requirements. We are a large 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 style="text-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. We made no purchases of these raw materials in 2009, since our Lorain, Ohio blast facility was idle during the year. Iron ore pellets and coke</P>
<P style="text-align: center;"> 32</P>
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<P style="text-align: left;"> accounted for approximately 23% of our U.S. and Canadian facilities&#146; direct costs for the year ended December 31, 2008. The iron ore pellets and coke made up 8% and 15%, respectively, of the direct costs of sales in this period. We purchased 50% of our iron ore pellet and 100% of our coke requirement on the open market. Our Mexican facilities do not use iron ore pellets or coke.</P>
<P style="text-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 13% of our direct cost of sales in 2009 and 11% in 2008, and they accounted for 18% of our direct cost of sales for the year ended December 31, 2009 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 style="text-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 style="text-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 9% of our consolidated costs, 8% of the direct costs incurred at our Mexican operations and 12% of the direct costs incurred at our U.S. operations.</P>
<P style="text-align: left;"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Electricity</I>. As of December 31, 2009, electricity accounted for approximately 9% of our consolidated direct cost of sales for the period (10% of the direct cost of our Mexican operations and 7% of the direct cost of our U.S. operations). Electricity accounted for 10% of our direct cost of sales in 2009 and 11% of direct cost of sales in 2008 in our Mexico facilities and is supplied by the <I>Comisi&oacute;n Federal de Electricidad </I>(&#147;CFE&#148;). It accounted for 8% of direct costs of sales in 2008 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 2007 and 2008, the Mexicali facility entered into a new contract with Sempra for the period May through October 2007 and May to October 2008, respectively.</P>
<P style="text-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 (7% of the direct cost of our Mexican operations and 4% of the direct cost of our U.S. operations) in 2009. 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</P>
<P style="text-align: center;"> 33</P>
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<p style="text-align: left;"> 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 the swaps are highly effective for mitigating the exposure to natural gas
  price fluctuations. In 2009, 2008 and 2007, the fair value of derivatives that
  did not qualify for hedge accounting was adjusted through statement of income.
  For the derivatives that qualified for hedge accounting, their fair value was
  adjusted through the stockholders&#146; equity under the caption fair value
  of derivative financial instruments until such time as the related item the
  derivative hedges is recognized as income.</p>
<p style="text-align: left;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our contracts are
  forwards with a minimum volume required to purchase.</p>
<p style="text-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 Accounting Standards Codification Section 815, <i>&#147;Derivatives and Hedging&#148; </i>and with Mexican GAAP relating to Bulletin C-10 <i>&#147;Derivative Financial Instruments and Hedging.&#148;</i></p>
<p style="text-align: left;"> <b>Regulation</b></p>
<p style="text-align: left;"> <i>U.S. and Canadian Operations</i></p>
<p style="text-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;Item 8. Financial Information&#151;Legal Proceedings.&#148;</p>
<p style="text-align: left;"> <i>Environmental Matters</i></p>
<p style="text-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 align="left">discharges to the air, water and soil;</p>
  </li>
  <li>
    <p align="left">the handling and disposal of solid and hazardous wastes;</p>
  </li>
  <li>
    <p align="left">the release of petroleum products, hazardous substances, hazardous wastes, or toxic substances to the environment; and</p>
  </li>
  <li>
    <p align="left">the investigation and remediation of contaminated soil and groundwater.</p>
  </li>
</ul>
<p style="text-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 adverse effect on us.</p>
<p style="text-align: left;"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Future changes in the applicable environmental laws and regulations, or changes in the regulating agencies&#146; 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</p>
<p style="text-align: center;"> 34</p>
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<p style="text-align: left;"> Manufacturers, or the 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 style="text-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 at present believe that such materials are being managed in accordance with applicable law.</p>
<p style="text-align: left;"> <i>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Mexican Operations</i></p>
<p style="text-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 style="text-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 style="text-align: left;"> <i>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Environmental Matters</i></p>
<p style="text-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 style="text-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 style="text-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 hazardous wastes and noise control, among others. Mexican Official Rules regarding soil contamination</p>
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<p style="text-align: left;"> 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 style="text-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 style="text-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 style="text-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 style="text-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 style="text-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 style="text-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 style="text-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 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</p>
<p style="text-align: center;"> 36</p>
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<p style="text-align: left;"> 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 style="text-align: left;"> <i>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Water</i></p>
<p style="text-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 style="text-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 style="text-align: left;"> <i>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Antitrust Matters</i></p>
<p style="text-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 material 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 style="text-align: left;"> <i>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Measurements Law</i></p>
<p style="text-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 style="text-align: left;"> <i>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Trade Regulation Matters</i></p>
<p style="text-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>
<p style="text-align: left;"> &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</p>
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<p style="text-align: left;"> 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 style="text-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 style="text-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 style="text-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 continued until March 2004 when 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 style="text-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 style="text-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 style="text-align: left;"> &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>
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<p style="text-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 style="text-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 style="text-align: center;"> <b>C. Organizational Structure</b></p>
<p style="text-align: center;"> The chart below sets forth a summary of our corporate structure at December 31, 2009:</p>
<div align="center"><img src="a40100x42x1.jpg" border=0> <br>
</div>
<hr align="left" width="90" size="1" noshade>
<table border=0 cellspacing=0 style="font-family: 'Times New Roman';font-size: 10pt;">
  <tr>
    <td nowrap valign=top> (1)&nbsp; &nbsp; &nbsp; </td>
    <td colspan=2>
      <p align="left">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.&nbsp; 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%), Sider&#250;rgica de Baja California,
        S.A. de C.V. (99.95%), CSG Comercial, S.A. de C.V. (99.95%), Comercializadora
        de Productos de Acero de Tlaxcala, S.A. de C. V. (99.95%), Productos Sider&#250;rgicos
        de Tlaxcala, S.A. de C.V. (100%), Comercializadora MSAN, S.A. de C.V.
        (100%), Comercializadora Aceros DM, S.A. de C.V. (100%), Promotora de
        Aceros San Luis, S.A. de C.V. (100%), Compa&ntilde;&iacute;a Sider&#250;rgica
        de Guadalajara S.A. de C.V. (99.99%), Simec Acero, S.A. de C.V. (100%),
        Simec USA Corp. (100%), Pacific Steel Projects Inc. (100%), Simec Steel
        Inc. (100%) and Simec International, S. A. de C. V.(100%). </p>
    </td>
  </tr>
  <tr>
    <td colspan=3>&nbsp;</td>
  </tr>
  <tr>
    <td nowrap valign=top> (2)&nbsp; &nbsp; &nbsp; </td>
    <td colspan=2>
      <p align="left">Our principal Mexican facilities consist of
        steel-making facilities in Guadalajara, Jalisco, Mexicali, Baja California,
        Apizaco, Tlaxcala, cold finishing facilities in Cholula, Puebla, and San
        Luis Potos&iacute;.</p>
    </td>
  </tr>
</table>
<p style="text-align: center;"> 39</p>
<hr noshade align="center" width="100%" size="5">
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<br>

<table style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'" cellspacing=0 border=0>
  <tr>
    <td valign=top nowrap width="2%">(3)&nbsp; &nbsp; &nbsp; </td>
    <td width="98%">
      <p align=left>The remaining 49.8% of SimRep Corporation is
        owned by our controlling shareholder, Industrias CH, S.A.B. de C.V.</p>
    </td>
  </tr>
  <tr>
    <td valign=top nowrap>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td valign=top nowrap width="2%">(4)&nbsp; &nbsp; &nbsp; </td>
    <td width="98%">
      <p align=left>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.</p>
    </td>
  </tr>
  <tr>
    <td valign=top nowrap>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td valign=top nowrap width="2%">(5)&nbsp; &nbsp; &nbsp; </td>
    <td width="98%">
      <p align=left>Simec owns 100% of Grupo San (Corporaci&#243;n
        Aceros DM, S.A. de C.V.) and its subsidiaries.</p>
    </td>
  </tr>
</table>
<p style="TEXT-ALIGN: left">The following table identifies each of our significant operating subsidiaries, including its country of incorporation and our percentage ownership thereof:</p>
<table width="100%" border=0 cellpadding="0" cellspacing=0 style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'">
  <tr>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
  </tr>
  <tr align="left" valign=bottom>
    <td bgcolor=#808080><font color=#ffffff size=2>Name of Subsidiary</font></td>
    <td bgcolor=#808080><font color=#ffffff size=2>Country of Incorporation</font></td>
    <td bgcolor=#808080><font color=#ffffff size=2>Ownership</font><br>
       <font color="#FFFFFF" size=2>Interest
      (%)</font></td>
  </tr>
  <tr valign=bottom>
    <td align=left><font size=2>Simec International, S.A. de C.V.</font></td>
    <td align=left><font size=2>Mexico</font></td>
    <td align=left><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><font size=2>Undershaft Investments, N.V.</font></td>
    <td align=left><font size=2>Netherlands Antillas</font></td>
    <td align=left><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><font size=2>Pacific Steel, Inc.</font></td>
    <td align=left><font size=2>USA</font></td>
    <td align=left><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><font size=2>SimRep Corporation</font></td>
    <td align=left><font size=2>USA</font></td>
    <td align=left><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><font size=2>Republic Engineered Products, Inc.</font></td>
    <td align=left><font size=2>USA</font></td>
    <td align=left><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><font size=2>Compa&#241;&#237;a Sider&#250;rgica del Pac&#237;fico,
      S.A. de</font></td>
    <td align=left><font size=2>Mexico</font></td>
    <td align=left><font size=2>99.99%</font></td>
  </tr>
  <tr valign=bottom>
    <td align=left><font size=2>C.V.</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>
  </tr>
  <tr valign=bottom>
    <td align=left><font size=2>Coordinadora de Servicios Sider&#250;rgicos de</font></td>
    <td align=left><font size=2>Mexico</font></td>
    <td align=left><font size=2>100%</font></td>
  </tr>
  <tr valign=bottom>
    <td align=left><font size=2>Calidad, S.A. de C.V.</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>
  </tr>
  <tr valign=bottom>
    <td align=left><font size=2>Comercializadora Simec, S.A. de C.V. (since</font></td>
    <td align=left><font size=2>Mexico</font></td>
    <td align=left><font size=2>100%</font></td>
  </tr>
  <tr valign=bottom>
    <td align=left><font size=2>2007, before Administradora de Servicios de la</font></td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
  </tr>
  <tr valign=bottom>
    <td align=left><font size=2>Industria Sider&#250;rgica ICH, S.A. de C.V.)</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>
  </tr>
  <tr valign=bottom>
    <td align=left><font size=2>Industrias del Acero y del Alambre, S.A. de</font></td>
    <td align=left><font size=2>Mexico</font></td>
    <td align=left><font size=2>99.99%</font></td>
  </tr>
  <tr valign=bottom>
    <td align=left><font size=2>C.V.</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>
  </tr>
  <tr valign=bottom>
    <td align=left><font size=2>Procesadora Mexicali, S.A. de C.V.</font></td>
    <td align=left><font size=2>Mexico</font></td>
    <td align=left><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><font size=2>Servicios Simec, S.A. de C.V.</font></td>
    <td align=left><font size=2>Mexico</font></td>
    <td align=left><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><font size=2>Sistemas de Transporte de Baja California,</font></td>
    <td align=left><font size=2>Mexico</font></td>
    <td align=left><font size=2>100%</font></td>
  </tr>
  <tr valign=bottom>
    <td align=left><font size=2>S.A. de C.V.</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>
  </tr>
  <tr valign=bottom>
    <td align=left><font size=2>Operadora de Metales, S.A. de C.V.</font></td>
    <td align=left><font size=2>Mexico</font></td>
    <td align=left><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><font size=2>Operadora de Servicios Sider&#250;rgicos de</font></td>
    <td align=left><font size=2>Mexico</font></td>
    <td align=left><font size=2>100%</font></td>
  </tr>
  <tr valign=bottom>
    <td align=left><font size=2>Tlaxcala, S.A. de C.V.</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>
  </tr>
  <tr valign=bottom>
    <td align=left><font size=2>Administradora de Servicios Sider&#250;rgicos
      de</font></td>
    <td align=left><font size=2>Mexico</font></td>
    <td align=left><font size=2>100%</font></td>
  </tr>
  <tr valign=bottom>
    <td align=left><font size=2>Tlaxcala, S.A. de C.V.</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>
  </tr>
  <tr valign=bottom>
    <td align=left><font size=2>Operadora de Servicios de la Industria</font></td>
    <td align=left><font size=2>Mexico</font></td>
    <td align=left><font size=2>100%</font></td>
  </tr>
  <tr valign=bottom>
    <td align=left><font size=2>Sider&#250;rgica ICH, S.A. de C.V.</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>
  </tr>
  <tr valign=bottom>
    <td align=left><font size=2>Arrendadora Simec S.A. de C.V.</font></td>
    <td align=left><font size=2>Mexico</font></td>
    <td align=left><font size=2>100%</font></td>
  </tr>
</table>
<br>

<p style="TEXT-ALIGN: center">40</p>
<hr align=center width="100%" noshade size=5>

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<div title="EE+ Page Break" style="FONT-SIZE: 1pt; PAGE-BREAK-AFTER: always; WIDTH: 100%; HEIGHT: 1px"></div>
<!-- -->
<br>
<table width=100% border=0 cellpadding="0" cellspacing=0 style="font-family: 'Times New Roman';font-size: 10pt;">
  <tr>
    <td width="56%"></td>
    <td width="30%"></td>
    <td width="14%"></td>
  </tr>
  <tr align="left" valign="bottom">
    <td> <font size=2>Compa&ntilde;&iacute;a Sider&#250;rgica de Guadalajara S.A.
      de</font></td>
    <td> <font size=2>Mexico</font></td>
    <td> <font size=2>99.99%</font></td>
  </tr>
  <tr align="left" valign="bottom">
    <td> <font size=2>C.V.</font></td>
    <td>&nbsp; </td>
    <td>&nbsp; </td>
  </tr>
  <tr align="left" valign="bottom">
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr align="left" valign="bottom">
    <td> <font size=2>Arrendadora Norte de Matamoros, S.A. de</font></td>
    <td> <font size=2>Mexico</font></td>
    <td> <font size=2>100%</font></td>
  </tr>
  <tr align="left" valign="bottom">
    <td> <font size=2>C.V. (since 2007)</font></td>
    <td>&nbsp; </td>
    <td>&nbsp; </td>
  </tr>
  <tr align="left" valign="bottom">
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr align="left" valign="bottom">
    <td> <font size=2>CSG Comercial, S.A. de C.V. (since 2007,</font></td>
    <td> <font size=2>Mexico</font></td>
    <td> <font size=2>99.95%</font></td>
  </tr>
  <tr align="left" valign="bottom">
    <td> <font size=2>before TMM America, S.A. de C.V. )</font></td>
    <td>&nbsp; </td>
    <td>&nbsp; </td>
  </tr>
  <tr align="left" valign="bottom">
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr align="left" valign="bottom">
    <td> <font size=2>Comercializadora de Productos de Acero de</font></td>
    <td> <font size=2>Mexico</font></td>
    <td> <font size=2>99.95%</font></td>
  </tr>
  <tr align="left" valign="bottom">
    <td> <font size=2>Tlaxcala, S.A. de C.V. (since 2007, before</font></td>
    <td>&nbsp; </td>
    <td>&nbsp; </td>
  </tr>
  <tr align="left" valign="bottom">
    <td> <font size=2>TMM Continental, S.A. de C.V.)</font></td>
    <td>&nbsp; </td>
    <td>&nbsp; </td>
  </tr>
  <tr align="left" valign="bottom">
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr align="left" valign="bottom">
    <td> <font size=2>Sider&#250;rgica de Baja California, S.A. de C.V.</font></td>
    <td> <font size=2>Mexico</font></td>
    <td> <font size=2>99.95%</font></td>
  </tr>
  <tr align="left" valign="bottom">
    <td> <font size=2>(since 2007, before Multimodal Domestic,</font></td>
    <td>&nbsp; </td>
    <td>&nbsp; </td>
  </tr>
  <tr align="left" valign="bottom">
    <td> <font size=2>S.A. de C.V.)</font></td>
    <td>&nbsp; </td>
    <td>&nbsp; </td>
  </tr>
  <tr align="left" valign="bottom">
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr align="left" valign="bottom">
    <td> <font size=2>Corporaci&oacute;n Aceros DM, S.A. de C.V. and</font></td>
    <td> <font size=2>M&eacute;xico</font></td>
    <td> <font size=2>100%</font></td>
  </tr>
  <tr align="left" valign="bottom">
    <td> <font size=2>subsidiaries (since 2008)</font></td>
    <td>&nbsp; </td>
    <td>&nbsp; </td>
  </tr>
  <tr align="left" valign="bottom">
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr align="left" valign="bottom">
    <td> <font size=2>Productos Sider&#250;rgicos de Tlaxcala, S.A. de</font></td>
    <td> <font size=2>M&eacute;xico</font></td>
    <td> <font size=2>100%</font></td>
  </tr>
  <tr align="left" valign="bottom">
    <td> <font size=2>C.V. (since 2008)</font></td>
    <td>&nbsp; </td>
    <td>&nbsp; </td>
  </tr>
  <tr align="left" valign="bottom">
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr align="left" valign="bottom">
    <td> <font size=2>Comercializadora MSAN, S.A de C.V. (since</font></td>
    <td> <font size=2>M&eacute;xico</font></td>
    <td> <font size=2>100%</font></td>
  </tr>
  <tr align="left" valign="bottom">
    <td> <font size=2>2008)</font></td>
    <td>&nbsp; </td>
    <td>&nbsp; </td>
  </tr>
  <tr align="left" valign="bottom">
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr align="left" valign="bottom">
    <td> <font size=2>Comercializadora Aceros DM, S.A. de C.V.</font></td>
    <td> <font size=2>M&eacute;xico</font></td>
    <td> <font size=2>100%</font></td>
  </tr>
  <tr align="left" valign="bottom">
    <td> <font size=2>(since 2008)</font></td>
    <td>&nbsp; </td>
    <td>&nbsp; </td>
  </tr>
  <tr align="left" valign="bottom">
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr align="left" valign="bottom">
    <td> <font size=2>Promotora de Aceros San Luis, S.A. de C.V.</font></td>
    <td> <font size=2>M&eacute;xico</font></td>
    <td> <font size=2>100%</font></td>
  </tr>
  <tr align="left" valign="bottom">
    <td> <font size=2>(since 2008)</font></td>
    <td>&nbsp; </td>
    <td>&nbsp; </td>
  </tr>
  <tr align="left" valign="bottom">
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr align="left" valign="bottom">
    <td> <font size=2>Simec International 2, S. A. de C. V. (since</font></td>
    <td> <font size=2>M&eacute;xico</font></td>
    <td> <font size=2>99.95%</font></td>
  </tr>
  <tr align="left" valign="bottom">
    <td> <font size=2>2008, before Northarc Express, S.A. de C.V.)</font></td>
    <td>&nbsp; </td>
    <td>&nbsp; </td>
  </tr>
  <tr align="left" valign="bottom">
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr align="left" valign="bottom">
    <td> <font size=2>Simec International 3, S. A. de C. V. (since</font></td>
    <td> <font size=2>M&eacute;xico</font></td>
    <td> <font size=2>99.95%</font></td>
  </tr>
  <tr align="left" valign="bottom">
    <td> <font size=2>2009)</font></td>
    <td>&nbsp; </td>
    <td>&nbsp; </td>
  </tr>
  <tr align="left" valign="bottom">
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr align="left" valign="bottom">
    <td> <font size=2>Simec International 4, S. A. de C. V. (since</font></td>
    <td> <font size=2>M&eacute;xico</font></td>
    <td> <font size=2>99.95%</font></td>
  </tr>
  <tr align="left" valign="bottom">
    <td> <font size=2>2009)</font></td>
    <td>&nbsp; </td>
    <td>&nbsp; </td>
  </tr>
  <tr align="left" valign="bottom">
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr align="left" valign="bottom">
    <td> <font size=2>Simec International 5, S. A. de C. V. (since</font></td>
    <td> <font size=2>M&eacute;xico</font></td>
    <td> <font size=2>99.95%</font></td>
  </tr>
  <tr align="left" valign="bottom">
    <td> <font size=2>2009)</font></td>
    <td>&nbsp; </td>
    <td>&nbsp; </td>
  </tr>
  <tr align="left" valign="bottom">
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr align="left" valign="bottom">
    <td> <font size=2>Simec Acero, S. A. de C. V. (since 2009)</font></td>
    <td> <font size=2>M&eacute;xico</font></td>
    <td> <font size=2>99.95%</font></td>
  </tr>
  <tr align="left" valign="bottom">
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr align="left" valign="bottom">
    <td> <font size=2>Simec USA, Corp (since 2009)</font></td>
    <td> <font size=2>USA</font></td>
    <td> <font size=2>100%</font></td>
  </tr>
  <tr align="left" valign="bottom">
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr align="left" valign="bottom">
    <td> <font size=2>Pacific Steel Projects, Inc. (since 2009)</font></td>
    <td> <font size=2>USA</font></td>
    <td> <font size=2>100%</font></td>
  </tr>
  <tr align="left" valign="bottom">
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr align="left" valign="bottom">
    <td> <font size=2>Simec Steel, Inc. (since 2009)</font></td>
    <td> <font size=2>USA</font></td>
    <td> <font size=2>100%</font></td>
  </tr>
</table>
<br>

<p style="text-align: center;"> 41</p>
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<br>

<p style="text-align: left;"> <b>D. Property, Plants and Equipment</b><br>

<br>

<b>Our Operations and Production Facilities</b></p>
<p style="text-align: left;"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We conduct our operations at twelve facilities throughout North America. At December 31, 2009, our crude steel production capacity was 4.5 million tons, of which 1.2 million tons were based on an integrated blast furnace technology, and 3.3 million were based on electric arc furnace, or mini-mill, technology. Our Mexican facilities have 1.9 million tons of crude steel production capacity, operating five mini-mill facilities. Our U.S. operations have 2.6 million tons of crude steel production capacity. In addition, we have 3.5 million tons of rolling and finishing capacity, of which 1.8 million are located in Mexico, and 1.7 million are located in the United States and Canada.</p>
<p style="text-align: left;"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We operate six mini-mills, five in Mexico and one in the United States. The Mexican mini-mills are located in Guadalajara, Jalisco; Apizaco, Tlaxcala; Mexicali, Baja California; as well as two in San Luis Potosi, San Luis Potos&iacute;. Our mini-mill in the United States is located in Canton, Ohio, and we have completed a revamping process that has increased capacity of the mill to 1.3 million tons of steel billet in 2007. 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 style="text-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 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 style="text-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 style="text-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 style="text-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 San Luis facilities starting from June 1, 2008.</p>
<p style="text-align: center;"> 42</p>
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<p style="text-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>
    <td></td>
    <td></td>
    <td></td>
    <td></td>
    <td></td>
    <td></td>
    <td></td>
    <td></td>
  </tr>
  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td colspan="7" align=center><b><font size=2>Years ended December 31,</font></b></td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td colspan="7" align="center">
      <hr noshade size=1>
       </td>
  </tr>
  <tr valign=bottom>
    <td align=left>&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>2008</font></b></td>
    <td align=center>&nbsp;</td>
    <td align=center><b><font size=2>2009</font></b></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>
  </tr>
  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td colspan="7" align=center><font size=2>(tons in thousands)</font></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>
  </tr>
  <tr valign=bottom>
    <td align=left><font size=2>&nbsp;&nbsp;&nbsp;Steel billet production</font></td>
    <td align=right><font size=2>2,985.6</font></td>
    <td align=left>&nbsp;&nbsp;&nbsp;</td>
    <td align=right><font size=2>2,899.2</font></td>
    <td align=left>&nbsp;&nbsp;&nbsp;</td>
    <td align=right><font size=2>3,228.3</font></td>
    <td align=left>&nbsp;&nbsp;</td>
    <td align=right><font size=2>2,110.0</font></td>
  </tr>
  <tr valign=bottom>
    <td align=left><font size=2>&nbsp;&nbsp;&nbsp;Annual installed capacity</font><sup><font size=2>(1)</font></sup></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>
    <td align=right><font size=2>4,532.2</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>4,532.2</font></td>
  </tr>
  <tr valign=bottom>
    <td align=left><font size=2>&nbsp;&nbsp;&nbsp;Effective capacity utilization</font></td>
    <td align=right><font size=2>79.3%</font></td>
    <td align=left>&nbsp;&nbsp;&nbsp;</td>
    <td align=right><font size=2>75.7%</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>76.2%</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>46.6%</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>
  </tr>
  <tr valign=bottom>
    <td align=left><font size=2>&nbsp;&nbsp;&nbsp;Total production</font></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>
    <td align=right><font size=2>2,463.6</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>2,015.6</font></td>
  </tr>
  <tr valign=bottom>
    <td align=left><font size=2>&nbsp;&nbsp;&nbsp;Annual installed capacity</font><sup><font size=2>(1)</font></sup></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>
    <td align=right><font size=2>3,521.9</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>3,521.9</font></td>
  </tr>
  <tr valign=bottom>
    <td align=left><font size=2>&nbsp;&nbsp;&nbsp;Effective capacity utilization</font></td>
    <td align=right><font size=2>82.2%</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>82.2%</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>75.5%</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>57.2%</font></td>
  </tr>
</table>
<br>
<hr align="left" width="90" size="1" noshade>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'" cellspacing=0 border=0>
  <tr>
    <td valign=top nowrap width="2%">(1)&nbsp; &nbsp; &nbsp; </td>
    <td width="98%">
      <p align=left>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 2008 is determined in the case of
        San Luis facilities based on utilization over the period from June 1 to
        December 31, 2008.</p>
    </td>
  </tr>
</table>
<p style="TEXT-ALIGN: left"><i>Mexican Operations and Facilities</i></p>
<p style="TEXT-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, 2009.</p>
<p style="TEXT-ALIGN: center"><b>Mexican Production per Facility by Product</b></p>
<table width="100%" border=0 cellpadding="0" cellspacing=0 style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'">
  <tr>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
  </tr>
  <tr valign=bottom>
    <td align=left><b><font size=2>Product</font></b></td>
    <td align=center>&nbsp;</td>
    <td colspan="2" align=center><b><font size=2>Guadalajara</font></b></td>
    <td align=center>&nbsp;</td>
    <td colspan="2" align=center><b><font size=2>Mexicali</font></b></td>
    <td align=center>&nbsp;</td>
    <td colspan="2" align=center><b><font size=2>Location</font></b><br>
       <b><font size=2>Apizaco/Cholula</font></b></td>
    <td align=center>&nbsp;</td>
    <td colspan="2" align=center><b><font size=2>San Luis</font></b></td>
    <td align=center>&nbsp;</td>
    <td colspan="2" align=center><b><font size=2>Total</font></b></td>
  </tr>
  <tr valign=bottom>
    <td align=left>
      <hr noshade size=1>
    </td>
    <td align=center>&nbsp;</td>
    <td colspan="2" align=center>
      <hr noshade size=1>
    </td>
    <td align=center>&nbsp;</td>
    <td colspan="2" align=center>
      <hr noshade size=1>
    </td>
    <td align=center>&nbsp;</td>
    <td colspan="2" align=center>
      <hr noshade size=1>
    </td>
    <td align=center>&nbsp;</td>
    <td colspan="2" align=center>
      <hr noshade size=1>
    </td>
    <td align=center>&nbsp;</td>
    <td colspan="2" align=center>
      <hr noshade size=1>
    </td>
  </tr>
  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=center>&nbsp;</td>
    <td colspan="14" align=center><font size=2>(Production %)</font></td>
  </tr>
  <tr valign=bottom>
    <td align=left><font size=2>I Beams</font></td>
    <td align=right>&nbsp;</td>
    <td align=right><font size=2>21.1</font></td>
    <td align=left><font size=2>%</font></td>
    <td align=right>&nbsp;</td>
    <td align=right><font size=2>0</font></td>
    <td align=left><font size=2>%</font></td>
    <td align=right>&nbsp;</td>
    <td align=right><font size=2>0</font></td>
    <td align=left><font size=2>%</font></td>
    <td align=right>&nbsp;</td>
    <td align=right><font size=2>0</font></td>
    <td align=left><font size=2>%</font></td>
    <td align=right>&nbsp;</td>
    <td align=right><font size=2>5.4</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>&nbsp;&nbsp;&nbsp;</td>
    <td align=right><font size=2>10.7</font></td>
    <td align=left><font size=2>%</font></td>
    <td align=right>&nbsp;</td>
    <td align=right><font size=2>6.6</font></td>
    <td align=left><font size=2>%</font></td>
    <td align=right>&nbsp;</td>
    <td align=right><font size=2>0</font></td>
    <td align=left><font size=2>%</font></td>
    <td align=right>&nbsp;</td>
    <td align=right><font size=2>0</font></td>
    <td align=left><font size=2>%</font></td>
    <td align=right>&nbsp;</td>
    <td align=right><font size=2>3.6</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>&nbsp;</td>
    <td align=right><font size=2>28.6</font></td>
    <td align=left><font size=2>%</font></td>
    <td align=right>&nbsp;&nbsp;&nbsp;</td>
    <td align=right><font size=2>33.3</font></td>
    <td align=left><font size=2>%</font></td>
    <td align=right>&nbsp;&nbsp;&nbsp;</td>
    <td align=right><font size=2>0</font></td>
    <td align=left><font size=2>%</font></td>
    <td align=right>&nbsp;&nbsp;&nbsp;</td>
    <td align=right><font size=2>0</font></td>
    <td align=left><font size=2>%</font></td>
    <td align=right>&nbsp;&nbsp;&nbsp;</td>
    <td align=right><font size=2>12.0</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 and</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>
  </tr>
  <tr valign=bottom>
    <td align=left><font size=2>&nbsp;&nbsp;&nbsp;hexagonal rods)</font></td>
    <td align=right>&nbsp;</td>
    <td align=right><font size=2>27.5</font></td>
    <td align=left><font size=2>%</font></td>
    <td align=right>&nbsp;</td>
    <td align=right><font size=2>8.0</font></td>
    <td align=left><font size=2>%</font></td>
    <td align=right>&nbsp;</td>
    <td align=right><font size=2>44.3</font></td>
    <td align=left><font size=2>%</font></td>
    <td align=right>&nbsp;</td>
    <td align=right><font size=2>1.9</font></td>
    <td align=left><font size=2>%</font></td>
    <td align=right>&nbsp;</td>
    <td align=right><font size=2>18.4</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>&nbsp;</td>
    <td align=right><font size=2>4.7</font></td>
    <td align=left><font size=2>%</font></td>
    <td align=right>&nbsp;</td>
    <td align=right><font size=2>36.2</font></td>
    <td align=left><font size=2>%</font></td>
    <td align=right>&nbsp;</td>
    <td align=right><font size=2>32.5</font></td>
    <td align=left><font size=2>%</font></td>
    <td align=right>&nbsp;</td>
    <td align=right><font size=2>75.1</font></td>
    <td align=left><font size=2>%</font></td>
    <td align=right>&nbsp;</td>
    <td align=right><font size=2>42.0</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>&nbsp;</td>
    <td align=right><font size=2>3.5</font></td>
    <td align=left><font size=2>%</font></td>
    <td align=right>&nbsp;</td>
    <td align=right><font size=2>5.5</font></td>
    <td align=left><font size=2>%</font></td>
    <td align=right>&nbsp;</td>
    <td align=right><font size=2>12.5</font></td>
    <td align=left><font size=2>%</font></td>
    <td align=right>&nbsp;</td>
    <td align=right><font size=2>0</font></td>
    <td align=left><font size=2>%</font></td>
    <td align=right>&nbsp;</td>
    <td align=right><font size=2>4.8</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>&nbsp;</td>
    <td align=right><font size=2>2.7</font></td>
    <td align=left><font size=2>%</font></td>
    <td align=right>&nbsp;</td>
    <td align=right><font size=2>0</font></td>
    <td align=left><font size=2>%</font></td>
    <td align=right>&nbsp;</td>
    <td align=right><font size=2>10.3</font></td>
    <td align=left><font size=2>%</font></td>
    <td align=right>&nbsp;</td>
    <td align=right><font size=2>0</font></td>
    <td align=left><font size=2>%</font></td>
    <td align=right>&nbsp;</td>
    <td align=right><font size=2>3.2</font></td>
    <td align=left><font size=2>%</font></td>
  </tr>
  <tr valign=bottom>
    <td align=left><font size=2>Electro-Welded wire mesh</font></td>
    <td align=right>&nbsp;</td>
    <td align=right><font size=2>0</font></td>
    <td align=left><font size=2>%</font></td>
    <td align=right>&nbsp;</td>
    <td align=right><font size=2>0</font></td>
    <td align=left><font size=2>%</font></td>
    <td align=right>&nbsp;</td>
    <td align=right><font size=2>0</font></td>
    <td align=left><font size=2>%</font></td>
    <td align=right>&nbsp;</td>
    <td align=right><font size=2>9.5</font></td>
    <td align=left><font size=2>%</font></td>
    <td align=right>&nbsp;</td>
    <td align=right><font size=2>3.5</font></td>
    <td align=left><font size=2>%</font></td>
  </tr>
  <tr valign=bottom>
    <td align=left><font size=2>Wire rod</font></td>
    <td align=right>&nbsp;</td>
    <td align=right><font size=2>0</font></td>
    <td align=left><font size=2>%</font></td>
    <td align=right>&nbsp;</td>
    <td align=right><font size=2>0</font></td>
    <td align=left><font size=2>%</font></td>
    <td align=right>&nbsp;</td>
    <td align=right><font size=2>0</font></td>
    <td align=left><font size=2>%</font></td>
    <td align=right>&nbsp;</td>
    <td align=right><font size=2>12.4</font></td>
    <td align=left><font size=2>%</font></td>
    <td align=right>&nbsp;</td>
    <td align=right><font size=2>4.6</font></td>
    <td align=left><font size=2>%</font></td>
  </tr>
  <tr valign=bottom>
    <td align=left><font size=2>Electro-Welded wire mesh panel</font></td>
    <td align=right>&nbsp;</td>
    <td align=right><font size=2>0</font></td>
    <td align=left><font size=2>%</font></td>
    <td align=right>&nbsp;</td>
    <td align=right><font size=2>0</font></td>
    <td align=left><font size=2>%</font></td>
    <td align=right>&nbsp;</td>
    <td align=right><font size=2>0</font></td>
    <td align=left><font size=2>%</font></td>
    <td align=right>&nbsp;</td>
    <td align=right><font size=2>0</font></td>
    <td align=left><font size=2>%</font></td>
    <td align=right>&nbsp;</td>
    <td align=right><font size=2>0</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>&nbsp;</td>
    <td align=right><font size=2>1.2</font></td>
    <td align=left><font size=2>%</font></td>
    <td align=right>&nbsp;</td>
    <td align=right><font size=2>10.4</font></td>
    <td align=left><font size=2>%</font></td>
    <td align=right>&nbsp;</td>
    <td align=right><font size=2>0.4</font></td>
    <td align=left><font size=2>%</font></td>
    <td align=right>&nbsp;</td>
    <td align=right><font size=2>1.1</font></td>
    <td align=left><font size=2>%</font></td>
    <td align=right>&nbsp;</td>
    <td align=right><font size=2>2.5</font></td>
    <td align=left><font size=2>%</font></td>
  </tr>
  <tr valign=bottom>
    <td align=left><font size=2>&nbsp;&nbsp;&nbsp;Total</font></td>
    <td align=right>&nbsp;</td>
    <td align=right><font size=2>100</font></td>
    <td align=left><font size=2>%</font></td>
    <td align=right>&nbsp;</td>
    <td align=right><font size=2>100</font></td>
    <td align=left><font size=2>%</font></td>
    <td align=right>&nbsp;</td>
    <td align=right><font size=2>100</font></td>
    <td align=left><font size=2>%</font></td>
    <td align=right>&nbsp;</td>
    <td align=right><font size=2>100</font></td>
    <td align=left><font size=2>%</font></td>
    <td align=right>&nbsp;</td>
    <td align=right><font size=2>100</font></td>
    <td align=left><font size=2>%</font></td>
  </tr>
</table>
<p style="TEXT-ALIGN: left">&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 2009, the Guadalajara mini-mill produced 302,877 tons of steel billet and 360,750 tons of finished product operating at 87% capacity for billet production and 75% 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>
<p style="TEXT-ALIGN: center">43</p>
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<p style="TEXT-ALIGN: center"><b>Guadalajara Mini-Mill</b></p>
<table width="100%" border=0 cellpadding="0" cellspacing=0 style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'">
  <tr>
    <td></td>
    <td></td>
    <td></td>
    <td></td>
    <td></td>
    <td></td>
    <td></td>
    <td></td>
  </tr>
  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td colspan="7" align=center><b><font size=2>Years ended December 31,</font></b></td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td colspan="7" align="center">
      <hr noshade size=1>
       </td>
  </tr>
  <tr valign=bottom>
    <td align=left>&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>2008</font></b></td>
    <td align=center>&nbsp;</td>
    <td align=center><b><font size=2>2009</font></b></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>
  </tr>
  <tr valign=bottom>
    <td align=left><font size=2>Steel sales (thousands of tons)</font></td>
    <td align=right><font size=2>407</font></td>
    <td align=right>&nbsp;</td>
    <td align=right><font size=2>405</font></td>
    <td align=right>&nbsp;</td>
    <td align=right><font size=2>377</font></td>
    <td align=right>&nbsp;</td>
    <td align=right><font size=2>344</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. 7,762</font></td>
    <td align=right>&nbsp;&nbsp;&nbsp;</td>
    <td align=right><font size=2>Ps. 7,832</font></td>
    <td align=right>&nbsp;&nbsp;&nbsp;</td>
    <td align=right><font size=2>Ps. 10,749</font></td>
    <td align=right>&nbsp;&nbsp;&nbsp;</td>
    <td align=right><font size=2>Ps 9,073</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>2,520</font></td>
    <td align=right>&nbsp;</td>
    <td align=right><font size=2>2,831</font></td>
    <td align=right>&nbsp;</td>
    <td align=right><font size=2>3,799</font></td>
    <td align=right>&nbsp;</td>
    <td align=right><font size=2>3,129</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;finished product</font></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>
    <td align=right>&nbsp;</td>
    <td align=right><font size=2>2,862</font></td>
    <td align=right>&nbsp;</td>
    <td align=right><font size=2>2,922</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;billet</font></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>
    <td align=right>&nbsp;</td>
    <td align=right><font size=2>1,642</font></td>
    <td align=right>&nbsp;</td>
    <td align=right><font size=2>1,583</font></td>
  </tr>
</table>
<p style="TEXT-ALIGN: left">&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>
<p style="TEXT-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 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 2009, the Mexicali mini-mill produced approximately 276,557 tons of billet, of which the Guadalajara mini-mill used 92,894 tons, and we sold 17,816 tons to third parties. In 2009, the Mexicali mini-mill produced 151,592 tons of finished product. In 2009 we operated the Mexicali mini-mill at 64% capacity for billet
production and at 61% 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 2009, 36% of the products produced at the Mexicali mini-mill were rebar, 33% were angles, 8% were hot rolled bars (round, square and hexagonal rods) and the remaining 23% were other products, principally channels and flat bars.</p>
<p style="TEXT-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>
    <td></td>
    <td></td>
    <td></td>
    <td></td>
    <td></td>
    <td></td>
    <td></td>
    <td></td>
  </tr>
  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=center colspan=7><b><font size=2>Years ended December 31,</font></b></td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td colspan=7 align="center">
      <hr noshade size=1>
       </td>
  </tr>
  <tr valign=bottom>
    <td align=left>&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>2008</font></b></td>
    <td align=center>&nbsp;</td>
    <td align=center><b><font size=2>2009</font></b></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>
  </tr>
  <tr valign=bottom>
    <td align=left><font size=2>Steel sales (thousands of tons)</font></td>
    <td align=right><font size=2>224</font></td>
    <td align=right>&nbsp;</td>
    <td align=right><font size=2>227</font></td>
    <td align=right>&nbsp;</td>
    <td align=right><font size=2>212</font></td>
    <td align=right>&nbsp;</td>
    <td align=right><font size=2>199.8</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. 7,188</font></td>
    <td align=right>&nbsp;&nbsp;&nbsp;</td>
    <td align=right><font size=2>Ps. 7,282</font></td>
    <td align=right>&nbsp;&nbsp;&nbsp;</td>
    <td align=right><font size=2>Ps.9,944</font></td>
    <td align=right>&nbsp;&nbsp;&nbsp;</td>
    <td align=right><font size=2>Ps 7.812</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>2,155</font></td>
    <td align=right>&nbsp;</td>
    <td align=right><font size=2>2,757</font></td>
    <td align=right>&nbsp;</td>
    <td align=right><font size=2>3,856</font></td>
    <td align=right>&nbsp;</td>
    <td align=right><font size=2>2,999</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;finished product</font></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>
    <td align=right>&nbsp;</td>
    <td align=right><font size=2>2,353</font></td>
    <td align=right>&nbsp;</td>
    <td align=right><font size=2>2,204</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>1,020</font></td>
    <td align=right>&nbsp;</td>
    <td align=right><font size=2>1,083</font></td>
    <td align=right>&nbsp;</td>
    <td align=right><font size=2>1,548</font></td>
    <td align=right>&nbsp;</td>
    <td align=right><font size=2>1,456</font></td>
  </tr>
</table>
<p style="TEXT-ALIGN: left">&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 480,000 tons. In 2009, the Apizaco mini-mill produced 396,849 and 353,127 tons of finished products. Our Apizaco facility is 1,112 miles from</p>
<p style="TEXT-ALIGN: center">44</p>
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<p style="TEXT-ALIGN: left">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 50,000 tons. In 2009, the Cholula facility produced 35,859 tons of finished product, at 72% capacity. Our Cholula facility mainly produces cold finished SBQ steel.</p>
<p style="TEXT-ALIGN: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In 2009, 33% of the products we produced at the Apizaco and Cholula facilities were rebar, 44% were hot rolled bars (round, square and hexagonals) and the remaining 23% were other products, flat merchant bar and cold finished products.</p>
<p style="TEXT-ALIGN: center"><b>Apizaco Mini-Mill and Cholula Facility</b></p>
<table width="100%" border=0 cellpadding="0" cellspacing=0 style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'">
  <tr>
    <td></td>
    <td></td>
    <td></td>
    <td></td>
    <td></td>
    <td></td>
    <td></td>
    <td></td>
  </tr>
  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=center colspan=7><b><font size=2>Years ended December 31,</font></b></td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td colspan=7 align="center">
      <hr noshade size=1>
       </td>
  </tr>
  <tr>
    <td colspan=8>&nbsp;</td>
  </tr>
  <tr valign=bottom>
    <td align=left>&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>2008</font></b></td>
    <td align=center>&nbsp;</td>
    <td align=center><b><font size=2>2009</font></b></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>
  </tr>
  <tr valign=bottom>
    <td align=left><font size=2>Steel sales (thousands of tons)</font></td>
    <td align=right><font size=2>425</font></td>
    <td align=right>&nbsp;</td>
    <td align=right><font size=2>448</font></td>
    <td align=right>&nbsp;</td>
    <td align=right><font size=2>387</font></td>
    <td align=right>&nbsp;</td>
    <td align=right><font size=2>347.4</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. 7,560</font></td>
    <td align=right>&nbsp;</td>
    <td align=right><font size=2>Ps. 7,866</font></td>
    <td align=right>&nbsp;&nbsp;&nbsp;</td>
    <td align=right><font size=2>Ps. 10,561</font></td>
    <td align=right>&nbsp;&nbsp;&nbsp;</td>
    <td align=right><font size=2>Ps. 8,510</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>2,852</font></td>
    <td align=right>&nbsp;&nbsp;&nbsp;</td>
    <td align=right><font size=2>3,035</font></td>
    <td align=right>&nbsp;</td>
    <td align=right><font size=2>4,170</font></td>
    <td align=right>&nbsp;</td>
    <td align=right><font size=2>3,111</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;finished product</font></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>
    <td align=right>&nbsp;</td>
    <td align=right><font size=2>3,227</font></td>
    <td align=right>&nbsp;</td>
    <td align=right><font size=2>2,856</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;billet</font></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>
    <td align=right>&nbsp;</td>
    <td align=right><font size=2>1,950</font></td>
    <td align=right>&nbsp;</td>
    <td align=right><font size=2>1,714</font></td>
  </tr>
</table>
<br>
<hr size="2" noshade>
<p style="TEXT-ALIGN: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<i>San Luis Operations
  and Facilities. </i>We have operated our San Luis facilities since we acquired
  them on May 30, 2008. The facilities are located in central Mexico in San Luis
  Potosi, in the state of San Luis Potosi. Our San Luis facilities and equipment
  include four electric arc furnaces, three continuous casters, three reheating
  furnaces, two rebar rolling mills and one wire rod rolling mill. As of December
  31, 2009, these facilities had an annual installed capacity of 705,000 tons
  of billet and 620,000 tons of finished product. In 2009, the San Luis facilities
  produced 490,091 tons of steel billet and 484,848 tons of finished product operating
  at 70% capacity for billet production and 78% capacity for finished product
  production. Our San Luis facilities mainly produces rebar, light structurals
  and wire rod. In 2009, 75% of the products produced at the San Luis facilities
  were rebar, 12% wire rod, and the remaining 13% were other light structural.</p>
<p style="TEXT-ALIGN: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table
  sets forth, for the periods indicated, selected operating data for our San Luis
  facilities.</p>
<table width="100%" border=0 cellpadding="0" cellspacing=0 style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'">
  <tr>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
  </tr>
  <tr valign=bottom>
    <td align=center>&nbsp;</td>
    <td align=center><font size=2>June 1 &#150; December</font><br>
       <font size=2>31,
      2008</font></td>
    <td align=center>&nbsp;&nbsp;&nbsp;</td>
    <td align=center><font size=2>Year ended</font><br>
       <font size=2>December
      31, 2009</font></td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>
      <hr noshade size=1>
       </td>
    <td>&nbsp;</td>
    <td>
      <hr noshade size=1>
       </td>
  </tr>
  <tr valign=bottom>
    <td align=left><font size=2>Steel sales (thousands of tons)</font></td>
    <td align=center><font size=2>261</font></td>
    <td align=center>&nbsp;</td>
    <td align=center><font size=2>512.8</font></td>
  </tr>
  <tr valign=bottom>
    <td align=left><font size=2>Average finished product price per ton</font></td>
    <td align=center><font size=2>Ps. 9,701</font></td>
    <td align=center>&nbsp;</td>
    <td align=center><font size=2>Ps. 7,264</font></td>
  </tr>
  <tr valign=bottom>
    <td align=left><font size=2>Average scrap cost per ton</font></td>
    <td align=center><font size=2>3,659</font></td>
    <td align=center>&nbsp;</td>
    <td align=center><font size=2>3,115</font></td>
  </tr>
  <tr valign=bottom>
    <td align=left><font size=2>Average manufacturing conversion cost per ton
      of</font></td>
    <td align=center><font size=2>2,270</font></td>
    <td align=center>&nbsp;</td>
    <td align=center><font size=2>1,874</font></td>
  </tr>
  <tr valign=bottom>
    <td align=left><font size=2>&nbsp;&nbsp;&nbsp;finished product</font></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>Average manufacturing conversion cost per ton
      of billet</font></td>
    <td align=center><font size=2>1,571</font></td>
    <td align=center>&nbsp;</td>
    <td align=center><font size=2>1,382</font></td>
  </tr>
</table>
<p style="TEXT-ALIGN: center">45</p>
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<p style="text-align: left;"> <i>U.S. and Canada Operations and Facilities</i></p>
<p style="text-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, 2009, these facilities had an annual installed capacity of 2,647,000 tons of billet and 1,692,000 tons of finished product. In 2009, the Republic facilities produced 643,658 tons of steel billet, of which 23,635 tons were sold as semi-finished The remainder went to the Lorain, Ohio and Lackawanna, New York facilities for further processing. For the same period, the Republic facilities produced 665,340 tons of hot-rolled bar, of which 102,514 tons were used by the cold finish facilities. The Republic facilities produced 103,421 tons of cold finish bars. During this period, 75% of the products shipped from the Republic facilities were hot-rolled bars, 14% were cold-finished bars, 8% were semi-finished, and 3% were other semi-finished trade products.</p>
<p style="text-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-family: 'Times New Roman';font-size: 10pt;">
  <tr>
    <td></td>
    <td></td>
    <td></td>
    <td></td>
    <td></td>
    <td></td>
    <td></td>
    <td></td>
  </tr>
  <tr valign="bottom">
    <td align=left>&nbsp; </td>
    <td colspan="7" align=center> <b><font size=2>Years ended December 31,</font></b>
    </td>
  </tr>
  <tr>
    <td>&nbsp; </td>
    <td colspan="7" align="center">
      <hr noshade size=1>
       </td>
  </tr>
  <tr valign="bottom">
    <td align=left>&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>2008</font></b></td>
    <td align=center>&nbsp;</td>
    <td align=center> <b><font size=2>2009</font></b></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>
  </tr>
  <tr valign="bottom">
    <td align=left> <font size=2>Steel sales (thousands of tons)</font></td>
    <td align=right> <font size=2>1,620</font></td>
    <td align=right>&nbsp;</td>
    <td align=right> <font size=2>1,611</font></td>
    <td align=right>&nbsp;</td>
    <td align=right> <font size=2>1,687</font></td>
    <td align=right>&nbsp;</td>
    <td align=right> <font size=2>636</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. 8,571</font></td>
    <td align=right>&nbsp;&nbsp;&nbsp;</td>
    <td align=right> <font size=2>Ps. 9,566</font></td>
    <td align=right>&nbsp;&nbsp;&nbsp;</td>
    <td align=right> <font size=2>Ps. 13,281</font></td>
    <td align=right>&nbsp;&nbsp;&nbsp;&nbsp;</td>
    <td align=right> <font size=2>Ps. 12,373</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>2,301</font></td>
    <td align=right>&nbsp;</td>
    <td align=right> <font size=2>2,785</font></td>
    <td align=right>&nbsp;</td>
    <td align=right> <font size=2>4,644</font></td>
    <td align=right>&nbsp;</td>
    <td align=right> <font size=2>3,494</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>677</font></td>
    <td align=right>&nbsp;</td>
    <td align=right> <font size=2>892</font></td>
    <td align=right>&nbsp;</td>
    <td align=right> <font size=2>1,057</font></td>
    <td align=right>&nbsp;</td>
    <td align=right> <font size=2>0</font></td>
  </tr>
  <tr valign="bottom">
    <td align=left> <font size=2>Average manufacturing conversion cost per ton</font></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>
    <td align=right>&nbsp;</td>
    <td align=right> <font size=2>6,499</font></td>
    <td align=right>&nbsp;</td>
    <td align=right> <font size=2>11,906</font></td>
  </tr>
  <tr valign="bottom">
    <td align=left> <font size=2>&nbsp;&nbsp;&nbsp;of finished product</font><sup><font size=2>(1)</font></sup></td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
    <td 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>Average manufacturing conversion cost per ton</font></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>
    <td align=right>&nbsp;</td>
    <td align=right> <font size=2>5,028</font></td>
    <td align=right>&nbsp;</td>
    <td align=right> <font size=2>3,975</font></td>
  </tr>
  <tr valign="bottom">
    <td align=left> <font size=2>&nbsp;&nbsp;&nbsp;of billet</font><sup><font size=2>(1)</font></sup></td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
    <td 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>
</table>
<br>
<hr align="left" width="90" size="1" noshade>
<table border=0 cellspacing=0 style="font-family: 'Times New Roman';font-size: 10pt;">

  <tr>

    <td nowrap valign=top width="2%"> (1)&nbsp; &nbsp; &nbsp;  </td>
    <td width="98%">
      <p align="left">Manufacturing conversion cost is defined as all production costs excluding the cost of scrap and related yield loss.</p>
    </td>
  </tr>
</table>
<p style="text-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 style="text-align: left;"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our Lorain facility had, at December 31, 2009, an annual installed capacity of 1,264,000 tons of steel billet and 838,000 tons of finished product. During 2009, the Lorain facility operated at 39% of capacity for 9-10&#148; rolling mill and 24% of capacity for 20&#148; mill finishing and shipping production, and it produced 271,252 tons of finished products. The facility did not produce any steel billets in 2009.</p>
<p style="text-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 style="text-align: center;"> 46</p>
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<p style="text-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 2009, the Canton facility had annual installed capacity of 1,383,000 tons of steel billet. In 2009, this facility produced 644,112 tons of blooms, billets and other semi-finished trade product and was operated at 46.5% capacity of steel billet.</p>
<p style="text-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, 2009, the Lackawanna facility had annual installed capacity of 599,000 tons of hot rolled bars. In 2009, this facility produced 291,211 tons of hot rolled bars and was operated at 48.7% capacity of finished product.</p>
<p style="text-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, 2009, an annual installed capacity of 125,000 tons of finished product. During 2009, the Massillon facility was operated at 46% capacity of finished product and produced 58,061 tons of cold finished bars.</p>
<p style="text-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, 2009, the Gary facility had annual installed capacity of 71,000 tons of cold finished bars. In 2009, this facility produced 19,051 tons of cold finished bars and was operated at 26.7% capacity of finished product.</p>
<p style="text-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, 2009, the Hamilton facility had annual installed capacity of 59,000 tons of cold finished bars. In 2009, this facility produced 26,309 tons of cold finished bars and was operated at 44% capacity of finished product.</p>
<p style="text-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 style="text-align: center;"> 47</p>
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<p style="TEXT-ALIGN: center"><b>Production per Facility by Product, Equipment and Volume</b></p>
<table border=0 cellpadding="0" cellspacing=0 style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'" width="100%">
  <tr>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
  </tr>
  <tr valign=bottom>
    <td align=left><b><font size=2>Location</font></b></td>
    <td align=center>&nbsp;</td>
    <td align=center><b><font size=2>Product (%)</font></b></td>
    <td align=center>&nbsp;</td>
    <td align=center><b><font size=2>Equipment</font></b></td>
    <td align=center>&nbsp;&nbsp;&nbsp;</td>
    <td align=center colspan="2"><b><font size=2>2009 Annual</font></b><br>
       <b><font size=2>Production</font></b><br>

      <b><font size=2>Volume (tons)</font></b></td>
    <td align=center>&nbsp;&nbsp;</td>
    <td align=center colspan="2"><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></td>
  </tr>
  <tr>
    <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 colspan="2">
      <hr noshade size=1>
    </td>
    <td>&nbsp;</td>
    <td colspan="2">
      <hr noshade size=1>
       </td>
  </tr>
  <tr align="left" valign=bottom>
    <td><font size=2>Guadalajara</font></td>
    <td>&nbsp;&nbsp;&nbsp;</td>
    <td><font size=2>Structurals (48%); Light</font></td>
    <td>&nbsp;</td>
    <td><font size=2>electric arc furnace</font></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>360,750</font></td>
    <td>&nbsp;&nbsp;&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>480,000</font></td>
    <td>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</td>
  </tr>
  <tr align="left" valign=bottom>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td><font size=2>structurals (31%);</font></td>
    <td>&nbsp;</td>
    <td><font size=2>with continuous caster,</font></td>
    <td>&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr align="left" valign=bottom>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td><font size=2>SBQ (15%), Rebar (6%)</font></td>
    <td>&nbsp;&nbsp;&nbsp;</td>
    <td><font size=2>rolling mill and bar</font></td>
    <td>&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr align="left" valign=bottom>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td><font size=2>processing lines</font></td>
    <td>&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr align="left">
    <td colspan=11>&nbsp;</td>
  </tr>
  <tr align="left" valign=bottom>
    <td><font size=2>Mexicali</font></td>
    <td>&nbsp;</td>
    <td><font size=2>Structurals (8%); Rebar</font></td>
    <td>&nbsp;</td>
    <td><font size=2>electric arc furnace</font></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>151,592</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>250,000</font></td>
    <td>&nbsp;</td>
  </tr>
  <tr align="left" valign=bottom>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td><font size=2>(36%); Light structurals</font></td>
    <td>&nbsp;</td>
    <td><font size=2>with continuous caster</font></td>
    <td>&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr align="left" valign=bottom>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td><font size=2>(56%)</font></td>
    <td>&nbsp;</td>
    <td><font size=2>and bar rolling mills</font></td>
    <td>&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr align="left">
    <td colspan=11>&nbsp;</td>
  </tr>
  <tr align="left" valign=bottom>
    <td><font size=2>Apizaco and Cholula</font></td>
    <td>&nbsp;</td>
    <td><font size=2>SBQ (40%); Rebar</font></td>
    <td>&nbsp;</td>
    <td><font size=2>electric arc furnace</font></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>353,127</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>480,000</font></td>
    <td>&nbsp;</td>
  </tr>
  <tr align="left" valign=bottom>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td><font size=2>(32%); Light structurals</font></td>
    <td>&nbsp;</td>
    <td><font size=2>with vacuum tank</font></td>
    <td>&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr align="left" valign=bottom>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td><font size=2>(28%)</font></td>
    <td>&nbsp;</td>
    <td><font size=2>degasser, continuous</font></td>
    <td>&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr align="left" valign=bottom>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td><font size=2>caster, bar rolling</font></td>
    <td>&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr align="left" valign=bottom>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td><font size=2>mills, cold drawn and</font></td>
    <td>&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr align="left" valign=bottom>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td><font size=2>bar turning equipment</font></td>
    <td>&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr align="left">
    <td colspan=11>&nbsp;</td>
  </tr>
  <tr align="left" valign=bottom>
    <td><font size=2>Aceros DM, San Luis</font></td>
    <td>&nbsp;</td>
    <td><font size=2>Rebar (66%), Light</font></td>
    <td>&nbsp;</td>
    <td><font size=2>three electric arc</font></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>348,898</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>400,000</font></td>
    <td>&nbsp;</td>
  </tr>
  <tr align="left" valign=bottom>
    <td><font size=2>Potos&#237;</font></td>
    <td>&nbsp;</td>
    <td><font size=2>structurals (2%), Wire</font></td>
    <td>&nbsp;</td>
    <td><font size=2>furnaces, two</font></td>
    <td>&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr align="left" valign=bottom>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td><font size=2>rod (17%), Billete (2%),</font></td>
    <td>&nbsp;</td>
    <td><font size=2>continuous casters, two</font></td>
    <td>&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr align="left" valign=bottom>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td><font size=2>Mesh (13%)</font></td>
    <td>&nbsp;</td>
    <td><font size=2>reheating furnaces,</font></td>
    <td>&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr align="left" valign=bottom>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td><font size=2>rebar rolling mill and</font></td>
    <td>&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr align="left" valign=bottom>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td><font size=2>wire rod rolling mills</font></td>
    <td>&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr align="left">
    <td colspan=11>&nbsp;</td>
  </tr>
  <tr align="left" valign=bottom>
    <td><font size=2>Aceros San Luis, San</font></td>
    <td>&nbsp;</td>
    <td><font size=2>Rebar (100%)</font></td>
    <td>&nbsp;</td>
    <td><font size=2>electric arc furnace,</font></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>135,445</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>220,000</font></td>
    <td>&nbsp;</td>
  </tr>
  <tr align="left" valign=bottom>
    <td><font size=2>Luis Potos&#237;</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td><font size=2>continuous caster,</font></td>
    <td>&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr align="left" valign=bottom>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td><font size=2>reheating furnace and</font></td>
    <td>&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr align="left" valign=bottom>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td><font size=2>rebar rolling mill</font></td>
    <td>&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr align="left">
    <td colspan=11>&nbsp;</td>
  </tr>
  <tr align="left" valign=bottom>
    <td><font size=2>Lorain</font><sup><font size=2>(1)</font></sup></td>
    <td>&nbsp;</td>
    <td><font size=2>SBQ (100%)</font></td>
    <td>&nbsp;</td>
    <td><font size=2>blast furnace, vacuum</font></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>271,252</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>838,000</font></td>
    <td>&nbsp;</td>
  </tr>
  <tr align="left" valign=bottom>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td><font size=2>tank degasser,</font></td>
    <td>&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr align="left" valign=bottom>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td><font size=2>continuous caster, bar</font></td>
    <td>&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr align="left" valign=bottom>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td><font size=2>and wire rod rolling</font></td>
    <td>&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr align="left" valign=bottom>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td><font size=2>mills</font></td>
    <td>&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr align="left">
    <td colspan=11>&nbsp;</td>
  </tr>
  <tr align="left" valign=bottom>
    <td><font size=2>Canton</font><sup><font size=2>(2)</font></sup></td>
    <td>&nbsp;</td>
    <td><font size=2>SBQ (100%)</font></td>
    <td>&nbsp;</td>
    <td><font size=2>electric arc furnace,</font></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>0</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>1,383,000</font></td>
    <td>&nbsp;</td>
  </tr>
  <tr align="left" valign=bottom>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td><font size=2>vacuum tank degasser,</font></td>
    <td>&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr align="left" valign=bottom>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td><font size=2>continuous caster,</font></td>
    <td>&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr align="left" valign=bottom>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td><font size=2>rolling mills</font></td>
    <td>&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr align="left">
    <td colspan=11>&nbsp;</td>
  </tr>
  <tr align="left" valign=bottom>
    <td><font size=2>Lackawanna</font></td>
    <td>&nbsp;</td>
    <td><font size=2>SBQ (100%)</font></td>
    <td>&nbsp;</td>
    <td><font size=2>reheat furnace, bar and</font></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>291,211</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>599,000</font></td>
    <td>&nbsp;</td>
  </tr>
  <tr align="left" valign=bottom>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td><font size=2>wire rod rolling mills</font></td>
    <td>&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr align="left">
    <td colspan=11>&nbsp;</td>
  </tr>
  <tr align="left" valign=bottom>
    <td><font size=2>Massillon</font></td>
    <td>&nbsp;</td>
    <td><font size=2>SBQ (100%)</font></td>
    <td>&nbsp;</td>
    <td><font size=2>cold drawn bar turning</font></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>58,061</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>125,000</font></td>
    <td>&nbsp;</td>
  </tr>
  <tr align="left" valign=bottom>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td><font size=2>and heat treating</font></td>
    <td>&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr align="left" valign=bottom>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td><font size=2>equipment</font></td>
    <td>&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr align="left">
    <td colspan=11>&nbsp;</td>
  </tr>
  <tr align="left" valign=bottom>
    <td><font size=2>Gary</font></td>
    <td>&nbsp;</td>
    <td><font size=2>SBQ (100%)</font></td>
    <td>&nbsp;</td>
    <td><font size=2>cold drawn bar turning</font></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>19,051</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>71,000</font></td>
    <td>&nbsp;</td>
  </tr>
  <tr align="left" valign=bottom>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td><font size=2>and heat treating</font></td>
    <td>&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr align="left" valign=bottom>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td><font size=2>equipment</font></td>
    <td>&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr align="left">
    <td colspan=11>&nbsp;</td>
  </tr>
  <tr align="left" valign=bottom>
    <td><font size=2>Hamilton</font></td>
    <td>&nbsp;</td>
    <td><font size=2>SBQ (100%)</font></td>
    <td>&nbsp;</td>
    <td><font size=2>cold drawn bar turning</font></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>26,039</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>59,000</font></td>
    <td>&nbsp;</td>
  </tr>
  <tr align="left" valign=bottom>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td><font size=2>and heat treating</font></td>
    <td>&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr align="left" valign=bottom>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td><font size=2>equipment</font></td>
    <td>&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
</table>
<br>
<hr align="left" width="90" size="1" noshade>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'" cellspacing=0 border=0>

  <tr>

    <td valign=top nowrap width="2%">(1)&nbsp; &nbsp; &nbsp; </td>
    <td width="98%">
      <p align=left>Production capacity is for rolling only.</p>
    </td>
  </tr>

  <tr>

    <td valign=top nowrap width="2%">(2)&nbsp; &nbsp; &nbsp; </td>
    <td width="98%">
      <p align=left>Production capacity is for billets only.</p>
    </td>
  </tr>
</table>
<p style="TEXT-ALIGN: center">48</p>
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<p style="text-align: left;"> <b><a name="p49a"></a>Item 4A. Unresolved Staff
  Comments</b></p>
<p style="text-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 style="text-align: left;"> <b><a name="p49b"></a>Item 5. Operating and Financial
  Review and Prospects</b></p>
<p style="text-align: left;"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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.</p>
<p style="text-align: left;"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have prepared our financial statements in accordance with MFRS, which differ in certain significant respects from U.S. GAAP. See Note 20 to our consolidated financial statements included elsewhere herein for the years ended December 31, 2007, 2008 and 2009 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, 2007 are presented in constant pesos with purchasing power as of December 31, 2007, unless otherwise noted. As of January 1, 2008 and as a result of the adoption of the Mexican Financial Reporting Standard MFRS B-10, Effects of inflation, we ceased recognizing the impact of inflation on our
financial information for the years 2008 and 2009. However, in the case of the financial information presented for the year ended December 31, 2007, it is expressed in peso purchasing power as of December 31, 2007, the last date on which we applied the method of comprehensive recognition of inflation.</p>
<p style="text-align: left;"> <b>A. Operating Results</b></p>
<p style="text-align: left;"> <b>Overview</b></p>
<p style="text-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. The sharp reduction in economic activity and consumer demand in general, and in the construction, appliance, and automotive industries in particular, in North America starting in the fourth quarter of 2008 has had a significant negative impact on the demand and price levels for all steel products, including SBQ and structural steel products. The steel industry as a whole is greatly impacted by the business cycle, and the current global downturn has depressed demand for new commercial and residential construction and new automobiles in particular within the United States and the rest of North America, and this has had an impact on all parts of our operations since the fourth quarter of 2008.
Our sales dropped in 2009 by 37% in the automotive sector and by 21% in the energy sector relative to 2008.</p>
<p style="text-align: left;"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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, many of our products are SBQ products for which competition is limited, therefore generating somewhat higher margins 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>
<p style="text-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</p>
<p style="text-align: center;"> 49</p>
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<p style="text-align: left;"> 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 style="text-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 style="text-align: center;"> <b>Sales Volume, Price and Cost Data, 2007 - 2009</b></p>
<table width=100% border=0 cellpadding="0" cellspacing=0 style="font-family: 'Times New Roman';font-size: 10pt;">
  <tr>
    <td></td>
    <td></td>
    <td></td>
    <td></td>
    <td></td>
    <td></td>
  </tr>
  <tr valign="bottom">
    <td align=left>&nbsp; </td>
    <td align=center colspan=5> <font size=2>Year ended December 31,</font> </td>
  </tr>
  <tr>
    <td>&nbsp; </td>
    <td colspan=5 align="center">
      <hr noshade size=1>
       </td>
  </tr>
  <tr valign="bottom">
    <td align=left>&nbsp; </td>
    <td align=center> <font size=2>2007</font></td>
    <td align=center>&nbsp;</td>
    <td align=center> <font size=2>2008</font></td>
    <td align=center>&nbsp;</td>
    <td align=center> <font size=2>2009</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>
  </tr>
  <tr valign="bottom">
    <td align=left> <font size=2>Shipments (thousands of tons)</font></td>
    <td align=right> <font size=2>2,691</font></td>
    <td align=right>&nbsp;&nbsp;&nbsp;</td>
    <td align=right> <font size=2>2,924</font></td>
    <td align=right>&nbsp;&nbsp;&nbsp;</td>
    <td align=right> <font size=2>2,040</font></td>
  </tr>
  <tr valign="bottom">
    <td align=left> <font size=2>&nbsp;&nbsp;&nbsp;Guadalajara and Mexicali</font></td>
    <td align=right> <font size=2>632</font></td>
    <td align=right>&nbsp;</td>
    <td align=right> <font size=2>589</font></td>
    <td align=right>&nbsp;</td>
    <td align=right> <font size=2>544</font></td>
  </tr>
  <tr valign="bottom">
    <td align=left> <font size=2>&nbsp;&nbsp;&nbsp;Apizaco and Cholula</font></td>
    <td align=right> <font size=2>448</font></td>
    <td align=right>&nbsp;</td>
    <td align=right> <font size=2>387</font></td>
    <td align=right>&nbsp;</td>
    <td align=right> <font size=2>347</font></td>
  </tr>
  <tr valign="bottom">
    <td align=left> <font size=2>&nbsp;&nbsp;&nbsp;San Luis facilities</font></td>
    <td align=right> <font size=2>-</font></td>
    <td align=right>&nbsp;</td>
    <td align=right> <font size=2>261</font></td>
    <td align=right>&nbsp;</td>
    <td align=right> <font size=2>513</font></td>
  </tr>
  <tr valign="bottom">
    <td align=left> <font size=2>&nbsp;&nbsp;&nbsp;Republic facilities</font></td>
    <td align=right> <font size=2>1,611</font></td>
    <td align=right>&nbsp;</td>
    <td align=right> <font size=2>1,687</font></td>
    <td align=right>&nbsp;</td>
    <td align=right> <font size=2>636</font></td>
  </tr>
  <tr>
    <td colspan=6>&nbsp; </td>
  </tr>
  <tr valign="bottom">
    <td align=left> <font size=2>Net sales (Ps. millions)</font></td>
    <td align=right> <font size=2>24,106</font></td>
    <td align=right>&nbsp;</td>
    <td align=right> <font size=2>35,185</font></td>
    <td align=right>&nbsp;</td>
    <td align=right> <font size=2>19,232</font></td>
  </tr>
  <tr valign="bottom">
    <td align=left> <font size=2>&nbsp;&nbsp;&nbsp;Guadalajara and Mexicali</font></td>
    <td align=right> <font size=2>4,888</font></td>
    <td align=right>&nbsp;</td>
    <td align=right> <font size=2>6,161</font></td>
    <td align=right>&nbsp;</td>
    <td align=right> <font size=2>4,686</font></td>
  </tr>
  <tr valign="bottom">
    <td align=left> <font size=2>&nbsp;&nbsp;&nbsp;Apizaco and Cholula</font></td>
    <td align=right> <font size=2>3,519</font></td>
    <td align=right>&nbsp;</td>
    <td align=right> <font size=2>4,087</font></td>
    <td align=right>&nbsp;</td>
    <td align=right> <font size=2>2,956</font></td>
  </tr>
  <tr valign="bottom">
    <td align=left> <font size=2>&nbsp;&nbsp;&nbsp;San Luis facilities</font></td>
    <td align=right> <font size=2>-</font></td>
    <td align=right>&nbsp;</td>
    <td align=right> <font size=2>2,532</font></td>
    <td align=right>&nbsp;</td>
    <td align=right> <font size=2>3,725</font></td>
  </tr>
  <tr valign="bottom">
    <td align=left> <font size=2>&nbsp;&nbsp;&nbsp;Republic facilities</font></td>
    <td align=right> <font size=2>15,699</font></td>
    <td align=right>&nbsp;</td>
    <td align=right> <font size=2>22,405</font></td>
    <td align=right>&nbsp;</td>
    <td align=right> <font size=2>7,865</font></td>
  </tr>
  <tr>
    <td colspan=6>&nbsp; </td>
  </tr>
  <tr valign="bottom">
    <td align=left> <font size=2>Direct cost of sales (Ps. millions)</font></td>
    <td align=right> <font size=2>20,498</font></td>
    <td align=right>&nbsp;</td>
    <td align=right> <font size=2>29,796</font></td>
    <td align=right>&nbsp;</td>
    <td align=right> <font size=2>17,717</font></td>
  </tr>
  <tr valign="bottom">
    <td align=left> <font size=2>&nbsp;&nbsp;&nbsp;Guadalajara and Mexicali</font></td>
    <td align=right> <font size=2>3,123</font></td>
    <td align=right>&nbsp;</td>
    <td align=right> <font size=2>3,995</font></td>
    <td align=right>&nbsp;</td>
    <td align=right> <font size=2>2,954</font></td>
  </tr>
  <tr valign="bottom">
    <td align=left> <font size=2>&nbsp;&nbsp;&nbsp;Apizaco and Cholula</font></td>
    <td align=right> <font size=2>2,593</font></td>
    <td align=right>&nbsp;</td>
    <td align=right> <font size=2>2,963</font></td>
    <td align=right>&nbsp;</td>
    <td align=right> <font size=2>2,046</font></td>
  </tr>
  <tr valign="bottom">
    <td align=left> <font size=2>&nbsp;&nbsp;&nbsp;San Luis facilities</font></td>
    <td align=right> <font size=2>-</font></td>
    <td align=right>&nbsp;</td>
    <td align=right> <font size=2>1,444</font></td>
    <td align=right>&nbsp;</td>
    <td align=right> <font size=2>2,928</font></td>
  </tr>
  <tr valign="bottom">
    <td align=left> <font size=2>&nbsp;&nbsp;&nbsp;Republic facilities</font></td>
    <td align=right> <font size=2>14,782</font></td>
    <td align=right>&nbsp;</td>
    <td align=right> <font size=2>21,394</font></td>
    <td align=right>&nbsp;</td>
    <td align=right> <font size=2>9,789</font></td>
  </tr>
  <tr>
    <td colspan=6>&nbsp; </td>
  </tr>
  <tr valign="bottom">
    <td align=left> <font size=2>Average price per ton (Ps.)</font></td>
    <td align=right> <font size=2>8,958</font></td>
    <td align=right>&nbsp;</td>
    <td align=right> <font size=2>12,033</font></td>
    <td align=right>&nbsp;</td>
    <td align=right> <font size=2>9,427</font></td>
  </tr>
  <tr valign="bottom">
    <td align=left> <font size=2>&nbsp;&nbsp;&nbsp;Guadalajara and Mexicali</font></td>
    <td align=right> <font size=2>7,734</font></td>
    <td align=right>&nbsp;</td>
    <td align=right> <font size=2>10,460</font></td>
    <td align=right>&nbsp;</td>
    <td align=right> <font size=2>8,614</font></td>
  </tr>
  <tr valign="bottom">
    <td align=left> <font size=2>&nbsp;&nbsp;&nbsp;Apizaco and Cholula</font></td>
    <td align=right> <font size=2>7,855</font></td>
    <td align=right>&nbsp;</td>
    <td align=right> <font size=2>10,561</font></td>
    <td align=right>&nbsp;</td>
    <td align=right> <font size=2>8,510</font></td>
  </tr>
  <tr valign="bottom">
    <td align=left> <font size=2>&nbsp;&nbsp;&nbsp;San Luis facilities</font></td>
    <td align=right> <font size=2>-</font></td>
    <td align=right>&nbsp;</td>
    <td align=right> <font size=2>9,701</font></td>
    <td align=right>&nbsp;</td>
    <td align=right> <font size=2>7,264</font></td>
  </tr>
  <tr valign="bottom">
    <td align=left> <font size=2>&nbsp;&nbsp;&nbsp;Republic facilities</font></td>
    <td align=right> <font size=2>9,745</font></td>
    <td align=right>&nbsp;</td>
    <td align=right> <font size=2>13,281</font></td>
    <td align=right>&nbsp;</td>
    <td align=right> <font size=2>12,373</font></td>
  </tr>
  <tr>
    <td colspan=6>&nbsp; </td>
  </tr>
  <tr valign="bottom">
    <td align=left> <font size=2>Average cost per ton (Ps.)</font></td>
    <td align=right> <font size=2>7,617</font></td>
    <td align=right>&nbsp;</td>
    <td align=right> <font size=2>10,190</font></td>
    <td align=right>&nbsp;</td>
    <td align=right> <font size=2>8,685</font></td>
  </tr>
  <tr valign="bottom">
    <td align=left> <font size=2>&nbsp;&nbsp;&nbsp;Guadalajara and Mexicali</font></td>
    <td align=right> <font size=2>4,941</font></td>
    <td align=right>&nbsp;</td>
    <td align=right> <font size=2>6,783</font></td>
    <td align=right>&nbsp;</td>
    <td align=right> <font size=2>5,430</font></td>
  </tr>
  <tr valign="bottom">
    <td align=left> <font size=2>&nbsp;&nbsp;&nbsp;Apizaco and Cholula</font></td>
    <td align=right> <font size=2>5,788</font></td>
    <td align=right>&nbsp;</td>
    <td align=right> <font size=2>7,656</font></td>
    <td align=right>&nbsp;</td>
    <td align=right> <font size=2>5,890</font></td>
  </tr>
  <tr valign="bottom">
    <td align=left> <font size=2>&nbsp;&nbsp;&nbsp;San Luis facilities</font></td>
    <td align=right> <font size=2>-</font></td>
    <td align=right>&nbsp;</td>
    <td align=right> <font size=2>5,533</font></td>
    <td align=right>&nbsp;</td>
    <td align=right> <font size=2>5,709</font></td>
  </tr>
  <tr valign="bottom">
    <td align=left> <font size=2>&nbsp;&nbsp;&nbsp;Republic facilities</font></td>
    <td align=right> <font size=2>9,176</font></td>
    <td align=right>&nbsp;</td>
    <td align=right> <font size=2>12,682</font></td>
    <td align=right>&nbsp;</td>
    <td align=right> <font size=2>15,400</font></td>
  </tr>
</table>
<p style="text-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 style="text-align: left;"> <i>Our primary source of revenue is the sale of SBQ steel and structural steel products.</i></p>
<p style="text-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 style="text-align: left;"> <i>Our results are affected by economic activity, steel consumption and end-market demand for steel products.</i></p>
<p style="text-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 style="text-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. Mexico&#146;s GDP decreased 6.5% in 2009 and increased 1.3% in 2008. The U.S. GDP decreased 2.4% in 2009 and increased 1.1% in 2008. Recession or a deterioration in economic conditions in the countries in which we operate is likely to adversely affect our results</p>
<p style="text-align: left;"> <i>Our results are affected by international steel prices and trends in the global steel industry.</i></p>
<p style="text-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 style="text-align: left;"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 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 2002-2004 period.   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. As the 2008 financial crisis worsened in late 2008 and early 2009, global demand for steel fell while new steel production capacity was coming into the market, and as a result steel prices fell worldwide. Average steel prices of finished products sold in the first quarter 2009 decreased approximately 25% compared to the fourth quarter 2008, in 2009 the average steel price decrease 22% compared 2008.  The average price in the first quarter of 2010 increased 4% as compared to the last quarter of 2009.</p>
<p style="text-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</p>
<p style="text-align: center;"> 51</p>
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<p style="text-align: left;"> 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 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 style="text-align: left;"> <i>Our results are affected by competition from imports.</i></p>
<p style="text-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.
  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. In 2006 and 2007, imports to Mexico increased as market
  conditions improved. In 2008, imports to Mexico continued to increase, notwithstanding
  the worsening of international market conditions. In 2009, imports to Mexico decreased as market conditions worsened.</p>
<p style="text-align: left;"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Steel imports to the United States accounted for an estimated 20% of the domestic steel market in 2009 and an estimated 23% in 2008. 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 style="text-align: left;"> <i>Our results are affected by the cost of raw materials and energy.</i></p>
<p style="text-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. As a result of the 2008 financial crisis that continues to affect the international markets, the prices of these inputs have remained highly volatile.</p>
<p style="text-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 increased significantly in 2008 and 2007 as economic activity fueled energy demand and the supply and price of oil was impacted by geopolitical events. While natural gas and electricity prices in the United States and Mexico decreased during the fourth quarter of 2008 in response to the financial crisis, they have remained highly volatile. In 2009, while natural gas prices decreased due to the financial crisis and an equivalent reduction in demand, electricity prices registered an increase.</p>
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<p style="TEXT-ALIGN: left"><b>Segment Information</b></p>
<p style="TEXT-ALIGN: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are required to disclose segment information in accordance with MFRS B-5 Segment Information which establishes standards for reporting information about operating segments in annual financial statements and requires reporting of selected information about operating segments in interim financial reports issued to shareholders. Operating segments are components of a company about which separate financial information is available that is regularly evaluated by the chief operating decision maker(s) in deciding how to allocate resources and assess performance. The statement also establishes standards for related disclosures about a company&#146;s products and services, geographical areas and major customers.</p>
<p style="TEXT-ALIGN: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We conduct business in two principal business segments which are organized on a geographical basis:</p>
<ul>

  <li>
    <p align=left>Our Mexican segment represents the results of our operations in Mexico including our plants in Mexicali, Guadalajara, Tlaxcala and San Luis Potos&#237;.</p>
  <li>
    <p align=left>Our USA segment represents the results of our operations of Republic, including its seven plants of which six are located in the USA and one is located in Canada.</p>
  </li>
</ul>
<p style="TEXT-ALIGN: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Financial information
  for each segment follows:</p>
<table width="100%" border=0 cellpadding="0" cellspacing=0 style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'">
  <tr>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
  </tr>
  <tr valign=bottom>
    <td align=center>&nbsp;</td>
    <td colspan="14" align=center><font size=2>For the year ended December 31,
      2009</font></td>
  </tr>
  <tr>
    <td align=center>&nbsp;</td>
    <td colspan="14" align=center>
      <hr noshade size=1>
       </td>
  </tr>
  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td colspan="2" align=center><font size=2>Mexico</font></td>
    <td align=center>&nbsp;</td>
    <td align=center>&nbsp;</td>
    <td colspan="2" align=center><font size=2>USA</font></td>
    <td align=center>&nbsp;</td>
    <td align=center>&nbsp;</td>
    <td colspan="2" 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 colspan="2" align=center><font size=2>Total</font></td>
    <td align=center>&nbsp;</td>
  </tr>
  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td colspan="14" align=center>
      <hr noshade size=1>
    </td>
  </tr>
  <tr valign=bottom>
    <td align=left><font size=2>Net Sales</font></td>
    <td align=left><font size=2>$</font></td>
    <td align=right><font size=2>11,366,780</font></td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;&nbsp;&nbsp;</td>
    <td align=left><font size=2>$</font></td>
    <td align=right><font size=2>7,864,749</font></td>
    <td align=left>&nbsp;</td>
    <td align=center>&nbsp;&nbsp;&nbsp;</td>
    <td align=left><font size=2>$</font></td>
    <td align=right><font size=2>-</font></td>
    <td align=right>&nbsp;&nbsp;&nbsp;</td>
    <td align=left><font size=2>$</font></td>
    <td align=right><font size=2>19,231,529</font></td>
    <td align=left>&nbsp;</td>
  </tr>
  <tr valign=bottom>
    <td align=left><font size=2>Cost of Sales</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>7,927,728</font></td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>9,789,026</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=right><font size=2>17,716,754</font></td>
    <td align=left>&nbsp;</td>
  </tr>
  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td colspan="14" align=center>
      <hr noshade size=1>
    </td>
  </tr>
  <tr valign=bottom>
    <td align=left><font size=2>Marginal (loss) profit</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>3,439,052</font></td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>(1,924,277</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>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>1,514,775</font></td>
    <td align=left>&nbsp;</td>
  </tr>
  <tr valign=bottom>
    <td align=left><font size=2>Indirect overhead, selling and</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=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><font size=2>administrative expenses</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>1,612,770</font></td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>688,212</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=right><font size=2>2,300,982</font></td>
    <td align=left>&nbsp;</td>
  </tr>
  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td colspan="14" align=center>
      <hr noshade size=1>
    </td>
  </tr>

  <tr valign=bottom>
    <td align=left><font size=2>Operating (loss) income</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>1,826,282</font></td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>(2,612,489</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>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>(786,207</font></td>
    <td align=left><font size=2>)</font></td>
  </tr>

  <tr valign=bottom>
    <td align=left><font size=2>Impairment of intangible assets</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>(2,368,000</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>
    <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=right><font size=2>(2,368,000</font></td>
    <td align=left><font size=2>)</font></td>
  </tr>
  <tr valign=bottom>
    <td align=left><font size=2>Other (expense) income, net</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>70,102</font></td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>(40,111</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>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>29,991</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=left>&nbsp;</td>
    <td align=right><font size=2>21,726</font></td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>(39,595</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>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>(17,869</font></td>
    <td align=left><font size=2>)</font></td>
  </tr>
  <tr valign=bottom>
    <td align=left><font size=2>Exchange loss, net</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>(78,429</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>
    <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>(78,429</font></td>
    <td align=left><font size=2>)</font></td>
  </tr>
  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td colspan="14" align=center>
      <hr noshade size=1>
    </td>
  </tr>

  <tr valign=bottom>
    <td align=left><font size=2>Income (loss) before income tax</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>(528,319</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>(2,692,195</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>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>(3,220,514</font></td>
    <td align=left><font size=2>)</font></td>
  </tr>
  <tr valign=bottom>
    <td align=left><font size=2>Income tax</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>(1,067,426</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>(977,976</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>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>(2,045,402</font></td>
    <td align=left><font size=2>)</font></td>
  </tr>
  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td colspan="14" align=center>
      <hr noshade size=1>
    </td>
  </tr>
  <tr>
    <td colspan=15>&nbsp;</td>
  </tr>
  <tr valign=bottom>
    <td align=left><font size=2>Net income (loss)</font></td>
    <td align=left><font size=2>$</font></td>
    <td align=right><font size=2>539,107</font></td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=left><font size=2>$</font></td>
    <td align=right><font size=2>(1,714,219</font></td>
    <td align=left><font size=2>)</font></td>
    <td align=center>&nbsp;</td>
    <td align=left><font size=2>$</font></td>
    <td align=right><font size=2>-</font></td>
    <td align=right>&nbsp;</td>
    <td align=left><font size=2>$</font></td>
    <td align=right><font size=2>(1,175,112</font></td>
    <td align=left><font size=2>)</font></td>
  </tr>
  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td colspan="14" align=center>
      <hr noshade size=2>
    </td>
  </tr>
  <tr>
    <td colspan=15>&nbsp;</td>
  </tr>
  <tr>
    <td colspan=15>&nbsp;</td>
  </tr>
  <tr valign=bottom>
    <td align=left><b><font size=2>Other Data</font></b></td>
    <td colspan="2" align=center><font size=2>Mexico</font></td>
    <td align=center>&nbsp;</td>
    <td align=center>&nbsp;</td>
    <td colspan="2" align=center><font size=2>USA</font></td>
    <td align=center>&nbsp;</td>
    <td align=center>&nbsp;</td>
    <td colspan="2" 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 colspan="2" align=center><font size=2>Total</font></td>
    <td align=center>&nbsp;</td>
  </tr>
  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td colspan="14" align=center>
      <hr noshade size=1>
    </td>
  </tr>
  <tr valign=bottom>
    <td align=left><font size=2>Total Assets</font></td>
    <td align=left><font size=2>$</font></td>
    <td align=right><font size=2>18,301,753</font></td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=left><font size=2>$</font></td>
    <td align=right><font size=2>8,581,370</font></td>
    <td align=left>&nbsp;</td>
    <td align=center>&nbsp;</td>
    <td align=left><font size=2>$</font></td>
    <td align=right><font size=2>-</font></td>
    <td align=right>&nbsp;</td>
    <td align=left><font size=2>$</font></td>
    <td align=right><font size=2>26,883,123</font></td>
    <td align=left>&nbsp;</td>
  </tr>
  <tr valign=bottom>
    <td align=left><font size=2>Depreciation and</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=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><font size=2>Amortization</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>783,414</font></td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>264,468</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=right><font size=2>1,047,882</font></td>
    <td align=left>&nbsp;</td>
  </tr>
  <tr valign=bottom>
    <td align=left><font size=2>Additions of property, plant</font></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>
    <td align=left>&nbsp;</td>
    <td align=right>&nbsp;</td>
    <td align=left>&nbsp;</td>
  </tr>
  <tr valign=bottom>
    <td align=left><font size=2>and equipment, net</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>176,249</font></td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>86,958</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=right><font size=2>263,207</font></td>
    <td align=left>&nbsp;</td>
  </tr>
</table>
<br>
<p style="TEXT-ALIGN: center">53</p>
<hr align=center width="100%" noshade size=5>
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<br>
<br>
<table width="100%" border=0 cellpadding="0" cellspacing=0 style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'">
  <tr>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
  </tr>
  <tr valign=bottom>
    <td align=center>&nbsp;</td>
    <td colspan="15" align=center><font size=2>For the year ended December 31,
      2008</font></td>
  </tr>
  <tr>
    <td align=center>&nbsp;</td>
    <td colspan="15" align=center>
      <hr noshade size=1>
       </td>
  </tr>
  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td colspan="2" align=center><font size=2>Mexico</font></td>
    <td align=center>&nbsp;</td>
    <td align=center>&nbsp;</td>
    <td colspan="2" align=center><font size=2>USA</font></td>
    <td align=center>&nbsp;</td>
    <td align=center>&nbsp;</td>
    <td colspan="2" 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;</td>
    <td colspan="2" align=center><font size=2>Total</font></td>
    <td align=center>&nbsp;</td>
  </tr>
  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td colspan="15" align=center>
      <hr noshade size=1>
    </td>
  </tr>
  <tr valign=bottom>
    <td align=left><font size=2>Net Sales</font></td>
    <td align=left><font size=2>$</font></td>
    <td align=right><font size=2>12,780,358</font></td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;&nbsp;&nbsp;</td>
    <td align=left><font size=2>$</font></td>
    <td align=right><font size=2>22,448,283</font></td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;&nbsp;&nbsp;</td>
    <td align=left><font size=2>$</font></td>
    <td align=right><font size=2>(43,421</font></td>
    <td align=left><font size=2>)</font></td>
    <td align=left>&nbsp;&nbsp;&nbsp;</td>
    <td align=left><font size=2>$</font></td>
    <td align=right><font size=2>35,185,220</font></td>
    <td align=left>&nbsp;</td>
  </tr>
  <tr valign=bottom>
    <td align=left><font size=2>Cost of Sales</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>8,402,516</font></td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>21,438,719</font></td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>(45,072</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>29,796,163</font></td>
    <td align=left>&nbsp;</td>
  </tr>
  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td colspan="15" align=center>
      <hr noshade size=1>
    </td>
  </tr>
  <tr valign=bottom>
    <td align=left><font size=2>Marginal Profit</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>4,377,842</font></td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>1,009,564</font></td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>1,651</font></td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>5,389,057</font></td>
    <td align=left>&nbsp;</td>
  </tr>
  <tr valign=bottom>
    <td align=left><font size=2>Indirect overhead, selling and</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>
  </tr>
  <tr valign=bottom>
    <td align=left><font size=2>administrative expenses</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>1,567,060</font></td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>706,768</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>2,273,828</font></td>
    <td align=left>&nbsp;</td>
  </tr>
  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td colspan="15" align=center>
      <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=right><font size=2>2,810,782</font></td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>302,796</font></td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>1,651</font></td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>3,115,229</font></td>
    <td align=left>&nbsp;</td>
  </tr>
  <tr valign=bottom>
    <td align=left><font size=2>Other (expense) income, net</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>(29,166</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>25,250</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>(3,916</font></td>
    <td align=left><font size=2>)</font></td>
  </tr>

  <tr valign=bottom>
    <td align=left><font size=2>Financial income (expenses), net</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>100,522</font></td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>(22,000</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>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>78,522</font></td>
    <td align=left>&nbsp;</td>
  </tr>
  <tr valign=bottom>
    <td align=left><font size=2>Exchange loss, net</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>(253,183</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>
    <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>(253,183</font></td>
    <td align=left><font size=2>)</font></td>
  </tr>
  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td colspan="15" align=center>
      <hr noshade size=1>
    </td>
  </tr>
  <tr valign=bottom>
    <td align=left><font size=2>Income before income tax</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>2,628,955</font></td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>306,046</font></td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>1,651</font></td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>2,936,652</font></td>
    <td align=left>&nbsp;</td>
  </tr>
  <tr valign=bottom>
    <td align=left><font size=2>Income tax</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>937,761</font></td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>98,542</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>1,036,303</font></td>
    <td align=left>&nbsp;</td>
  </tr>
  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td colspan="15" align=center>
      <hr noshade size=1>
    </td>
  </tr>
  <tr valign=bottom>
    <td align=left><font size=2>Net income</font></td>
    <td align=left><font size=2>$</font></td>
    <td align=right><font size=2>1,691,194</font></td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=left><font size=2>$</font></td>
    <td align=right><font size=2>207,504</font></td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=left><font size=2>$</font></td>
    <td align=right><font size=2>1,651</font></td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=left><font size=2>$</font></td>
    <td align=right><font size=2>1,900,349</font></td>
    <td align=left>&nbsp;</td>
  </tr>
  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td colspan="15" align=center>
      <hr noshade size=2>
    </td>
  </tr>
  <tr>
    <td colspan=16>&nbsp;</td>
  </tr>
  <tr valign=bottom>
    <td align=left><b><font size=2>Other Data</font></b></td>
    <td colspan="2" align=center><font size=2>Mexico</font></td>
    <td align=center>&nbsp;</td>
    <td align=center>&nbsp;</td>
    <td colspan="2" align=center><font size=2>USA</font></td>
    <td align=center>&nbsp;</td>
    <td align=center>&nbsp;</td>
    <td colspan="2" 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;</td>
    <td colspan="2" align=center><font size=2>Total</font></td>
    <td align=center>&nbsp;</td>
  </tr>
  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td colspan="15" align=center>
      <hr noshade size=1>
    </td>
  </tr>
  <tr valign=bottom>
    <td align=left><font size=2>Total Assets</font></td>
    <td align=left><font size=2>$</font></td>
    <td align=right><font size=2>19,885,862</font></td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=left><font size=2>$</font></td>
    <td align=right><font size=2>10,928,155</font></td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=left><font size=2>$</font></td>
    <td align=right><font size=2>-</font></td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=left><font size=2>$</font></td>
    <td align=right><font size=2>30,814,017</font></td>
    <td align=left>&nbsp;</td>
  </tr>
  <tr valign=bottom>
    <td align=left><font size=2>Depreciation and</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>
  </tr>
  <tr valign=bottom>
    <td align=left><font size=2>Amortization</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>677,339</font></td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>217,967</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>895,306</font></td>
    <td align=left>&nbsp;</td>
  </tr>
  <tr valign=bottom>
    <td align=left><font size=2>Additions of property, plant</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>
  </tr>
  <tr valign=bottom>
    <td align=left><font size=2>and equipment, net</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>148,749</font></td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>331,055</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>479,804</font></td>
    <td align=left>&nbsp;</td>
  </tr>
  <tr>
    <td colspan=16>&nbsp;</td>
  </tr>
  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td colspan="15" align=center><font size=2>For the year ended December 31,
      2007</font></td>
  </tr>
  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td colspan="15" align=center>
      <hr noshade size=1>
    </td>
  </tr>
  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td colspan="2" align=center><font size=2>Mexico</font></td>
    <td align=center>&nbsp;</td>
    <td align=center>&nbsp;</td>
    <td colspan="2" align=center><font size=2>USA</font></td>
    <td align=center>&nbsp;</td>
    <td align=center>&nbsp;</td>
    <td colspan="2" 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 colspan="3" align=center><font size=2>Total</font></td>
    <td align=center>&nbsp;</td>
  </tr>
  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td colspan="15" align=center>
      <hr noshade size=1>
    </td>
  </tr>
  <tr valign=bottom>
    <td align=left><font size=2>Net Sales</font></td>
    <td align=left><font size=2>$</font></td>
    <td align=right><font size=2>8,407,018</font></td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=left><font size=2>$</font></td>
    <td align=right><font size=2>16,118,609</font></td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=left><font size=2>$</font></td>
    <td align=right><font size=2>(419,533</font></td>
    <td align=left><font size=2>)</font></td>
    <td align=left>&nbsp;</td>
    <td align=left><font size=2>$</font></td>
    <td align=right><font size=2>24,106,094</font></td>
    <td align=left>&nbsp;</td>
  </tr>
  <tr valign=bottom>
    <td align=left><font size=2>Cost of Sales</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>5,716,571</font></td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>15,199,112</font></td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>(416,765</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>20,498,918</font></td>
    <td align=left>&nbsp;</td>
  </tr>
  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td colspan="15" align=center>
      <hr noshade size=1>
    </td>
  </tr>
  <tr valign=bottom>
    <td align=left><font size=2>Marginal Profit</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>2,690,447</font></td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>919,497</font></td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>(2,768</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>3,607,176</font></td>
    <td align=left>&nbsp;</td>
  </tr>
  <tr valign=bottom>
    <td align=left><font size=2>Indirect overhead, selling and</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>
  </tr>
  <tr valign=bottom>
    <td align=left><font size=2>administrative expenses</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>837,246</font></td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>585,913</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>1,423,159</font></td>
    <td align=left>&nbsp;</td>
  </tr>
  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td colspan="15" align=center>
      <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=right><font size=2>1,853,201</font></td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>333,584</font></td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>(2,768</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>2,184,017</font></td>
    <td align=left>&nbsp;</td>
  </tr>
  <tr valign=bottom>
    <td align=left><font size=2>Other (expense) income, net</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>(8,666</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>29,995</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>21,329</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=left>&nbsp;</td>
    <td align=right><font size=2>291,189</font></td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>(17,876</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>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>273,313</font></td>
    <td align=left>&nbsp;</td>
  </tr>
  <tr valign=bottom>
    <td align=left><font size=2>Exchange loss, net</font></td>
    <td align=left>&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>
    <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>(37,879</font></td>
    <td align=left><font size=2>)</font></td>
  </tr>
  <tr valign=bottom>
    <td align=left><font size=2>Result on monetary position</font></td>
    <td align=left>&nbsp;</td>
    <td align=right><font size=2>(227,014</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>32,083</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>(194,931</font></td>
    <td align=left><font size=2>)</font></td>
  </tr>
  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td colspan="15" align=center>
      <hr noshade size=1>
    </td>
  </tr>
  <tr valign="bottom">
    <td align=left> <font size=2>Income before income tax</font></td>
    <td align=left>&nbsp; </td>
    <td align=right> <font size=2>1,870,831</font></td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right> <font size=2>377,786</font></td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right> <font size=2>(2,768</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>2,245,849</font> </td>
    <td align=right>&nbsp; </td>
  </tr>
  <tr valign="bottom">
    <td align=left> <font size=2>Income tax</font></td>
    <td align=left>&nbsp; </td>
    <td align=right> <font size=2>435,973</font></td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right> <font size=2>184,701</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>620,674</font> </td>
    <td align=right>&nbsp; </td>
  </tr>
  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td colspan="15" align=center>
      <hr noshade size=1>
    </td>
  </tr>
  <tr valign="bottom">
    <td align=left> <font size=2>Net income</font></td>
    <td align=left> <font size=2>&#36;</font></td>
    <td align=right> <font size=2>1,434,858</font></td>
    <td align=left>&nbsp;&nbsp;&nbsp;</td>
    <td align=left>&nbsp;&nbsp;&nbsp;</td>
    <td align=left> <font size=2>&#36;</font></td>
    <td align=right> <font size=2>193,085</font></td>
    <td align=left>&nbsp;&nbsp;&nbsp;</td>
    <td align=left>&nbsp;&nbsp;&nbsp;</td>
    <td align=left> <font size=2>&#36;</font></td>
    <td align=right> <font size=2>(2,768</font></td>
    <td align=left> <font size=2>)</font></td>
    <td align=left>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</td>
    <td align=left><font size=2>&#36;</font></td>
    <td align=right> <font size=2>1,625,175</font></td>
    <td align=right>&nbsp; </td>
  </tr>
  <tr>
    <td colspan=16>&nbsp; </td>
  </tr>
  <tr>
    <td colspan=16>&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>
    <td align=left>&nbsp;</td>
    <td align=right>&nbsp; </td>
    <td align=left>&nbsp; </td>
  </tr>
  <tr valign="bottom">
    <td align=left> <font size=2>Total Assets</font></td>
    <td align=left> <font size=2>&#36;</font></td>
    <td align=right> <font size=2>15,221,534</font></td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=left> <font size=2>&#36;</font></td>
    <td align=right> <font size=2>7,619,723</font></td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=left> <font size=2>&#36;</font></td>
    <td align=right> <font size=2>-</font></td>
    <td align=left>&nbsp; </td>
    <td align=left>&nbsp;</td>
    <td align=left>$</td>
    <td align=right> <font size=2>22,841,257</font></td>
    <td align=right>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td align=left> <font size=2>Depreciation and</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=right>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td align=left> <font size=2>Amortization</font></td>
    <td align=left>&nbsp; </td>
    <td align=right> <font size=2>334,010</font></td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right> <font size=2>215,246</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>549,256</font></td>
    <td align=right>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td align=left> <font size=2>Additions of property, plant</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=right>&nbsp; </td>
    <td align=left>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td align=left> <font size=2>and equipment, net</font></td>
    <td align=left>&nbsp; </td>
    <td align=right> <font size=2>168,926</font></td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right> <font size=2>316,742</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>485,668</font></td>
    <td align=right>&nbsp;</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>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=right>&nbsp;</td>
    <td align=left>&nbsp;</td>
  </tr>
</table>
<br>
<p style="TEXT-ALIGN: center">54</p>
<hr align=center width="100%" noshade size=5>
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<div title="EE+ Page Break" style="FONT-SIZE: 1pt; PAGE-BREAK-AFTER: always; WIDTH: 100%; HEIGHT: 1px"></div>
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<br>
<br>
<p align="left" style="text-align: left;"> The Company&#146;s net sales to foreign
  or regional customers during 2009, 2008 and 2007 are as follows:</p>
<table width=100% border=0 cellpadding="0" cellspacing=0 style="font-family: 'Times New Roman';font-size: 10pt;">
  <tr>
    <td></td>
    <td></td>
    <td></td>
    <td></td>
    <td></td>
    <td></td>
    <td></td>
    <td></td>
    <td></td>
  </tr>
  <tr valign="bottom">
    <td align=left>&nbsp; </td>
    <td colspan="8" align=center> <b><font size=2>Sales</font></b> </td>
  </tr>
  <tr>
    <td>&nbsp; </td>
    <td colspan="8" align="center">
      <hr noshade size=1>
       </td>
  </tr>
  <tr valign="bottom">
    <td align=left>&nbsp; </td>
    <td align=center>&nbsp; </td>
    <td align=center> <font size=2>2009</font></td>
    <td align=center>&nbsp;</td>
    <td align=center>&nbsp; </td>
    <td align=center> <font size=2>2008</font></td>
    <td align=center>&nbsp;</td>
    <td align=center>&nbsp; </td>
    <td align=center> <font size=2>2007</font></td>
  </tr>
  <tr>
    <td>&nbsp; </td>
    <td>
      <hr noshade size=1>
       </td>
    <td>
      <hr noshade size=1>
       </td>
    <td>
      <hr noshade size=1>
    </td>
    <td>
      <hr noshade size=1>
       </td>
    <td>
      <hr noshade size=1>
       </td>
    <td>
      <hr noshade size=1>
    </td>
    <td>
      <hr noshade size=1>
       </td>
    <td>
      <hr noshade size=1>
       </td>
  </tr>
  <tr valign="bottom">
    <td align=left> <font size=2>M&eacute;xico</font></td>
    <td align=left> <font size=2>&#36;</font></td>
    <td align=right> <font size=2>10,685,259</font></td>
    <td align=left>&nbsp;</td>
    <td align=left> <font size=2>&#36;</font></td>
    <td align=right> <font size=2>11,366,526</font></td>
    <td align=left>&nbsp;</td>
    <td align=left> <font size=2>&#36;</font></td>
    <td align=right> <font size=2>7,393,755</font></td>
  </tr>
  <tr valign="bottom">
    <td align=left> <font size=2>USA</font></td>
    <td align=left>&nbsp; </td>
    <td align=right> <font size=2>7,829,024</font></td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right> <font size=2>21,622,442</font></td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right> <font size=2>15,296,430</font></td>
  </tr>
  <tr valign="bottom">
    <td align=left> <font size=2>Canada</font></td>
    <td align=left>&nbsp; </td>
    <td align=right> <font size=2>502,286</font></td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right> <font size=2>598,711</font></td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right> <font size=2>583,917</font></td>
  </tr>
  <tr valign="bottom">
    <td align=left> <font size=2>Latin America</font></td>
    <td align=left>&nbsp; </td>
    <td align=right> <font size=2>135,965</font></td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right> <font size=2>394,998</font></td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right> <font size=2>113,058</font></td>
  </tr>
  <tr valign="bottom">
    <td align=left> <font size=2>Other (Europe and Asia)</font></td>
    <td align=left>&nbsp; </td>
    <td align=right> <font size=2>78,995</font></td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right> <font size=2>1,202,543</font></td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp; </td>
    <td align=right> <font size=2>718,934</font></td>
  </tr>
  <tr>
    <td>&nbsp; </td>
    <td>
      <hr noshade size=1>
       </td>
    <td>
      <hr noshade size=1>
       </td>
    <td>
      <hr noshade size=1>
    </td>
    <td>
      <hr noshade size=1>
       </td>
    <td>
      <hr noshade size=1>
       </td>
    <td>
      <hr noshade size=1>
    </td>
    <td>
      <hr noshade size=1>
       </td>
    <td>
      <hr noshade size=1>
       </td>
  </tr>
  <tr valign="bottom">
    <td align=left> <font size=2>Total</font></td>
    <td align=left> <font size=2>&#36;</font></td>
    <td align=right> <font size=2>19,231,529</font></td>
    <td align=left>&nbsp;&nbsp;&nbsp;</td>
    <td align=left> <font size=2>&#36;</font></td>
    <td align=right> <font size=2>35,185,220</font></td>
    <td align=left>&nbsp;&nbsp;&nbsp;</td>
    <td align=left> <font size=2>&#36;</font></td>
    <td align=right> <font size=2>24,106,094</font></td>
  </tr>
  <tr>
    <td>&nbsp; </td>
    <td>
      <hr noshade size=2>
       </td>
    <td>
      <hr noshade size=2>
       </td>
    <td>
      <hr noshade size=2>
    </td>
    <td>
      <hr noshade size=2>
       </td>
    <td>
      <hr noshade size=2>
       </td>
    <td>
      <hr noshade size=2>
    </td>
    <td>
      <hr noshade size=2>
       </td>
    <td>
      <hr noshade size=2>
       </td>
  </tr>
</table>
<p style="text-align: left;"> <b>Comparison of Years Ended December 31, 2009, 2008 and 2007</b></p>
<p style="text-align: left;"> <i>Net Sales</i></p>
<p style="text-align: left;"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net sales decreased
45% to Ps. 19,232 million in 2009 (including the net sales generated by the newly acquired plants of Grupo San of Ps. 3,725 million and including sales in Mexico of Ps. 11,367 million and net sales in the United States and Canada of Ps. 7,865 million) compared to Ps. 35,185 million in 2008 (including the net sales generated by the newly acquired plants of Grupo San of Ps. 2,532 million and including sales in Mexico of Ps. 12,780 million and net sales in the United States and Canada of Ps. 22,405 million). Net sales increased 46% to Ps. 35,185 million in 2008 (including the net sales generated by the newly acquired plants of Grupo San of Ps. 2,532 million and including sales in Mexico of Ps. 12,780 million and net sales in the United States and Canada of Ps. 22,405 million) compared to Ps. 24,106 million in 2007 (including sales in Mexico of Ps.
8,407 million and net sales in the United States and Canada of Ps. 15,699
million). The decrease in sales can be explained due to lower shipments during 2009, compared with 2008 (884 thousand ton decrease), including the net sales generated by the newly acquired plants of Grupo San of 513 thousand tons and 22% decrease in the average price of steel products. The increase in sales can be explained due to higher shipments during 2008, compared with 2007 (233 thousand ton increase), including the net sales generated by the newly acquired plants of Grupo San of 261 thousand tons and 34% increase in the average price of steel products. Shipments of finished steel products decreased 30% to 2,040 thousand tons in 2009 (including the net sales generated by the newly acquired plants of Grupo San of 513 thousand tons) compared to 2,924 thousand tons in 2008 (including the net sales generated by the newly acquired plants of Grupo
San of 261 thousand tons). Shipments of finished steel products increased 9% to 2,924 thousand tons in 2008 (including the net sales generated by the newly
acquired plants of Grupo San of 261 thousand tons) compared to 2,691 thousand tons in 2007.</p>
<p style="text-align: center;"> 55</p>
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<p style="text-align: left;"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Sales outside Mexico (including sales by our U.S. subsidiaries) of basic steel products decreased 60% to 755 thousand metric tons in 2009 compared to 1,896 thousand metric tons in 2008, due to the drop of the automotive sector mainly, while total Mexican sales increased 25% from 1,028 thousand metric tons in 2008 to 1,285 thousand metric tons in 2009. Sales outside Mexico (including sales by our U.S. subsidiaries) of basic steel products increased 6% to 1,896 thousand metric tons in 2008 compared to 1,791 thousand metric tons in 2007, while total Mexican sales increased 14% from 901 thousand metric tons in 2007 to 1,028 thousand metric tons in 2008.</p>
<p style="text-align: left;"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The average price of steel products decreased 22% in real terms in 2009 compared to 2008. The average price of steel products increased 34% in real terms in 2008 compared to 2007. We attribute the 2009 decrease due to lower prices prevailing in the worldwide steel markets and in 2008 we attribute the increase to higher prices prevailing in the worldwide steel markets.</p>
<p style="text-align: left;"> <i>Direct Cost of Sales</i></p>
<p style="text-align: left;"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our direct cost of sales decreased 41% from Ps. 29,796 million in 2008 (including the cost of sales generated by the newly acquired plants of Grupo San of Ps. 1,444 million) to Ps. 17,717 million in 2009 (including the cost of sales generated by the newly acquired plants of Grupo San of Ps. 2,928 million). Our direct cost of sales increased 45% from Ps. 20,499 million in 2007 to Ps. 29,796 million in 2008 (including the cost of sales generated by the newly acquired plants of Grupo San of Ps. 1,444 million). Direct cost of sales as a percentage of net sales was 92% in 2009 and 85% in 2008 and 2007. The decrease in the direct cost of sales is due to a lower shipment in 2009, compared to 2008 in 884 thousand tons or 30%, and the increase in the direct cost of sales is attributable mainly to an increase of 34% in the average cost of raw materials used to produce steel products in 2008 versus 2007, primarily as a result of increases in the price of
scrap and certain other raw materials, as well as a 9% increase in shipments. 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;2.5 and &#36;4 per hour on average compared to average hourly wages in our U.S. operations of an average of more than &#36;54 and &#36;30 per hour in 2009 and 2008, respectively. Although raw material 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 in 2009, decreased 15% compared to 2008 primarily as a result of the decreased in the prices of
raw materials, scrap and alloys, while the average cost of raw materials that we used to produce steel products increased 34% in real terms in 2008 compared to 2007, primarily as a result of increase in the price of scrap and certain other raw materials.</p>
<p style="text-align: left;"> <i>Gross Profit</i></p>
<p style="text-align: left;"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our gross profit in 2009 decreased  72% to Ps. 1,515 million (including the gross profit generated by the newly acquired plants of Grupo San of Ps. 797 million) compared to Ps. 5,389 million in 2008. This decrease in gross profit was principally due to 30% of lower shipments of tons in 2009. Our gross profit in 2008 increase 49% to Ps. 5,389 million (including the gross profit generated by the newly acquired plants of Grupo San of Ps. 1,088 million) compared to Ps. 3,607 million in 2007. This increase in gross profit was principally due to an increase of 9% in sales volume. As a percentage of net sales, our gross profit was 8% in 2009 and 15% in 2008 and 2007. </p>
<p style="text-align: left;"> <i>Indirect Manufacturing, Selling, General and Administrative Expenses</i></p>
<p style="text-align: left;"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our indirect manufacturing, selling, general, and administrative expenses (including depreciation and amortization) in 2009 increased 1% to Ps. 2,301 million, (including Ps 346 of amortization of the</p>
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<p style="text-align: left;"> tangible and intangible assets registered by the acquisition of Grupo San), from Ps. 2,274 million in 2008 (including the operating expenses from the newly acquired plants of Grupo San of Ps. 433 million and the depreciation and amortization of the tangible and intangible assets of Ps. 277 million registered by the acquisition of Grupo San) from Ps. 1,423 million in 2007.</p>
<p style="text-align: left;"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The operating expenses as a percentage of net sales represented 12% in 2009 and 6% in 2008 and 2007. We recorded an increase of Ps.153 and 346 million, or 17% and 63%, in depreciation and amortization expense in 2009 and 2008 respectively, which in 2009, was Ps.1,048 million and Ps. 895 million in 2008, while in 2007 was Ps. 549 million. We attribute the increases in expenses in 2008 and 2009 to the inclusion of the depreciation and amortization of the newly acquired plants of Grupo San.</p>
<p style="text-align: left;"> <i>Operating (Loss) Income</i></p>
<p style="text-align: left;"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Operating loss was Ps. 786 million in 2009 (including the operating income generated by the newly acquired plants of Grupo San of Ps. 303 million) compared to Ps. 3,115 million of operating income in 2008 (including the operating income generated by the newly acquired plants of Grupo San of Ps. 655 million). Our operating income increased 43% from Ps. 2,184 million in 2007 to Ps. 3,115 million in 2008 (including Ps. 655 million of operating profit from the newly acquired plants of Grupo San which we began consolidating as of June 1, 2008). Operating loss represented 4% of our net sales in 2009 compared to 9% of operating income in 2008 and 2007. In 2009 the operating loss is due to lower shipments of 30% during 2009 compared with 2008. In 2008 we attribute the increase in operating income due to the increase of 9% in sales volume (including the net sales generated by the newly acquired plants of Grupo San of 261 thousand tons) and an increase
of 34% in the average price of steel products.</p>
<p style="text-align: left;"> <i>Other Income (Expense), Net</i></p>
<p style="text-align: left;"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We recorded other
  income, net, of Ps. 30 million in 2009. This amount reflected:</p>
<ul>
  <li>
    <p align="left">expense of Ps. 7 million for employee profit sharing;</p>
  </li>
  <li> other income of Ps. 37 million by returns of tax from investment in new
    projects. </li>
</ul>
<p align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We recorded other expense, net,
  of Ps. 4 million in 2008. This amount reflected:</p>
<ul>
  <li>
    <p align="left">expense of Ps. 24 million for employee profit sharing;</p>
  </li>
  <li>
    <p align="left">other income of Ps. 5 million for by load maneuvers;</p>
  </li>
  <li>
    <p align="left">other income of Ps. 3 million in the returns restated for
      inflation of the value added tax; and</p>
  </li>
  <li> other income, net, related to other financial operations of Ps. 12 million.</li>
</ul>
<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 align="left">income of Ps. 17 million from gain in the derivative instruments;</p>
  </li>
  <li>
    <p align="left">other expense of Ps. 8 million for fiscal amnesty offered
      by the Federal Government,</p>
  </li>
  <li>
    <p align="left">gain of Ps. 9 million in the sale of shares; and</p>
  </li>
  <li>
    <p align="left">other income, net, related to other financial operations of
      Ps. 3 million.</p>
  </li>
</ul>
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<p style="text-align: left;"> <i>Impairment of Intangible Assets</i></p>
<p style="text-align: left;"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In 2009, the Company recognized an impairment of Ps. 2,368 million, which diminished the value of the goodwill of Grupo San and the trademark &#147;San 42&#148;  for Ps. 2,352 million and Ps. 16 million, respectively.</p>
<p style="text-align: left;"> <i>Financial Income (Expense)</i></p>
<p style="text-align: left;"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We recorded financial expense of Ps. 96 million in 2009 and Ps. 175 million in 2008 compared to financial income of Ps. 41 million in 2007. 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 until 2007. We recorded an exchange loss of approximately Ps. 78 million in 2009 and Ps. 254 million in 2008, compared to an exchange loss of approximately Ps. 37 million in 2007. These exchange results reflect the 4% increase and 25% decrease in the value of the peso versus the dollar in 2009 and 2008, respectively, and 0.1% decrease in the value of the peso versus the dollar in 2007.</p>
<p style="text-align: left;"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of January 1, 2008, and as a result of the adoption of the MFRS B-10, Effects of inflation, we ceased recognizing the gain or loss from monetary position on its financial information for the years 2009 and 2008. We recorded a loss from monetary position of Ps. 195 million in 2007 reflecting the domestic inflation rate of 3.6 % for the year ended December 31, 2007</p>
<p style="text-align: left;"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our net interest expense in 2009 was Ps. 18 million compared to a net interest income of Ps. 79 million in 2008 (reflecting the use of cash and debt for the acquisition of Grupo San) and Ps. 273 million of net interest income in 2007. The income of 2007 reflects larger cash balances during this year partly reflecting the capital stock increase in February 2007.</p>
<p style="text-align: left;"> <i>Income Tax</i></p>
<p style="text-align: left;"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In 2009, we recorded an income tax benefit of Ps. 2,045 million. This income is attributable to the loss before taxes incurred in 2009 and the reversal  of the additional tax liability from other tax transactions of Ps. 1,143 million.</p>
<p style="text-align: left;"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For the years ended December 31, 2008 and 2007 we recorded an income tax provision of Ps. 1,036 million and Ps. 621 million, respectively. These amounts included a provision for deferred income taxes of Ps. 293 million in 2008 and Ps. 509 million in 2007.</p>
<p style="text-align: left;"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our effective income tax rates for the fiscal years ended December 31, 2009, 2008 and 2007 were (63.5%), 35.3% and 27.6% respectively. In 2008, income tax rate was higher than the statutory rate, mainly because the new Flat-Rate Business Tax paid during the year and an increase in the deferred tax valuation allowance. The effective income tax rate for 2009 increased as a result of the benefits recorded, as discussed above.</p>
<p style="text-align: left;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On December 7, 2009, a tax reform bill was approved and published for the 2010 fiscal year, and it reforms and amends certain tax regulations. This reform came into force as of January 1, 2010, and enacts  an income tax rate increase that will be effective as follows: 30% for 2010, 2011, and 2012, 29% for 2013, and 28% for 2014 and thereafter.</p>
<p style="text-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 style="text-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 came into force on January 1, 2008, and abolished 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. The deferred taxes of the exercise where determined based on the specific rules of each tax.</p>
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<p style="text-align: left;"> <i>Net (Loss) Income</i></p>
<p style="text-align: left;"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We recorded a net loss of Ps. 1,175 million in 2009 and net income of Ps. 1,900 million and Ps. 1,625 million in 2008 and 2007, respectively. We attribute the loss in 2009 to the impact of lower sales due to the recession in the automotive and construction industries and the impairment of assets. We attribute the income in 2008 to an increase of 9% in sales volume (including the net sales generated by the newly acquired plants of Grupo San of 261 thousand tons) and an increase of 34% in the average price of steel products.</p>
<p style="text-align: left;"> <b>Critical Accounting Policies</b></p>
<p style="text-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 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 style="text-align: left;"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Management
believes that the critical accounting policies which require the most
significant judgments and estimates used in the preparation of the financial
statements relate to deferred income taxes, the impairment of property, plant
and equipment, impairment of intangible assets and valuation allowance on
accounts receivable. We evaluate the recoverability of deferred income tax
assets, including those for net operating loss (NOL) carryforwards, whether the
probability of not recovering all or a portion of them was more likely than
not. The final realization of deferred tax assets depends on the generation of
taxable profits in the periods when the temporary differences are deductible.
Upon carrying out this evaluation, we considered the expected reversal of
deferred tax liabilities, projected taxable profit and planning strategies. As
part of our analysis, we also considered the impact of Mexico&#146;s Flat-Rate
Business Tax in the projected utilization of NOLs to determine which tax system
(the regular income tax or the Flat Rate Business Tax) would be more likely to
limit the realization of deferred tax assets. To the extent that the Flat Rate
did not limit recognition of deferred tax assets, we projected future taxable
profits for a period of four years. Based on the Company&#146;s evaluation, it
determined the amount of deferred tax asset that is more likely than not to be
realized in the future against those taxable profits, and records an allowance
for the deferred tax asset amount that it does not expect to recover in the
future. Any deferred tax amounts which were not recovered in that time period
or through the reversal of deferred tax liabilities had a valuation allowance
provided for their realization.  </p>
<p style="text-align: left;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We evaluate periodically the adjusted values of our property, plant and equipment and intangible assets 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 indefinite lived intangibles including goodwill, due to the current market environment.</p>
<p style="text-align: left;"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
assessing the recoverability of the goodwill and other intangibles, we
must make assumptions regarding estimate future cash flows and other factors to
determine the fair value of the respective assets. We perform an
annual review in the fourth quarter of each year, or more frequently if
indicators of potential impairment exist, to determine if the carrying value of
recorded goodwill is impaired. The impairment review process compares the fair
value of the reporting unit in which goodwill resides to its carrying value.
We estimate the reporting unit&#146;s fair value based on a discounted
future cash flow approach that requires estimating income from operations. In order to estimate our cash flows used in impairment computations, we considered the following: </p>
<ul>
  <li>
    <p>Our history of earnings; </p>
  </li>
  <li>
    <p>Our history of capital expenditures;</p>
  </li>
  <li>
    <p>The remaining useful lives of our primary assets;</p>
  </li>
  <li>
    <p>Current and expected market and operating conditions; and</p>
  </li>
  <li>
    <p>Our weighted average cost of capital.</p>
  </li>
</ul>
<p style="text-align: left;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under U.S. GAAP, if the carrying
amount of the reporting units exceeds its related fair value, we
should apply a &#147;second step&#148; process by means of which the fair value of such
reporting unit should be allocated to the fair value of our net assets in order
to determine the reporting unit&#146;s &#147;implied&#148; goodwill. The resulting impairment
loss under U.S. GAAP is the difference between the carrying amount of the
related goodwill as of the valuation date and the implied goodwill amount. As
of December 31, 2009, the implied goodwill under the second step process was Ps.
1,916 million, resulting in a U.S. GAAP reconciliation adjustment of Ps. 102
million. Additionally, we reconcile the aggregate fair value of the
reporting units to our market capitalization. Our market
capitalization as of December 31, 2009 indicates an implied control premium of
approximately 25%. This implied control premium is consistent with recent
observed control premiums. Assumptions used in the analysis considered the
current market conditions in developing short- and long-term growth
expectations.</p>
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<p style="text-align: left;"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other
intangible assets are mainly comprised of trademarks, customer listings and
non-competition agreements. When impairment indicators exist, or at least
annually for indefinite live intangibles, we determine our projected
revenue streams over the estimated useful life of the asset. In order to obtain
undiscounted and discounted cash flows attributable to each intangible asset,
such revenues are adjusted for operating expenses, changes in working capital
and other expenditures as applicable, and discounted to net present value using
the risk adjusted discount rates of return. As of December 31, 2009, there was
no impairment charge related to other intangible assets.</p>
<p style="text-align: left;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
a result of the downturn in the construction industry in Mexico during 2009 and
the negative impact the downturn had on our operations mainly at the
San Luis facilities, in which goodwill resides, we adjusted the key
assumptions used in the valuation model. As of December 31, 2009, the main key
assumptions used in the valuation models of San Luis reporting unit are as
follows:</p>
<ul>
  <li>Discount rate: 18.1%</li>
  <li>Sales: we estimate sales will start a recovery in the
years 2010, 2011, and 2012 to basically reach its 2008 sales level at the year
2012. After 2012, no sales increases in volume terms are considered in the
valuation model. </li>
</ul>
<p style="text-align: left;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If these
estimates or their related assumptions for prices and demand change in the
future, we may be required to record additional impairment charges for these
assets. </p>
<p style="text-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 style="text-align: left;"> <b>New Accounting Pronouncements</b></p>
<blockquote>
  <p style="text-align: left;"> The most important new pronouncements that became
    effective on January 1, 2009 are summarized below:</p>
  <p style="text-align: left;"> <b>MFRS B-7, Business Acquisitions</b></p>
  <p style="text-align: left;"> This MFRS substitutes MFRS B-7 Business Acquisitions,
    and establishes general rules for the initial recognition of net assets, non-controlling
    interests and other items, as of the acquisition date. According to this statement,
    purchase and restructuring expenses resulting from acquisition process, should
    not be part of the consideration, because these expenses are not an amount
    being shared by the business acquired. In addition, MFRS B-7 requires a company
    to recognize non-controlling interests in the acquiree at fair value as of
    the acquisition date. MFRS B-7 is effective for future acquisitions.</p>
  <p style="text-align: left;"> The effects of the implementation of the MFRS
    were not significant in the financial statements of the Company.</p>
  <p style="text-align: left;"> <b>MFRS B-8, Consolidated or Combined Financial
    Statements</b></p>
  <p style="text-align: left;"> This MFRS replaces MFRS B-8 Consolidated Financial
    Statements and describes general rules for the preparation, presentation and
    disclosure of consolidated and combined financial statements. The main changes
    of this MFRS are as follows: (a) this rule defines &#147;Specific-purpose
    Entity&#148; (SPE), establishes the cases in which an entity has control over
    a SPE, and when a company should consolidate this type of entity; (b) addresses
    that potential voting rights should be analyzed when evaluating the existence
    of control over an entity; and, (c) set new terms for &#147;controlling interest&#148;
    instead of &#147;majority interest,&#148; and &#147;non-controlling interest&#148;
    instead of &#147;minority interest.&#148;</p>
  <p style="text-align: left;"> The effects of the implementation of the MFRS
    were not significant in the financial statements of the Company.</p>
</blockquote>
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<blockquote>
  <p style="text-align: left;"> <b>MFRS C-7, Investments in Associates and Other
    Permanent Investments</b></p>
  <p style="text-align: left;"> MFRS C-7 describes the accounting treatment for
    investments in associates and other permanent investments, which were previously
    treated within MFRS B-8 Consolidated Financial Statements. This MFRS requires
    the recognition of a SPE, through equity method. Also, this MFRS establishes
    that potential voting rights should be considered when analyzing the existence
    of significant influence. In addition, this rule defines a procedure and a
    limit for the recognition of losses in an associate.</p>
  <p style="text-align: left;"> The effects of the implementation of the MFRS
    were not significant in the financial statements of the Company.</p>
  <p style="text-align: left;"> <b>MFRS C-8, Intangible Assets</b></p>
  <p style="text-align: left;"> This rule substitutes MFRS C-8 Intangible Assets.
    The new rule defines intangible assets as non-monetary items and broadens
    the criteria of identification, indicating that an intangible asset must be
    separable; this means that such asset could be sold, transferred, or used
    by the entity. In addition, intangible asset arises from legal or contractual
    rights, whether those rights are transferable or separable from the entity.</p>
  <p style="text-align: left;"> On the other hand, this standard establishes that
    preoperative costs should be eliminated from the capitalized balance, affecting
    retained earnings, and without restating prior financial statements. This
    amount should be presented as an accounting change in consolidated financial
    statements.</p>
  <p style="text-align: left;"> See the effects of the implementation of the MFRS
    in Note 10  to our financial statements.</p>
  <p style="text-align: left;"> <b>MFRS D-8, Share-Based Payments</b></p>
  <p style="text-align: left;"> MFRS D-8 establishes the recognition of share-based
    payments. When an entity purchases goods or pay services with share-based
    payments, the entity is required to recognize those goods or services at fair
    value and the corresponding increase in equity. According with MFRS D-8, if
    share-based payments cannot be settled with equity instruments, they have
    to be settled using an indirect method considering MFRS D-8 parameters.</p>
  <p style="text-align: left;"> The effects of the implementation of the MFRS
    were not significant in the financial statements of the Company.</p>
  <p style="text-align: left;">There are no new pronouncements that will be effective in 2010. The most significant new accounting pronouncements
    that will become effective on January 1, 2011, and that could affect the Company&#146;s
    accounting policies, are as follows:</p>
  <p style="text-align: left;"> <b>MFRS B-5, Financial Information by Segment</b></p>
  <p style="text-align: left;"> In November 2009, the CINIF issued MFRS B-5, which
    is effective for fiscal years beginning on or after January 1, 2011. MFRS
    B-5 will replace Mexican accounting Bulletin B-5.</p>
  <p style="text-align: left;"> MFRS B-5 establishes the criteria for identifying
    the segments to be reported by an entity, as well as the standards for disclosing
    the financial information of such segments. The standard also contains the
    requirements applicable to the disclosure of certain information related to
    the entity as a whole.</p>
</blockquote>
<p style="text-align: center;"> 61</p>
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<blockquote>
  <p> The principal changes compared to Mexican accounting Bulletin B-5 are as follows:</p>
</blockquote>
<ul>
  <li>
    <p align="left">Information to be disclosed &#150; MFRS B-5 is management-focused,
      since the segment information disclosures it requires refer to the information
      used by the entity&#146;s most- senior business decision makers. MFRS B-5
      also requires the disclosure of information related to an entity&#146;s
      products, geographic zones, customers and suppliers.</p>
  </li>
  <li>
    <p align="left">Business risks &#150; In identifying operating segments, this
      standard does not require the different areas of the business to be subject
      to different risks.</p>
  </li>
  <li>
    <p align="left">Segments in the pre-operating stage &#150; Under MFRS B-5,
      the different areas of a business in its pre-operating stage can be classified
      as operating segments.</p>
  </li>
  <li>
    <p align="left">Disclosure of financial results &#150; This standard requires
      disclosure of interest income and expense, as well as the other comprehensive
      financing items.</p>
  </li>
  <li>
    Disclosure of liabilities &#150; MFRS B-5 requires disclosure
      of the liabilities included in the regular information for the operating
      segment that is habitually used by the entity&#146;s most- senior business
      decision makers.
    <p> <b>MFRS B-9, Interim Financial Information</b></p>
    <p> In November 2009, the CINIF issued Mexican MFRS B-9, which is effective
        for fiscal years beginning on or after January 1, 2011. MFRS B-9 replaces
        Mexican accounting Bulletin B-9, Interim Financial Information.</p>
    <p> MFRS B-9 establishes that interim financial information must contain,
      as a minimum for each interim period, the following comparative financial
      statements:</p>
  </li>
  <li>Condensed statement of financial position; <br>
    <br>
  </li>
  <li>Condensed income statement or statement of activities, as applicable;<br>
    <br>
  </li>
  <li>Condensed statement of changes in shareholders&#146; equity;<br>
    <br>
  </li>
  <li>Condensed statement of cash flows;
    <p> Notes to financial statements with select
        disclosures must also be included.</p>
    <p> MFRS C-9 requires the interim financial information
        at the end of a period to be compared to the information at the closing
        of the immediately prior equivalent period (except for the statement of
        financial position), which makes it necessary to also include a comparison
        with the statement at the immediately prior annual closing date.</p>
    <p> At the date of the financial statements, management
        is evaluating the effect of the observance of these new accounting standards
        will have on the Company&#146;s consolidated results of operations and
        financial position.</p>
  </li>
</ul>
<blockquote>
  <p> <b>a) International Financial Reporting Standards
      (IFRS)</b></p>
  <p> On November 11, 2008 the Mexican Securities
      Commission (Comisi&oacute;n Nacional Bancaria y de Valores) issued a press
      release in which it debriefed that this Commission will perform the necessary
      regulatory adaptations on which it will  establish  the requirements
      for the listed companies to prepare and reveal their financial information
      under IFRS beginning the year 2012. Likewise it was specified that early
      adoption for the years 2008, 2009, 2010 and 2011 is allowed.</p>
</blockquote>
<p style="text-align: center;"> 62</p>
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<blockquote>
  <p style="text-align: left;"> Management
    is evaluating the effects of the adoption and implementation of IFRS as well
    as the potential adoption date.</p>
</blockquote>
<p style="text-align: left;"> <b>B. Liquidity and Capital Resources</b></p>
<p style="text-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 style="text-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 style="text-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>
<p style="text-align: left;"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On December 31, 2009, our total consolidated debt was U.S. &#36;302,000 of 8 7/8% medium-term notes (&#147;MTNs&#148;) due 1998 which remained outstanding after we conducted exchange offers for the MTNs in October 1997 and August of 1998. We could not identify the holders of such MTNs at the time of the exchange offers and as a result such MTNs, which matured in 1998, have not been paid and remain outstanding.</p>
<p style="text-align: left;"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On December 31, 2008, Republic maintained a &#36;150 million Senior Secured Credit Agreement (GE credit facility) with General Electric Capital Corporation (GE Capital). This facility was scheduled to mature on May 20, 2009. On December 1, 2008, Republic was granted an extension of the GE credit facility until May 20, 2010, at the Company&#146;s election. However, on October 30, 2009, the Company changed the termination date to December 31, 2009, and the Company did not have access to a revolving credit facility on December 31, 2009.</p>
<p style="text-align: left;"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At December 31, 2008, Republic had &#36;0.6 million in outstanding borrowings and had &#36;5.8 million in letters of credit under the GE credit facility. As this agreement was terminated on December 31, 2009, there were no outstanding borrowings at December 31, 2009. However there were outstanding letters of credit of &#36;6.4 million open as of December 31, 2009 creating an event of default under the GE Credit Facility. In this event of default, GE Capital withheld &#36;6.7 million of funds from Republic&#146;s bank account during January 2010 to cover the outstanding letters of credit plus 5% cash collateral to be held as</p>
<p style="text-align: center;"> 63</p>
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<p style="text-align: left;"> security until the letters of credit issued by GE Capital are cancelled. During February 2010, one of the letters of credit was replaced by JP Morgan Chase and GE Capital refunded &#36;3.9 million to the Company.</p>
<p style="text-align: left;"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Borrowings under the GE credit facility were bearing interest, at Republic&#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. Through October 29, 2009, the applicable margins ranged 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 margins on the unused facility fee ranged from 0.50% to 0.375%. Through October 29, 2009, Republic was required to pay an unused facility fee of 0.50% per annum. On October 30, 2009 through December 31, 2009, the applicable margin was 2% for index rate loans and 3% for LIBOR loans, and the unused facility fee was increased to 0.75% per annum.</p>
<p style="text-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, 2008 and
  2007, Republic had &#36;20 and &#36;4.2 million, respectively, outstanding under
  this intercompany promissory note. <font size="2">As of December 31, 2009, Ps.
  200.1 million (presented net of an account receivable of Ps. 82.4 million) of
  the amount payable to Industrias CH, Ps. 374.3 million of the amount payable
  to Tuber&iacute;as Procarsa, Ps. 63.3 million of the amount payable to Pytsa
  Industrial de M&eacute;xico, Procarsa Tube and PPE Ps. 91.6 million and Ps.
  10.8 million of the amount payable to Aceros y Laminados Sigosa are notes payable
  denominated in dollars at an indefinite term and bear interest at 0.25% per
  year.</font></p>
<p style="text-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 style="text-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 style="text-align: left;"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On May 30, 2008, we acquired 100% of the stock of Grupo San for approximately U.S. &#36;844 million (Ps. 8,730 million). To finance the purchase price, on May 29, 2008 we accepted a loan from Banco Inbursa S.A. for U.S. &#36;120 million (Ps. 1,325 million) at Libor + 1.45% that was due on May 29, 2009, which debt has since been repaid in full. We also received U.S. &#36;112.5 million (Ps. 1,169 million) of capital stock increase from Industrias CH that was formalized on July 22, 2008. We paid the remaining balance of the purchase price through our own cash reserves.</p>
<p style="text-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. 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,</p>
<p style="text-align: center;"> 64</p>
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<p style="text-align: left;"> we had on hand cash in the amount of approximately U.S.&#36;589 million. As of December 31, 2008, we had cash and cash equivalents of Ps. 576.7 million and as of December 31, 2009 we had cash and cash equivalents of Ps. 1,948 million. We believe that this amount 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 style="text-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, 2007, 2008 and 2009:</p>
<p style="text-align: center;"> <b>Principal Cash Flows</b></p>
<table width=100% border=0 cellpadding="0" cellspacing=0 style="font-family: 'Times New Roman';font-size: 10pt;">
  <tr>
    <td></td>
    <td></td>
    <td></td>
    <td></td>
    <td></td>
    <td></td>
    <td></td>
    <td></td>
    <td></td>
  </tr>
  <tr valign="bottom">
    <td align=left>&nbsp; </td>
    <td align=center colspan=8> <b><font size=2>Years ended December 31,</font></b></td>
  </tr>
  <tr>
    <td>&nbsp; </td>
    <td colspan=8 align="center">
      <hr noshade size=1>
       </td>
  </tr>
  <tr valign="bottom">
    <td align=left>&nbsp;</td>
    <td colspan=2 align=center><b><font size=2>2007</font></b></td>
    <td align=center>&nbsp;</td>
    <td colspan=2 align=center><b><font size=2>2008</font></b></td>
    <td align=center>&nbsp;</td>
    <td colspan=2 align=center><b><font size=2>2009</font></b></td>
  </tr>
  <tr valign="bottom">
    <td align=left>&nbsp;</td>
    <td colspan=2 align=center>
      <hr noshade size=1>
    </td>
    <td align=center>&nbsp;</td>
    <td colspan=2 align=center>
      <hr noshade size=1>
    </td>
    <td align=center>&nbsp;</td>
    <td colspan=2 align=center>
      <hr noshade size=1>
    </td>
  </tr>
  <tr valign="bottom">
    <td align=left>&nbsp; </td>
    <td colspan=8 align=center> <font size=2>(millions of constant December 31,
      2007 Pesos)</font></td>
  </tr>
  <tr valign="bottom">
    <td align=left> <font size=2>Funds provided by operating activities</font></td>
    <td align=right> <font size=2>2,352</font></td>
    <td align=left>&nbsp; </td>
    <td align=right>&nbsp;&nbsp;&nbsp;</td>
    <td align=right> <font size=2>1,845</font></td>
    <td align=left>&nbsp; </td>
    <td align=right>&nbsp;&nbsp;&nbsp;</td>
    <td align=right> <font size=2>1,159</font></td>
    <td align=left>&nbsp; </td>
  </tr>
  <tr valign="bottom">
    <td align=left> <font size=2>Funds  provided by financing</font></td>
    <td align=right> <font size=2>2,324</font></td>
    <td align=left>&nbsp; </td>
    <td align=right>&nbsp;</td>
    <td align=right> <font size=2>1,334</font></td>
    <td align=left>&nbsp; </td>
    <td align=right>&nbsp;</td>
    <td align=right> <font size=2>439</font></td>
    <td align=left>&nbsp; </td>
  </tr>
  <tr valign="bottom">
    <td align=left> <font size=2>Funds (used in)  investing activities</font></td>
    <td align=right> <font size=2>(484</font></td>
    <td align=left> <font size=2>)</font></td>
    <td align=right>&nbsp;</td>
    <td align=right> <font size=2>(9,000</font></td>
    <td align=left> <font size=2>)</font></td>
    <td align=right>&nbsp;</td>
    <td align=right> <font size=2>(226</font></td>
    <td align=left> <font size=2>)</font></td>
  </tr>
</table>
<p style="text-align: left;"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The amounts presented in the table above are not comparable, due to the adoption of MFRS B-2 Cash flow statement in January 1, 2008. The information for 2007 is presented in accordance with MFRS B-12 Statement of changes in financial position.</p>
<p style="text-align: left;"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our net funds provided by operations were Ps. 1,159 million in 2009, Ps. 1,845 million in 2008 and Ps. 2,352 million in 2007 and reflected the net loss  of 2009.</p>
<p style="text-align: left;"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our net funds provided by financing activities in 2009 were Ps. 439 million, as compared to Ps. 1,334 million in 2008 (which amount includes the capital increase of Ps. 1,169 million in July 2008). In 2007, net funds provided by financing activities in 2007 were Ps. 2,324 million (which amount includes the capital increase of Ps. 2,421 million in February 2007).</p>
<p style="text-align: left;"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We attribute our net
  funds used in investing activities primarily to the acquisition of new facilities
  (Grupo San), property, plant and equipment and other non-current assets. Our
  net funds used in investing activities (to acquire property, plant and equipment
  and other non-current assets) were Ps. 226 million in 2009 and Ps. 9,000 million
  in 2008, primarily due to our use of net funds to acquire Grupo San for Ps.
  8,730 million, as compared to net funds used for investing activities of Ps.
  484 million in 2007 (to acquire property, plant and equipment and other non-current
  assets).</p>
<p style="text-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 7 to our audited financial statements, certain futures contracts that we entered to fix the price of our natural gas purchases.</p>
<p style="text-align: left;"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of December 31,
  2009, we had no material commitments for capital expenditures.</p>
<p style="text-align: left;"> <b>C. Research and Development, Patents and Licenses</b></p>
<p style="text-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 style="text-align: center;"> 65</p>
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<p style="TEXT-ALIGN: left"><b>D. Trend Information</b></p>
<p style="TEXT-ALIGN: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In the first quarter 2010 net sales increased 26% compared to the fourth quarter 2009. Sales in tons of finished steel increased 14% in the first quarter 2010 compared with the fourth quarter 2009. Prices of finished products sold in the first quarter 2010 increased approximately 11% compared to the fourth quarter 2009.</p>
<p style="TEXT-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 style="TEXT-ALIGN: left"><b>E. Off-Balance Sheet Arrangements</b></p>
<p style="TEXT-ALIGN: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We do not have any material
  off-balance sheet arrangements.</p>
<p style="TEXT-ALIGN: left"><b>F. Contractual Obligations</b></p>
<p style="TEXT-ALIGN: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The table below sets forth our significant short-term and long-term contractual obligations as of December 31, 2009:</p>
<table width="100%" border=0 cellpadding="0" cellspacing=0 style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'">
  <tr>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td colspan="9" align="center"><b><font size=2>Maturity</font></b></td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td colspan="9" align="center">
      <hr noshade size=1>
       </td>
  </tr>
  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=center><b><font size=2>Less than<br>
      1 year</font></b></td>
    <td align=center>&nbsp;</td>
    <td align=center><b><font size=2>1 &#150; 3<br>
      years</font></b></td>
    <td align=center>&nbsp;</td>
    <td align=center><b><font size=2>4 &#150; 5<br>
      years</font></b></td>
    <td align=center>&nbsp;</td>
    <td align=center><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><b><font size=2>Total</font></b></td>
  </tr>
  <tr valign=bottom>
    <td align=left>&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=left>&nbsp;</td>
    <td colspan="9" align=center><font size=2>(millions of pesos)</font></td>
  </tr>
  <tr valign=bottom>
    <td align=left><font size=2>Short-term debt obligations of related parties</font><sup><font size=2>(1)</font></sup></td>
    <td align=center><font size=2>727</font></td>
    <td align=center>&nbsp;&nbsp;&nbsp;</td>
    <td align=center><font size=2>-</font></td>
    <td align=center>&nbsp;&nbsp;&nbsp;</td>
    <td align=center><font size=2>-</font></td>
    <td align=center>&nbsp;&nbsp;&nbsp;</td>
    <td align=center><font size=2>-</font></td>
    <td align=center>&nbsp;&nbsp;&nbsp;</td>
    <td align=center><font size=2>727</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;&nbsp;&nbsp;4</font></td>
    <td align=center>&nbsp;</td>
    <td align=center><font size=2>-</font></td>
    <td align=center>&nbsp;</td>
    <td align=center><font size=2>-</font></td>
    <td align=center>&nbsp;</td>
    <td align=center><font size=2>-</font></td>
    <td align=center>&nbsp;</td>
    <td align=center><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;4</font></td>
  </tr>
  <tr valign=bottom>
    <td align=left><font size=2>Long-term contractual obligations</font></td>
    <td align=center><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;-</font></td>
    <td align=center>&nbsp;</td>
    <td align=center><font size=2>-</font></td>
    <td align=center>&nbsp;</td>
    <td align=center><font size=2>-</font></td>
    <td align=center>&nbsp;</td>
    <td align=center><font size=2>-</font></td>
    <td align=center>&nbsp;</td>
    <td align=center><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;-</font></td>
  </tr>
  <tr valign=bottom>
    <td align=left><font size=2>&nbsp;&nbsp;&nbsp;Total</font></td>
    <td align=center><font size=2>731</font></td>
    <td align=center>&nbsp;</td>
    <td align=center><font size=2>-</font></td>
    <td align=center>&nbsp;</td>
    <td align=center><font size=2>-</font></td>
    <td align=center>&nbsp;</td>
    <td align=center><font size=2>-</font></td>
    <td align=center>&nbsp;</td>
    <td align=center><font size=2>731</font></td>
  </tr>
</table>
<br>
<hr align="left" width="90" size="1" noshade>
<table width="100%" border="0" cellspacing="0" cellpadding="0">
  <tr valign="top">
    <td width="2%"><font size="2">(1) </font></td>
    <td><font size="2">Note payable to Industrias CH, Tuberias Procarsa, Pytsa
      Industrial de M&#233;xico, Aceros Laminados Sigosa is denominated in U.S.
      dollars, is for an indefinite term and bears annual interest at a rate of
      0.25%.</font></td>
  </tr>
</table>
<p style="TEXT-ALIGN: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On December 31, 2009
  and 2008, the net carrying value of property, plant and equipment for various
  equipment and computer capital leases was $0.4 million (gross carrying value
  of $2.0 million net of accumulated amortization of $1.6 million). The Company&#146;s
  capital leases require future minimum payments of $0.3 million for 2010 and
  $11.0 thousand for 2011, at which time these obligations will be repaid in full.
  The current and non-current portions of the capital lease obligations are included
  in other accrued liabilities and other long-term liabilities, respectively,
  in the accompanying consolidated balance sheets.</p>
<p style="TEXT-ALIGN: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Republic leases
certain equipment, office space and computers through operating contracts under
non-cancelable operating leases. These lease contracts will expire on several different dates by the end of 2013. During the years ended December 31, 2009, 2008
and 2007, the expenses for operating leases were Ps. 80 million, Ps. 84 million
and Ps. 77 million, respectively. At December 31, 2009, total minimum lease
payments under non-cancelable operating leases are Ps. 30 million in 2010, Ps.
21 million in 2011, Ps. 7.8 million in 2012 and Ps. 3.9 million in 2013. At
December 31, 2009 there are no additional obligations after 2013.</p>
<p style="TEXT-ALIGN: left"><b><a name="p66"></a>Item 6. Directors, Senior Management
  and Employees </b></p>
<p style="TEXT-ALIGN: left"><b>A. Directors and Senior Management </b></p>
<p style="TEXT-ALIGN: left"><b>Our Board of Directors</b></p>
<p style="TEXT-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 style="TEXT-ALIGN: center">66</p>
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<P style="TEXT-ALIGN: left"><I>Election of the Board of Directors</I></P>
<P style="TEXT-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 style="TEXT-ALIGN: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The current members of our board of directors were nominated and elected to such position at the 2010 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 style="TEXT-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 style="TEXT-ALIGN: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our board of directors
  adopted a code of ethics in December 2002.</P>
<P style="TEXT-ALIGN: left"><I>Authority of the Board of Directors</I></P>
<P style="TEXT-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 align=left>our general strategy;</P>
<LI>
<P align=left>annual approval of the business plan and the investment budget;</P>
<LI>
<P align=left>capital investments not considered in the approved annual budget for each fiscal year;</P>
<LI>
<P align=left>proposals to increase our capital or that of our subsidiaries;</P>
<LI>
<P align=left>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>
<P align=left>calling shareholders&#146; meetings and acting on their resolutions;</P>
<LI>
<P align=left>any transfer by us of shares in our subsidiaries;</P>
</LI></UL>
<P style="TEXT-ALIGN: center">67</P>
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<UL>
<LI>
<P align=left>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>
<P align=left>determining how to vote the shares that we hold in our subsidiaries; and</P>
<LI>
<P align=left>the exercise of our general powers in order to comply with our corporate purpose.</P>
</LI></UL>
<P style="TEXT-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 style="TEXT-ALIGN: left"><I>Duty of Care and Duty of Loyalty</I></P>
<P style="TEXT-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 style="TEXT-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 style="TEXT-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 style="TEXT-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 style="TEXT-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 style="TEXT-ALIGN: center">68</P>
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<P style="TEXT-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;Committees.&#148;</P>
<P style="TEXT-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 width="100%" border=0 cellpadding="0" cellSpacing=0 style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'">
<TR>
     <TD></TD>
     <TD></TD></TR>
<TR vAlign=bottom>
     <TD align=left><B><FONT size=2>Name</FONT></B></TD>
     <TD align=center><B><FONT size=2>Director Since</FONT></B></TD></TR>
<TR>
     <TD>
<HR noshade SIZE=1>
</TD>
     <TD>
<HR width="90%" SIZE=1 noshade>
</TD></TR>
<TR vAlign=bottom>
     <TD align=left><FONT size=2>Rufino Vigil Gonz&#225;lez</FONT></TD>
     <TD align=center><FONT size=2>2001</FONT></TD></TR>
<TR vAlign=bottom>
     <TD align=left><FONT size=2>Ra&#250;l Arturo P&#233;rez Trejo</FONT></TD>
     <TD align=center><FONT size=2>2003</FONT></TD></TR>
<TR vAlign=bottom>
     <TD align=left><FONT size=2>Eduardo Vigil Gonz&#225;lez</FONT></TD>
     <TD align=center><FONT size=2>2001</FONT></TD></TR>
<TR vAlign=bottom>
     <TD align=left><FONT size=2>Ra&#250;l Vigil Gonz&#225;lez</FONT></TD>
     <TD align=center><FONT size=2>2001</FONT></TD></TR>
<TR vAlign=bottom>
     <TD align=left><FONT size=2>Jos&#233; Luis Rico Maciel</FONT></TD>
     <TD align=center><FONT size=2>2001</FONT></TD></TR>
<TR vAlign=bottom>
     <TD align=left><FONT size=2>Rodolfo Garc&#237;a G&#243;mez de Parada</FONT></TD>
     <TD align=center><FONT size=2>2001</FONT></TD></TR>
<TR vAlign=bottom>
     <TD align=left><FONT size=2>Gerardo Arturo Avenda&#241;o Guzm&#225;n</FONT></TD>
     <TD align=center><FONT size=2>2001</FONT></TD></TR></TABLE>
<P style="TEXT-ALIGN: left"><I>Biographical Information of our Board of Directors</I></P>
<P style="TEXT-ALIGN: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Gerardo Arturo Avenda&#241;o Guzm&#225;n</I></B><B>. </B>Mr. Avenda&#241;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&#241;o is an independent lawyer specializing in civil, mercantile and fiscal litigation.</P>
<P style="TEXT-ALIGN: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Rodolfo Garc&#237;a G&#243;mez de Parada</I></B>. Mr. Garc&#237;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 style="TEXT-ALIGN: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Ra&#250;l Arturo P&#233;rez Trejo</I></B>. Mr. P&#233;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&#233;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 style="TEXT-ALIGN: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Jos&#233; 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 style="TEXT-ALIGN: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Eduardo Vigil Gonz&#225;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&#225;lez and Ra&#250;l Vigil Gonz&#225;lez.</P>
<P style="TEXT-ALIGN: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Ra&#250;l Vigil Gonz&#225;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&#225;lez and Eduardo Vigil Gonz&#225;lez.</P>
<P style="TEXT-ALIGN: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Rufino Vigil Gonz&#225;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&#225;lez and Ra&#250;l Vigil Gonz&#225;lez.</P>
<P style="TEXT-ALIGN: center">69</P>
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<P style="TEXT-ALIGN: left"><B>Executive Officers</B></P>
<P style="TEXT-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>
    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left><B><FONT size=2>Name</FONT></B></TD>
    <TD align=center>&nbsp;&nbsp;&nbsp;</TD>
    <TD align=center><B><FONT size=2>Position</FONT></B></TD>
    <TD align=center>&nbsp;&nbsp;&nbsp;</TD>
    <TD align=center><B><FONT size=2>Position</FONT></B><BR> <B><FONT size=2>Held
      Since</FONT></B></TD>
  </TR>
  <TR>
    <TD> <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>Luis Garc&#237;a Lim&#243;n</FONT></TD>
    <TD align=center>&nbsp;</TD>
    <TD align=center><FONT size=2>Chief Executive Officer</FONT></TD>
    <TD align=center>&nbsp;</TD>
    <TD align=center>&nbsp;&nbsp;<FONT size=2>1982*</FONT></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left><FONT size=2>Adolfo Luna Luna</FONT></TD>
    <TD align=center>&nbsp;</TD>
    <TD align=center><FONT size=2>Chief Financial Officer</FONT></TD>
    <TD align=center>&nbsp;</TD>
    <TD align=center><FONT size=2>2010</FONT></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left><FONT size=2>Juan Jos&#233; Acosta Mac&#237;as</FONT></TD>
    <TD align=center>&nbsp;</TD>
    <TD align=center><FONT size=2>Chief Operating Officer</FONT></TD>
    <TD align=center>&nbsp;</TD>
    <TD align=center><FONT size=2>2004</FONT></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left><FONT size=2>Marcos Maga&#241;a Rodarte</FONT></TD>
    <TD align=center>&nbsp;</TD>
    <TD align=center><FONT size=2>Chief Sales Officer</FONT></TD>
    <TD align=center>&nbsp;</TD>
    <TD align=center><FONT size=2>2001</FONT></TD>
  </TR>
</TABLE>
<BR>
<hr align="left" width="90" size="1" noshade>
<TABLE style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'" cellSpacing=0 border=0>
<TR>
     <TD vAlign=top nowrap width="2%">*&nbsp; &nbsp; &nbsp; </TD>
     <TD width="98%">
<P align=left>Represents the date as of which Mr. Garc&#237;a Lim&#243;n first held this office with our predecessor, CSG.</P>
</TD></tr></TABLE>
<P style="TEXT-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 style="TEXT-ALIGN: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Adolfo Luna Luna</I></B>. Mr. Luna was born in 1955. He is currently our chief financial officer. From 2004 to 2009 he was our chief financial officer of the facility of Tlaxcala. From 2001 to 2004 he was our chief financial officer of Grupo Simec, S. A. B. de C. V. Previously, Mr. Luna was the auditor manager of Grupo Simec, S. A. B. de C. V. from 2000 to 2001.</P>
<P style="TEXT-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 style="TEXT-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 style="TEXT-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 style="TEXT-ALIGN: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The business address of our directors and executive officers is our principal executive headquarters.</P>
<P style="TEXT-ALIGN: center">70</P>
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<P style="TEXT-ALIGN: left"><B>B. Compensation</B></P>
<P style="TEXT-ALIGN: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For the years ended December 31, 2009 and 2008, we paid no fees to our seven directors, and the aggregate compensation our executive officers earned was approximately Ps. 28.9 million and Ps. 26.6 million, respectively. We do not provide pension, retirement or similar benefits to our directors in their capacity as directors. Our executive officers are eligible for retirement and severance benefits required by Mexican law on the same terms as all other employees, and we do not separately set aside, accrue or determine the amount of our costs that is attributable to executive officers.</P>
<P style="TEXT-ALIGN: left"><B>C. Board Practices</B></P>
<P style="TEXT-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 style="TEXT-ALIGN: left"><B>Committees</B></P>
<P style="TEXT-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 style="TEXT-ALIGN: left"><I>Audit and Corporate Practices Committee</I></P>
<P style="TEXT-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 style="TEXT-ALIGN: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The audit and corporate practices committee is currently composed of three members. Ra&#250;l Arturo P&#233;rez Trejo, the chairman of the audit and corporate practices committee, was elected at our annual ordinary shareholders&#146; meeting held on April 30, 2010, and Gerardo Arturo Avenda&#241;o Guzm&#225;n and Rodolfo Garc&#237;a G&#243;mez de Parada were appointed. Ra&#250;l Arturo P&#233;rez Trejo has been appointed as the &#147;audit committee financial expert.&#148;</P>
<P style="TEXT-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 style="TEXT-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 style="TEXT-ALIGN: center">71</P>
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<BR>

<P style="TEXT-ALIGN: left"><B>D. Employees</B></P>
<P style="TEXT-ALIGN: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of December 31, 2009, we had 4,378 employees (of whom 2,738 were employed at our Mexico facilities, and 1,413 were unionized, and 1,640 were employed at the Republic facilities, of whom 1,345 were unionized) compared to 4,823 employees at December 31, 2008 (of whom 3,030 were employed at our Mexico facilities, and 1,581 were unionized, and 1,793 were employed at the Republic facilities, of whom 1,292 were unionized) compared to 4,437 employees at December 31, 2007 (of whom 1,915 were employed at our Mexican facilities, and 1,136 were unionized, and 2,522 were employed at the Republic facilities, and 2,060 were unionized).</P>
<P style="TEXT-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 align=left><I>Guadalajara facilities</I>: Sindicato de Trabajadores en la Industria Sider&#250;rgica y Similares en el Edo. de Jalisco. The contract expires on February 14, 2011.</P>
<LI>
<P align=left><I>Mexicali facilities</I>: Sindicato de Trabajadores de la Industria Procesadora y Comercializaci&#243;n de Metales de Baja California. The contract expires on February 1, 2011</P>
<LI>
<P align=left><I>Apizaco facilities</I>: Sindicato Nacional de Trabajadores de Productos Metalicos, Similares y Conexos de la Rep&#250;blica Mexicana. The contract expires on January 15, 2011</P>
<LI>
<P align=left><I>Cholula facilities</I>: Sindicato Industrial "Acci&#243;n y Fuerza" de Trabajadores Metalurgicos Fundidores, Mec&#225;nicos y Conexos Crom del Estado. The contract expires on February 28, 2011.</P>
<LI>
<P align=left><I>San Luis facilities</I>: At the Aceros San Luis facility: Sindicato de Empresas adherido a la CTM; and at the Aceros DM and Abastecedora Sider&#250;rgica facilities: Sindicato de Trabajadores de la Industria Metal Mec&#225;nica, Similares y Conexos del Estado de San Luis Potos&#237; CTM. The contracts expire on January 21, 2011, January 14, 2011 and January 14, 2011, respectively.</P>
</LI></UL>
<P style="TEXT-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 style="TEXT-ALIGN: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Republic is the only subsidiary of the Group which offers other benefits and pension plans to their employees. Benefit plans to employees with Republic are described below.</P>
<P style="TEXT-ALIGN: left"><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Collective Bargaining Agreements</B></P>
<P style="TEXT-ALIGN: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Eighty-two percent of the Company&#146;s production workers are covered by a collective bargaining agreement with the United Steelworkers of America (USWA). During the year ended December 31, 2007, the Company negotiated a new collective bargaining agreement effective from August 16, 2007 through August 15, 2012 (new labor agreement). The previous collective bargaining agreement expired on August 15, 2007 (previous labor agreement). For the Mexican operations, approximately 52% of the employees are under a collective contract. The Mexican collective contracts expire in periods greater than one year.</P>
<P style="TEXT-ALIGN: center">72</P>
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<P style="TEXT-ALIGN: left"><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Defined Contribution Plans</B></P>
<P style="TEXT-ALIGN: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Both the new and previous labor agreements provide for a defined contribution program for retirement healthcare and pension benefits. The Company is required to make a contribution for every hour worked. Under the previous labor agreement, the contribution amount was U.S.$3.00 for every hour worked through August 16, 2004, U.S.$3.50 for every hour worked through August 16, 2005, and U.S.$3.80 for every hour worked thereafter until August 16, 2007. The new labor agreement requires a contribution to the retirement healthcare plan of U.S.$3.00 for every hour worked, not to be less than U.S.$2.85 million per quarter, but not to exceed U.S.$11.4 million per year. Contributions are made to the pension plan at a rate of U.S. $1.68 per hour as defined in the new labor agreement. The new contribution rates and contribution limit were effective beginning August 16, 2007. For the years ended December 31, 2009, 2008, 2007 and 2006 the Company recorded Ps.
251 million, Ps. 216 million, Ps. 176 million and Ps. 170 million, respectively, of expense related to these funding obligations.</P>
<P style="TEXT-ALIGN: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company 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. The Company 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 three years of service. In addition, employees are permitted to make contributions into a 401(k) retirement plan through payroll deferrals. The Company provides a 25.0% matching contribution for the first 5.0% of payroll that an employee elects to contribute. Employees are 100.0% vested in both their and the Company&#146;s matching 401(k)
contributions. For years ended December 31, 2009, 2008, 2007 and 2006 the Company recorded expense of Ps. 25.8 million, Ps. 31.3 million, Ps. 26 million and Ps. 27.1 million respectively. Effective April 1, 2007, the Company 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 through voluntary deferrals of employees&#146; compensation. There are no Company contributions or employer matching contributions.</P>
<P style="TEXT-ALIGN: left"><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Profit Sharing Plans</B></P>
<P style="TEXT-ALIGN: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The previous labor agreement included a profit sharing plan to which the Company was required to contribute 15.0% of its quarterly pre-tax income, as defined in the previous labor agreement, in excess of U.S.$12.5 million. 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, related to its profit sharing funding obligation under the previous labor agreement. The new labor agreement also 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 the year, the contribution will be based upon annual pre-tax income up to U.S.$50.0 million multiplied by 2.5%, U.S. $50.0 million to U.S. $100.0 million multiplied by 3.0%, and above U.S.$100.0 million multiplied by 3.5%, less the previous payouts
during the year. For the year ended December 31, 2008, the Company recorded Ps. 51 million related to its profit sharing funding obligation under the new labor agreement. For the year ended December 31, 2009, there was no profit sharing earned, accrued or recorded.</P>
<P style="TEXT-ALIGN: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In 2004, Republic Inc. adopted a profit sharing plan for salary and nonunion hourly employees excluding a select group of managers and executives. The Company is required to contribute 3.0% of its quarterly pre-tax income, as defined in the plan, in excess of U.S.$12.5 million. For the years ended December, 2008, 2007 and 2006 the Company recorded expense of Ps. 26 million, Ps. 16 million and Ps. 21.5 million, respectively, under this plan. For the year ended December 31, 2009, there was no profit sharing earned, accrued, or recorded.</P>
<P style="TEXT-ALIGN: center">73</P>
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<P style="TEXT-ALIGN: left"><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Incentive Compensation
  Plans</B></P>
<P style="TEXT-ALIGN: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During 2007, Republic Inc. had a Key Employee Incentive Plan which was in effect beginning February 1, 2007. The plan was based on attaining the 2007 Business Plan earnings before income taxes, depreciation and amortization (EBITDA) and individual performance targets. The objectives were measured on an annual basis. For the year ended December 31, 2007, the Company did not record expense under this plan due to not meeting the annual measurement objectives.</P>
<P style="TEXT-ALIGN: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Effective January 1, 2008, Republic Inc. adopted a Key Manager Incentive Plan and Operations and Maintenance Incentive Plan. Additionally, effective April 1, 2008, the Company adopted a Commercial Sales Incentive Plan and a Production Planning Incentive Plan. The plans were based on attaining the 2008 Business Plan (EBITDA) and other performance targets. The objectives were measured on a quarterly basis. Individuals designated as participants in these plans were excluded from the profit sharing plan. For the year ended December 31, 2008, the Company recorded Ps. 26 million of expense under these incentive plans. For the year ended December 31, 2009, there were no incentives earned under these plans as the target threshold for the year were not met.</P>
<P style="TEXT-ALIGN: left"><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Deferred Compensation
  Plan</B></P>
<P style="TEXT-ALIGN: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company had a deferred compensation plan covering certain key employees. The plan allows for the covered employees to make annual deferrals of base salary and provides for a fixed annual contribution by the Company based on a percentage of salary. The Company recorded expense related to the deferred compensation plan of Ps. 1.1 million for each of the years ended December 31, 2007 and 2008 and Ps. 1.3 million for the year ended December 31, 2009.</P>
<P style="TEXT-ALIGN: left"><B>E. Share Ownership</B></P>
<P style="TEXT-ALIGN: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Industrias CH and its direct wholly-owned subsidiaries currently hold approximately 84% of our series B shares. At December 31, 2009, Rufino Vigil Gonz&#225;lez, the chairman of our board of directors, owned approximately 62% of Industrias CH directly or through its subsidiaries, and Eduardo Vigil Gonz&#225;lez, a member of our board of directors, owned 0.6%.</P>
<P style="TEXT-ALIGN: left"><B><a name="p74"></a>Item 7. Major Shareholders and
  Related Party Transactions</B></P>
<P style="TEXT-ALIGN: left"><B>A. Major Shareholders</B></P>
<P style="TEXT-ALIGN: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of May 31, 2010, we had 497,709,214 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 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 style="TEXT-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.</P>
<P style="TEXT-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 style="TEXT-ALIGN: center">74</P>
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<P style="TEXT-ALIGN: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table
  shows the ownership of our series B shares as of June 1, 2010.</P>
<TABLE width="100%" border=0 cellpadding="0" cellSpacing=0 style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'">
  <TR>
    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left><B><FONT size=2>Name of Shareholder</FONT></B></TD>
    <TD align=center><B><FONT size=2>Number of shares</FONT></B><BR> <B><FONT size=2>owned</FONT></B></TD>
    <TD align=center>&nbsp;</TD>
    <TD align=center colSpan=2><B><FONT size=2>% of shares</FONT></B><BR> <B><FONT size=2>owned</FONT></B></TD>
  </TR>
  <TR>
    <TD> <HR align="left" width="500" SIZE=1 noshade> </TD>
    <TD> <HR noshade SIZE=1> </TD>
    <TD>&nbsp;</TD>
    <TD colSpan=2> <HR noshade SIZE=1> </TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left><FONT size=2>Industrias CH</FONT></TD>
    <TD align=right><FONT size=2>275,369,337</FONT></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><FONT size=2>55.3</FONT></TD>
    <TD align=left><FONT size=2>%</FONT></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left><FONT size=2>Tuber&#237;as Procarsa, S.A. de C.V. </FONT><SUP><FONT size=2>(1)</FONT></SUP></TD>
    <TD align=right><FONT size=2>99,461,866</FONT></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><FONT size=2>20.0</FONT></TD>
    <TD align=left><FONT size=2>%</FONT></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left><FONT size=2>Operadora de Manufacturera de Tubos, S.A. de C.V.
      </FONT><SUP><FONT size=2>(2)</FONT></SUP></TD>
    <TD align=right><FONT size=2>27,207,654</FONT></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><FONT size=2>5.5</FONT></TD>
    <TD align=left><FONT size=2>%</FONT></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left><FONT size=2>Aceros y Laminados Sigosa, S.A. de C.V</FONT><SUP><FONT size=2>(1)</FONT></SUP></TD>
    <TD align=right><FONT size=2>4,377,776</FONT></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><FONT size=2>0.9</FONT></TD>
    <TD align=left><FONT size=2>%</FONT></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left><FONT size=2>Joist Estructuras S.A. de C.V. </FONT><SUP><FONT size=2>(2)</FONT></SUP></TD>
    <TD align=right><FONT size=2>6,188,406</FONT></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><FONT size=2>1.2</FONT></TD>
    <TD align=left><FONT size=2>%</FONT></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left><FONT size=2>Industrial de Herramientas CH, S.A. de C.V. </FONT><SUP><FONT size=2>(2)</FONT></SUP></TD>
    <TD align=right><FONT size=2>2,240,628</FONT></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><FONT size=2>0.5</FONT></TD>
    <TD align=left><FONT size=2>%</FONT></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left><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><FONT size=2>3,841,082</FONT></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><FONT size=2>0.8</FONT></TD>
    <TD align=left><FONT size=2>%</FONT></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left><FONT size=2>Public Investors</FONT></TD>
    <TD align=right><FONT size=2>79,022,465</FONT></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><FONT size=2>15.8</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>
  </TR>
  <TR>
    <TD colSpan=5>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left><FONT size=2>Total</FONT></TD>
    <TD align=right><FONT size=2>497,709,214</FONT></TD>
    <TD align=left><SUP><FONT size=2>(3)&nbsp;&nbsp;&nbsp;</FONT></SUP></TD>
    <TD align=right><FONT size=2>100</FONT></TD>
    <TD align=left><FONT size=2>%</FONT></TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD> <HR noshade SIZE=1> </TD>
    <TD>&nbsp; </TD>
  </TR>
</TABLE>
<BR>
<hr align="left" width="90" size="1" noshade>
<TABLE style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'" cellSpacing=0 border=0>
  <TR>
    <TD vAlign=top nowrap width="2%">(1)&nbsp; &nbsp; &nbsp; </TD>
    <TD width="98%"> <P align=left>A subsidiary of Industrias CH.</P></TD>
  </tr>
  <TR>
    <TD vAlign=top nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
  </tr>
  <TR>
    <TD vAlign=top nowrap width="2%">(2)&nbsp; &nbsp; &nbsp; </TD>
    <TD width="98%"> <P align=left>Companies directly or indirectly owned by members
        of the Vigil family.</P></TD>
  </tr>
  <TR>
    <TD vAlign=top nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
  </tr>
  <TR>
    <TD vAlign=top nowrap width="2%">(3)&nbsp; &nbsp; &nbsp; </TD>
    <TD width="98%"> <P align=left>Includes 23,087,603 shares issued to Industrias
        CH and its subsidiaries on July 22, 2008.</P></TD>
  </tr>
</TABLE>
<P style="TEXT-ALIGN: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At May 31, 2010, 473,842,801 series B common shares were held in Mexico by approximately 448 shareholders who were record holders in Mexico and 18 were ADS record holders in the US.</P>
<P style="TEXT-ALIGN: left"><B>B. Related Party Transactions</B></P>
<P style="TEXT-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>
<P style="TEXT-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 style="TEXT-ALIGN: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;From time to time we sell steel products, primarily billet, to Industrias CH and its affiliates. In 2007 these sales totaled Ps. 28 million, in 2008 they totaled Ps. 371 million and in 2009, they totaled Ps. 150 million. In addition, in 2007, 2008 and 2009 we purchased Ps. 76 million, Ps. 89 million, and Ps. 38 million, respectively, of steel products from Industrias CH and its affiliates. We negotiated these prices on an arms-length basis.</P>
<P style="TEXT-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 2007 we paid Ps. 12 million to Industrias CH for its services, in 2008 we paid Ps. 13 million and in 2009 we paid Ps. 15 million. Please also refer to footnote 16 to our financial statements for information  regarding a sale of a subsidiary to Industrias CH. </P>
<P style="TEXT-ALIGN: center">75</P>
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<P style="TEXT-ALIGN: left"><B>C. Interests of Experts and Counsel</B></P>
<P style="TEXT-ALIGN: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Not applicable.</P>
<P style="TEXT-ALIGN: left"><B><a name="p76"></a>Item 8. Financial Information</B></P>
<P style="TEXT-ALIGN: left"><B>A. Consolidated Statements and Other Financial Information</B></P>
<P style="TEXT-ALIGN: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;See Item 18 - &#147;Financial
  Statements&#148; and &#147;Index to Financial Statements.&#148;</P>
<P style="TEXT-ALIGN: left"><B>Legal Proceedings</B></P>
<P style="TEXT-ALIGN: left"><I>Mexico</I></P>
<P style="TEXT-ALIGN: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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 style="TEXT-ALIGN: left"><I>United States</I></P>
<P style="TEXT-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>
<P style="TEXT-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 $235,000 (payable in four payments of $58,750 over the course of one year) for fines of $131,250, the department's costs of $45,000 and an environmental project of $58,750. All these payments were duly made by Pacific Steel.</P>
<P style="TEXT-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 were available.</P>
<P style="TEXT-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 style="TEXT-ALIGN: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We estimated, based on experience in prior years and using the same processes, a liability of between $0.8 million and $1.7 million. Due to the above, at December 31, 2002, and 2003, we created a reserve for this contingency of approximately $0.8 million and $1.7 million, respectively. At December 31, 2009, such reserve is Ps. 6.2 million ($0.5 million).</P>
<P style="TEXT-ALIGN: center">76</P>
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<P style="TEXT-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 $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 style="TEXT-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. 23,324 (19,750 historical pesos) and a charge to results of operations of 2002 for the same amount.</P>
<P style="TEXT-ALIGN: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Environmental Liabilities. </I>At December 31, 2009 and 2008, we had a reserve of  $3.4 and $4 million (Ps. 44.4 and Ps. 54.2 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 Accrued Expenses&#148; and &#147;Other Long-Term Liabilities&#148;, respectively, in the financial statement. 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 style="TEXT-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 style="TEXT-ALIGN: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our currently dividend
  distribution policy is to reinvest all profits.</P>
<P style="TEXT-ALIGN: left"><B>B. Significant Changes</B></P>
<P style="TEXT-ALIGN: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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 style="TEXT-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 style="TEXT-ALIGN: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On July 22, 2008 at a Shareholders Meeting, the Shareholders approved an increase to the capital stock in its variable portion of Ps. 134,695, represented by 27,699,442 ordinary series B shares, with a subscription price of 50.64 Pesos which included a stock premium of 45.7772612088 Pesos for each share. In this same meeting Industrias CH, two of its affiliate companies, and other related companies were authorized to subscribe and pay for 23,087,603 of these shares, and the 4,611,839 remaining shares were offered to the rest of the shareholders in accordance with their preemptive rights. Once the subscription term expired, the Board of Directors exercised the powers delegated to it at the Shareholders Meeting of February 24, 2009 and cancelled these additional shares corresponding to an amount of Ps. 22,426. The increase of capital stock
  paid was Ps. 112,269 plus a stock premium of Ps. 1,056,887.</P>
<P style="TEXT-ALIGN: center">77</P>
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<P style="TEXT-ALIGN: left"><B><a name="p78"></a>Item 9. The Offer and Listing</B></P>
<P style="TEXT-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 style="TEXT-ALIGN: left"><B>Share Price Information</B></P>
<P style="TEXT-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>
    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=center>&nbsp;</TD>
    <TD align=center colSpan=3><B><FONT size=2>Mexican</FONT></B><br> <b><font size=2>Stock</font></b><B><FONT size=2><br>
      Exchange</FONT></B></TD>
    <TD align=center><B></B></TD>
    <TD colSpan=3 align=center><b><font size=2>American<br>
      Stock<br>
      Exchange</font></b></TD>
  </TR>
  <TR>
    <TD align=center>&nbsp;</TD>
    <TD align=center colSpan=3> <HR noshade SIZE=1> </TD>
    <TD align=center>&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>High</FONT></B></TD>
    <TD align=center>&nbsp;</TD>
    <TD align=center><B><FONT size=2>Low</FONT></B></TD>
    <TD align=center>&nbsp;</TD>
    <TD align=center><B><FONT size=2>High</FONT></B></TD>
    <TD align=center>&nbsp;</TD>
    <TD align=center><B><FONT size=2>Low</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>
    <TD colSpan=8>&nbsp;</TD>
  </TR>
  <TR>
    <TD colSpan=8>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left><B><FONT size=2>2005</FONT></B></TD>
    <TD align=right><FONT size=2>95.00</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>40.75</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>8.70</FONT></TD>
    <TD align=right>&nbsp;&nbsp;&nbsp;</TD>
    <TD align=right><FONT size=2>3.63</FONT></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left><B><FONT size=2>2006</FONT></B></TD>
    <TD align=right><FONT size=2>80.00</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>22.00</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>21.64</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>3.96</FONT></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left><B><FONT size=2>2007</FONT></B></TD>
    <TD align=right><FONT size=2>55.91</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>32.50</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>15.46</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>8.55</FONT></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left><B><FONT size=2>2008</FONT></B></TD>
    <TD align=right><FONT size=2>63.60</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>15.50</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>18.48</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>3.21</FONT></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left><B><FONT size=2>2009</FONT></B></TD>
    <TD align=right><FONT size=2>38.64</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>17.52</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>9.24</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>3.94</FONT></TD>
  </TR>
  <TR>
    <TD colSpan=8>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left><B><FONT size=2>2008</FONT></B></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right>&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;First Quarter</FONT></TD>
    <TD align=right><FONT size=2>43.20</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>32.70</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>12.43</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>8.75</FONT></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left><FONT size=2>&nbsp;&nbsp;&nbsp;Second Quarter</FONT></TD>
    <TD align=right><FONT size=2>63.60</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>39.97</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>18.48</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>11.00</FONT></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left><FONT size=2>&nbsp;&nbsp;&nbsp;Third Quarter</FONT></TD>
    <TD align=right><FONT size=2>58.80</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>30.10</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>17.02</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>7.93</FONT></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left><FONT size=2>&nbsp;&nbsp;&nbsp;Fourth Quarter</FONT></TD>
    <TD align=right><FONT size=2>33.15</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>15.50</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>8.90</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>3.21</FONT></TD>
  </TR>
  <TR>
    <TD colSpan=8>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left><B><FONT size=2>2009</FONT></B></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right>&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;First Quarter</FONT></TD>
    <TD align=right><FONT size=2>24.35</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>17.52</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>9.24</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>7.05</FONT></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left><FONT size=2>&nbsp;&nbsp;&nbsp;Second Quarter</FONT></TD>
    <TD align=right><FONT size=2>31.95</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>20.20</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>8.90</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>5.69</FONT></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left><FONT size=2>&nbsp;&nbsp;&nbsp;Third Quarter</FONT></TD>
    <TD align=right><FONT size=2>38.64</FONT></TD>
    <TD align=right>&nbsp;&nbsp;&nbsp;</TD>
    <TD align=right><FONT size=2>26.01</FONT></TD>
    <TD align=right>&nbsp;&nbsp;&nbsp;</TD>
    <TD align=right><FONT size=2>7.50</FONT></TD>
    <TD align=right>&nbsp;&nbsp;&nbsp;</TD>
    <TD align=right><FONT size=2>4.20</FONT></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left><FONT size=2>&nbsp;&nbsp;&nbsp;Fourth Quarter</FONT></TD>
    <TD align=right><FONT size=2>38.10</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>31.9</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>5.40</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>3.56</FONT></TD>
  </TR>
  <TR>
    <TD colSpan=8>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left><B><FONT size=2>2010</FONT></B></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right>&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;First Quarter</FONT></TD>
    <TD align=right><FONT size=2>37.8</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>29.1</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>8.95</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>6.81</FONT></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left><FONT size=2>&nbsp;&nbsp;&nbsp;Second Quarter</FONT></TD>
    <TD align=right><FONT size=2>36.91</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>30.25</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>9.08</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>6.64</FONT></TD>
  </TR>
  <TR>
    <TD colSpan=8>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left><B><FONT size=2>2010</FONT></B></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right>&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;January</FONT></TD>
    <TD align=right><FONT size=2>37.8</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>29.1</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>8.95</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>6.81</FONT></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left><FONT size=2>&nbsp;&nbsp;&nbsp;February</FONT></TD>
    <TD align=right><FONT size=2>33.5</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>30.25</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>7.82</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>6.86</FONT></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left><FONT size=2>&nbsp;&nbsp;&nbsp;March</FONT></TD>
    <TD align=right><FONT size=2>35.95</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>32.1</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>8.85</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>7.75</FONT></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left><FONT size=2>&nbsp;&nbsp;&nbsp;April</FONT></TD>
    <TD align=right><FONT size=2>36.91</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>33.33</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>9.08</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>8.18</FONT></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left><FONT size=2>&nbsp;&nbsp;&nbsp;May</FONT></TD>
    <TD align=right><FONT size=2>35.00</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>30.35</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>8.46</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>6.89</FONT></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left><FONT size=2>&nbsp;&nbsp;&nbsp;June</FONT></TD>
    <TD align=right><FONT size=2>33.70</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>30.25</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>8.10</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>6.64</FONT></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left><FONT size=2>&nbsp;&nbsp;&nbsp;July</FONT></TD>
    <TD align=right><FONT size=2>31.80</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>28.20</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>7.75</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>6.49</FONT></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left><FONT size=2>&nbsp;&nbsp;&nbsp;August</FONT></TD>
    <TD align=right><FONT size=2>32.00</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>28.20</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>7.60</FONT></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><FONT size=2>6.64</FONT></TD>
  </TR>
</TABLE>
<BR>
<P style="TEXT-ALIGN: center">78</P>
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<P style="TEXT-ALIGN: left"><B>Trading on the Mexican Stock Exchange</B></P>
<P style="TEXT-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 style="TEXT-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 align=left>non-disclosure of material events; or</P>
<LI>
<P align=left>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 style="TEXT-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 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 style="TEXT-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 style="TEXT-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 style="TEXT-ALIGN: left"><B><a name="p79"></a>Item 10. Additional Information</B></P>
<P style="TEXT-ALIGN: left"><B>A. Share Capital</B></P>
<P style="TEXT-ALIGN: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Not applicable.</P>
<P style="TEXT-ALIGN: left"><B>B. Memorandum and Articles of Association</B></P>
<P style="TEXT-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 style="TEXT-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 style="TEXT-ALIGN: center">79</P>
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<P style="TEXT-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 style="TEXT-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 style="TEXT-ALIGN: left"><I>Voting Rights and Shareholders&#146; Meetings</I></P>
<P style="TEXT-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 align=left>our transformation from one type of company to another;</P>
<LI>
<P align=left>to elect one member of our board of directors pursuant to the provisions of our by-laws and the Securities Market Law;</P>
<LI>
<P align=left>any merger or corporate spin-off in which we are not the surviving entity;</P>
<LI>
<P align=left>our dissolution or liquidation;</P>
<LI>
<P align=left>cancellation of the registration of our shares with the National Registry of Securities; and</P>
<LI>
<P align=left>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 style="TEXT-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>
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<P style="TEXT-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 preceding 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 preceding 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 style="TEXT-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 align=left>voluntary dissolution of the company;</P>
<LI>
<P align=left>an increase or decrease in a company&#146;s minimum fixed capital;</P>
<LI>
<P align=left>change in corporate purpose or nationality;</P>
<LI>
<P align=left>any transformation, merger or spin-off involving the company;</P>
<LI>
<P align=left>any stock redemption or issuance of preferred stock or bonds;</P>
<LI>
<P align=left>the cancellation of the listing of our shares with the National Securities Registry or on any stock exchange;</P>
<LI>
<P align=left>any other amendment to our by-laws; and</P>
<LI>
<P align=left>any other matters for which applicable Mexican law or our by-laws specifically require an extraordinary meeting.</P>
</LI></UL>
<P style="TEXT-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 style="TEXT-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 style="TEXT-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</P>
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<P style="TEXT-ALIGN: left">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 style="TEXT-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 style="TEXT-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>
<P style="TEXT-ALIGN: left"><I>Quorums</I></P>
<P style="TEXT-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 style="TEXT-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 style="TEXT-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 style="TEXT-ALIGN: left"><I>No Right of Redemption</I></P>
<P style="TEXT-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 style="TEXT-ALIGN: left"><I>Registration and Transfer</I></P>
<P style="TEXT-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</P>
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<P style="TEXT-ALIGN: left">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 style="TEXT-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 style="TEXT-ALIGN: left"><I>Dividends and Distributions</I></P>
<P style="TEXT-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 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, 2009, was approximately Ps. 4,143 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.</P>
<P style="TEXT-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 style="TEXT-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 style="TEXT-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 style="TEXT-ALIGN: left"><I>Changes in Capital Stock</I></P>
<P style="TEXT-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 style="TEXT-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</P>
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<P style="TEXT-ALIGN: left">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 style="TEXT-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>
<P style="TEXT-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 style="TEXT-ALIGN: left"><I>Share Repurchases</I></P>
<P style="TEXT-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 align=left>the acquisition must be carried out through the Mexican Stock Exchange;</P>
<LI>
<P align=left>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>
<P align=left>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.<BR>
No shareholder consent is required for such purchases.</P>
<LI>
<P align=left>the amount and price paid in all share repurchases must be made public;</P>
<LI>
<P align=left>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>
<P align=left>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>
<P align=left>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 style="TEXT-ALIGN: left"><I>Ownership of Capital Stock by Subsidiaries</I></P>
<P style="TEXT-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>
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<P style="TEXT-ALIGN: left"><I>Delisting</I></P>
<P style="TEXT-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 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 style="TEXT-ALIGN: left"><I>Other Provisions</I></P>
<P style="TEXT-ALIGN: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Information to Shareholders. </I>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 align=left>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>
<P align=left>a report explaining the principal accounting and information policies and criteria followed in the preparation of the financial information,</P>
<LI>
<P align=left>a statement of the financial condition of the company at the end of the fiscal year,</P>
<LI>
<P align=left>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>
<P align=left>a report of the chief executive officer on the operations of the company during the preceding year,</P>
<LI>
<P align=left>a report of the fulfillment of the company&#146;s tax obligations of the last fiscal year,</P>
<LI>
<P align=left>a report of the audit and corporate practices committee with respect to the preceding year, and</P>
<LI>
<P align=left>the notes which are required to complete or clarify the above mentioned information.</P>
</LI></UL>
<P style="TEXT-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>
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<P style="TEXT-ALIGN: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Shareholders&#146; Conflict of Interest. </I>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 style="TEXT-ALIGN: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Liquidation. </I>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 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 style="TEXT-ALIGN: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Foreign Investment. </I>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 style="TEXT-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&#243;n Extranjera)</I>.</P>
<P style="TEXT-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 style="TEXT-ALIGN: left"><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Duration</I>. Our
  existence under our by-laws is indefinite.</P>
<P style="TEXT-ALIGN: left"><I>Certain Differences between Mexican and U.S. Corporate Law</I></P>
<P style="TEXT-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 style="TEXT-ALIGN: left"><I>Independent Directors</I></P>
<P style="TEXT-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 style="TEXT-ALIGN: left"><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Mergers, Consolidations,
  and Similar Arrangements</I></P>
<P style="TEXT-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 style="TEXT-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 style="TEXT-ALIGN: left"><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Anti-Takeover Provisions</I></P>
<P style="TEXT-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 style="TEXT-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 align=left>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>
<P align=left>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>
    <P align=left>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>2</SUP>/<font size="1">3</font>% of the voting stock which is not owned by the interested shareholder.</P>
</LI></UL>
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<P style="TEXT-ALIGN: left"><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Shareholders&#146;
  Suits</I></P>
<P style="TEXT-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 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 style="TEXT-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 style="TEXT-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 style="TEXT-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 style="TEXT-ALIGN: left"><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Shareholder Proposals</I></P>
<P style="TEXT-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 style="TEXT-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 style="TEXT-ALIGN: left"><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Calling of Special
  Shareholders&#146; Meetings</I></P>
<P style="TEXT-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 style="TEXT-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>
<P style="TEXT-ALIGN: center">88</P>
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<P style="TEXT-ALIGN: left"><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cumulative Voting</I></P>
<P style="TEXT-ALIGN: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under Mexican law, cumulative
  voting for the election of directors is permitted.</P>
<P style="TEXT-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 style="TEXT-ALIGN: left"><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Staggered Board of
  Directors</I></P>
<P style="TEXT-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 style="TEXT-ALIGN: left"><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Approval of Corporate
  Matters by Written Consent</I></P>
<P style="TEXT-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 style="TEXT-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 style="TEXT-ALIGN: left"><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Amendment of Certificate
  of Incorporation</I></P>
<P style="TEXT-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 style="TEXT-ALIGN: left"><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Amendment of By-laws</I></P>
<P style="TEXT-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 style="TEXT-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 style="TEXT-ALIGN: left"><B>C. Material Contracts</B></P>
<P style="TEXT-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.$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.$122 million (Ps. 1,392 million). We financed our portion of the U.S.$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 style="TEXT-ALIGN: center">89</P>
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<P style="TEXT-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 for a total consideration of U.S. $844 million (Ps. 8,730 million), 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 style="TEXT-ALIGN: left"><B>D. Exchange Control</B></P>
<P style="TEXT-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 style="TEXT-ALIGN: left"><B>E. Taxation</B></P>
<P style="TEXT-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 style="TEXT-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 style="TEXT-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 style="TEXT-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 style="TEXT-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</P>
<P style="TEXT-ALIGN: center">90</P>
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<P style="TEXT-ALIGN: left">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 style="TEXT-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 style="TEXT-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 style="TEXT-ALIGN: left"><I>Taxation of Dividends</I></P>
<P style="TEXT-ALIGN: left"><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Mexican Tax Considerations</I></P>
<P style="TEXT-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 style="TEXT-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, 2009 and 42.86% for 2010. 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 style="TEXT-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% in 2009 and 30% in 2010, or at the rate mentioned above, as the case may be.</P>
<P style="TEXT-ALIGN: left"><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;U.S. Federal Income
  Tax Considerations</I></P>
<P style="TEXT-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 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 2007, 2008 or our 2009 taxable year.</P>
<P style="TEXT-ALIGN: center">91</P>
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<P style="TEXT-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 style="TEXT-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 style="TEXT-ALIGN: left"><I>Taxation of Dispositions of Shares or ADSs</I></P>
<P style="TEXT-ALIGN: left"><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Mexican Tax Considerations&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</I></P>
<P style="TEXT-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 style="TEXT-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, 2009 and 30% by 2010 of gains realized from the disposition.</P>
<P style="TEXT-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 style="TEXT-ALIGN: left"><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;U.S. Federal Income
  Tax Considerations</I></P>
<P style="TEXT-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 style="TEXT-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</P>
<P style="TEXT-ALIGN: center">92</P>
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<P style="TEXT-ALIGN: left">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 style="TEXT-ALIGN: left"><I>Other Mexican Taxes</I></P>
<P style="TEXT-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 style="TEXT-ALIGN: left"><I>U.S. Backup Withholding Tax and Information Reporting Requirements</I></P>
<P style="TEXT-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 style="TEXT-ALIGN: left"><B>F. Dividends and Paying Agents</B></P>
<P style="TEXT-ALIGN: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Not applicable.</P>
<P style="TEXT-ALIGN: left"><B>G. Statements by Experts</B></P>
<P style="TEXT-ALIGN: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Not applicable</P>
<P style="TEXT-ALIGN: left"><B>H. Documents on Display</B></P>
<P style="TEXT-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 style="TEXT-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 Securities and Exchange Commission (the &#147;Commission&#148;), 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 style="TEXT-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 Commission, promptly after it is made public or filed, information that we make public in Mexico, file with the Mexican Stock Exchange or the National</P>
<P style="TEXT-ALIGN: center">93</P>
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<P style="TEXT-ALIGN: left">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 style="TEXT-ALIGN: left"><B>I. Subsidiary Information</B></P>
<P style="TEXT-ALIGN: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Not applicable.</P>
<P style="TEXT-ALIGN: left"><B><a name="p94"></a>Item 11. Quantitative and Qualitative
  Disclosures About Market Risk</B></P>
<P style="TEXT-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 107% higher than the Mexican peso&#146;s devaluation relative to the dollar.</P>
<P style="TEXT-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 until such time as the related item hedged is recorded in income. At that time, the hedging instrument&#146;s fair value is recorded in income. 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 7 to the consolidated financial statements.</P>
<P style="TEXT-ALIGN: left"><B>Market Risk Measurement</B></P>
<P style="TEXT-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, 2009 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 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 style="TEXT-ALIGN: left"><B>Interest Rate Exposure</B></P>
<P style="TEXT-ALIGN: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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  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 style="TEXT-ALIGN: center">94</P>
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<P style="TEXT-ALIGN: left"><B>Currency Rate Exposure</B></P>
<P style="TEXT-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. 0.4 million ($30 thousand).</P>
<P style="TEXT-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, 2009 and assuming that the hypothetical market rate changes selected by us in our market risk analysis occur during 2010. 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 style="TEXT-ALIGN: left"><B><a name="p95"></a>Item 12. Description of Securities
  Other than Equity Securities</B></P>
<P style="TEXT-ALIGN: left"><B>A. Debt Securities</B></P>
<P style="TEXT-ALIGN: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Not applicable.</P>
<P style="TEXT-ALIGN: left"><B>B. Warrants and Rights</B></P>
<P style="TEXT-ALIGN: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Not applicable</P>
<P style="TEXT-ALIGN: left"><B>C. Other Securities</B></P>
<P style="TEXT-ALIGN: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Not applicable</P>
<P style="TEXT-ALIGN: left"><B>D. American Depositary Shares</B></P>
<P style="TEXT-ALIGN: left"><B>12.D.3. American Depositary Shares</B></P>
<P style="TEXT-ALIGN: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Bank of New York Mellon serves as the depositary for our ADSs. The depositary collects its fees for delivery and surrender of ADSs directly from investors depositing shares or surrendering ADSs for the purpose of withdrawal or from intermediaries acting for them. The depositary collects fees for making distributions to investors by deducting those fees from the amounts distributed or by selling a portion of distributable property to pay the fees. The depositary may collect its annual fee for depositary services by deductions from cash distributions or by directly billing investors or by charging the book-entry system accounts of participants acting for them. The depositary may generally refuse to provide fee-attracting services until its fees for those services are paid.</P>
<P style="TEXT-ALIGN: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;ADS holders are also required to pay additional fees for certain services provided by the depositary, as set forth in the table below.</P>
<TABLE width="100%" border=0 cellpadding="0" cellSpacing=0 style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'">
  <TR>
    <TD></TD>
    <TD></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>
      <HR noshade SIZE=1>
    </TD>
    <TD align=left>
      <HR noshade SIZE=1>
    </TD>
  </TR>
  <TR vAlign=bottom>
    <TD width="60%" align=left><B><FONT size=2>Depositary service</FONT></B></TD>
    <TD align=left><B><FONT size=2>Fee payable by ADR holders</FONT></B></TD>
  </TR>
  <TR>
    <TD>
      <HR noshade SIZE=1>
       </TD>
    <TD>
      <HR noshade SIZE=1>
       </TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left><FONT size=2>Issuance and delivery of ADSs, including issuances
      resulting from</FONT></TD>
    <TD align=left><FONT size=2>Up to US$ 5.00 per 100 ADSs (or</FONT></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left height="14"><FONT size=2>a distribution of shares or rights or other property</FONT></TD>
    <TD align=left height="14"><FONT size=2>portion thereof)</FONT></TD>
  </TR>

  <TR>
    <TD>
      <HR noshade SIZE=1>
       </TD>
    <TD>
      <HR noshade SIZE=1>
    </TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left><FONT size=2>Cancellation of ADSs for the purpose of withdrawal,
      including if</FONT></TD>
    <TD align=left><FONT size=2>Up to US$ 5.00 per 100 ADSs (or</FONT></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left><FONT size=2>the deposit agreement terminates</FONT></TD>
    <TD align=left><FONT size=2>portion thereof)</FONT></TD>
  </TR>

  <TR>
    <TD>
      <HR noshade SIZE=1>
       </TD>
    <TD>
      <HR noshade SIZE=1>
    </TD>
  </TR>
</TABLE>
<BR>
<P style="TEXT-ALIGN: center">95</P>
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<TABLE width="100%" border=0 cellpadding="0" cellSpacing=0 style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'">
  <TR>
    <TD></TD>
    <TD></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left><HR noshade SIZE=1></TD>
    <TD align=left><HR noshade SIZE=1></TD>
  </TR>
  <TR vAlign=bottom>
    <TD width="60%" align=left><FONT size=2>Distribution of securities distributed
      to holders of deposited</FONT></TD>
    <TD align=left><FONT size=2>A fee equivalent to the fee that</FONT></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left><FONT size=2>securities which are distributed by the depositary
      to ADS</FONT></TD>
    <TD align=left><FONT size=2>would be payable if securities</FONT></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left><FONT size=2>registered holders</FONT></TD>
    <TD align=left><FONT size=2>distributed to you had been shares</FONT></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>
    <TD align=left><FONT size=2>and the shares had been deposited</FONT></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>
    <TD align=left><FONT size=2>for issuance of ADSs</FONT></TD>
  </TR>
  <TR>
    <TD><HR noshade SIZE=1></TD>
    <TD> <HR noshade SIZE=1> </TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left><FONT size=2>Registration for the transfer of shares</FONT></TD>
    <TD align=left><FONT size=2>Registration or transfer fees that</FONT></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>
    <TD align=left><FONT size=2>may from time to time be in effect</FONT></TD>
  </TR>
  <TR>
    <TD> <HR noshade SIZE=1> </TD>
    <TD> <HR noshade SIZE=1> </TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left><FONT size=2>Cash distribution fees</FONT></TD>
    <TD align=left><FONT size=2>US$.02 or less per ADS</FONT></TD>
  </TR>
  <TR>
    <TD> <HR noshade SIZE=1> </TD>
    <TD> <HR noshade SIZE=1> </TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left><FONT size=2>Depositary services</FONT></TD>
    <TD align=left><FONT size=2>US$.02 or less per ADS</FONT></TD>
  </TR>
  <TR>
    <TD> <HR noshade SIZE=1> </TD>
    <TD> <HR noshade SIZE=1> </TD>
  </TR>
</TABLE>
<P style="TEXT-ALIGN: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition, holders may be required to pay a fee for the distribution or sale of securities. Such fee (which may be deducted from such proceeds) would be for an amount equal to the lesser of (1) the fee for the issuance of ADSs that would be charged as if the securities were treated as deposited shares and (2) the amount of such proceeds.</P>
<P style="TEXT-ALIGN: left"><B>12.D.4 Direct And Indirect Payments By The Depositary</B></P>
<P style="TEXT-ALIGN: left"><B>Fees Incurred in Past Annual Period</B></P>
<P style="TEXT-ALIGN: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We did not receive any
  reimbursement from the depositary in 2009.</P>
<P style="TEXT-ALIGN: left"><B>Fees to be Paid in the Future</B></P>
<P style="TEXT-ALIGN: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Bank of New York Mellon, as depositary, has agreed to reimburse us for expenses they incur that are related to establishment and maintenance expenses of the ADS program. The depositary has agreed to reimburse us for its continuing annual stock exchange listing fees. The depositary has also agreed to pay the standard out-of-pocket maintenance costs for the ADSs, which consist of the expenses of postage and envelopes for mailing annual and interim financial reports, printing and distributing dividend checks, electronic filing of U.S. Federal tax information, mailing required tax forms, stationery, postage, facsimile, and telephone calls. It has also agreed to reimburse us annually for certain investor relationship programs or special investor relations promotional activities. In certain instances, the depositary has agreed to provide additional payments to us based on any applicable performance indicators relating to the ADS facility. There
are limits on the amount of expenses for which the depositary will reimburse us, but the amount of reimbursement available to us is not necessarily tied to the amount of fees the depositary collects from investors.</P>
<P style="TEXT-ALIGN: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The depositary collects its fees for delivery and surrender of ADSs directly from investors depositing shares or surrendering ADSs for the purpose of withdrawal or from intermediaries acting for them. The depositary collects fees for making distributions to investors by deducting those fees from the amounts distributed or by selling a portion of distributable property to pay the fees. The depositary may collect its annual fee for depositary services by deduction from cash distributions or by directly billing investors or by charging the book-entry system accounts of participants acting for them. The depositary may generally refuse to provide fee-attracting services until its fees for those services are paid.</P>
<P style="TEXT-ALIGN: center"><B>PART II.</B></P>
<P style="TEXT-ALIGN: left"><B><a name="p96"></a>Item 13. Defaults, Dividends
  Arrearages and Delinquencies</B></P>
<P style="TEXT-ALIGN: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are in default on the payment of U.S. $302,000 principal amount of 8 7/8% MTNs due 1998 which were issued in 1993 as part of a U.S. $68 million exchange offer. Accrued interest on the MTNs at</P>
<P style="TEXT-ALIGN: center">96</P>
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<P style="TEXT-ALIGN: left">December 31, 2009 was U.S. $418,176. The U.S. $418,176 due reflects sums that were not paid to holders that could not be identified at the time of the exchange offer.</P>
<P style="TEXT-ALIGN: left"><B><a name="p97a"></a>Item 14. Material Modifications
  to the Rights of Security Holders and Use of Proceeds</B></P>
<P style="TEXT-ALIGN: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;None.</P>
<P style="TEXT-ALIGN: left"><B><a name="p97b"></a>Item 15. Controls and Procedures</B></P>
<P style="TEXT-ALIGN: left"><B>&nbsp;&nbsp;&nbsp;A. Disclosure Control and Procedures</B></P>
<P style="text-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, and as a result of the material weaknesses described in item
  15(B) our disclosure controls and procedures were not effective.</P>
<P style="text-align: left;"> <B>&nbsp;&nbsp;&nbsp;B. Management&#146;s Annual
  Report on Internal Control over Financial Reporting</B></P>
<P style="text-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 applicable Mexican financial
  reporting standards (MFRS). 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 assurance
  with respect to financial statement preparation and presentation. Also, projections
  of any evaluation of effectiveness of the internal control over financial reporting
  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 style="text-align: left;"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The effectiveness
  of our internal control over financial reporting as of December
  31, 2009 has been audited by Mancera S.C., a member firm of Ernst &amp; Young
  Global, an independent registered public accounting firm, as stated in their
  report which appears in Item 15(c) as required by item 15(b)(4) of Form 20-F.</P>
<P style="text-align: left;"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our management assessed
  the effectiveness of our internal control over financial reporting as of December
  31, 2009. 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 identified the following material weaknesses  in our internal control over financial
  reporting.</P>
<P style="text-align: left;"> <B>Material weaknesses</B></P>
<P style="text-align: left;"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A deficiency in internal
  control over financial reporting exists when the design or operation of a control
  does not allow management or employees, in the normal course of performing their
  assigned functions, to prevent or detect misstatements on a timely basis. A material weakness is
  a deficiency, or a combination of deficiencies, in internal control over financial
  reporting such that there is a reasonable possibility that a material misstatement
  of the company&#146;s annual or interim financial statements will not be prevented
  or detected on a timely basis. We have identified the following material weaknesses:</P>
<P style="text-align: left;"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Due to the growth
  of our operations in Mexico during 2008 primarily as a result of our acquisition
  in May 2008 of Corporaci&oacute;n Aceros D.M. S.A. de C.V., the structure of
  our finance department proved to be insufficient insofar as it did not allow
  for adequate segregation of duties with respect to the supervision and review
  procedures for the assessment of deferred taxes and for the closing of our financial
  statements. The personnel of our finance department also lacked the requisite
  level of knowledge and specialization to calculate asset impairments, to convert
  between MFRS and US GAAP and to convert the financial statements of our foreign
  subsidiaries to MFRS. Our continuing growth also had an adverse impact on our
  ability to maintain adequate control over our preparation of consolidated financial
  information which had become more complex.</P>
<P style="text-align: center;"> 97</P>
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<P style="text-align: left;"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The preparation of consolidated financial information was carried out through the use of electronic Excel
  sheets and a partially integrated system which relied on the use of different
  software by various subsidiaries, rather than through a company-wide, integrated
  consolidation system.  This situation did not allow a proper supervision of the consolidation process during 2009. </P>
<P style="text-align: left;"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We invoiced in Mexico
  certain materials that were paid for in 2009 but shipped in 2010. This occurred
  due to a failure of a manual key control regarding our revenue recognition process. As a result, we incorrectly classified Ps.94 million
  as sales in 2009 instead of 2010. Our external auditors subsequently detected
   this discrepancy and we corrected it through a Ps.21 million net audit adjustment
  to the sales and related costs reflected in our 2009 financial statements.</P>
<P style="text-align: left;"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On April 29, 2010,
  our external auditor notified our Audit and Corporate Practices Committee (&#147;Audit
  Committee&#148;) and certain members of the management of Republic Engineered
  Products, Inc. that it had identified, during its audit of the financial statements
  of SimRep and its subsidiaries for the year ended December 31, 2009 what it
  considered, under standards established by the Public Company Accounting Oversight
  Board, to be material weaknesses in internal control over financial reporting
  at the SimRep evaluation level. Republic Engineered Products, Inc. is a subsidiary of SimRep Corporation.  Specifically, our external auditor noted material
  weaknesses with regard to what it characterized as &#147;management override
  of internal controls.&#148; <font face="Times New Roman, Times, serif" size="2">In response, our Audit Committee instructed our
internal audit department to perform supplementary testing actions and
afterwards engaged outside counsel to conduct an internal
investigation concerning the matters characterized as &#147;management override of
internal controls&#148; and the material weaknesses at our subsidiary SimRep
Corporation. As a result of our investigation, we have identified the following
material weaknesses at our subsidiary SimRep Corporation: </font></P>
<ul>
  <li>
    <p><font face="Times New Roman, Times, serif" size="2">Management
override of controls during 2009 by SimRep&#146;s senior management that resulted in
certain accounting errors that inappropriately increased income and also
affected the interim financial reporting process. This material weakness
resulted in certain accounting errors that we adjusted through an audit
adjustment to our 2009 financial statements. </font></p>
  </li>
  <li>
    <p><font face="Times New Roman, Times, serif" size="2">Lack of appropriate accounting
resources during 2009 at SimRep that affected its adherence to its written
policies with regard to accounting for its working capital and fixed assets.
This material weakness resulted in certain accounting errors that we adjusted
through an audit adjustment to our 2009 financial statements.   </font></p>
  </li>
</ul>
<p>&nbsp;</p>
<P style="text-align: center;"> 98</P>
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<P style="text-align: left;"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our management has
  determined that these deficiencies constitute  material weaknesses. Accordingly,
  our management has concluded that we did not maintain effective internal control
  over our financial reporting as defined in Rule 13a-15(f) under the Exchange
  Act as of December 31, 2009.</P>
<P style="text-align: left;"> <B>&nbsp;&nbsp;&nbsp;C. Attestation Reports of the Independent Registered
  Public Accounting Firms</B></P>
<P style="text-align: center;"> <B>Report of Independent Registered Public Accounting
  Firm</B></P>
<P style="text-align: left;"> <B>The Board of Directors and Shareholders of Grupo
  Simec, S.A.B. de C.V.</B></P>
<P style="text-align: left;"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have audited Grupo
  Simec, S.A.B. de C.V.&#146;s internal control over financial reporting as of
  December 31, 2009, 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</P>
<P style="text-align: center;"> 99</P>
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<P style="text-align: left;"> 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 Annual Report on 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.
  We did not examine the effectiveness of internal control over financial reporting
  of the subsidiaries included in the combined financial statements of Corporaci&oacute;n
  Aceros DM, S.A. de C.V. and affiliates, wholly owned subsidiaries, whose financial
  statements reflect total assets and revenues of Ps. 3,844,696 (thousands) and
  Ps. 3,724,960 (thousands), respectively, as of and for the year ended December
  31, 2009. The effectiveness of Corporaci&oacute;n Aceros DM, S.A. de C.V. and
  affiliates internal control over financial reporting was audited by other auditors
  whose report has been furnished to us and expressed an adverse opinion. Our opinion, insofar as it relates to the effectiveness of Corporaci&oacute;n
  Aceros DM, S.A. de C.V. and affiliates internal control over financial reporting,
  is based solely on the report of the other auditors.</P>
<P style="text-align: left;"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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 and the report of the other auditors
  provide a reasonable basis for our opinion.</P>
<P style="text-align: left;"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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.</P>
<P style="text-align: left;"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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.</P>
<P style="text-align: left;"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A material weakness
  is a deficiency, or combination of deficiencies, in internal control over financial
  reporting, such that there is a reasonable possibility that a material misstatement
  of the company&#146;s annual or interim financial statements will not be prevented
  or detected on a timely basis. The following material weaknesses have been identified
  and included in management&#146;s assessment:</P>
<blockquote>
  <p style="text-align: left;"> (1) Lack of appropriate accounting resources during
    2009 at the corporate office that affected the operation of key supervision
    controls of the accounting department that, in turn, affected the financial
    statement closing process, the deferred income tax process, the U.S. GAAP
    reconciliation process, the impairment determination process and the conversion
    of foreign subsidiaries process. This material weakness resulted in some accounting
    errors during 2009. The</p>
</blockquote>
<P style="text-align: center;">100</P>
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<blockquote>
  <p style="text-align: left;"> total accounting errors adjusted for this matter
    were considered material to the consolidated financial statements of Grupo
    Simec, S.A.B. de C.V.</p>
  <p style="text-align: left;"> (2) Lack of appropriate consolidation system to
    allow management to properly supervise the preparation of consolidated financial
    information.</p>
  <p style="text-align: left;"> (3) Ineffective key controls in the revenue recognition
    process regarding the period of revenue recognition of the Mexican operations.</p>
  <p style="text-align: left;"> (4) Management override of controls during 2009
    at the subsidiary, SimRep Corporation, by the CEO of the subsidiary that resulted
    in some accounting errors that inappropriately increased income. The total
    accounting errors adjusted for this matter were considered material to the
    consolidated financial statements of Grupo Simec, S.A.B. de C.V.</p>
  <p style="text-align: left;"> (5) Lack of appropriate accounting resources during
    2009 at the subsidiary SimRep Corporation that affected the subsidiary&#146;s
    adherence to its written policies with regard to accounting for its working
    capital and fixed assets accounts. This material weakness resulted in some
    accounting errors during the year 2009. The total accounting errors adjusted
    for this matter were considered material to the consolidated financial statements
    of Grupo Simec, S.A.B. de C.V.</p>
</blockquote>
<P style="text-align: left;"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We also have audited,
  in accordance with the standards of the Public Company Accounting Oversight
  Board (United States), the consolidated balance sheets of Grupo Simec, S.A.B.
  de C.V. and subsidiaries (the &#147;Company&#148;) as of December 31, 2009 and
  2008, and the related consolidated statements of operations and changes in stockholders&#146;
  equity for each of the three years ended December 31, 2009, the related consolidated
  statement of cash flows for each of the two years ended December 31, 2009, and
  the consolidated statement of changes in financial position for the year ended
  December 31, 2007. We did not audit the combined financial statements of Corporaci&oacute;n
  Aceros D.M., S.A. de C.V. and affiliates, wholly-owned subsidiaries acquired
  on May 31, 2008, which statements reflect total combined assets of Ps. 3,844,696
  (thousand) and Ps. 3,673,889 (thousand), as of December 31, 2009 and 2008, respectively,
  and total combined revenues of Ps. 3,724,960 (thousand) and Ps. 2,871,090 (thousand),
  for the year ended December 31, 2009 and the period ended December 31, 2008,
  respectively. Those statements were audited by other auditors whose report has
  been furnished to us, and our opinion, insofar as it relates to the amounts
  included for Corporaci&oacute;n Aceros D.M., S.A. de C.V. and affiliates, is
  based solely on the report of the other auditors. These material weaknesses
  were considered in determining the nature, timing and extent of audit tests
  applied in our audit of the 2009 financial statements and this report does not
  affect our report dated September 17, 2010, which expressed an unqualified opinion on
  those financial statements.</P>
<P style="text-align: left;"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In our opinion, based
  on our audit and the report of the other auditors, because of the effect of
  the material weaknesses described above on the achievement of the objectives
  of the control criteria, Grupo Simec, S.A.B. de C.V. has not maintained effective
  internal control over financial reporting as of December 31, 2009, based on
  the COSO criteria.</P>
<P style="text-align: right;"> Mancera, S.C.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<BR>
  A member Practice of</P>
<P style="text-align: center;"> 101</P>
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<P style="text-align: right;"> Ernst &amp; Young Global&nbsp;</P>
<P style="text-align: right;"> Humberto Valdes Mier</P>
<P style="text-align: left;"> Guadalajara, Jalisco, M&eacute;xico<BR>
  September 17, 2010</P>
<P style="text-align: left;">&nbsp; </P>
<p style="text-align: center;"><b>Report of Independent Registered Public Accounting Firm</b></p>
<p style="text-align: left;"> <b>The Board of Directors and Shareholders of Corporaci&oacute;n Aceros D.M., S.A. de C.V. subsidiaries and affiliates.</b></p>
<p style="text-align: left;"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have audited Corporacion Aceros D.M., S.A. de C.V. subsidiaries and affiliates<u>, </u>internal control over financial reporting as of December 31, 2009, based on criteria established in Internal Control&#151;<i>Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission </i>(the COSO criteria). Corporaci&oacute;n Aceros D.M., S.A de C.V. subsidiaries and affiliates management is responsible for maintaining effective internal control over financial reporting, and for the assessment of the effectiveness of internal control over financial reporting included in the accompanying Management&#146;s Annual Report on 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.</p>
<p style="text-align: left;"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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.</p>
<p style="text-align: left;"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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 the Mexican Financial Information Regulations (NIF). 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 disposals 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 the Mexican Financial Information Regulations (NIF), 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.</p>
<p style="text-align: left;"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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.</p>
<p style="text-align: left;"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement in the company&#146;s annual or interim financial statements will not be prevented or detected on a timely basis. The following material weakness has been identified and included in management&#146;s assessment. Management has a material weakness in control to determine the US GAAP
adjustments, which allows to present the information in note 17 of the financial statements; such information refers to the differences between Mexican and United States Accounting Regulations.</p>
<p style="text-align: left;"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In our opinion, because of the effect of the material weakness described above on the achievement of the objectives of the control criteria Corporaci&oacute;n Aceros D.M., S.A. de C.V. subsidiaries and affiliates has not maintained effective internal control over financial reporting as of December 31, 2009, based on the COSO criteria.</p>
<p style="text-align: right;"> Marcelo de los Santos y C&iacute;a., S.C.<br>

A Member of Moore Stephens<br>

San Luis Potos&iacute;, S.L.P., M&eacute;xico<br>

September 17, 2010<br>

<br>

Marcelo de los Santos Anaya, C.P.A.<br>

Professional Identity Card 1649173<br>

AGAFF Register 10374</p>
<P style="text-align: left;"><B>D. Changes in Internal Control Over Financial
  Reporting</B></P>
<P style="text-align: left;"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our internal audit department did not have the resources to finish the testing of our internal controls in a timely manner, and as a result we did not implement remediation actions before December 31, 2009. Our Audit Committee
  instructed our internal audit department to hire the appropriate personnel to conclude the testing of our internal control in a more timely manner. Following
  the completion of our internal investigation of our subsidiary SimRep Corporation, our outside counsel discussed
  with our outside auditor the types of remedial measures that would be appropriate
  to address these material weaknesses in internal control over financial reporting.
  After consulting with our outside auditor, our outside counsel reported the
  findings and conclusions of its internal investigation to our Audit Committee
  and recommended that the Audit Committee adopt certain remedial measures to
  address these matters.</P>
<P style="text-align: left;"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On September 3, 2010,
  our Audit Committee adopted the following remedial measures to address the material
  weaknesses in internal controls over financial reporting at SimRep Corporation  that   are described
  above in Item 15(B), which measures are reasonably likely to materially affect
  our internal control over financial reporting:</P>
<blockquote>
  <p> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. The CFO of Republic
  Engineered Products (&#147;Republic&#148;) and his senior subordinates who handle
  general accounting and financial reporting matters will report directly to our
  CFO on all such matters. Republic&#146;s CEO shall not give instructions or
  make suggestions to Republic&#146;s CFO or Republic&#146;s accounting staff
  concerning any general accounting or financial reporting matters. Republic&#146;s
  CFO will continue to report to and collaborate with Republic&#146;s CEO on other
  matters.</p>
  <p> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. Republic&#146;s
  CEO and the Director General of Industrias C.H. S.A.B. de C.V. will certify
  annually that they understand that Republic&#146;s accounting staff is obligated
  to adhere to U.S. GAAP and that they are not permitted to instruct Republic&#146;s
  accounting personnel about the accounting treatment of any matter. In the event
  that any member of Republic&#146;s accounting staff is instructed by anyone
  to engage in any conduct that the staff member believes does not comply with
  U.S. GAAP, that staff member is required to notify Republic&#146;s CFO of such
  an event; Republic&#146;s CFO in turn is required to notify our CFO. In the
  event that Republic&#146;s CFO makes such a notification to our CFO, Republic&#146;s
  CFO will send the relevant documentation and information to our CFO, who will
  analyze it (with the assistance of a third party consultant as necessary) and
  make a final written determination as to the matter, provided that if the matter
  involves an amount of &#36;500,000 or more, that determination by our CFO must
  also be approved by our CEO and our Audit and Corporate Practices Committee.</p>
  <p> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3. Republic will hire
  a professional to oversee testing of internal controls for purposes of the Sarbanes-Oxley
  Act of 2002, including testing related to information technologies, and a member
  of our audit team will perform an on-site review of Republic&#146;s internal
  controls at least twice a year.</p>
</blockquote>
<P style="text-align: center;"> 102</P>
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<blockquote>
  <p> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4. We will retain
  a third party consultant to evaluate what additional resources are needed by
  Republic&#146;s accounting department, including in what specific areas of expertise
  and at what levels of experience. We will require Republic to hire additional
  resources as appropriate.</p>
  <p> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5. Republic will revamp
  its current whistleblower procedures to enable members of Republic&#146;s accounting
  staff to anonymously report problems directly to our internal audit department,
  and it will provide training to Republic&#146;s accounting staff on these procedures.</p>
  <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6. Our CFO will review all of Republic Engineered Products&#146;s
      finance policies to ensure that such policies are consistent with best practices
      and are fully compliant with U.S. GAAP. Our CFO will need to approve any
      changes to these finance policies.</p>
</blockquote>
<P style="text-align: left;"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Furthermore, also
  as a result of our evaluation of the effectiveness of our internal controls
  in Mexico for the year ended December 31, 2009 and the material weaknesses and
  other deficiencies identified during that period, we have conducted an analysis
  of functions and workloads in our finance department and we are implementing
  the additional following changes that have materially affected, or are reasonably
  likely to materially affect, our internal controls over financial reporting:</P>
<UL>
  <LI>
    <P align="left">We have started implementing what we believe is an improved
      system for the preparation of our consolidated financial statements.
      This consolidation process is now carried out through a semi-automated system
      and electronic Excel sheets instead of a completely manual consolidation
      process through electronic Excel sheets as had been the case before. We believe this system will improve our  supervision of the consolidation process.<B></B></P>
  </LI>
  <LI>
    <P align="left">We have segregated functions and procedures relating to our
      calculation of deferred taxes by hiring an external consultant to perform
      this function. We believe these changes will improve our supervision of
      the deferred taxes determination process.</P>
  </LI>
  <LI>
    <P align="left">Our CFO is currently conducting an analysis of functions and
      workloads in the finance departments of all of our Mexican subsidiaries
      in order to improve internal controls over financial reporting. Our plan
      is to distribute certain time-consuming finance processes to personnel at
      our Mexican subsidiaries as the workload in the subsidiaries may have been
      reduced due to decreased operations in the subsidiaries. Once this process is completed, we intend to establish appropriate accounting resources at our corporate finance department to enhance the effectiveness of the supervision controls for which this department is responsible.</P>
  </LI>
</UL>
<P style="text-align: left;"> <B><a name="p101a"></a>Item 16. Reserved</B></P>
<P style="TEXT-ALIGN: left"><B><a name="p101b"></a>Item 16A. Audit Committee Financial
  Expert</B></P>
<P style="TEXT-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&#233;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&#233;rez&#146;s experience and understanding with respect to certain accounting and auditing matters. The designation does not impose on Mr. P&#233;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&#233;rez is &#147;independent&#148; as such term is defined in the listing standards of the American Stock Exchange.</P>
<P style="TEXT-ALIGN: left"><B><a name="p101c"></a>Item 16B. Code of Ethics</B></P>
<P style="TEXT-ALIGN: left">&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 2009, 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: Adolfo Luna Luna, telephone number: 011-52-33-3770-6700.</P>
<P style="TEXT-ALIGN: center">103</P>
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<P style="TEXT-ALIGN: left"><B><a name="p102a"></a>Item 16C. Principal Accountant
  Fees and Services</B></P>
<P style="TEXT-ALIGN: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Audit Fees</I>. We paid fees in the amount of Ps. 13.7 million, Ps. 17.4 million and Ps.19.6 million, in 2007, 2008 and 2009, respectively, 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 style="TEXT-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. 0.08 million, Ps. 2.4 million and Ps. 0.2, in 2007, 2008 and 2009, respectively, associated with tax compliance and tax consultation.</P>
<P style="TEXT-ALIGN: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Other Fees</I>. We paid no fees in 2008 and 2009 other than those set forth above to Mancera, S.C. Ernst &amp; Young. 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. The audit committee approved all of the services incurred in 2007 and 2008, 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 style="TEXT-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 style="TEXT-ALIGN: left"><B><a name="p102b"></a>Item 16D. Exemptions from the
  Listing Standards for Audit Committees</B></P>
<P style="TEXT-ALIGN: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Not applicable.</P>
<P style="TEXT-ALIGN: left"><B><a name="p102c"></a>Item 16E. Purchases of Equity
  Securities by the Issuer and Affiliated Purchasers.</B></P>
<P style="TEXT-ALIGN: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;None.</P>
<P style="TEXT-ALIGN: left"><B><a name="p102d"></a>Item 16F. Change in Registrant&#146;s
  Certifying Accountant.</B></P>
<P style="TEXT-ALIGN: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;None.</P>
<P style="TEXT-ALIGN: left"><B><a name="p102e"></a>Item 16G. Corporate Governance.</B></P>
<P style="TEXT-ALIGN: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our following corporate governance practices differ from the NYSE AMEX standards in the following ways:</P>
<P style="TEXT-ALIGN: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Board of Directors Composition, Nomination and Board Meetings</I>. Pursuant to the Mexican Securities Market Law, our board of directors must be composed of a maximum of 21 members, of which at least 25% must be independent. The board of directors is elected by the shareholders at the annual meeting, for a one year term with the option to be reelected, as determined by the shareholders. One alternate director may be appointed for each director, provided that independent alternates are appointed for the independent directors. In accordance with Mexican law, our shareholders determine directors&#146; independence during the annual shareholders meeting, but this independence determination may be challenged by the Mexican National Banking and Securities Commission. Our board of directors meets at least quarterly and resolutions are binding if adopted by a majority of the directors present at a meeting.</P>
<P style="TEXT-ALIGN: center">104</P>
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<P style="TEXT-ALIGN: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Nominating and Compensation Committees. </I>In compliance with Mexican laws, we do not have a nominating or compensation committee. Members of our board of directors are appointed by a majority of shareholders present at our annual shareholders meeting. We do have a corporate practice committee, made up of three independent directors, that assists the board in determining executive compensation. Shareholders, at our annual shareholders meeting, or the board of directors, make the final determination about executive compensation. Shareholders&#146; approval must be acquired for the adoption and amendment of any equity compensation plans.</P>
<P style="TEXT-ALIGN: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Audit Committee and Auditors. </I>Our audit committee is governed by: (i) our bylaws and (ii) Mexican law. Our audit committee is made up of at least three independent directors, appointed by the board of directors. Our shareholders appoint and/or remove the chairman of the audit committee at the annual shareholders meeting. In accordance with Mexican law, the audit committee must provide an opinion regarding any transaction with a related party, outside of the ordinary course of business. Such transactions must also be approved by the board of directors.</P>
<P style="TEXT-ALIGN: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under Mexican law, we must be audited by an independent public accountant that has received a &#147;quality control review,&#148; as defined by the general rules issued by the National Banking and Securities Commission. These general rules require accounting firms rendering external audit services, to fulfill higher independence standards, as well as issuing and following quality control internal policies and manuals in accordance with the rules issued by the Mexican Institute of Public Accountants (<I>Instituto Mexicano de Contadores P&#250;blicos, A.C.</I>).</P>
<P style="TEXT-ALIGN: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Quorum Requirements and Shareholders&#146; Approval</I>. In compliance with Mexican law, shareholders representing 50% of our capital stock must be present to conduct business at the first call for ordinary shareholders meetings, dealing with general matters. If a quorum is not reached, there is no minimum quorum requirement for a second or subsequent call. Resolutions approved at ordinary shareholders&#146; meetings are valid when approved by a majority of the shares present. On the other hand, shareholders representing 75% of our capital stock must be present to conduct business at the first call for extraordinary shareholders meeting dealing with modifications to the our bylaws. If a quorum is not reached, shareholders representing 50% of our capital stock must be present at the meeting in a second or subsequent call. Resolutions at extraordinary shareholders meetings are valid if approved by shares representing more than 50% of our
capital stock. However, resolutions regarding the (i) quorum requirements, (ii) minority shareholders&#146; rights, (iii) merger, spin-off and conversion are valid if approved by at least 75% of our capital stock. Furthermore, resolutions regarding our registration with the National Securities Registry (<I>Registro Nacional de Valores</I>) are valid if approved by at least 95% of our capital stock. Class II Series &#147;L&#148; Shares, representative of our capital stock with limited economic and corporate rights, are not taken into account when determining the quorum at the general shareholders&#146; meeting.</P>
<P style="TEXT-ALIGN: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Code of Conduct and Ethics</I>. In compliance with Mexican law, we do not have a code conduct and ethics for our directors or executive officers. However, our directors&#146; and executive officers&#146; conduct is subject to the applicable provisions of the Securities Market Law and the regulations issued by the Mexican Banking and Securities Commission.</P>
<P style="TEXT-ALIGN: center"><B>PART III.</B></P>
<P style="TEXT-ALIGN: left"><B><a name="p103a"></a>Item 17. Financial Statements</B></P>
<P style="TEXT-ALIGN: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have responded to
  Item 18 in lieu of responding to this item.</P>
<P style="TEXT-ALIGN: left"><B><a name="p103b"></a>Item 18. Financial Statements</B></P>
<P style="TEXT-ALIGN: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Reference is made to
  the consolidated financial statements included herein.</P>
<P style="TEXT-ALIGN: center">105</P>
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<P style="TEXT-ALIGN: left"><B><a name="p104"></a>Item 19. Exhibits</B></P>
<P style="TEXT-ALIGN: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant to the rules and regulations of the SEC, we have filed certain agreements as exhibits to this annual report on Form 20-F. Documents filed as exhibits to this annual report:</P>
<TABLE width="100%" border=0 cellpadding="0" cellSpacing=0 style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'">
  <TR valign="bottom">
    <TD nowrap><FONT size=2>Exhibit<br>
      Number</FONT>
      <hr noshade size="1" width="45" align="left">
    </TD>
    <TD>&nbsp;</TD>
    <TD><FONT size=2>Item</FONT>
      <hr noshade size="1" width="30" align="left">
    </TD>
  </tr>
  <TR>
    <TD vAlign=top nowrap>1.1&nbsp; &nbsp; &nbsp; </TD>
    <TD>&nbsp;&nbsp;&nbsp;</TD>
    <TD> <P align=left>Amended and Restated By-laws (<I>estatutos sociales</I>)
        of the registrant, together with an English translation.*</P></TD>
  </tr>
  <TR>
    <TD vAlign=top nowrap>8.1&nbsp; &nbsp; &nbsp; </TD>
    <TD>&nbsp;</TD>
    <TD>
      <P align=left>List of subsidiaries, their jurisdiction of incorporation
        and names under which they do business.**</P>
    </TD>
  </tr>
  <TR>
    <TD vAlign=top nowrap>10.1&nbsp; &nbsp; &nbsp; </TD>
    <TD>&nbsp;</TD>
    <TD> <P align=left>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>
    <TD vAlign=top nowrap>10.2&nbsp; &nbsp; &nbsp; </TD>
    <TD>&nbsp;</TD>
    <TD> <P align=left>2007-2008 Rounds Supply Agreement by and Between Republic,
        Inc. and United States Steel Corporation.*</P></TD>
  </tr>
  <TR>
    <TD vAlign=top nowrap>10.3&nbsp; &nbsp; &nbsp; </TD>
    <TD>&nbsp;</TD>
    <TD>
      <P align=left>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>
    <TD vAlign=top nowrap>12.1&nbsp; &nbsp; &nbsp; </TD>
    <TD>&nbsp;</TD>
    <TD> <P align=left>Certification of chief executive officer pursuant to Section
        302 of the Sarbanes-Oxley Act of 2002.</P></TD>
  </tr>
  <TR>
    <TD vAlign=top nowrap>12.2&nbsp; &nbsp; &nbsp; </TD>
    <TD>&nbsp;</TD>
    <TD> <P align=left>Certification of principal financial officer pursuant to
        Section 302 of the Sarbanes- Oxley Act of 2002.</P></TD>
  </tr>
  <TR>
    <TD vAlign=top nowrap>13.1&nbsp; &nbsp; &nbsp; </TD>
    <TD>&nbsp;</TD>
    <TD> <P align=left>Certifications of chief executive officer and principal
        financial officer pursuant to Section 906 of the Sarbanes-Oxley Act of
        2002.</P></TD>
  </TR>
</TABLE>
<hr align="left" width="90" size="1" noshade>
<table width="100%" border="0" cellspacing="0" cellpadding="0">
  <tr valign="top">
    <td width="3%"><font size="2">*&nbsp;&nbsp;&nbsp;</font></td>
    <td width="97%"><font size="2">Previously filed with the SEC as an exhibit and incorporated
      by reference from our Registration Statement on Form F-1, File No. 333-138239.</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font size="2">*</font><font size="2">*</font></td>
    <td width="97%"><font size="2">Previously filed with the SEC as an exhibit and incorporated
      by reference from our Annual Report on Form 20-F, filed on July 20, 2009.</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font size="2">*</font><font size="2">*</font><font size="2">*</font></td>
    <td width="97%"><font size="2">Previously filed with the SEC as an exhibit and incorporated
      by reference from our Annual Report on Form 20-F, filed on July 1, 2008.</font></td>
  </tr>
</table>
<P style="TEXT-ALIGN: center">106</P>
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<P style="text-align: center;"> <B>SIGNATURES</B></P>
<P style="text-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 width=100% border=0 cellpadding="0" cellspacing=0 style="font-family: 'Times New Roman';font-size: 10pt;">
  <TR>
    <TD></TD>
    <TD></TD>
  </TR>
  <TR valign="bottom">
    <TD width="60%" align=left>&nbsp;</TD>
    <TD align=left> <B><FONT size=2>GRUPO SIMEC, S.A.B. DE C.V.</FONT></B></TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;&nbsp;&nbsp;</TD>
    <TD align=left> <FONT size=2>By: </FONT><FONT size=2> /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> <FONT size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Luis Garc&iacute;a
      Lim&oacute;n</FONT></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD align=left> <I><FONT size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Chief
      Executive Officer</FONT></I></TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD align=left> <FONT size=2>By: /s/ Adolfo Luna Luna</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> <FONT size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Adolfo Luna
      Luna</FONT></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD align=left> <I><FONT size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Chief
      Financial Officer</FONT></I></TD>
  </TR>
</TABLE>
<P style="text-align: left;"> Dated: September 17, 2010</P>
<P style="text-align: center;"> 107</P>
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<p align="center"><b><font size=2>INDEX TO FINANCIAL STATEMENTS</font></b></p>
<table width=100% border=0 cellpadding=4 cellspacing=0 style="FONT-FAMILY: 'Times New Roman';font-size: 10pt;">
  <tr>
    <td width=10%></td>
    <td width=86%></td>
    <td width=4%></td>
  </tr>
  <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> <a href="#f2"><font size=2>Report of Mancera, S.C.
      Ernst &amp; Young</font> </a></td>
    <td align=right> <a href="#f2"><font size=2>F-2</font> </a></td>
  </tr>
  <tr valign="bottom">
    <td align=left colspan=2> <a href="#f3"><font size=2>Report of Marcelo de
      Los Santos y C&iacute;a., S.C</font> </a></td>
    <td align=right> <a href="#f3"><font size=2>F-3</font> </a></td>
  </tr>
  <tr valign="bottom">
    <td align=left colspan=2> <a href="#f2"><font size=2>Consolidated Balance
      Sheets as of December 31, 2009 and 2008</font> </a></td>
    <td align=right> <a href="#f2"><font size=2>F-4</font> </a></td>
  </tr>
  <tr valign="bottom">
    <td align=left colspan=2> <a href="#f3"><font size=2>Consolidated Statements
      of Operations  for the years ended</font> <font size=2>December 31, 2009, 2008
      and 2007</font> </a></td>
    <td align=right><a href="#f3"><font size=2>F-5</font> </a></td>
  </tr>
  <tr valign="bottom">
    <td align=left colspan=2> <a href="#f4"><font size=2>Consolidated Statements
      of Changes in Stockholders&#146; Equity</font> <font size=2>for the years
      ended December 31, 2009, 2008 and 2007</font> </a></td>
    <td align=right><a href="#f4"><font size=2>F-6</font> </a></td>
  </tr>
  <tr valign="bottom">
    <td align=left colspan=2> <a href="#f5"><font size=2>Consolidated Statement
      of Cash Flow for the years  ended </font></a><a href="#f4"><font size=2>December 31, 2009 and 2008</font></a><a href="#f7"><font size=2>  </font> </a></td>
    <td align=right> <a href="#f5"><font size=2>F-7</font> </a></td>
  </tr>
  <tr valign="bottom">
    <td align=left colspan=2> <a href="#f6"><font size=2>Consolidated Statements
      of Changes in Financial Position for</font> <font size=2>the year ended
      December 31, 2007 </font> </a></td>
    <td align=right><a href="#f6"><font size=2>F-8</font> </a></td>
  </tr>
  <tr valign="bottom">
    <td align=left colspan=2> <a href="#f7"><font size=2>Notes to Consolidated
      Financial Statements</font> </a></td>
    <td align=right> <a href="#f7"><font size=2>F-9</font> </a></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> <a href="#s1"><font size=2>Schedule I-</font> </a></td>
    <td align=left> <a href="#s1"><font size=2>Condensed Parent Company Balance
      Sheets as of</font> <font size=2>December 31, 2009 and 2008</font> </a></td>
    <td align=right><a href="#s1"><font size=2>S-1</font> </a></td>
  </tr>
  <tr valign="bottom">
    <td align=left> <a href="#s2"><font size=2>Schedule I-</font> </a></td>
    <td align=left> <a href="#s2"><font size=2>Condensed Parent Company Statements
      of Operations</font> <font size=2>for the years ended December 31, 2009, 2008
      and 2007</font> </a></td>
    <td align=right><a href="#s2"><font size=2>S-2</font> </a></td>
  </tr>
  <tr valign="bottom">
    <td align=left> <a href="#s3"><font size=2>Schedule I-</font> </a></td>
    <td align=left> <a href="#s3"><font size=2>Condensed Parent Company Statement of Cash
      Flow for the years ended December 31, 2009 and 2008</font> </a></td>
    <td align=right> <a href="#s3"><font size=2>S-3</font> </a></td>
  </tr>
  <tr valign="bottom">
    <td align=left> <a href="#s4"><font size=2>Schedule I-</font> </a></td>
    <td align=left> <a href="#s4"><font size=2>Condensed Parent Company Statements
      of Changes in</font> <font size=2>Financial Position for the year ended
      December 31, 2007</font> </a></td>
    <td align=right><a href="#s4"><font size=2>S-4</font> </a></td>
  </tr>


</table>
<br>
<p align="center"> F-1</p>
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<br>


<p style="text-align: center;"> <b>Report of Independent Registered Public Accounting Firm</b></p>
<p style="text-align: left;"> <b>The Board of Directors and Stockholders of Grupo Simec, S.A.B. de C.V. and Subsidiaries</b></p>
<p style="text-align: left;"> We have audited the accompanying consolidated balance sheets of Grupo Simec, S.A.B. de C.V. and subsidiaries (the &#147;Company&#148;) as of December 31, 2009 and 2008, and the related consolidated statements of operations and changes in stockholders&#146; equity for each of the three years ended December 31, 2009, the related consolidated statement of cash flow for each of the two years ended December 31, 2009, and the consolidated statement of changes in financial position for the year ended December 31, 2007. These consolidated financial statements are the responsibility of the Company&#146;s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We did not audit the combined financial statements of Corporaci&oacute;n Aceros D.M., S.A. de C.V. and affiliates, wholly-owned subsidiaries acquired on May 31, 2008, which statements reflect total combined assets of Ps. 3,844,696 (thousand) and Ps. 3,673,889
(thousand), as of December 31, 2009 and 2008, respectively, and total combined revenues of Ps. 3,724,960 (thousand) and Ps. 2,871,090 (thousand), for the year ended December 31, 2009 and the period ended December 31, 2008, respectively. Those statements were audited by other auditors whose report has been furnished to us, and our opinion, insofar as it relates to the amounts included for Corporaci&oacute;n Aceros D.M., S.A. de C.V. and affiliates, is based solely on the report of the other auditors.</p>
<p style="text-align: left;"> We conducted our audits in accordance with 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 auditors provide a reasonable basis for our opinion.</p>
<p style="text-align: left;"> In our opinion, based on our audits and the report of the other 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, 2009 and 2008, and the consolidated results of their operations for each of the three years ended December 31, 2009, and their cash flows for each of the two years ended December 31, 2009, and the consolidated changes in their financial position for the year ended December 31, 2007, in conformity with Mexican financial reporting standards, which differ in certain respects from accounting principles generally accepted in the United States of America (see Note 20 to the consolidated financial statements).</p>
<p style="text-align: left;"> As disclosed in Note 2 to the accompanying consolidated financial statements, during 2008, the Company adopted Mexican Financial Reporting Standard (&#147;MFRS&#148;) B-2 <i>Statement of Cash Flows </i>and certain other MFRS. As disclosed in Note 2, during 2009, the Company adopted MFRS C-8, <i>Intangible Assets </i>and certain other MFRS. The application of all of these standards was prospective in nature.</p>
<p style="text-align: left;"> 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, 2009, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. We did not examine the effectiveness of internal control over financial reporting of the subsidiaries included in the combined financial statements of Corporaci&oacute;n Aceros DM, S.A. de C.V. and affiliates, wholly-owned subsidiaries, whose financial statements reflect total assets and revenues of Ps. 3,844,696 (thousands) and Ps. 3,724,960 (thousands), respectively, as of and for the year ended December 31, 2009. The effectiveness of Corporaci&oacute;n Aceros DM, S.A. de C.V. and affiliates internal
control over financial reporting was audited by other auditors whose report has been furnished to us and
our opinion, insofar as it relates to the effectiveness of Corporaci&oacute;n Aceros DM, S.A. de C.V. and affiliates internal control over financial reporting, is based solely on the report of the other auditors. Our report dated September 17, 2010 expressed an adverse opinion on the effectiveness of internal control over financial reporting.</p>
<p style="TEXT-ALIGN: center">Mancera, S.C.<br>

A Member Practice of<br>

Ernst &amp; Young Global</p>
<p style="TEXT-ALIGN: center">C.P.C. Humberto Valdes Mier</p>
<p style="TEXT-ALIGN: left">Guadalajara, Jalisco, M&#233;xico<br>

September 17, 2010</p>
<P style="TEXT-ALIGN: center">F-2</P>
<hr align=center width="100%" noshade size=5>
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<p style="text-align: center;"> <b>Report of Independent Registered Public Accounting Firm</b></p>
<p style="text-align: left;"> <b>To the Board of Directors and Shareholders of</b><br>

<b>Corporaci&oacute;n Aceros D.M., S.A. de C.V. and</b><br>

<b>Affiliates</b></p>
<p style="text-align: left;"> We have audited the accompanying Combined Balance Sheet of Corporaci&oacute;n Aceros D.M., S.A. de C.V. and Affiliates as of December 31, 2009 and 2008, as well as the related Combined Income Statements, Statements of Changes in Stockholders' Equity and Cash Flow Statements, for the years ended December 31, 2009, and for the seven month period from June 1, 2008 to December 31, 2008. These financial statements are responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit.</p>
<p style="text-align: left;"> We conducted the audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that the audit be planned and performed to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes the examination, on a test basis, of the evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and the significant estimates made by management, as well as evaluating the overall financial statements presentation. We believe that our audit provides a reasonable basis for our opinion.</p>
<p style="text-align: left;"> In our opinion, the accompanying combined financial statements present fairly, in all material respects, the combined financial position of Corporaci&oacute;n Aceros D.M., S.A. de C.V., and affiliates, as of December 31, 2009 and 2008, as well as the results of the operations, the Changes in Stockholder&#146;s Equity and the Cash Flows for the years then ended and for the seven month period from June 1, to December 31, 2008, in conformity with Mexican Financial Reporting Standards, which differ in certain respects from U.S. generally accepted accounting principles; one important difference relates to push-down accounting.</p>
<p style="text-align: left;"> We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Corporaci&oacute;n Aceros D.M., S.A. de C.V. and affiliates internal control over financial reporting as of December 31, 2009, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated September 17, 2010, expressed an adverse opinion on the effectiveness of internal control over financial reporting, regarding the differences between Mexican and United States Accounting Regulations, which is presented in note 19 of the financial statements.</p>
<table border="0" cellspacing="0" cellpadding="0" width="100%">
  <tr>
    <td width="52%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</td>
    <td width="48%"><font size="2">Moore Stephens Marcelo de los Santos y C&iacute;a., S.C.<br>

San Luis Potos&iacute;, S.L.P., M&eacute;xico<br>

September 17, 2010<br>

<br>

Marcelo de los Santos Anaya, C.P.A.<br>

Professional Identity Card 1649173<br>

AGAFF Register 10374</font></td>
  </tr>
</table>
<P style="TEXT-ALIGN: center">F-3</P>
<hr noshade align="center" width="100%" size="5">
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<P style="TEXT-ALIGN: center"><B>GRUPO SIMEC, S.A.B. DE C.V. AND SUBSIDIARIES</B></P>
<P style="TEXT-ALIGN: center"> <a name="f2"></a>Consolidated Balance Sheets<BR>
  <BR>
  December 31, 2009 and 2008<BR>
  <BR>
  (In thousands of Mexican pesos)</P>
<TABLE width="100%" border=0 cellpadding="0" cellSpacing=0 style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'">
  <TR>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>
    <TD colspan="3" align=center><B>2009</B> <hr size="1" noshade></TD>
    <TD colspan="3" align=center>2008
      <hr size="1" noshade></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left><B>Assets</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>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>Current assets:</TD>
    <TD align=left>&nbsp;</TD>
    <TD 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>Cash and cash equivalents</TD>
    <TD align=left><B>Ps.</B></TD>
    <TD align=right><B>1,948,900</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>Ps.</TD>
    <TD align=right>576,741</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>
    <TD align=left><hr size="1" noshade></TD>
    <TD align=right><hr size="1" noshade></TD>
    <TD align=left><hr size="1" noshade></TD>
    <TD align=left><hr size="1" noshade></TD>
    <TD align=right><hr size="1" noshade></TD>
    <TD align=left><hr size="1" noshade></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>Accounts receivable</TD>
    <TD align=left>&nbsp;</TD>
    <TD 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;Trade</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>2,427,801</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>3,091,253</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;&nbsp;&nbsp;Related parties (note 4)</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>5,321</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>54,085</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;&nbsp;&nbsp;Recoverable taxes (note 5)</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>1,425,519</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>360,422</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;&nbsp;&nbsp;Other receivables</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>46,527</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>90,311</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>
    <TD align=left><hr size="1" noshade></TD>
    <TD align=right><hr size="1" noshade></TD>
    <TD align=left><hr size="1" noshade></TD>
    <TD align=left><hr size="1" noshade></TD>
    <TD align=right><hr size="1" noshade></TD>
    <TD align=left><hr size="1" noshade></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>3,905,168</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>3,596,071</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>Less: allowance for doubtful accounts (note 2e)</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>365,646</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>235,781</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>
    <TD align=left><hr size="1" noshade></TD>
    <TD align=right><hr size="1" noshade></TD>
    <TD align=left><hr size="1" noshade></TD>
    <TD align=left><hr size="1" noshade></TD>
    <TD align=right><hr size="1" noshade></TD>
    <TD align=left><hr size="1" noshade></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;&nbsp;&nbsp;Total accounts receivable, net</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>3,539,522</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>3,360,290</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR>
    <TD colSpan=7>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>Inventories, net (note 6)</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>6,618,742</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>8,849,906</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>Prepaid expenses</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>197,247</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>258,492</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>
    <TD align=left><hr size="1" noshade></TD>
    <TD align=right><hr size="1" noshade></TD>
    <TD align=left><hr size="1" noshade></TD>
    <TD align=left><hr size="1" noshade></TD>
    <TD align=right><hr size="1" noshade></TD>
    <TD align=left><hr size="1" noshade></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>Total current assets</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>12,304,411</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>13,045,429</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR>
    <TD colSpan=7>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>Non-current inventories (note 2i)</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>141,497</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>122,223</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>Property, plant and equipment, net (note 8)</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>9,794,942</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>10,291,145</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>Intangible assets (note 9)</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>4,359,843</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>7,089,953</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>Other assets and deferred charges, net (note 10)</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>109,108</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>265,267</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>
    <TD align=left><hr size="1" noshade></TD>
    <TD align=right><hr size="1" noshade></TD>
    <TD align=left><hr size="1" noshade></TD>
    <TD align=left><hr size="1" noshade></TD>
    <TD align=right><hr size="1" noshade></TD>
    <TD align=left><hr size="1" noshade></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>Total assets</TD>
    <TD align=left><B>Ps.</B></TD>
    <TD align=right><B>26,709,801</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>Ps.</TD>
    <TD align=right>30,814,017</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>
    <TD align=left><hr size="2" noshade></TD>
    <TD align=right><hr size="2" noshade></TD>
    <TD align=left><hr size="2" noshade></TD>
    <TD align=left><hr size="2" noshade></TD>
    <TD align=right><hr size="2" noshade></TD>
    <TD align=left><hr size="2" noshade></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left><B>Liabilities and stockholders' equity</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>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>Current liabilities:</TD>
    <TD align=left>&nbsp;</TD>
    <TD 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;Short-term debt</TD>
    <TD align=left><B>Ps.</B></TD>
    <TD align=right><B>3,944</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>Ps.</TD>
    <TD align=right>12,855</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;&nbsp;&nbsp;Accounts payable</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>1,896,825</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>3,399,772</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;&nbsp;&nbsp;Related parties (note 4)</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>727,046</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>365,088</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;&nbsp;&nbsp;Derivative financial instruments (note 7)</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>216,753</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>376,206</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;&nbsp;&nbsp;Income tax payable</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>334,278</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>298,251</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;&nbsp;&nbsp;Accrued expenses</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>318,021</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>504,351</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;&nbsp;&nbsp;Other liabilities</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>397,514</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>298,622</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>
    <TD align=left><hr size="1" noshade></TD>
    <TD align=right><hr size="1" noshade></TD>
    <TD align=left><hr size="1" noshade></TD>
    <TD align=left><hr size="1" noshade></TD>
    <TD align=right><hr size="1" noshade></TD>
    <TD align=left><hr size="1" noshade></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>Total current liabilities</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>3,894,381</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>5,255,145</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>
    <TD align=left><hr size="1" noshade></TD>
    <TD align=right><hr size="1" noshade></TD>
    <TD align=left><hr size="1" noshade></TD>
    <TD align=left><hr size="1" noshade></TD>
    <TD align=right><hr size="1" noshade></TD>
    <TD align=left><hr size="1" noshade></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;&nbsp;&nbsp;Seniority premiums and termination benefits
      (note 12)</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>33,140</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>34,095</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;&nbsp;&nbsp;Deferred income tax (note 16)</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>2,737,770</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>4,172,251</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;&nbsp;&nbsp;Other long-term liabilities</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>62,616</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>47,029</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>
    <TD align=left><hr size="1" noshade></TD>
    <TD align=right><hr size="1" noshade></TD>
    <TD align=left><hr size="1" noshade></TD>
    <TD align=left><hr size="1" noshade></TD>
    <TD align=right><hr size="1" noshade></TD>
    <TD align=left><hr size="1" noshade></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>Total long-term liabilities</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>2,833,526</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>4,253,375</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>
    <TD align=left><hr size="1" noshade></TD>
    <TD align=right><hr size="1" noshade></TD>
    <TD align=left><hr size="1" noshade></TD>
    <TD align=left><hr size="1" noshade></TD>
    <TD align=right><hr size="1" noshade></TD>
    <TD align=left><hr size="1" noshade></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>Total liabilities</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>6,727,907</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>9,508,520</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>
    <TD align=left><hr size="1" noshade></TD>
    <TD align=right><hr size="1" noshade></TD>
    <TD align=left><hr size="1" noshade></TD>
    <TD align=left><hr size="1" noshade></TD>
    <TD align=right><hr size="1" noshade></TD>
    <TD align=left><hr size="1" noshade></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>Stockholders' equity (note 15):</TD>
    <TD align=left>&nbsp;</TD>
    <TD 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>Capital stock</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>4,142,696</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>4,142,696</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>Additional paid-in capital</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>4,208,204</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>4,208,204</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>Retained earnings</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>9,075,705</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>9,507,958</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>Translation effect in foreign subsidiaries, net</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>515,658</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>595,165</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>Fair value of derivative financial instruments (note 7)</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>(151,727</B></TD>
    <TD align=left><B>)&nbsp;&nbsp;&nbsp;</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>(270,868</TD>
    <TD align=left>)</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>
    <TD align=left><hr size="1" noshade></TD>
    <TD align=right><hr size="1" noshade></TD>
    <TD align=left><hr size="1" noshade></TD>
    <TD align=left><hr size="1" noshade></TD>
    <TD align=right><hr size="1" noshade></TD>
    <TD align=left><hr size="1" noshade></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>Total controlling stockholders' equity</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>17,790,536</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>18,183,155</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>Non-controlling interest</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>2,191,358</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>3,122,342</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>
    <TD align=left><hr size="1" noshade></TD>
    <TD align=right><hr size="1" noshade></TD>
    <TD align=left><hr size="1" noshade></TD>
    <TD align=left><hr size="1" noshade></TD>
    <TD align=right><hr size="1" noshade></TD>
    <TD align=left><hr size="1" noshade></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>Total stockholders' equity</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>19,981,894</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>21,305,497</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>
    <TD align=left><hr size="1" noshade></TD>
    <TD align=right><hr size="1" noshade></TD>
    <TD align=left><hr size="1" noshade></TD>
    <TD align=left><hr size="1" noshade></TD>
    <TD align=right><hr size="1" noshade></TD>
    <TD align=left><hr size="1" noshade></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>Total liabilities and stockholders' equity</TD>
    <TD align=left><B>Ps.</B></TD>
    <TD align=right><B>26,709,801</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>Ps.</TD>
    <TD align=right>30,814,017</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>
    <TD align=left><hr size="2" noshade></TD>
    <TD align=right><hr size="2" noshade></TD>
    <TD align=left><hr size="2" noshade></TD>
    <TD align=left><hr size="2" noshade></TD>
    <TD align=right><hr size="2" noshade></TD>
    <TD align=left><hr size="2" noshade></TD>
  </TR>
</TABLE>
<P style="TEXT-ALIGN: left">See accompanying notes to consolidated financial statements.</P>
<P style="TEXT-ALIGN: center">F-4</P>
<HR align=center width="100%" noshade SIZE=5>
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<BR>
<P style="TEXT-ALIGN: center">GRUPO SIMEC, S.A.B. DE C.V. AND SUBSIDIARIES<BR>
  <a name="f3"></a>Consolidated Statements of Operations<BR>
  <BR>
  Years ended December 31, 2009, 2008 and 2007<BR>
  <BR>
  (In thousands of Mexican pesos, except share and earnings per share figures)</P>
<TABLE width="100%" border=0 cellpadding="0" cellSpacing=0 style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'">
  <TR>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>
    <TD colspan="3" align=center><B>2009</B></TD>
    <TD colspan="3" align=center>2008</TD>
    <TD colspan="3" align=center>2007</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>
    <TD align=left><hr size="1" noshade></TD>
    <TD align=right><hr size="1" noshade></TD>
    <TD align=left><hr size="1" noshade></TD>
    <TD align=left><hr size="1" noshade></TD>
    <TD align=right><hr size="1" noshade></TD>
    <TD align=left><hr size="1" noshade></TD>
    <TD align=left><hr size="1" noshade></TD>
    <TD align=right><hr size="1" noshade></TD>
    <TD align=left><hr size="1" noshade></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>Net sales</TD>
    <TD align=left><B>Ps.</B></TD>
    <TD align=right><B>19,231,529</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>Ps.</TD>
    <TD align=right>35,185,220</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>Ps.</TD>
    <TD align=right>24,106,094</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>Direct cost of sales</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>17,716,754</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>29,796,163</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>20,498,918</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>
    <TD align=left><hr size="1" noshade></TD>
    <TD align=right><hr size="1" noshade></TD>
    <TD align=left><hr size="1" noshade></TD>
    <TD align=left><hr size="1" noshade></TD>
    <TD align=right><hr size="1" noshade></TD>
    <TD align=left><hr size="1" noshade></TD>
    <TD align=left><hr size="1" noshade></TD>
    <TD align=right><hr size="1" noshade></TD>
    <TD align=left><hr size="1" noshade></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;&nbsp;&nbsp;Marginal profit</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>1,514,775</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>5,389,057</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>3,607,176</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>Indirect overhead, selling, general and</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD 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;administrative expenses</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>2,300,982</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>2,273,828</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>1,423,159</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>
    <TD align=left><hr size="1" noshade></TD>
    <TD align=right><hr size="1" noshade></TD>
    <TD align=left><hr size="1" noshade></TD>
    <TD align=left><hr size="1" noshade></TD>
    <TD align=right><hr size="1" noshade></TD>
    <TD align=left><hr size="1" noshade></TD>
    <TD align=left><hr size="1" noshade></TD>
    <TD align=right><hr size="1" noshade></TD>
    <TD align=left><hr size="1" noshade></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>Operating (loss) income</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>(786,207</B></TD>
    <TD align=left><B>)</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>3,115,229</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>2,184,017</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>
    <TD align=left><hr size="1" noshade></TD>
    <TD align=right><hr size="1" noshade></TD>
    <TD align=left><hr size="1" noshade></TD>
    <TD align=left><hr size="1" noshade></TD>
    <TD align=right><hr size="1" noshade></TD>
    <TD align=left><hr size="1" noshade></TD>
    <TD align=left><hr size="1" noshade></TD>
    <TD align=right><hr size="1" noshade></TD>
    <TD align=left><hr size="1" noshade></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>Other income (expenses), net:</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>29,991</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>(3,916</TD>
    <TD align=left>)</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>21,329</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>Impairment loss on intangible assets (note 9)</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>(2,368,000</B></TD>
    <TD align=left><B>)</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>-</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>-</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>Comprehensive financing cost:</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD 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;Interest (expense) income, net</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>(17,869</B></TD>
    <TD align=left><B>)</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>78,522</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>273,313</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;&nbsp;&nbsp;Foreign exchange loss, net</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>(78,429</B></TD>
    <TD align=left><B>)</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>(253,183</TD>
    <TD align=left>)</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>(37,879</TD>
    <TD align=left>)</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;&nbsp;&nbsp;Monetary position loss</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>-</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>-</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>(194,931</TD>
    <TD align=left>)</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>
    <TD align=left><hr size="1" noshade></TD>
    <TD align=right><hr size="1" noshade></TD>
    <TD align=left><hr size="1" noshade></TD>
    <TD align=left><hr size="1" noshade></TD>
    <TD align=right><hr size="1" noshade></TD>
    <TD align=left><hr size="1" noshade></TD>
    <TD align=left><hr size="1" noshade></TD>
    <TD align=right><hr size="1" noshade></TD>
    <TD align=left><hr size="1" noshade></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Comprehensive financial
      result, net</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>(96,298</B></TD>
    <TD align=left><B>)</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>(174,661</TD>
    <TD align=left>)</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>40,503</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>
    <TD align=left><hr size="1" noshade></TD>
    <TD align=right><hr size="1" noshade></TD>
    <TD align=left><hr size="1" noshade></TD>
    <TD align=left><hr size="1" noshade></TD>
    <TD align=right><hr size="1" noshade></TD>
    <TD align=left><hr size="1" noshade></TD>
    <TD align=left><hr size="1" noshade></TD>
    <TD align=right><hr size="1" noshade></TD>
    <TD align=left><hr size="1" noshade></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(Loss) income before income
      tax</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>(3,220,514</B></TD>
    <TD align=left><B>)</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>2,936,652</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>2,245,849</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>
    <TD align=left><hr size="1" noshade></TD>
    <TD align=right><hr size="1" noshade></TD>
    <TD align=left><hr size="1" noshade></TD>
    <TD align=left><hr size="1" noshade></TD>
    <TD align=right><hr size="1" noshade></TD>
    <TD align=left><hr size="1" noshade></TD>
    <TD align=left><hr size="1" noshade></TD>
    <TD align=right><hr size="1" noshade></TD>
    <TD align=left><hr size="1" noshade></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>Income tax (note 16):</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD 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;Current</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>(641,742</B></TD>
    <TD align=left><B>)</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>743,255</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>111,522</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;&nbsp;&nbsp;Deferred</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>(1,403,660</B></TD>
    <TD align=left><B>)</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>293,048</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>509,152</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>
    <TD align=left><hr size="1" noshade></TD>
    <TD align=right><hr size="1" noshade></TD>
    <TD align=left><hr size="1" noshade></TD>
    <TD align=left><hr size="1" noshade></TD>
    <TD align=right><hr size="1" noshade></TD>
    <TD align=left><hr size="1" noshade></TD>
    <TD align=left><hr size="1" noshade></TD>
    <TD align=right><hr size="1" noshade></TD>
    <TD align=left><hr size="1" noshade></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>Total income tax</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>(2,045,402</B></TD>
    <TD align=left><B>)</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>1,036,303</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>620,674</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>
    <TD align=left><hr size="1" noshade></TD>
    <TD align=right><hr size="1" noshade></TD>
    <TD align=left><hr size="1" noshade></TD>
    <TD align=left><hr size="1" noshade></TD>
    <TD align=right><hr size="1" noshade></TD>
    <TD align=left><hr size="1" noshade></TD>
    <TD align=left><hr size="1" noshade></TD>
    <TD align=right><hr size="1" noshade></TD>
    <TD align=left><hr size="1" noshade></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>Net consolidated (loss) income</TD>
    <TD align=left><B>Ps.</B></TD>
    <TD align=right><B>(1,175,112</B></TD>
    <TD align=left><B>)</B></TD>
    <TD align=left>Ps.</TD>
    <TD align=right>1,900,349</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>Ps.</TD>
    <TD align=right>1,625,175</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>
    <TD align=left><hr size="2" noshade></TD>
    <TD align=right><hr size="2" noshade></TD>
    <TD align=left><hr size="2" noshade></TD>
    <TD align=left><hr size="2" noshade></TD>
    <TD align=right><hr size="2" noshade></TD>
    <TD align=left><hr size="2" noshade></TD>
    <TD align=left><hr size="2" noshade></TD>
    <TD align=right><hr size="2" noshade></TD>
    <TD align=left><hr size="2" noshade></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>Allocation of net income</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD 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;Non-controlling interest</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>(852,174</B></TD>
    <TD align=left><B>)</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>104,212</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>96,118</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;&nbsp;&nbsp;Controlling interest</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>(322,938</B></TD>
    <TD align=left><B>)</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>1,796,137</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>1,529,057</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>
    <TD align=left><hr size="1" noshade></TD>
    <TD align=right><hr size="1" noshade></TD>
    <TD align=left><hr size="1" noshade></TD>
    <TD align=left><hr size="1" noshade></TD>
    <TD align=right><hr size="1" noshade></TD>
    <TD align=left><hr size="1" noshade></TD>
    <TD align=left><hr size="1" noshade></TD>
    <TD align=right><hr size="1" noshade></TD>
    <TD align=left><hr size="1" noshade></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>
    <TD align=left><B>Ps.</B></TD>
    <TD align=right><B>(1,175,112</B></TD>
    <TD align=left><B>)</B></TD>
    <TD align=left>Ps.</TD>
    <TD align=right>1,900,349</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>Ps.</TD>
    <TD align=right>1,625,175</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>
    <TD align=left><hr size="2" noshade></TD>
    <TD align=right><hr size="2" noshade></TD>
    <TD align=left><hr size="2" noshade></TD>
    <TD align=left><hr size="2" noshade></TD>
    <TD align=right><hr size="2" noshade></TD>
    <TD align=left><hr size="2" noshade></TD>
    <TD align=left><hr size="2" noshade></TD>
    <TD align=right><hr size="2" noshade></TD>
    <TD align=left><hr size="2" noshade></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>Controlling interest (loss) earnings per share:</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD 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;Weighted average shares outstanding</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>497,709,214</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>484,903,795</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>468,228,497</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>
    <TD align=left><hr size="1" noshade></TD>
    <TD align=right><hr size="1" noshade></TD>
    <TD align=left><hr size="1" noshade></TD>
    <TD align=left><hr size="1" noshade></TD>
    <TD align=right><hr size="1" noshade></TD>
    <TD align=left><hr size="1" noshade></TD>
    <TD align=left><hr size="1" noshade></TD>
    <TD align=right><hr size="1" noshade></TD>
    <TD align=left><hr size="1" noshade></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Controlling interest (loss)
      earnings per share (pesos)</TD>
    <TD align=left><B>Ps.</B></TD>
    <TD align=right><B>(0.65</B></TD>
    <TD align=left><B>)&nbsp;&nbsp;&nbsp;</B></TD>
    <TD align=left>Ps.</TD>
    <TD align=right>3.70</TD>
    <TD align=left>&nbsp;&nbsp;&nbsp;</TD>
    <TD align=left>Ps.</TD>
    <TD align=right>3.27</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>
    <TD align=left><hr size="2" noshade></TD>
    <TD align=right><hr size="2" noshade></TD>
    <TD align=left><hr size="2" noshade></TD>
    <TD align=left><hr size="2" noshade></TD>
    <TD align=right><hr size="2" noshade></TD>
    <TD align=left><hr size="2" noshade></TD>
    <TD align=left><hr size="2" noshade></TD>
    <TD align=right><hr size="2" noshade></TD>
    <TD align=left><hr size="2" noshade></TD>
  </TR>
</TABLE>
<BR>
<P style="TEXT-ALIGN: left">See accompanying notes to consolidated financial statements.</P>
<P style="TEXT-ALIGN: center">F-5</P>
<HR align=center width="100%" noshade SIZE=5>
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<BR>
<P style="TEXT-ALIGN: center">GRUPO SIMEC, S.A.B. DE C.V. AND SUBSIDIARIES<BR>
  <BR>
  <a name="f4"></a>Consolidated Statements of Changes in Stockholders' Equity<BR>
  Years ended December 31, 2009, 2008 and 2007<BR>
  (In thousands of Mexican pesos)</P>
<TABLE width="100%" border=0 cellpadding="0" cellSpacing=0 style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'">
  <TR>
    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left><font size="1"></font></TD>
    <TD colspan="2" align=center><font size="1"><b>Capital</b><br>
      <b>stock</b></font></TD>
    <TD align=center><font size="1"></font></TD>
    <TD colspan="2" align=center><font size="1"><b>Additional</b><br>
      <b>paid-in capital</b></font></TD>
    <TD align=center><font size="1"></font></TD>
    <TD colspan="2" align=center><font size="1"><b>Retained</b><br>
      <b>earnings</b></font></TD>
    <TD align=center><font size="1"></font></TD>
    <TD colSpan=2 align=center><font size="1"><b>Cumulative</b><br>
      <b>deferred</b><br>
      <b>income tax</b></font></TD>
    <TD align=center><font size="1"></font></TD>
    <TD colspan="2" align=center><font size="1"><b>Deficit / Surplus on</b><br>
      <b>restatement of</b><br>
      <b>stockholders&#146;<br>
      equity</b></font></TD>
    <TD align=center><font size="1"></font></TD>
    <TD colSpan=2 align=center><font size="1"><b>Translation</b><br>
      <b>effect in</b><br>
      <b>foreign</b><br>
      <b>subsidiaries</b></font></TD>
    <TD align=center><font size="1"></font></TD>
  </TR>
  <TR>
    <TD><font size="1"></font></TD>
    <TD colSpan=18>
      <hr size="1" noshade>
    </TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left><font size="1">Balance at December 31, 2006</font></TD>
    <TD align=left><font size="1">Ps.</font></TD>
    <TD align=right><font size="1">3,763,412</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">997,606</font></TD>
    <TD align=left><font size="1">&nbsp;&nbsp;&nbsp;</font></TD>
    <TD align=left><font size="1">Ps.</font></TD>
    <TD align=right><font size="1">7,021,122</font></TD>
    <TD align=left><font size="1">&nbsp;&nbsp;&nbsp;</font></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">)&nbsp;&nbsp;&nbsp;</font></TD>
    <TD align=left><font size="1"> Ps.</font></TD>
    <TD align=right><font size="1">(73,659</font></TD>
    <TD align=left><font size="1">)&nbsp;&nbsp;&nbsp;</font></TD>
    <TD align=left><font size="1">Ps.</font></TD>
    <TD align=right><font size="1">(25,539</font></TD>
    <TD align=left><font size="1">)</font></TD>
  </TR>
  <TR>
    <TD colSpan=19><font size="1"></font></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left><font size="1">Increase in capital stock (note 15)</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1">267,015</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1"></font></TD>
    <TD align=right><font size="1">2,153,711</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1">-</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1">-</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1">-</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1">-</font></TD>
    <TD align=left><font size="1"></font></TD>
  </TR>
  <TR>
    <TD colSpan=19><font size="1"></font></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left><font size="1">Comprehensive income:</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left><font size="1">Net income for the year</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1">-</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1"></font></TD>
    <TD align=right><font size="1">-</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1">1,529,057</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1">-</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1">-</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1">-</font></TD>
    <TD align=left><font size="1"></font></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left><font size="1">&nbsp;&nbsp;&nbsp;Translation effect in foreign
      <br>
      &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;subsidiaries</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1">-</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1"></font></TD>
    <TD align=right><font size="1">-</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1">-</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1">-</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1">-</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1">(6,171</font></TD>
    <TD align=left><font size="1">)</font></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left><font size="1">&nbsp;&nbsp;&nbsp;Effect of market value of
      swaps </font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1"></font></TD>
    <TD align=right><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left><font size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;net of&nbsp;deferred
      taxes</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1">-</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1"></font></TD>
    <TD align=right><font size="1">-</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1">-</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1">-</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1">-</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1">-</font></TD>
    <TD align=left><font size="1"></font></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left><font size="1">&nbsp;&nbsp;&nbsp;Result of holding non-monetary
      </font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left><font size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;assets,
      net of deferred taxes</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1">-</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1"></font></TD>
    <TD align=right><font size="1">-</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1">-</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1">-</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1">205,814</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1">-</font></TD>
    <TD align=left><font size="1"></font></TD>
  </TR>
  <TR>
    <TD><font size="1"></font></TD>
    <TD colSpan=18>
      <hr size="1" noshade>
    </TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left><font size="1">Balance at December 31, 2007</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1">4,030,427</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1"></font></TD>
    <TD align=right><font size="1">3,151,317</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1">8,550,179</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right colSpan=2><font size="1">(970,513</font></TD>
    <TD align=left><font size="1">)</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1">132,155</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1">(31,710</font></TD>
    <TD align=left><font size="1">)</font></TD>
  </TR>
  <TR>
    <TD colSpan=19><font size="1"></font></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left><font size="1">Increase in capital stock (note 15)</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1">112,269</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1"></font></TD>
    <TD align=right><font size="1">1,056,887</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1">-</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1">-</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1">-</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1">-</font></TD>
    <TD align=left><font size="1"></font></TD>
  </TR>
  <TR>
    <TD colSpan=19><font size="1"></font></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left><font size="1">Investment in PAV Republic &#150; ICH</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1">-</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1"></font></TD>
    <TD align=right><font size="1">-</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1">-</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1">-</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1">-</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1">-</font></TD>
    <TD align=left><font size="1"></font></TD>
  </TR>
  <TR>
    <TD colSpan=19><font size="1"></font></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left><font size="1">Comprehensive income:</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left><font size="1">&nbsp;&nbsp;&nbsp;Net income for the year</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1">-</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1"></font></TD>
    <TD align=right><font size="1">-</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1">1,796,137</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1">-</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1">-</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1">-</font></TD>
    <TD align=left><font size="1"></font></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left><font size="1">&nbsp;&nbsp;&nbsp;Translation effect in foreign
      <br>
      &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;subsidiaries</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1">-</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1"></font></TD>
    <TD align=right><font size="1">-</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1">-</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1">-</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1">-</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1">626,875</font></TD>
    <TD align=left><font size="1"></font></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left><font size="1">&nbsp;&nbsp;&nbsp;Effect of market value of
      swaps </font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1"></font></TD>
    <TD align=right><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left><font size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;net of deferred
      taxes</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1">-</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1"></font></TD>
    <TD align=right><font size="1">-</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1">-</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1">-</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1">-</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1">-</font></TD>
    <TD align=left><font size="1"></font></TD>
  </TR>
  <TR>
    <TD colSpan=19><font size="1"></font></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left><font size="1">&nbsp;&nbsp;&nbsp;Effect of the adoption of
      the new </font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1"></font></TD>
    <TD align=right><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right colSpan=2><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left><font size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;MFRS B-10</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1">-</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1"></font></TD>
    <TD align=right><font size="1">-</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1">132,155</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1">-</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right colSpan=2><font size="1">(132,155</font></TD>
    <TD align=left><font size="1">)</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1">-</font></TD>
    <TD align=left><font size="1"></font></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left><font size="1">&nbsp;&nbsp;&nbsp;Effect of the adoption of
      the new </font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1"></font></TD>
    <TD align=right><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left><font size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;MFRS D-4</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1">-</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1"></font></TD>
    <TD align=right><font size="1">-</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></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"></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"></font></TD>
    <TD align=right><font size="1">-</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1">-</font></TD>
    <TD align=left><font size="1"></font></TD>
  </TR>
  <TR>
    <TD><font size="1"></font></TD>
    <TD colSpan=18>
      <hr size="1" noshade>
    </TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left><font size="1">Balances at December 31, 2008</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1">4,142,696</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1"></font></TD>
    <TD align=right><font size="1">4,208,204</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1">9,507,958</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1"><B>-</B></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1"><B>-</B></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1"><B>595,165</B></font></TD>
    <TD align=left><font size="1"></font></TD>
  </TR>
  <TR>
    <TD colSpan=19><font size="1"></font></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left><font size="1">Comprehensive income:</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left><font size="1">Net income for the year</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1">-</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1"></font></TD>
    <TD align=right><font size="1">-</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1"><B>(322,938</B></font></TD>
    <TD align=left><font size="1"><B>)</B></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1"><B>-</B></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1"><B>-</B></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left><font size="1">&nbsp;&nbsp;&nbsp;Translation effect in foreign
      <br>
      &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;subsidiaries</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1">-</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1"></font></TD>
    <TD align=right><font size="1">-</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1">-</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1"><B>-</B></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1"><B>-</B></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1"><B>(79,507</B></font></TD>
    <TD align=left><font size="1"><B>)</B></font></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left><font size="1">&nbsp;&nbsp;&nbsp;Effect of market value of
      swaps </font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1"></font></TD>
    <TD align=right><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left><font size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;net of deferred
      taxes</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1">-</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1"></font></TD>
    <TD align=right><font size="1">-</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1">-</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1"><B>-</B></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1"><B>-</B></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
  </TR>
  <TR>
    <TD colSpan=19><font size="1"></font></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left><font size="1">Effect of the adoption of the new<br>
      &nbsp;&nbsp;&nbsp;MFRS C-8</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1">-</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1"></font></TD>
    <TD align=right><font size="1">-</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1"><B>(109,315</B></font></TD>
    <TD align=left><font size="1"><B>)</B></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1"><B>-</B></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1"><B>-</B></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
  </TR>
  <TR>
    <TD><font size="1"></font></TD>
    <TD colSpan=18>
      <hr size="1" noshade>
    </TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left><font size="1">Balances at December 31, 2009</font></TD>
    <TD align=left><font size="1"><B>Ps.</B></font></TD>
    <TD align=right><font size="1"><B>4,142,696</B></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"><B>Ps.</B></font></TD>
    <TD align=right><font size="1"><B>4,208,204</B></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"><B>Ps.</B></font></TD>
    <TD align=right><font size="1"><B>9,075,705</B></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"><B>Ps.</B></font></TD>
    <TD align=right><font size="1"><B>- </B></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"><B>-</B></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"><B>Ps.</B></font></TD>
    <TD align=right><font size="1"><B>515,658</B></font></TD>
    <TD align=left><font size="1"></font></TD>
  </TR>
  <TR>
    <TD><font size="1"></font></TD>
    <TD colSpan=18>
      <hr size="2" noshade>
    </TD>
  </TR>
  <TR>
    <TD colSpan=19><font size="1"></font></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left><font size="1"></font></TD>
    <TD colspan="2" align=center><font size="1"><B>Fair<br>
      value of<br>
      derivative<br>
      financial<br>
      instruments</B></font></TD>
    <TD align=center><font size="1"></font></TD>
    <TD colspan="2" align=center><font size="1"><b>Total<br>
      controlling<br>
      stockholders&#146;<br>
      equity</b></font></TD>
    <TD align=center><font size="1"></font></TD>
    <TD colspan="2" align=center><font size="1"><b>Non-controlling<br>
      interest</b></font></TD>
    <TD align=center><font size="1"></font></TD>
    <TD colspan="2" align=center><font size="1"><b>Total<br>
      stockholders&#146;<br>
      equity</b></font></TD>
    <TD align=center><font size="1"></font></TD>
    <TD colspan="2" align=center><font size="1"><b>Comprehensive<br>
      income</b></font></TD>
    <TD align=center><font size="1"></font></TD>
    <TD align=center><font size="1"></font></TD>
    <TD align=center><font size="1"></font></TD>
    <TD align=center><font size="1"></font></TD>
  </TR>
  <TR>
    <TD><font size="1"></font></TD>
    <TD colSpan=15>
      <hr size="1" noshade>
    </TD>
    <TD><font size="1"></font></TD>
    <TD><font size="1"></font></TD>
    <TD><font size="1"></font></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left><font size="1">Balance at December 31, 2006</font></TD>
    <TD align=left><font size="1">Ps.</font></TD>
    <TD align=right><font size="1">(4,557</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">10,707,872</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">2,252,461</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">12,960,333</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
  </TR>
  <TR>
    <TD colSpan=19><font size="1"></font></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left><font size="1">Increase in capital stock (note 15)</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1">-</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1"></font></TD>
    <TD align=right><font size="1">2,420,726</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1">38,436</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1">2,459,162</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
  </TR>
  <TR>
    <TD colSpan=19><font size="1"></font></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left><font size="1">Comprehensive income:</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left><font size="1">&nbsp;&nbsp;&nbsp;Net income for the year</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1">-</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1"></font></TD>
    <TD align=right><font size="1">1,529,057</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1">96,118</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1">1,625,175</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">1,625,175</font></TD>
    <TD align=right><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left><font size="1">&nbsp;&nbsp;&nbsp;Translation effect in foreign
      <br>
      &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;subsidiaries</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1">-</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1"></font></TD>
    <TD align=right><font size="1">(6,171</font></TD>
    <TD align=left><font size="1">)</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1">(6,055</font></TD>
    <TD align=left><font size="1">)</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1">(12,226</font></TD>
    <TD align=left><font size="1">)</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1">(12,226</font></TD>
    <TD align=left><font size="1">)</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left><font size="1">&nbsp;&nbsp;&nbsp;Effect of market value of
      swaps </font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1"></font></TD>
    <TD align=right><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1"></font></TD>
    <TD align=right><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left><font size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;net of deferred
      taxes</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1">4,557</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1"></font></TD>
    <TD align=right><font size="1">4,557</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1">-</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1">4,557</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1">4,557</font></TD>
    <TD align=right><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left><font size="1">&nbsp;&nbsp;&nbsp;Result of holding non-monetary
      <br>
      &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;assets,</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1"></font></TD>
    <TD align=right><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left><font size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;net of deferred
      taxes</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1">-</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1"></font></TD>
    <TD align=right><font size="1">205,814</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1">9,219</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1">215,033</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1">215,033</font></TD>
    <TD align=right><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left>
      <hr size="1" noshade>
    </TD>
    <TD align=right>
      <hr size="1" noshade>
    </TD>
    <TD align=right>
      <hr size="1" noshade>
    </TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1"></font></TD>
    <TD align=right><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1">1,832,539</font></TD>
    <TD align=right><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
  </TR>
  <TR>
    <TD><font size="1"></font></TD>
    <TD>
      <hr size="1" noshade>
    </TD>
    <TD>
      <hr size="1" noshade>
    </TD>
    <TD>
      <hr size="1" noshade>
    </TD>
    <TD>
      <hr size="1" noshade>
    </TD>
    <TD>
      <hr size="1" noshade>
    </TD>
    <TD>
      <hr size="1" noshade>
    </TD>
    <TD>
      <hr size="1" noshade>
    </TD>
    <TD>
      <hr size="1" noshade>
    </TD>
    <TD>
      <hr size="1" noshade>
    </TD>
    <TD>
      <hr size="1" noshade>
    </TD>
    <TD>
      <hr size="1" noshade>
    </TD>
    <TD>
      <hr size="1" noshade>
    </TD>
    <TD>
      <hr size="2" noshade>
    </TD>
    <TD>
      <hr size="2" noshade>
    </TD>
    <TD>
      <hr size="2" noshade>
    </TD>
    <TD><font size="1"></font></TD>
    <TD><font size="1"></font></TD>
    <TD><font size="1"></font></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left><font size="1">Balance at December 31, 2007</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1">-</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1"></font></TD>
    <TD align=right><font size="1">14,861,855</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1">2,390,179</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1">17,252,034</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1"></font></TD>
    <TD align=right><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left><font size="1">Increase in capital stock (note 15)</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1">-</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1"></font></TD>
    <TD align=right><font size="1">1,169,156</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1">-</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1">1,169,156</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1"></font></TD>
    <TD align=right><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
  </TR>
  <TR>
    <TD colSpan=19><font size="1"></font></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left><font size="1">Investment in PAV Republic &#150; ICH</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1">-</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1"></font></TD>
    <TD align=right><font size="1">-</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1">9,794</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1">9,794</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1"></font></TD>
    <TD align=right><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
  </TR>
  <TR>
    <TD colSpan=19><font size="1"></font></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left><font size="1">Comprehensive income:</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1"></font></TD>
    <TD align=right><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left><font size="1">&nbsp;&nbsp;&nbsp;Net income for the year</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1">-</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1"></font></TD>
    <TD align=right><font size="1">1,796,137</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1">104,212</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1">1,900,349</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1">1,900,349</font></TD>
    <TD align=right><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left><font size="1">&nbsp;&nbsp;&nbsp;Translation effect in foreign
      <br>
      &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;subsidiaries</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1">-</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1"></font></TD>
    <TD align=right><font size="1">626,875</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1">618,157</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1">1,245,032</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1">1,245,032</font></TD>
    <TD align=right><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left><font size="1">&nbsp;&nbsp;&nbsp;Effect of market value of
      swaps </font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1"></font></TD>
    <TD align=right><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left><font size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;net of deferred
      taxes</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1">(270,868</font></TD>
    <TD align=left><font size="1">)</font></TD>
    <TD align=right><font size="1"></font></TD>
    <TD align=right><font size="1">(270,868</font></TD>
    <TD align=left><font size="1">)</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1">-</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1">(270,868</font></TD>
    <TD align=left><font size="1">)</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1">(270,868</font></TD>
    <TD align=left><font size="1">)</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
  </TR>
  <TR>
    <TD colSpan=19><font size="1"></font></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left><font size="1">&nbsp;&nbsp;&nbsp;Effect of the adoption of
      the new </font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1"></font></TD>
    <TD align=right><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1"></font></TD>
    <TD align=right><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left><font size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;MFRS B-10</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1">-</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1"></font></TD>
    <TD align=right><font size="1">-</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1">-</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1">-</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1"></font></TD>
    <TD align=right><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left><font size="1">&nbsp;&nbsp;&nbsp;Effect of the adoption of
      the new </font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1"></font></TD>
    <TD align=right><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1"></font></TD>
    <TD align=right><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left><font size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;MFRS D-4</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1">-</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1"></font></TD>
    <TD align=right><font size="1">-</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1">-</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1">-</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1"></font></TD>
    <TD align=right><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left>
      <hr size="1" noshade>
    </TD>
    <TD align=right>
      <hr size="1" noshade>
    </TD>
    <TD align=right>
      <hr size="1" noshade>
    </TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1">2,874,513</font></TD>
    <TD align=right><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
  </TR>
  <TR>
    <TD><font size="1"></font></TD>
    <TD>
      <hr size="1" noshade>
    </TD>
    <TD>
      <hr size="1" noshade>
    </TD>
    <TD>
      <hr size="1" noshade>
    </TD>
    <TD>
      <hr size="1" noshade>
    </TD>
    <TD>
      <hr size="1" noshade>
    </TD>
    <TD>
      <hr size="1" noshade>
    </TD>
    <TD>
      <hr size="1" noshade>
    </TD>
    <TD>
      <hr size="1" noshade>
    </TD>
    <TD>
      <hr size="1" noshade>
    </TD>
    <TD>
      <hr size="1" noshade>
    </TD>
    <TD>
      <hr size="1" noshade>
    </TD>
    <TD>
      <hr size="1" noshade>
    </TD>
    <TD>
      <hr size="2" noshade>
    </TD>
    <TD>
      <hr size="2" noshade>
    </TD>
    <TD>
      <hr size="2" noshade>
    </TD>
    <TD><font size="1"></font></TD>
    <TD><font size="1"></font></TD>
    <TD><font size="1"></font></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left><font size="1">Balances at December 31, 2008</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1">(270,868</font></TD>
    <TD align=left><font size="1">)</font></TD>
    <TD align=right><font size="1"></font></TD>
    <TD align=right><font size="1">18,183,155</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1">3,122,342</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1">21,305,497</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
  </TR>
  <TR>
    <TD colSpan=19><font size="1"></font></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left><font size="1">Comprehensive income:</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left><font size="1">Net loss for the year</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1">-</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1"></font></TD>
    <TD align=right><font size="1"><B>(322,938</B></font></TD>
    <TD align=left><font size="1"><B>)</B></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1"><B>(852,174</B></font></TD>
    <TD align=left><font size="1"><B>)</B></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1"><B>(1,175,112</B></font></TD>
    <TD align=left><font size="1"><B>)</B></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1"><B>(1,175,112</B></font></TD>
    <TD align=left><font size="1"><B>)</B></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left><font size="1">&nbsp;&nbsp;&nbsp;Translation effect in foreign
      <br>
      &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;subsidiaries</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1">-</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1"></font></TD>
    <TD align=right><font size="1"><B>(79,507</B></font></TD>
    <TD align=left><font size="1"><B>)</B></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1"><B>(78,810</B></font></TD>
    <TD align=left><font size="1"><B>)</B></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1"><B>(158,317</B></font></TD>
    <TD align=left><font size="1"><B>)</B></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1"><B>(158,317</B></font></TD>
    <TD align=left><font size="1"><B>)</B></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left><font size="1">&nbsp;&nbsp;&nbsp;Effect of market value of
      swaps </font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1"></font></TD>
    <TD align=right><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left><font size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;net of&nbsp;deferred
      taxes</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1"><B>119,141</B></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1"></font></TD>
    <TD align=right><font size="1"><B>119,141</B></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1">-</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1"><B>119,141</B></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1"><B>119,141</B></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
  </TR>
  <TR>
    <TD colSpan=19><font size="1"></font></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left><font size="1">Effect of the adoption of the new </font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1"></font></TD>
    <TD align=right><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left><font size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;MFRS C-8</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1">-</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1"></font></TD>
    <TD align=right><font size="1"><B>(109,315</B></font></TD>
    <TD align=left><font size="1"><B>)</B></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1">-</font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=right><font size="1"><B>(109,315</B></font></TD>
    <TD align=left><font size="1"><B>)</B></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left><font size="1"></font></TD>
    <TD colspan="15" align=left>
      <hr size="1" noshade>
    </TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left><font size="1">Balances at December 31, 2009</font></TD>
    <TD align=left><font size="1"><B>Ps.</B></font></TD>
    <TD align=right><font size="1"><B>(151,727</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>17,790,536</B></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"><B>Ps.</B></font></TD>
    <TD align=right><font size="1"><B>2,191,358</B></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"><B>Ps.</B></font></TD>
    <TD align=right><font size="1"><B>19,981,894</B></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"><B>Ps.</B></font></TD>
    <TD align=right><font size="1"><B>(1,214,288</B></font></TD>
    <TD align=left><font size="1"><B>)</B></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left><font size="1"></font></TD>
    <TD colspan="15" align=left>
      <hr size="2" noshade>
    </TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
    <TD align=left><font size="1"></font></TD>
  </TR>
</TABLE>
<P style="TEXT-ALIGN: left">See accompanying notes to consolidated financial statements.</P>
<P style="TEXT-ALIGN: center">F-6</P>
<HR align=center width="100%" noshade SIZE=5>
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<DIV title="EE+ Page Break" style="FONT-SIZE: 1pt; PAGE-BREAK-AFTER: always; WIDTH: 100%; HEIGHT: 1px"></DIV>
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<BR>
<P style="TEXT-ALIGN: center">GRUPO SIMEC, S.A.B. DE C.V. AND SUBSIDIARIES<BR>
  <a name="f5"></a>Consolidated Statement of Cash Flow<BR>
  <BR>
  Years ended December 31, 2009 and 2008<BR>
  <BR>
  (In thousands of Mexican pesos)</P>
<TABLE width="100%" border=0 cellpadding="0" cellSpacing=0 style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'">
  <TR>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>
    <TD colspan="3" align=center><B>2009</B></TD>
    <TD colspan="3" align=center>2008</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>
    <TD align=left><hr size="1" noshade></TD>
    <TD colspan="5" align=right><hr size="1" noshade></TD>
  </TR>
  <TR>
    <TD colSpan=7>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>Operating activities:</TD>
    <TD align=left>&nbsp;</TD>
    <TD 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>(Loss) income before income tax</TD>
    <TD align=left><B>Ps.</B></TD>
    <TD align=right><B>(3,220,514</B></TD>
    <TD align=left><B>)</B></TD>
    <TD align=left>Ps.</TD>
    <TD align=right>2,936,652</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR>
    <TD colSpan=7>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;&nbsp;&nbsp;Depreciation and amortization</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>1,047,882</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>895,306</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;&nbsp;&nbsp;Impairment loss on intangible assets</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>2,368,000</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=center>
      <div align="right">-</div>
    </TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;&nbsp;&nbsp;Seniority premiums and termination benefits</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>35,708</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>27,016</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;&nbsp;&nbsp;Interest income</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>(30,964</B></TD>
    <TD align=left><B>)</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>(135,810</TD>
    <TD align=left>)</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;&nbsp;&nbsp;Accrued interest</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>48,833</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>57,288</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>
    <TD align=left><hr size="1" noshade></TD>
    <TD colspan="5" align=right><hr size="1" noshade></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>248,945</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>3,780,452</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR>
    <TD colSpan=7>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;&nbsp;&nbsp;Decrease in trade receivable, net</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>760,413</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>367,250</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;&nbsp;&nbsp;Decrease (increase) in related parties receivables</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>48,764</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>(49,644</TD>
    <TD align=left>)</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;&nbsp;&nbsp;Decrease (increase) in inventories, net</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>2,037,628</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>(2,030,274</TD>
    <TD align=left>)</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;&nbsp;&nbsp;Decrease (increase) in other accounts receivable,</TD>
    <TD align=left>&nbsp;</TD>
    <TD 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;recoverable taxes and prepaid
      expenses</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>79,464</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>(202,276</TD>
    <TD align=left>)</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;&nbsp;&nbsp;(Decrease) increase in other accounts payable
      and accrued</TD>
    <TD align=left>&nbsp;</TD>
    <TD 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;Expenses</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>(361,591</B></TD>
    <TD align=left><B>)</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>93,916</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;&nbsp;&nbsp;(Decrease) increase in accounts payable</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>(1,338,235</B></TD>
    <TD align=left><B>)</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>541,938</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;&nbsp;&nbsp;(Decrease) increase in related parties payable</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>(98,413</B></TD>
    <TD align=left><B>)</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>17,840</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;&nbsp;&nbsp;Income tax paid</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>(217,285</B></TD>
    <TD align=left><B>)</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>(695,852</TD>
    <TD align=left>)</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>
    <TD align=left><hr size="1" noshade></TD>
    <TD colspan="5" align=right><hr size="1" noshade></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Resources provided by operating
      activities</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>1,159,690</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>1,823,350</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>
    <TD align=left><hr size="1" noshade></TD>
    <TD colspan="5" align=right><hr size="1" noshade></TD>
  </TR>
  <TR>
    <TD colSpan=7>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>Investing activities:</TD>
    <TD align=left>&nbsp;</TD>
    <TD 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;Investing in shares of Corporaci&#243;n San</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>-</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>(8,450,796</TD>
    <TD align=left>)</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;&nbsp;&nbsp;Acquisition of property, plant and equipment</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>(263,207</B></TD>
    <TD align=left><B>)</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>(479,804</TD>
    <TD align=left>)</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;&nbsp;&nbsp;Increase in other noncurrent assets</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>818</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>(210,035</TD>
    <TD align=left>)</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;&nbsp;&nbsp;Interest income collected</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>30,758</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>135,810</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;&nbsp;&nbsp;Proceeds from sale of machinery and equipment</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>6,114</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>4,769</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>
    <TD align=left><hr size="1" noshade></TD>
    <TD colspan="5" align=right><hr size="1" noshade></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Resources used in investing
      activities</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>(225,517</B></TD>
    <TD align=left><B>)</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>(9,000,056</TD>
    <TD align=left>)</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>
    <TD align=left><hr size="1" noshade></TD>
    <TD colspan="5" align=right><hr size="1" noshade></TD>
  </TR>
  <TR>
    <TD colSpan=7>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>Financing activities:</TD>
    <TD align=left>&nbsp;</TD>
    <TD 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;Financial debt</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>-</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>1,334,129</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;&nbsp;&nbsp;Financial debt repayment</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>(8,800</B></TD>
    <TD align=left><B>)</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>(1,325,329</TD>
    <TD align=left>)</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;&nbsp;&nbsp;Related parties payable (financing)</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>1,189,850</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>232,943</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;&nbsp;&nbsp;Related parties payable repayment</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>(709,219</B></TD>
    <TD align=left><B>)</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>(36,138</TD>
    <TD align=left>)</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;&nbsp;&nbsp;Increase in capital stock</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>-</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>112,269</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;&nbsp;&nbsp;Additional paid-in capital</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>-</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>1,056,887</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;&nbsp;&nbsp;Interest paid</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>(33,441</B></TD>
    <TD align=left><B>)</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>(40,607</TD>
    <TD align=left>)</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>
    <TD align=left><hr size="1" noshade></TD>
    <TD colspan="5" align=right><hr size="1" noshade></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Resources provided by financing
      activities</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>438,390</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>1,334,154</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>
    <TD align=left><hr size="1" noshade></TD>
    <TD colspan="5" align=right><hr size="1" noshade></TD>
  </TR>
  <TR>
    <TD colSpan=7>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net increase (decrease)
      in cash and cash equivalents</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>1,372,563</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>(5,842,552</TD>
    <TD align=left>)</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>Translation differences in cash and cash equivalents</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>(404</B></TD>
    <TD align=left><B>)&nbsp;&nbsp;&nbsp;</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>1,238</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>Foreign exchange loss, not realized</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>-</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>21,900</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>Cash and cash equivalents at beginning of year</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>576,741</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>6,396,155</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>
    <TD align=left><hr size="1" noshade></TD>
    <TD colspan="5" align=right><hr size="1" noshade></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>Cash and cash equivalents at end of year</TD>
    <TD align=left><B>Ps.</B></TD>
    <TD align=right><B>1,948,900</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>Ps.</TD>
    <TD align=right>576,741</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>
    <TD align=left><hr size="2" noshade></TD>
    <TD colspan="5" align=right><hr size="2" noshade></TD>
  </TR>
</TABLE>
<P style="TEXT-ALIGN: left">See accompanying notes to consolidated financial statements.</P>
<P style="TEXT-ALIGN: center">F-7</P>
<HR align=center width="100%" noshade SIZE=5>
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<BR>
<P style="TEXT-ALIGN: center"><B>GRUPO SIMEC, S.A.B. DE C.V. AND SUBSIDIARIES</B></P>
<P style="TEXT-ALIGN: center"><a name="f6"></a>Consolidated Statements of Changes in Financial
  Position</P>
<P style="TEXT-ALIGN: center">Year ended December 31, 2007</P>
<P style="TEXT-ALIGN: center">(In thousands of Mexican pesos)</P>
<TABLE width="100%" border=0 cellpadding="0" cellSpacing=0 style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'">
  <TR>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>
    <TD colspan="3" align=center>2007</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>
    <TD align=left>
      <hr size="1" noshade>
    </TD>
    <TD align=right>
      <hr size="1" noshade>
    </TD>
    <TD align=left>
      <hr size="1" noshade>
    </TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>Operating activities:</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>Net income</TD>
    <TD align=left>Ps.</TD>
    <TD align=right>1,625,175</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>Add (deduct) items not requiring the use of resources</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR>
    <TD colSpan=4>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;&nbsp;&nbsp;Depreciation and amortization</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>549,256</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;&nbsp;&nbsp;Deferred income tax</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>509,152</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;&nbsp;&nbsp;Seniority premiums and termination benefits</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>4,575</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR>
    <TD colSpan=4>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>
    <TD align=left>
      <hr size="1" noshade>
    </TD>
    <TD align=right>
      <hr size="1" noshade>
    </TD>
    <TD align=left>
      <hr size="1" noshade>
    </TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>2,688,158</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR>
    <TD colSpan=4>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>Net changes in operating assets and liabilities:</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;Trade receivable, net</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>(237,795</TD>
    <TD align=left>)</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;&nbsp;&nbsp;Other accounts receivable and prepaid expenses</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>(271,374</TD>
    <TD align=left>)</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;&nbsp;&nbsp;Inventories, net</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>123,835</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;&nbsp;&nbsp;Derivative financial instruments&nbsp;&nbsp;&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>-</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;&nbsp;&nbsp;Related parties receivables</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>(3,434</TD>
    <TD align=left>)</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;&nbsp;&nbsp;Accounts payable, other accounts payable
      and accrued expenses</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>84,494</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;&nbsp;&nbsp;Other long-term liabilities</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>(31,928</TD>
    <TD align=left>)</TD>
  </TR>
  <TR>
    <TD colSpan=4>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>
    <TD align=left>
      <hr size="1" noshade>
    </TD>
    <TD align=right>
      <hr size="1" noshade>
    </TD>
    <TD align=left>
      <hr size="1" noshade>
    </TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Resources provided by operating
      activities</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>2,351,956</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>
    <TD align=left>
      <hr size="1" noshade>
    </TD>
    <TD align=right>
      <hr size="1" noshade>
    </TD>
    <TD align=left>
      <hr size="1" noshade>
    </TD>
  </TR>
  <TR>
    <TD colSpan=4>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>Financing activities:</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;Increase in capital stock</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>2,420,726</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;&nbsp;&nbsp;Related parties payable (financing)</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>(134,676</TD>
    <TD align=left>)</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;&nbsp;&nbsp;Increase of investment in subsidiaries by
      Industrias CH</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>38,436</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;&nbsp;&nbsp;Short-term loans (repaid)</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>(124</TD>
    <TD align=left>)</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;&nbsp;&nbsp;Financial debt repayment</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>-</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR>
    <TD colSpan=4>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>
    <TD align=left>
      <hr size="1" noshade>
    </TD>
    <TD align=right>
      <hr size="1" noshade>
    </TD>
    <TD align=left>
      <hr size="1" noshade>
    </TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Resources provided by financing
      activities</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>2,324,362</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>
    <TD align=left>
      <hr size="1" noshade>
    </TD>
    <TD align=right>
      <hr size="1" noshade>
    </TD>
    <TD align=left>
      <hr size="1" noshade>
    </TD>
  </TR>
  <TR>
    <TD colSpan=4>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>Investing activities:</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;Increase in long-term inventories&nbsp;&nbsp;&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>(8,292</TD>
    <TD align=left>)</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;&nbsp;&nbsp;Acquisition of property, plant and equipment</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>(485,668</TD>
    <TD align=left>)</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;&nbsp;&nbsp;Proceeds from insurance claim, net</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>-</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;&nbsp;&nbsp;Increase in other noncurrent assets</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>9,779</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=left>
      <hr size="1" noshade>
    </td>
    <td align=right>
      <hr size="1" noshade>
    </td>
    <td align=left>
      <hr size="1" noshade>
    </td>
  </tr>

  <TR vAlign=bottom>
    <TD align=left>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Resources used in investing
      activities</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>(484,181</TD>
    <TD align=left>)</TD>
  </TR>
  <TR>
    <TD colSpan=4>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net increase in cash and
      cash equivalents</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>4,192,137</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR>
    <TD colSpan=4>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>Cash and cash equivalents:</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;At beginning of year</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>2,204,018</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>
    <TD align=left>
      <hr size="1" noshade>
    </TD>
    <TD align=right>
      <hr size="1" noshade>
    </TD>
    <TD align=left>
      <hr size="1" noshade>
    </TD>
  </TR>
  <TR>
    <TD colSpan=4>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;&nbsp;&nbsp;At end of year</TD>
    <TD align=left>Ps.</TD>
    <TD align=right>6,396,155</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>
    <TD align=left>
      <hr size="2" noshade>
    </TD>
    <TD align=right>
      <hr size="2" noshade>
    </TD>
    <TD align=left>
      <hr size="2" noshade>
    </TD>
  </TR>
</TABLE>
<BR>
<P style="TEXT-ALIGN: left">See accompanying notes to consolidated financial statements.</P>
<P style="TEXT-ALIGN: center">F-8</P>
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<P style="TEXT-ALIGN: center"><B>GRUPO SIMEC, S.A.B. DE C.V. AND SUBSIDIARIES</B><BR>
  <BR>
  <a name="f7"></a>Notes to Consolidated Financial Statements</P>
<P style="TEXT-ALIGN: center">December 31, 2009, 2008 and 2007</P>
<P style="TEXT-ALIGN: center">(In thousands of Mexican pesos, except that other
  currency is indicated)</P>
<P style="TEXT-ALIGN: left"><B>1. Operations and significant accounting policies</B></P>
<P style="TEXT-ALIGN: left">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 or ICH).</P>
<P style="TEXT-ALIGN: left">The issuance of the financial statements and accompanying
  notes were authorized on September 17,
  2010 by Luis Garc&#237;a Lim&#243;n and Adolfo Luna Luna, 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.</P>
<P style="TEXT-ALIGN: left"><B>Significant Transactions</B></P>
<P style="TEXT-ALIGN: left">On December 26, 2008 the Company acquired 99.95% of
  the shares of Northarc Express, S. A. de C. V. a subsidiary of Grupo TMM, S.
  A. de C. V. for Ps. 202 million. This company became the operating subsidiary
  of the manufacturing steel plants located in Mexico (see note 17). On January
  6, 2009 this company was renamed to Simec International 2, S. A. de C. V.</P>
<P style="TEXT-ALIGN: left">On February 5, 2009 at the extraordinary stockholders&#146;
  meeting of Simec International 2, S.A. de C.V., the stockholders authorized
  the split-up of its assets, liabilities and stockholders&#146; equity, transferring
  them to the companies that were created as follows, Simec International 3, S.A.
  de C.V., Simec International 4, S.A. de C.V. and Simec International 5, S.A. de
  C.V. From that date, only the operation of the plants located in Guadalajara
  and Mexicali remained with Simec International 2, S.A. de C.V.; Simec International
  3, S.A. de C.V. became the operator of the plant located in Tlaxcala; Simec
  International 4, S.A. de C.V. and Simec International 5, S.A. de C.V. assumed
  the operation of the plants in San Luis Potos&#237;.</P>
<P style="TEXT-ALIGN: left">In 2009 two companies were set-up to focus in the
  commercialization of products in Mexico. These companies are Simec Acero, S.A.
  de C.V., which is in charge of the domestic sales in Mexico and Simec USA Co.,
  which is in charge of all the export sales.</P>
<P style="TEXT-ALIGN: left">On May 12, 2009, a new company named Pacific Steel
  Project, Inc. located in the State of California USA was set-up. It carries
  out the administration, development and beginning of the new projects of investment
  for the manufacturing plants in Mexico.</P>
<blockquote>
  <p style="TEXT-ALIGN: left">On August 10, 2009, at the extraordinary stockholders&#146;
    meeting of Simec International, S.A. de C.V, it was decided to the split-up
    certain assets, liabilities and equity to companies named Siminsa A, S.A.
    de C.V., Siminsa B, S.A. de C.V., Siminsa C, S.A. de C.V., and Siminsa D,
    S.A. de C.V., Simec International, S.A. de C.V. remained as the original company.
    These companies merged on October 29, 2009, as following indicated:</p>
</blockquote>
<P style="TEXT-ALIGN: left">Siminsa A, S.A. de C.V. (which was dissolved) merged
  with Simec International 2, S.A. de C.V., which was the surviving corporation.</P>
<P style="TEXT-ALIGN: center">F-9</P>
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Siminsa B, S.A. de C.V. (which was dissolved) merged with Simec International
3, S.A. de C.V., which was the surviving corporation. <br>
Siminsa C, S.A. de C.V. (which was dissolved) merged with Simec International
4, S.A. de C.V., which was the surviving corporation. <br>
Siminsa D, S.A. de C.V. (which was dissolved) merged with Simec International
5, S.A. de C.V., which was the surviving corporation.
<P style="TEXT-ALIGN: left">On November 10, 2009, at the extraordinary stockholders&#146;
  meetings of Simec International 2, S.A. de C.V, Simec International 3, S.A.
  de C.V, Simec International 4, S.A. de C.V, and Simec International 5, S.A.
  de C.V., the Group decided to transfer certain accounts receivable, liabilities
  and stockholders&#146; equity to a new entity located in the State of California,
  USA named Simec Steel Inc. The main activity of this subsidiary is to finance
  the operation of Grupo Simec and the acquisition of new long-term investments.</P>
<table width="100%" border="0" cellspacing="0" cellpadding="0">
  <tr>
    <td width="3%"><font size="2"><B>2. </B></font></td>
    <td><font size="2"><b>Summary of significant accounting policies</b></font></td>
  </tr>
</table>
<P style="TEXT-ALIGN: left">The financial statements has been prepared in conformity
  with Mexican Financial Reporting Standards (hereinafter referred as &#147;MFRS&#148;
  or &#147;Mexican Accounting Bulletin&#148;) and their interpretations (IMFRS).</P>
<table width="100%" border="0" cellspacing="0" cellpadding="0">
  <tr valign="top">
    <td width="3%"><font size="2"><B>a) </B></font></td>
    <td><p><font size="2"><B>Basis of consolidation</B></font></p>
      <p style="TEXT-ALIGN: left"><font size="2">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.</font></p>
      <p style="TEXT-ALIGN: left"><font size="2">The Company&#146;s subsidiaries
        and its equity percentage are as follows:</font></p></td>
  </tr>
</table>
<br>
<TABLE width="100%" border=0 cellpadding="0" cellSpacing=0 style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'">
  <TR>
    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=center>&nbsp;</TD>
    <TD align=center colSpan=2><B>Percentage of equity owned</B> <hr size="1" noshade></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=center>&nbsp;</TD>
    <TD align=center> <B>2009</B> <hr size="1" noshade></TD>
    <TD align=center><B>2008</B> <hr size="1" noshade></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>Compa&#241;&#237;a Sider&#250;rgica de Guadalajara, S.A. de
      C.V.</TD>
    <TD align=center><B>99.99%</B></TD>
    <TD align=center><B>99.99%</B></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>Arrendadora Norte de Matamoros S.A. de C.V.</TD>
    <TD align=center><B>100%</B></TD>
    <TD align=center><B>100%</B></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>Arrendadora Simec, S.A. de C.V.</TD>
    <TD align=center><B>100%</B></TD>
    <TD align=center><B>100%</B></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>Simec International, S.A. de C.V.</TD>
    <TD align=center><B>100%</B></TD>
    <TD align=center><B>100%</B></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>SimRep Corporation and Subsidiaries</TD>
    <TD align=center><B>50.22%</B></TD>
    <TD align=center><B>50.22%</B></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>Undershaft Investments, N.V.</TD>
    <TD align=center><B>100%</B></TD>
    <TD align=center><B>100%</B></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>Pacific Steel, Inc.</TD>
    <TD align=center><B>100%</B></TD>
    <TD align=center><B>100%</B></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>Compa&#241;&#237;a Sider&#250;rgica del Pac&#237;fico, S.A.
      de C.V.</TD>
    <TD align=center><B>99.99%</B></TD>
    <TD align=center><B>99.99%</B></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>Coordinadora de Servicios Sider&#250;rgicos de Calidad, S.A.
      de C.V.</TD>
    <TD align=center><B>100%</B></TD>
    <TD align=center><B>100%</B></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>Industrias del Acero y del Alambre, S.A. de C.V.</TD>
    <TD align=center><B>99.99%</B></TD>
    <TD align=center><B>99.99%</B></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>Procesadora Mexicali, S.A. de C.V.</TD>
    <TD align=center><B>99.99%</B></TD>
    <TD align=center><B>99.99%</B></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>Servicios Simec, S.A. de C.V.</TD>
    <TD align=center><B>100%</B></TD>
    <TD align=center><B>100%</B></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>Sistemas de Transporte de Baja California, S.A. de C.V.</TD>
    <TD align=center><B>100%</B></TD>
    <TD align=center><B>100%</B></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>Operadora de Servicios Sider&#250;rgicos de Tlaxcala, S.A.
      de C.V.</TD>
    <TD align=center><B>100%</B></TD>
    <TD align=center><B>100%</B></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>Operadora de Metales, S.A. de C.V.</TD>
    <TD align=center><B>100%</B></TD>
    <TD align=center><B>100%</B></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>Administradora de Servicios Sider&#250;rgicos de Tlaxcala,
      S.A., de C.V.</TD>
    <TD align=center><B>100%</B></TD>
    <TD align=center><B>100%</B></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>Comercializadora, Simec S.A. de C.V.</TD>
    <TD align=center><B>100%</B></TD>
    <TD align=center><B>100%</B></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>CSG Comercial, S.A. de C.V.</TD>
    <TD align=center><B>99.95%</B></TD>
    <TD align=center><B>99.95%</B></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>Comercializadora de Productos de Acero de Tlaxcala, S.A. de
      C.V.</TD>
    <TD align=center><B>99.95%</B></TD>
    <TD align=center><B>99.95%</B></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>Sider&#250;rgica de Baja California, S.A. de C.V.</TD>
    <TD align=center><B>99.95%</B></TD>
    <TD align=center><B>99.95%</B></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>Operadora de Servicios de la Industria Sider&#250;rgica ICH,
      S.A. de C.V.</TD>
    <TD align=center><B>100%</B></TD>
    <TD align=center><B>100%</B></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>Corporaci&#243;n Aceros DM, S.A. de C.V. y Subsidiarias (Grupo
      San)</TD>
    <TD align=center><B>100%</B></TD>
    <TD align=center><B>100%</B></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>Productos Sider&#250;rgicos de Tlaxcala, S.A. de C.V.</TD>
    <TD align=center><B>100%</B></TD>
    <TD align=center><B>100%</B></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>Comercializadora MSAN, S.A. de C.V.</TD>
    <TD align=center><B>100%</B></TD>
    <TD align=center><B>100%</B></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>Comercializadora Aceros DM, S.A. de C.V.</TD>
    <TD align=center><B>100%</B></TD>
    <TD align=center><B>100%</B></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>Promotora de Aceros San Luis, S.A. de C.V.</TD>
    <TD align=center><B>100%</B></TD>
    <TD align=center><B>100%</B></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>Simec International 2, S.A. de C.V.</TD>
    <TD align=center><B>99.95%</B></TD>
    <TD align=center><B>99.95%</B></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>Simec International 3, S.A. de C.V. (effective 2009)</TD>
    <TD align=center><B>99.95%</B></TD>
    <TD align=center><B>-</B></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>Simec International 4, S.A. de C.V. (effective 2009)</TD>
    <TD align=center><B>99.95%</B></TD>
    <TD align=center><B>-</B></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>Simec International 5, S.A. de C.V. (effective 2009)</TD>
    <TD align=center><B>99.95%</B></TD>
    <TD align=center><B>-</B></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>Simec Acero, S.A. de C.V. (effective 2009)</TD>
    <TD align=center><B>100.00%</B></TD>
    <TD align=center><B>-</B></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>Simec USA, Co. (effective 2009)</TD>
    <TD align=center><B>100.00%</B></TD>
    <TD align=center><B>-</B></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>Pacific Steel Projects, Inc. (effective 2009)</TD>
    <TD align=center><B>100.00%</B></TD>
    <TD align=center><B>-</B></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>Simec Steel, Inc. (effective 2009)</TD>
    <TD align=center><B>100.00%</B></TD>
    <TD align=center><B>-</B></TD>
  </TR>
</TABLE>
<BR>
<P style="TEXT-ALIGN: center">F-10</P>
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<TABLE style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'" cellSpacing=0 border=0>
  <TR>
    <TD width="3%" vAlign=top nowrap><B>b)</B>&nbsp; &nbsp; &nbsp; </TD>
    <TD> <P align=left><B>Revenue recognition</B></P>
      <P align=left>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.</P>
      <P align=left>The Company recognizes the provisions necessary to record
        the freight expenses, 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 or included in selling expenses as appropriate.</P></TD>
  </TR>
  <TR>
    <TD vAlign=top nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD vAlign=top nowrap><B>c)</B>&nbsp; &nbsp; &nbsp; </TD>
    <TD> <P align=left><B>Recognition of the effects of inflation on the financial
        information</B></P>
      <P align=left>Beginning January 1, 2008 and as a result of the adoption
        of the Mexican Financial Reporting Standard (MFRS) NIF B-10, Effects of
        Inflation, the Company concluded that during 2008 and 2009 the economic
        environment was non-inflationary and ceased recognition of inflation.
        However, the financial information for the year ended on December 31,
        2007, it is presented in Mexican pesos with purchasing power as of December
        31, 2007, the last date on which the Company recognized the effects of
        inflation in the financial information.</P>
      <P>The Company considered that it was impractical to identify the realized
        and unrealized part of the deficit by holding non-monetary assets included
        in the Deficit on restatement of stockholders&#146; equity at January
        1, 2008 for &#36;132,155 and this was reclassified to Retained earnings.</P></TD>
  </TR>
  <TR valign="top">
    <TD>&nbsp;</TD>
    <TD colspan=1>&nbsp;</TD>
  </TR>
  <TR valign="top">
    <TD> <P><B>d)</B></P></TD>
    <TD colspan=1> <P><B>Foreign currency translation</B></P>
      <P>Transactions in foreign currencies are recorded at the exchange rates
        prevailing at the celebration and liquidation dates. The assets and liabilities
        in foreign currencies are translated at the exchange rates prevailing
        at the date of the consolidated balance sheet. The exchange gains or losses
        incurred in connection with those assets or liabilities are included in
        the Statement of income, as part of the comprehensive financing cost.
        Note 3 presents the consolidated position in foreign currencies at the
        end of each year and the exchange rates used in the translation.</P>
      <P>The functional and reporting currency of the Company is the Mexican peso.
        The financial statements of foreign subsidiaries were translated to Mexican
        pesos in accordance with the Mexican Financial Reporting Standard MFRS
        B-15 &#147;Conversion of foreign currencies&#148; that came into effect on
        January 1, 2008. Under this Standard, the first step to convert financial
        information from operations abroad is the determination of the functional
        currency. The functional currency is the currency of the primary economic
        environment of the foreign operation or, if different, the currency that
        mainly impacts its cash flows. This rule incorporates the concepts of
        recording currency that is the currency in which the entity maintains
        its accounting records, whether for legal or information purposes and
        the reporting currency, which is the currency chosen by the Company to
        report its financial information.</P>
      <P>The U.S. dollar was considered as the functional currency of the subsidiaries
        SimRep Corporation and Subsidiaries, (Republic) and Simec USA, Corp.,
        therefore the financial statements of these subsidiaries were translated
        into Mexican pesos by applying: i) the exchange rates at the balance sheet
        date to all assets and liabilities and (ii) the historical exchange rate
        at stockholders&#146; equity accounts and revenues, costs and expenses.
        The difference resulting from the translation or consolidation processes
        is recognized as a cumulative translation adjustment as part of Translation
        effect in foreign subsidiaries in Stockholders&#146; equity.</P></TD>
  </TR>
</TABLE>
<BR>
<P style="text-align: center;"> F-11</P>
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<TABLE border=0 cellSpacing=0 style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'">
  <TR valign="top">
    <TD width="3%"> <P>&nbsp;</P></TD>
    <TD colspan=1> <P>The Mexican Peso was considered the functional currency
        of the subsidiaries Pacific Steel, Inc., Pacific Steel Projects, Inc.
        and Simec Steel Inc. and the U.S. dollar as its recording currency; therefore
        the financial statements were translated to Mexican pesos 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.</P>
      <P>Translation differences were carried directly to the income statement
        under the caption Foreign exchange loss, net.</P>
      <P>The adoption of this standard did not result in a significant change
        in the financial statements of the Company.</P></TD>
  </TR>
  <TR>
    <TD colspan=2>&nbsp; </TD>
  </TR>
  <TR valign="top">
    <TD> <P><B>e)</B></P></TD>
    <TD colspan=1> <P><B>Use of estimates</B></P>
      <P>The preparation of consolidated financial statements requires management
        to make reasonable estimates that can affect the reported amounts of assets
        and liabilities and disclosure of contingent assets and liabilities at
        the date of the financial statements and amounts of revenues and expenses
        reported that arise during the year. Actual results could differ from
        these estimates.</P>
      <P style="text-align: left;">The Company has made accounting estimates with
        respect to the valuations for accounts receivable, inventories, long-term
        assets, valuation of derivatives, deferred tax assets and liabilities
        and environmental obligations.</P>
      <P style="text-align: left;"> The Company maintains a doubtful accounts
        reserve to account for uncollectible receivables. The reserve is determined
        based on several factors including the adjustments to prices, length of
        overdue accounts and the experience of the Company. The following table
        shows the movement of the estimate of doubtful accounts receivable for
        the years ended December 31, 2009 and 2008:</P></TD>
  </TR>
</TABLE>
<br>
<TABLE width=100% border=0 cellpadding="0" cellspacing=0 style="font-family: 'Times New Roman';font-size: 10pt;">
  <TR>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp; </TD>
    <TD colspan="2" align=center> <B>2009</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD colspan="3" align=center> 2008</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD colspan="7" align=left><hr size="1" noshade></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Opening balance</TD>
    <TD align=left> <B>Ps.</B></TD>
    <TD align=right> <B>235,781</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left> Ps.</TD>
    <TD align=right>97,255</TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Provision of the year</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>185,351</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right>142,238</TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Write-off of uncollectible accounts</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>(49,095</B></TD>
    <TD align=left><B>)</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right>(27,077</TD>
    <TD align=left> )</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Recovery of uncollectible accounts</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>(83</B></TD>
    <TD align=left><B>)</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right>-</TD>
    <TD align=center>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Inflation and exchange rate effect of previous year</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>(6,308</B></TD>
    <TD align=left><B>)</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right>23,365</TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD colspan="7" align=left><hr size="1" noshade></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Final balance</TD>
    <TD align=left> <B>Ps.</B></TD>
    <TD align=right> <B>365,646</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;&nbsp;&nbsp;</TD>
    <TD align=left> Ps.</TD>
    <TD align=right>235,781</TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD colspan="7" align=left><hr size="2" noshade></TD>
  </TR>
</TABLE>
<BR>
<TABLE border=0 cellspacing=0 style="font-family: 'Times New Roman';font-size: 10pt;">
  <TR>
    <TD></TD>
    <TD></TD>
  </TR>
  <TR valign="top">
    <TD width=3%> <P><B>f)</B></P></TD>
    <TD colspan=1> <P><B>Cash and cash equivalents</B></P>
      <P>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.</P></TD>
  </TR>
  <TR>
    <TD colspan=2>&nbsp; </TD>
  </TR>
  <TR valign="top">
    <TD> <P><B>g)</B></P></TD>
    <TD colspan=1> <P><B>Derivative financial instruments</B></P>
      <P>During 2009, 2008 and 2007 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.</P></TD>
  </TR>
</TABLE>
<BR>
<P style="text-align: center;"> F-12</P>
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  <TR>
    <TD></TD>
    <TD></TD>
  </TR>
  <TR valign="top">
    <TD width="3%"></TD>
    <TD colspan=1><P>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 cost.</P>
      <P>The fair value of these assets or liabilities is restated at the end
        of each month based on the new estimate. The Company periodically evaluates
        the changes in cash flows of the derivative instrument to analyze if the
        swaps are highly effective for mitigating the exposure to natural gas
        price fluctuations. A hedge instrument is considered to be highly effective
        when changes in its fair value or cash flows of the primary position are
        compensated on a regular or cumulative basis, by changes in fair value
        or cash flows of the hedging instrument in a range between 80% and 125%.
        In 2009, 2008 and 2007 the fair value of derivatives that did not qualify
        for hedge accounting was adjusted through Statement of Income. For the
        derivatives that qualified for hedge accounting their fair value was adjusted
        through the Stockholders&#146; equity in the caption Fair value of derivative
        financial instruments until such time as the related item the derivative
        hedges is recognized in income. At that time, the fair value included
        in Stockholders&#146; equity is also recognized in income.</P></TD>
  </TR>
  <TR valign="top">
    <TD>&nbsp;</TD>
    <TD colspan=1>&nbsp;</TD>
  </TR>
  <TR valign="top">
    <TD><B>h)</B></TD>
    <TD colspan=1> <P><B>Concentration risk</B></P>
      <P>Cash amounts in excess of current requirements are deposited in bank
        institutions with qualified credit ratings, which are located in different
        geographical regions. Our policy was designed to not limit our exposure
        to one bank institution. We use derivative instruments as referred to
        in paragraph (g) and these contracts contain the risk that the counterparty
        does not fully comply with its obligations, which could result in a material
        loss. A significant amount of our sales are related to the construction
        industry. In 2009, 2008 and 2007 sales related to the construction industry
        represented approximately 60%, 33% and 27%, respectively. Direct sales
        of products to automotive assemblers and manufacturers accounted for approximately
        15%, 18% and 22% of our consolidated net sales in 2009, 2008 and 2007,
        respectively.</P>
      <P>Our products sold in the domestic market to a large base, which is geographically
        diverse, consequently, there is no significant concentration in a specific
        customer or region. In the case of the U.S. market, our products are used
        primarily in automotive and industrial equipment and our sales are concentrated;
        for the years ended December 31, 2009, 2008 and 2007, the five largest
        customers accounted for 25%, 34% and 30.1%, respectively, of total sales
        for that market. In 2008 and 2007, United Steel Corporation, Inc. accounted
        for approximately 20% (and 13% of our consolidated sales) and 10% of total
        sales in the U.S. market, respectively. There were no sales during 2009
        to United Steel Corporation, Inc. Direct sales of products to automotive assemblers and manufacturers accounted for approximately 15%, 18% and 22% of our consolidated net sales in 2009, 2008 and 2007, respectively.</P>
      <P>During the year ended December 31, 2008, the Company purchased metallurgical
        coke from eleven suppliers, of which two vendors supplied approximately
        70.0% of the Company&#146;s metallurgical coke requirements. Also during
        2008, the Company purchased iron ore pellets from four suppliers, of which
        two vendors supplied approximately 95.0% of the Company&#146;s iron ore
        pellet requirements. As the Lorain, Ohio blast furnace facility was idle
        during all of 2009, there were no coke and pellet purchases during 2009.
        Republic believes that the availability of raw materials is adequate for
        its needs, and, in general, it is not dependent on any single source of
        supply.</P></TD>
  </TR>
  <TR>
    <TD colspan=2>&nbsp; </TD>
  </TR>
  <TR valign="top">
    <TD> <P><B>i)</B></P></TD>
    <TD colspan=1> <P><B>Inventories, cost of sales, estimate for slow moving
        inventory and obsolescence</B></P>
      <P>Beginning January 1, 2008, the Company ceased to recognize the inflation
        effects in inventories. Inventories are recorded at average cost under
        the direct costing systems. The amount of inventories does not exceed
        its market value price.</P>
      <P>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).</P>
      <P>The reserve for slow-moving, obsolete and damaged inventory is determined
        by considering the reprocessing cost of the materials with a turnover
        above one year.</P></TD>
  </TR>
</TABLE>
<BR>
<P style="text-align: center;"> F-13</P>
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  <TR valign="top">
    <TD width="3%"> <P><B>j)</B></P></TD>
    <TD colspan=1> <P><B>Property, plant and equipment</B></P>
      <P>Property, plant and equipment were recorded at historic cost and were
        updated by factors derived from the National Consumer Price Index (NCPI)
        until December 31, 2007, except machinery and equipment of foreign origin
        which was updated using the inflation rates in the country of origin and
        changes in exchange rates in relation to Mexican peso until December 31,
        2007.</P>
      <P>Beginning January 1, 2008, the Company ceased to recognize the effects
        of inflation in property, plant and equipment according with the MFRS
        B-10.</P>
      <P>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 until December 31, 2007, was 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.</P>
      <P>Depreciation of property, plant and equipment is computed using the straight-line
        method based on the estimated remaining useful lives of the related assets.</P>
      <P style="text-align: left;">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.</P>
      <P style="text-align: left;"> The estimated useful lives of the Company&#146;s
        main assets are the following:</P></TD>
  </TR>
</TABLE>
<br>
<TABLE width=600 border=0 align="center" cellpadding="0" cellspacing=0 style="font-family: 'Times New Roman';font-size: 10pt;">
  <TR>
    <TD></TD>
    <TD></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp; </TD>
    <TD align=center> <B>Years</B> <hr size="1" noshade></TD>
  </TR>
  <TR>
    <TD colspan=2>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Buildings</TD>
    <TD align=center> 10 to 65</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Machinery and equipment</TD>
    <TD align=center> 5 to 40</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Transportation equipment</TD>
    <TD align=center> 4</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Furniture, mixtures and computer equipment</TD>
    <TD align=center> 3 to 10</TD>
  </TR>
</TABLE>
<BR>
<P style="text-align: left;"> Maintenance and minor repairs are expensed as incurred.</P>
<TABLE border=0 cellspacing=0 style="font-family: 'Times New Roman';font-size: 10pt;">
  <TR>
    <TD></TD>
    <TD></TD>
  </TR>
  <TR valign="top">
    <TD width=3%> <P><B>k)&nbsp;&nbsp;&nbsp;</B></P></TD>
    <TD colspan=1> <P><B>Leases</B></P>
      <P>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.</P></TD>
  </TR>
  <TR>
    <TD colspan=2>&nbsp; </TD>
  </TR>
  <TR valign="top">
    <TD> <P><B>l)</B></P></TD>
    <TD colspan=1> <P><B>Intangible assets</B></P>
      <P>Intangibles assets are recorded initially at acquisition cost and until
        December 31, 2007 adjusted for inflation applying the NCPI factors. Intangible
        assets are amortized based on their estimated useful lives through the
        straight-line method. Intangibles of indefinite life are not amortized
        and are tested for impairment every year end.</P>
      <P>In assessing the recoverability of the goodwill and other intangibles
        the Company must make assumptions regarding estimated future cash flows
        and other factors to determine the fair value of the respective assets.
        The Company performs an annual review in the fourth quarter of each year,
        or more frequently if indicators of potential impairment exist, to determine
        if the carrying value of recorded goodwill and other intangible assets
        are impaired. The impairment review process compares the fair value of
        the cash flow generating unit in which goodwill and other long-lived assets
        reside to its carrying value. The Company estimates the cash flow generating
        unit&#146;s fair value based on a discounted future cash flow approach
        that requires estimating income from operations based on historical results
        and discount rates based on a weighted average cost of capital. In 2009,
        the downturn in the construction industry in Mexico had an negative impact
        in our San Luis facilities resulting in an impairment loss of Ps. 2,368,000
        on the goodwill and other intangibles obtained in the Grupo San acquisition.</P></TD>
  </TR>
</TABLE>
<BR>
<P style="text-align: center;"> F-14</P>
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    <TD></TD>
    <TD></TD>
  </TR>
  <TR valign="top">
    <TD width=3%> <P><B>m)</B></P></TD>
    <TD colspan=1> <P><B>Environmental costs</B></P>
      <P>The Company established a liability for an amount considered appropriate
        to cover costs of environmental remediation that are probable of being
        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;</P></TD>
  </TR>
  <TR>
    <TD colspan=2>&nbsp; </TD>
  </TR>
  <TR valign="top">
    <TD> <P><B>n)</B></P></TD>
    <TD colspan=1> <P><B>Accruals and contingencies</B></P>
      <P>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.</P>
      <P>Contingent liabilities are recognized 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.</P></TD>
  </TR>
  <TR>
    <TD colspan=2>&nbsp; </TD>
  </TR>
  <TR valign="top">
    <TD> <P><B>o)</B></P></TD>
    <TD colspan=1> <P><B>Seniority premiums and termination payments</B></P>
      <P>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, 2009, the estimated
        average working lifetime of the Company&#146;s employees entitled to pension
        benefits ranges from 8 to 9 years, approximately.</P>
      <P>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
        MFRS D-3</P>
      <P>Beginning January 1, 2008, we adopted the MFRS D-3, Employee Benefits,
        which replaced the Bulletin D-3, Labor Obligations. As a result of the
        adoption of the MFRS D-3, the transition liabilities from labor obligations
        are being amortized over a period of five years, while as of December
        31, 2007 the transitional liabilities were amortized in a straight line
        over the remaining work life of our covered employees. The adoption of
        this standard did not represent a significant change in the financial
        statements of the Company.</P></TD>
  </TR>
</TABLE>
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<P style="text-align: center;"> F-15</P>
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    <TD></TD>
  </TR>
  <TR valign="top">
    <TD width="3%">
      <P><B>p)&nbsp;&nbsp;</B></P>
    </TD>
    <TD colspan=1>
      <P><B>Employee profit sharing (EPS)</B></P>
      <P>The expenses from EPS are presented as an ordinary expense., rather than
        forming part of the comprehensive tax of the year in the income statement
        as it did in 2007.</P>
      <P>Beginning January 1, 2008, upon the adoption of the MFRS D-3, Employee
        Benefits, we recognized the effects of deferred EPS, which is determined
        under the assets and liabilities method. Under this method, we compute
        deferred EPS on all temporary differences between book and tax values
        of our assets and liabilities at a rate of 10%. To assess recoverable
        amount of deferred assets of EPS, management determines which portion
        of the asset is more likely than not to be recovered and when considered
        appropriate, an allowance is included to account for unrecoverable amounts.</P>
      <P>Until December 31, 2007, the deferred EPS was computed only if there
        were no indications that the liabilities or benefits that originated could
        not be materialized in the future.</P>
    </TD>
  </TR>
  <TR>
    <TD colspan=2>&nbsp; </TD>
  </TR>
  <TR valign="top">
    <TD>
      <P><B>q)</B></P>
    </TD>
    <TD colspan=1>
      <P><B>Comprehensive income</B></P>
      <P>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.</P>
    </TD>
  </TR>
  <tr>
    <td colspan=2>&nbsp; </td>
  </tr>
  <TR valign="top">
    <TD>
      <P><B>r)</B></P>
    </TD>
    <TD colspan=1>
      <P><B>Income taxes</B></P>
      <P>Income tax is presented as a short-term liability net of advances made
        during the year.</P>
      <P>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.</P>
      <P>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 depend largely on taxable profits
        generated in the periods in which temporary differences are deductible.
        When this analysis is performed, management considers the expected reversal
        of deferred tax liabilities, projected taxable profits and planning strategies.</P>
      <P>Beginning January 1, 2008, MFRS D-4, Income Tax replaced Bulletin D-4
        Accounting for income tax, asset tax and employee profit sharing. The
        main change under this new MFRS was the reclassification of the cumulative
        deferred income tax included in stockholders&#146; equity to retained
        earnings.</P>
      <P>The Company applied on a supplementary basis to MFRS, ASC 740-10-25 &#147;Income
        taxes&#148; Acquired Temporary Differences in Certain Purchases Transactions
        that are not Accounted for as Business Combinations for the acquisition
        of companies with NOLs. The deferred credit is amortized to result of
        operations in the same proportion to the realization of the tax benefits
        that gave rise to the deferred credit. For the years ended December 31,
        2009 the amortization of this deferred credit resulted in a benefit of
        Ps. 163,333 recorded in the deferred income tax of the period. As of December
        31, 2008 and 2007 there was no deferred credit amortization.</P>
    </TD>
  </TR>
  <TR>
    <TD colspan=2>&nbsp; </TD>
  </TR>
  <TR valign="top">
    <TD>
      <P><B>s)</B></P>
    </TD>
    <TD colspan=1>
      <P><B>Presentation of income statement</B></P>
      <P>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.</P>
      <P>The presentation of operating income is not required by MFRS B-3, Statement
        of operations; however it is presented as it is considered to be an important
        indicator in evaluating our results.</P>
    </TD>
  </TR>
</TABLE>
<BR>
<P style="text-align: center;"> F-16</P>
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  <TR>
    <TD></TD>
    <TD></TD>
  </TR>
  <TR valign="top">
    <TD width="3%"> <P><B>t)</B></P></TD>
    <TD colspan=1> <P><B>Earnings (loss) per share</B></P>
      <P>Controlling interest (loss) earnings per share have been computed by
        dividing the net consolidated income allocated to the controlling interest
        by the weighted average number of shares outstanding of each period, in
        conformity with accounting Bulletin B-14, &#147;Earnings per Share.&#148;</P></TD>
  </TR>
  <TR>
    <TD colspan=2>&nbsp; </TD>
  </TR>
  <TR valign="top">
    <TD> <P><B>u)</B></P></TD>
    <TD colspan=1> <P><B>Segments</B></P>
      <P>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 18).</P></TD>
  </TR>
  <TR>
    <TD colspan=2>&nbsp; </TD>
  </TR>
  <TR valign="top">
    <TD> <P><B>v)</B></P></TD>
    <TD colspan=1> <P><B>Statement of Cash Flow</B></P>
      <P>MFRS B-2 was issued by the CINIF to replace Mexican accounting Bulletin
        B-12, Statement of Changes in Financial Position. This standard establishes
        the replacement of the statement of changes in financial position 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 shows 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. Additionally, 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.</P>
      <P>The transitory rules of MFRS B-2 establish that the application of this
        standard is prospective. Therefore, the financial statements for year
        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. The company opted to prepare and present its
        cash flow statement under the indirect method.</P></TD>
  </TR>
  <TR>
    <TD colspan=2>&nbsp; </TD>
  </TR>
  <TR valign="top">
    <TD width=3%> <P><B>w)</B></P></TD>
    <TD colspan=1> <P><B>New accounting pronouncements</B></P>
      <P>The most important new pronouncements that became effective on January
        1, 2009 are summarized below:</P>
      <P><B>MFRS B-7, Business Acquisitions</B></P>
      <P>This MFRS substitutes MFRS B-7 Business Acquisitions, and establishes
        general rules for the initial recognition of net assets, non-controlling
        interests and other items, as of the acquisition date. According to this
        statement, purchase and restructuring expenses resulting from acquisition
        process, should not be part of the consideration, because these expenses
        are not an amount being shared by the business acquired. In addition,
        MFRS B-7 requires a company to recognize non-controlling interests in
        the acquisition at fair value as of the acquisition date. MFRS B-7 is
        effective for future acquisitions.</P>
      <P>The effects of the implementation of the MFRS were not significant in
        the financial statements of the Company.</P>
      <P><B>MFRS B-8, Consolidated or Combined Financial Statements</B></P>
      <P>This MFRS replaces MFRS B-8 Consolidated Financial Statements and describes
        general rules for the preparation, presentation and disclosure of consolidated
        and combined financial statements. The main changes of this MFRS are as
        follows: (a) this rule defines &#147;Specific-purpose Entity&#148; (SPE),
        establishes the cases in which an entity has control over a SPE, and when
        a company should consolidate this type of entity; (b) addresses that potential
        voting rights should be analyzed when evaluating the existence of control
        over an entity; and, (c) set new terms for &#147;controlling interest&#148;
        instead of &#147;majority interest,&#148; and &#147;non-controlling interest&#148;
        instead of &#147;minority interest.&#148;</P></TD>
  </TR>
</TABLE>
<BR>
<P style="text-align: center;"> F-17</P>
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  <TR valign="top">
    <TD width=3%> <P>&nbsp;</P></TD>
    <TD colspan=1> <P>The effects of the implementation of the MFRS were not significant
        in the financial statements of the Company.</P>
      <P><B>MFRS C-7, Investments in Associates and Other Permanent Investments</B></P>
      <P>MFRS C-7 describes the accounting treatment for investments in associates
        and other permanent investments, which were previously treated within
        MFRS B-8 Consolidated Financial Statements. This MFRS requires the recognition
        of a SPE through equity method. Also, this MFRS establishes that potential
        voting rights should be considered when analyzing the existence of significant
        influence. In addition, this rule defines a procedure and a limit for
        the recognition of losses in an associate.</P>
      <P>The effects of the implementation of the MFRS were not significant in
        the financial statements of the Company.</P>
      <P style="text-align: left;"><B>MFRS C-8, Intangible Assets</B></P>
      <P style="text-align: left;"> This rule replaces MFRS C-8 Intangible Assets.
        The new rule defines intangible assets as non-monetary items and broadens
        the criteria of identification, indicating that an intangible asset must
        be separable; this means that such asset could be sold, transferred, or
        used by the entity. In addition, an intangible asset arises from legal
        or contractual rights, whether those rights are transferable or separable
        from the entity.</P>
      <P style="text-align: left;"> On the other hand, this standard establishes
        that preoperative costs should be eliminated from the capitalized intangible
        asset balance, through an adjustment affecting retained earnings, and
        without restating prior financial statements. This amount should be presented
        as an accounting change in consolidated financial statements.</P>
      <P style="text-align: left;"> See the effects of the implementation of the
        MFRS in the Note 10.</P>
      <P style="text-align: left;"> <B>MFRS D-8, Share-Based Payments</B></P>
      <P style="text-align: left;"> MFRS D-8 establishes the recognition of share-based
        payments. When an entity purchases goods or pays for services with share-based
        payments, the entity is required to recognize those goods or services
        at fair value and the corresponding increase in equity. According to MFRS
        D-8, if share-based payments cannot be settled with equity instruments,
        they have to be settled using an indirect method considering MFRS D-8
        parameters.</P>
      <P style="text-align: left;"> The effects of the implementation of the MFRS
        were not significant in the financial statements of the Company.</P>
      <P style="text-align: left;"> The most significant new accounting pronouncements
        that will become effective on January 1, 2011, and that could affect the
        Company&#146;s accounting policies (there are none for 2010), are as follows:</P>
      <P style="text-align: left;"> <B>MFRS B-5, Financial Information by Segment</B></P>
      <P style="text-align: left;"> In November 2009, CINIF issued MFRS B-5, which
        is effective for fiscal years beginning on or after January 1, 2011. MFRS
        B-5 will replace Mexican accounting Bulletin B-5.</P></TD>
  </TR>
</TABLE>
<P style="text-align: center;"> F-18</P>
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  <tr valign="top">
    <td width="3%"><font size="2">&nbsp;</font></td>
    <td><P style="text-align: left;"><font size="2">MFRS B-5 establishes the criteria
        for identifying the segments to be reported by an entity, as well as the
        standards for disclosing the financial information of such segments. The
        standard also contains the requirements applicable to the disclosure of
        certain information related to the entity as a whole.</font></P>
      <P style="text-align: left;"><font size="2"> The principal changes compared
        to Mexican accounting Bulletin B-5 are as follows:</font></P>
      <UL>
        <LI>
          <P align="left"><font size="2">Information to be disclosed &#150; MFRS
            B-5 is management-focused, since the segment information disclosures
            it requires refer to the information used by the entity&#146;s most-senior
            business decision makers. MFRS B-5 also requires the disclosure of
            information related to an entity&#146;s products, geographic zones,
            customers and suppliers.</font></P>
        </LI>
        <LI>
          <P align="left"><font size="2">Business risks &#150; In identifying
            operating segments, this standard does not require the different areas
            of the business to be subject to different risks.</font></P>
        </LI>
        <LI>
          <P align="left"><font size="2">Segments in the pre-operating stage &#150;
            Under MFRS B-5, the different areas of a business in its pre-operating
            stage can be classified as operating segments.</font></P>
        </LI>
        <LI>
          <P align="left"><font size="2">Disclosure of financial results &#150;
            This standard requires disclosure of interest income and expense,
            as well as the other comprehensive financing items.</font></P>
        </LI>
      </UL>
      <UL>
        <LI>
          <P align="left"><font size="2">Disclosure of liabilities &#150; MFRS
            B-5 requires disclosure of the liabilities included in the regular
            information for the operating segment that is usually used by the
            entity&#146;s most-senior business decision makers.</font></P>
        </LI>
      </UL>
      <P style="text-align: left;"> <font size="2"><B>MFRS B-9, Interim Financial
        Information</B></font></P>
      <P style="text-align: left;"><font size="2"> In November 2009, CINIF issued
        Mexican MFRS B-9, which is effective for fiscal years beginning on or
        after January 1, 2011. MFRS B-9 replaces Mexican accounting Bulletin B-9,
        Interim Financial Information.</font></P>
      <P style="text-align: left;"><font size="2"> MFRS B-9 establishes that interim
        financial information must contain, as a minimum for each interim period,
        the following comparative financial statements:</font></P>
      <UL>
        <LI>
          <P align="left"><font size="2">Condensed statement of financial position;</font></P>
        </LI>
        <LI>
          <P align="left"><font size="2">Condensed income statement or statement
            of activities, as applicable;</font></P>
        </LI>
        <LI>
          <P align="left"><font size="2">Condensed statement of changes in shareholders&#146;
            equity;</font></P>
        </LI>
        <LI> <font size="2">Condensed statement of cash flows;</font></LI>
      </UL>
      <p><font size="2">Notes to financial statements with select disclosures
        must also be included.</font></p>
      <P><font size="2">MFRS C-9 requires the interim financial information at
        the end of a period to be compared to the information at the closing of
        the immediately prior equivalent period (except for the statement of financial
        position), which makes it necessary to also include a comparison with
        the statement at the immediately prior annual closing date.</font></P>
      <P><font size="2">At the date of these financial statements, management
        is evaluating the effect of the observance of these new accounting standards
        will have on the Company&#146;s consolidated results of operations and
        financial position.</font></P></td>
  </tr>
  <TR valign="top">
    <TD>&nbsp;</TD>
    <TD colspan=1>&nbsp;</TD>
  </TR>
  <TR valign="top">
    <TD width="3%"> <P><font size="2"><B>x)</B></font></P></TD>
    <TD colspan=1> <P><font size="2"><B>International Financial Reporting Standards
        (IFRS)</B></font></P>
      <P><font size="2">On November 11, 2008 the Mexican Securities Commission
        (Comisi&oacute;n Nacional Bancaria y de Valores) issued a press release
        in which it indicated that this Commission will perform the necessary
        regulatory adaptations to establish the requirements for listed companies
        to prepare their financial information under IFRS beginning the year 2012.
        Likewise it was specified that early adoption for the years 2008, 2009,
        2010 and 2011 is allowed.</font></P></TD>
  </TR>
</table>
<BR>
<P style="text-align: center;"> F-19</P>
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  <TR valign="top">
    <TD width="3%"> <P><font size="2"></font></P></TD>
    <TD colspan=1> <P><font size="2">At the date of these financial statements,
        management is evaluating the effects of the adoption and implementation
        of IFRS as well as the potential adoption date.</font></P></TD>
  </TR>
  <TR valign="top">
    <TD>&nbsp;</TD>
    <TD colspan=1>&nbsp;</TD>
  </TR>
  <TR valign="top">
    <TD><font size="2"><b>3. </b></font></TD>
    <TD colspan=1><p><font size="2"><b>Foreign Currency Position -</b></font></p>
      <p><font size="2">At December 31, 2009 and 2008, foreign currency denominated
        assets and liabilities were as follows:</font></p></TD>
  </TR>
</table>
<br>
<TABLE width=100% border=0 cellpadding="0" cellspacing=0 style="font-family: 'Times New Roman';font-size: 10pt;">
  <TR>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp; </TD>
    <TD colspan="6" align=center> <B>(Figures in thousands of dollars)</B></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD colspan="6" align=left>
      <hr size="1" noshade>
    </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp; </TD>
    <TD colspan="2" align=center> <B>2009</B></TD>
    <TD align=center>&nbsp;</TD>
    <TD colspan="2" align=center> 2008</TD>
    <TD align=center>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD colspan="6" align=left>
      <hr size="1" noshade>
    </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Cash and cash equivalent</TD>
    <TD align=left> <B>US&#36;</B></TD>
    <TD align=right> <B>118,089</B></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left> US&#36;</TD>
    <TD align=right> 13,293</TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Accounts receivable</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>109,165</B></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 147,090</TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Other accounts receivable and prepaid expenses</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>58,808</B></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 9,247</TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD colspan="6" align=left>
      <hr size="1" noshade>
    </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Total</TD>
    <TD align=left> <B>US&#36;</B></TD>
    <TD align=right> <B>286,062</B></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left> US&#36;</TD>
    <TD align=right> 169,630</TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR>
    <TD colspan=7>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Current liabilities:</TD>
    <TD align=left>&nbsp; </TD>
    <TD 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> Suppliers</TD>
    <TD align=left> <B>US&#36;</B></TD>
    <TD align=right> <B>(105,622</B></TD>
    <TD align=left> <B>)&nbsp;&nbsp;&nbsp;</B></TD>
    <TD align=left> US&#36;</TD>
    <TD align=right> (238,092</TD>
    <TD align=left> )</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Related parties</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>(56,689</B></TD>
    <TD align=left> <B>)</B></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> (20,200</TD>
    <TD align=left> )</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Other accounts payable and accrued expenses</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>(31,455</B></TD>
    <TD align=left> <B>)</B></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> (40,214</TD>
    <TD align=left> )</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD colspan="6" align=left>
      <hr size="1" noshade>
    </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>(193,766</B></TD>
    <TD align=left> <B>)</B></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> (298,506</TD>
    <TD align=left> )</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Long term liabilities</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>(4,784</B></TD>
    <TD align=left> <B>)</B></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> (3,472</TD>
    <TD align=left> )</TD>
  </TR>
  <tr valign="bottom">
    <td align=left>&nbsp;</td>
    <td colspan="6" align=left>
      <hr size="1" noshade>
    </td>
  </tr>
  <TR valign="bottom">
    <TD align=left> Total liabilities</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>(198,550</B></TD>
    <TD align=left> <B>)</B></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> (301,978</TD>
    <TD align=left> )</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD colspan="6" align=left>
      <hr size="1" noshade>
    </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Net assets (liabilities)</TD>
    <TD align=left> <B>US&#36;</B></TD>
    <TD align=right> <B>87,512</B></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left> US&#36;</TD>
    <TD align=right> (132,348</TD>
    <TD align=left> )</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD colspan="6" align=left>
      <hr size="2" noshade>
    </TD>
  </TR>
</TABLE>
<br>
<table width="100%" border="0" cellspacing="0" cellpadding="0">
  <tr>
    <td width="3%"><font size="2">&nbsp;&nbsp;&nbsp;</font></td>
    <td>
      <P style="text-align: left;"><font size="2">The exchange rates used to
        translate U.S. currency amounts were Ps. 13.0587, Ps. 13.5383 and Ps.
        10.8662 per U.S. dollar as of December 31, 2009, 2008 and 2007 respectively.
        As of  September 15, 2010, issue date of
        the financial statements, the exchange rate is Ps. 12.7793
        per dollar.</font></P>
      <P style="text-align: left;"><font size="2"> A summary of transactions carried
        out for the years ended December 31, 2009, 2008 and 2007, in U.S. dollars,
        excluding imports of machinery and equipment and excluding transactions
        of foreign subsidiaries is as follows:</font></P></td>
  </tr>
</table>
<br>
<TABLE width=100% border=0 cellpadding="0" cellspacing=0 style="font-family: 'Times New Roman';font-size: 10pt;">
  <TR>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp; </TD>
    <TD colspan="9" align=center> <B>(Figures in thousands of dollars)</B> </TD>
  </TR>
  <TR>
    <TD>&nbsp; </TD>
    <TD colspan=9><hr size="1" noshade></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp; </TD>
    <TD colspan="2" align=center> <B>2009</B></TD>
    <TD align=center>&nbsp;</TD>
    <TD colspan="2" align=center> 2008</TD>
    <TD align=center>&nbsp;</TD>
    <TD colspan=2 align=center> 2007</TD>
    <TD align=center>&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp; </TD>
    <TD colspan=9><hr size="1" noshade></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Sales</TD>
    <TD align=left> <B>US&#36;</B></TD>
    <TD align=right> <B>81,465</B></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left> US&#36;</TD>
    <TD align=right> 192,618</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>US&#36;</TD>
    <TD align=right> 119,539</TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Purchases (raw material)</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>(4,230</B></TD>
    <TD align=left> <B>)</B></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> (42,184</TD>
    <TD align=left> )&nbsp;&nbsp;&nbsp;</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> (39,382</TD>
    <TD align=left> )</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Other expenses (spare parts)</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>(11,719</B></TD>
    <TD align=left> <B>)&nbsp;&nbsp;&nbsp;</B></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> (4,590</TD>
    <TD align=left> )</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> (9,162</TD>
    <TD align=left> )</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Paid interest</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>(2,765</B></TD>
    <TD align=left> <B>)</B></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> (1,307</TD>
    <TD align=left> )</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> (172</TD>
    <TD align=left> )</TD>
  </TR>
</TABLE>
<br>
<table width="100%" border="0" cellspacing="0" cellpadding="0">
  <tr>
    <td width="3%"><font size="2">&nbsp;&nbsp;&nbsp;</font></td>
    <td><P style="text-align: left;"><font size="2">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.</font></P></td>
  </tr>
</table>
<P style="text-align: center;"> F-20</P>
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  <tr>
    <td width="3%"><font size="2">&nbsp;&nbsp;&nbsp;</font></td>
    <td><P style="text-align: left;"><font size="2">The Company has foreign subsidiaries,
        whose combined assets and liabilities are summarized below: </font></P></td>
  </tr>
</table>
<br>
<TABLE width=100% border=0 cellpadding="0" cellspacing=0 style="font-family: 'Times New Roman';font-size: 10pt;">
  <TR>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp; </TD>
    <TD colspan="6" align=center> <B>Thousands of U.S. dollars</B></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp; </TD>
    <TD colspan="6" align=left><hr size="1" noshade> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp; </TD>
    <TD colspan="2" align=center> <B>2009</B></TD>
    <TD align=center>&nbsp;</TD>
    <TD colspan="2" align=center> 2008</TD>
    <TD align=center>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp; </TD>
    <TD colspan="6" align=left><hr size="1" noshade> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Monetary current assets</TD>
    <TD align=left> <B>US&#36;</B></TD>
    <TD align=right> <B>176,640</B></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left> US&#36;</TD>
    <TD align=right> 116,857</TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Inventories and anticipated expenses</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>362,245</B></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 504,315</TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Short term liabilities</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>(187,712</B></TD>
    <TD align=left> <B>)</B></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> (265,332</TD>
    <TD align=left> )</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp; </TD>
    <TD colspan="6" align=left><hr size="1" noshade> </TD>
  </TR>
  <TR>
    <TD colspan=7>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> &nbsp;&nbsp;&nbsp;Working capital</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>351,173</B></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 355,840</TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR>
    <TD colspan=7>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Buildings, machinery and equipment</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>159,113</B></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 171,328</TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Other assets and deferred charges</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>13,847</B></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 14,525</TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Long term liabilities</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>(45,674</B></TD>
    <TD align=left> <B>)</B></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> (56,643</TD>
    <TD align=left> )</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp; </TD>
    <TD colspan="6" align=left><hr size="1" noshade> </TD>
  </TR>
  <TR>
    <TD colspan=7>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Stockholders&#146; equity</TD>
    <TD align=left> <B>US&#36;</B></TD>
    <TD align=right> <B>478,459</B></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left> US&#36;</TD>
    <TD align=right> 485,050</TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp; </TD>
    <TD colspan="6" align=left><hr size="2" noshade> </TD>
  </TR>
</TABLE>
<br>
<table width="100%" border="0" cellspacing="0" cellpadding="0">
  <tr valign="top">
    <td width="3%"><font size="2"><B>4.</B></font></td>
    <td><p><font size="2"><B>Balances and transactions with related parties</B></font></p>
      <p><font size="2">Balances due to/from related parties at December 31, 2009
        and 2008 were as follows:</font></p></td>
  </tr>
</table>
<BR>
<TABLE width=100% border=0 cellpadding="0" cellspacing=0 style="font-family: 'Times New Roman';font-size: 10pt;">
  <TR>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <U>Accounts receivable:</U></TD>
    <TD colspan="2" align=center> <B>2009</B></TD>
    <TD align=center>&nbsp;</TD>
    <TD colspan="2" align=center> 2008</TD>
  </TR>
  <TR>
    <TD>&nbsp; </TD>
    <TD colspan=5><hr size="1" noshade></TD>
  </TR>
  <TR>
    <TD colspan=6>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Aceros y Laminados SIGOSA, S.A. de C.V. (1)</TD>
    <TD align=left> <B>Ps.</B></TD>
    <TD align=right> <B>-</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left> Ps.</TD>
    <TD align=right> 39,447</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Operadora ICH, S.A. de C.V. (1)</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>-</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 14,177</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Ferrovisa, S.A. de C.V. (1)</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>5,273</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Others (1)</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>48</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 461</TD>
  </TR>
  <TR>
    <TD>&nbsp; </TD>
    <TD colspan=5><hr size="1" noshade></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> &nbsp;&nbsp;&nbsp;Total</TD>
    <TD align=left> <B>Ps.</B></TD>
    <TD align=right> <B>5,321</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left> Ps.</TD>
    <TD align=right> 54,085</TD>
  </TR>
  <TR>
    <TD>&nbsp; </TD>
    <TD colspan=5><hr size="2" noshade></TD>
  </TR>
  <TR>
    <TD colspan=6>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <U>Payables</U></TD>
    <TD 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=6>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Industrias CH, S.A.B. de C.V. (2)</TD>
    <TD align=left> <B>Ps.</B></TD>
    <TD align=right> <B>172,473</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left> Ps.</TD>
    <TD align=right> 296,755</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Tuber&iacute;as Procarsa, S.A. de C.V. (1)</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>374,329</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> -</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Procarsa Tube and PPE (1)</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>91,615</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> -</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Pytsa Industrial de M&eacute;xico, S.A. de C.V. (1)</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>63,349</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 67,692</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Aceros y Laminados Sigosa, S.A. de C.V. (1)</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>25,169</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> -</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Others (1)</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>111</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 641</TD>
  </TR>
  <TR>
    <TD>&nbsp; </TD>
    <TD colspan=5><hr size="1" noshade></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> &nbsp;&nbsp;&nbsp;Total</TD>
    <TD align=left> <B>Ps.</B></TD>
    <TD align=right> <B>727,046</B></TD>
    <TD align=left>&nbsp;&nbsp;&nbsp;</TD>
    <TD align=left> Ps.</TD>
    <TD align=right> 365,088</TD>
  </TR>
  <TR>
    <TD>&nbsp; </TD>
    <TD colspan=5><hr size="2" noshade></TD>
  </TR>
</TABLE>
<table width="100%" border="0" cellspacing="0" cellpadding="0">
  <tr>
    <td width="3%"><font size="2">&nbsp;&nbsp;&nbsp;</font></td>
    <td><p><font size="2">(1) Affiliate company </font></p>
      <p><font size="2">(2) Holding company</font></p>
      <P style="text-align: left;"><font size="2"> As of December 31, 2009, Ps.
        200.1 (presented net of an account receivable of Ps. 82.4 million) million
        of the amount payable to Industrias CH, Ps. 374.3 million of the amount
        payable to Tuber&iacute;as Procarsa, Ps. 63.3 million of the amount payable
        to Pytsa Industrial de M&eacute;xico, Procarsa Tube and PPE Ps. 91.6 million
        and Ps. 10.8 million of the amount payable to Aceros y Laminados Sigosa
        are notes payable denominated in dollars at an indefinite term and bear
        interest at 0.25% per year. As of December 31, 2008 Ps. 273.6 million
        of the amount payable to Industrias CH is a note payable denominated in
        dollars at an indefinite term and bear interest at 5.23% per year.</font></P>
      <P style="text-align: left;"><font size="2"> The benefits granted to key
        senior personnel or relevant directors of the Company as of December 31,
        2009, 2008 and 2007 were Ps. 28.9 million, Ps. 26.6 million and Ps. 24.5
        million, respectively.</font></P></td>
  </tr>
</table>
<P style="text-align: center;"> F-21</P>
<HR noshade align="center" width="100%" size="5">
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<BR>
<table width="100%" border="0" cellspacing="0" cellpadding="0">
  <tr>
    <td width="3%"><font size="2">&nbsp;&nbsp;&nbsp;</font></td>
    <td><p><font size="2">During the years ended December 31, 2009, 2008 and 2007,
        the following transactions with related parties were carried out:</font></p></td>
  </tr>
</table>
<br>
<TABLE width=100% border=0 cellpadding="0" cellspacing=0 style="font-family: 'Times New Roman';font-size: 10pt;">
  <TR>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp; </TD>
    <TD colspan="8" align=center> Years ended as of December 31st of</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp; </TD>
    <TD colspan="2" align=center> <B>2009</B></TD>
    <TD align=center>&nbsp;</TD>
    <TD colspan="2" align=center> 2008</TD>
    <TD align=center>&nbsp;</TD>
    <TD colspan="2" align=center> 2007</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD colspan="8" align=left><hr size="1" noshade></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Sales</TD>
    <TD align=left> <B>Ps.</B></TD>
    <TD align=right> <B>149,682</B></TD>
    <TD align=left>&nbsp;&nbsp;&nbsp;</TD>
    <TD align=left> Ps.</TD>
    <TD align=right> 371,163</TD>
    <TD align=left>&nbsp;&nbsp;&nbsp;</TD>
    <TD align=left> Ps.</TD>
    <TD align=right> 28,351</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left><hr size="2" noshade></TD>
    <TD colspan="8" align=left><hr size="2" noshade></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Purchases</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>38,483</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 88,993</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 76,015</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Paid interest</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>3,916</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 2,611</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 7,261</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Administrative services expenditures</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>15,071</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 13,346</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 11,896</TD>
  </TR>
</TABLE>
<br>
<table width="100%" border="0" cellspacing="0" cellpadding="0">
  <tr>
    <td width="3%"><font size="2">&nbsp;&nbsp;&nbsp;</font></td>
    <td><p><font size="2">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 service
        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.</font></p></td>
  </tr>
  <tr>
    <td><font size="2">&nbsp;</font></td>
    <td><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2"><B>5. </B></font></td>
    <td><font size="2"><B>Recoverable taxes</B></font></td>
  </tr>
  <tr>
    <td><font size="2">&nbsp;</font></td>
    <td><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2">&nbsp;</font></td>
    <td><font size="2">The recoverable taxes were as follows:</font></td>
  </tr>
</table>
<br>
<TABLE width=100% border=0 cellpadding="0" cellspacing=0 style="font-family: 'Times New Roman';font-size: 10pt;">
  <TR>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp; </TD>
    <TD colspan="5" align=center> Year ended December 31,</TD>
  </TR>
  <TR>
    <TD colspan=6>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp; </TD>
    <TD colspan="2" align=center> <B>2009</B></TD>
    <TD align=center>&nbsp;</TD>
    <TD colspan="2" align=center> 2008</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD colspan="5" align=left><hr size="1" noshade></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Recoverable taxes in Republic (1)</TD>
    <TD align=left> <B>Ps.</B></TD>
    <TD align=right> <B>767,956</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left> Ps.</TD>
    <TD align=right> -</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Added value tax</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>468,652</B></TD>
    <TD align=left>&nbsp;&nbsp;&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 224,657</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Income tax</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>188,911</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 135,765</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD colspan="5" align=left><hr size="1" noshade></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp; </TD>
    <TD align=left> <B>Ps.</B></TD>
    <TD align=right> <B>1,425,519</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left> Ps.</TD>
    <TD align=right> 360,422</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD colspan="5" align=left><hr size="2" noshade></TD>
  </TR>
</TABLE>
<BR>
<TABLE border=0 cellspacing=0 style="font-family: 'Times New Roman';font-size: 10pt;">
  <TR>
    <TD width="3%" valign=top nowrap>&nbsp;&nbsp;&nbsp;</TD>
    <TD width="3%" valign=top nowrap> (1)&nbsp; &nbsp; &nbsp; </TD>
    <TD> <P align="left">In November 2009, the &#147;Worker, Home Ownership and
        Business Assistance Act&#148; was passed in the United States which included
        provisions to allow corporations to carryback losses from either (but
        not both of) 2008 or 2009 to the 3<SUP>rd </SUP>, 4<SUP>th </SUP>and 5<SUP>th
        </SUP>previous year in addition to the current provisions permitting a
        two-year carryback. The Company fully intends to take advantage of this
        tax law change for its subsidiary Republic and carryback the current year
        loss to the two stub periods in 2005 and 2006 to fully monetize the current
        year Net Operating Loss (NOL) of such subsidiary.</P></TD>
  </TR>
  <TR>
    <TD valign=top nowrap>&nbsp;</TD>
    <TD valign=top nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD valign=top nowrap><B>6. </B></TD>
    <TD colspan="2" valign=top nowrap><p><B>Inventories</B></p>
      <p>Inventories are comprised of the following:</p></TD>
  </TR>
</TABLE>
<br>
<TABLE width=100% border=0 cellpadding="0" cellspacing=0 style="font-family: 'Times New Roman';font-size: 10pt;">
  <TR>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp; </TD>
    <TD colspan="6" align=center> <B>Year ended December 31</B></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp; </TD>
    <TD colspan="3" align=center> <B>2009</B></TD>
    <TD colspan="3" align=center> 2008</TD>
  </TR>
  <TR>
    <TD>&nbsp; </TD>
    <TD colspan=6><hr size="1" noshade></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Finished goods</TD>
    <TD align=left> <B>Ps.</B></TD>
    <TD align=right> <B>3,394,117</B></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left> Ps.</TD>
    <TD align=right> 4,329,727</TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Raw materials and supplies</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>2,323,047</B></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 3,627,135</TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Materials, spare parts and rollers</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>397,965</B></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 424,872</TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Billet</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>238,404</B></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 276,078</TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Advanced payments to suppliers</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>246,942</B></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 138,395</TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Materials in transit</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>-</B></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 29,599</TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Work in process</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>22,085</B></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 27,936</TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR>
    <TD>&nbsp; </TD>
    <TD colspan=6><hr size="1" noshade></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>6,622,560</B></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 8,853,742</TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR>
    <TD colspan=7>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Less allowance for obsolescence</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>(3,818</B></TD>
    <TD align=left> <B>)&nbsp;&nbsp;&nbsp;</B></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> (3,836</TD>
    <TD align=left> )</TD>
  </TR>
  <TR>
    <TD>&nbsp; </TD>
    <TD colspan=6><hr size="1" noshade></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp; </TD>
    <TD align=left> <B>Ps.</B></TD>
    <TD align=right> <B>6,618,742</B></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left> Ps.</TD>
    <TD align=right> 8,849,906</TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR>
    <TD>&nbsp; </TD>
    <TD colspan=6><hr size="2" noshade></TD>
  </TR>
</TABLE>
<div align="center">
  <p>F-22</p>
</div>
<HR noshade align="center" width="100%" size="5">
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<div title="EE+ Page Break" style="FONT-SIZE: 1pt; PAGE-BREAK-AFTER: always; WIDTH: 100%; HEIGHT: 1px"></div>
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<BR>
<TABLE style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'" cellSpacing=0 border=0>
  <TR>
    <TD></TD>
    <TD></TD>
  </TR>
  <TR vAlign=top>
    <TD width="3%">&nbsp;</TD>
    <TD> <P>As of December 31, 2009 and 2008 the Company recorded a loss of Ps.
        709 million and Ps. 727.3 million respectively in the cost of sales caption
        to recognize the market value of some inventory items.</P></TD>
  </TR>
  <TR>
    <TD colSpan=2>&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD> <P><B>7.</B></P></TD>
    <TD> <P><B>Derivative financial instruments</B></P>
      <P>The Company uses derivative financial instruments, primarily to offset
        the exposure to variability in the price of natural gas. Derivative financial
        instruments used by the Company consist of natural gas swap contracts.
        These contracts are recognized on the balance sheet at fair value. The
        swaps from the Mexican operations are highly effective in mitigating the
        exposure to natural gas fluctuations, therefore those swaps are considered
        as cash flow hedges. In the operations of the subsidiary SimRep Corporation
        (&#147;Republic&#148; or &#147;SimRep&#148;) which operates in the United States of America,
        no derivative financial instruments were used during 2009.</P>
      <P>As of December 31, 2009, the Company has contracted natural gas swaps
        with PEMEX Gas and Basic Petrochemicals (PGBP), and Natgasmex, SA of C.V.
        (Natgasmex).</P>
      <P>The following table shows the existing natural gas swap as of December
        31, 2009:</P></TD>
  </TR>
</TABLE>
<BR>
<TABLE width="100%" border=0 cellpadding="0" cellSpacing=0 style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'">
  <TR>
    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=center><B>Date of</B><BR> <B>Contract</B></TD>
    <TD align=center><B>Starting</B><BR> <B>Date</B></TD>
    <TD align=center><B>Ending</B><BR> <B>Date</B></TD>
    <TD align=center><B>Price</B><br> <b>(US$) /</b><B><br>
      MMBTU /</B><BR> <B>G. CAL.</B></TD>
    <TD align=center><B>Quantity</B></TD>
    <TD align=center><B>Units</B></TD>
    <TD align=center><B>Fair</B><BR> <B>Value</B></TD>
  </TR>
  <TR vAlign=bottom>
    <TD colspan="7" align=center><hr size="1" noshade></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=center>25/06/2008</TD>
    <TD align=center>01/07/2008</TD>
    <TD align=center>30/06/2011</TD>
    <TD align=right>11.45</TD>
    <TD align=right>21,420.00</TD>
    <TD align=center>G.CAL. </TD>
    <TD align=right>Ps. 111,262</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=center>25/06/2008</TD>
    <TD align=center>01/07/2008</TD>
    <TD align=center>30/06/2011</TD>
    <TD align=right>11.45</TD>
    <TD align=right>45,000.00</TD>
    <TD align=center>MMBTU</TD>
    <TD align=right>58,904</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=center>25/06/2008</TD>
    <TD align=center>01/01/2009</TD>
    <TD align=center>30/06/2011</TD>
    <TD align=right>11.12</TD>
    <TD align=right>8,000.00</TD>
    <TD align=center>MMBTU</TD>
    <TD align=right>9,855</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=center>02/09/2008</TD>
    <TD align=center>01/01/2009</TD>
    <TD align=center>30/06/2011</TD>
    <TD align=right>8.44</TD>
    <TD align=right>4,000.00</TD>
    <TD align=center>MMBTU</TD>
    <TD align=right>2,424</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=center>02/09/2008</TD>
    <TD align=center>01/07/2011</TD>
    <TD align=center>30/06/2012</TD>
    <TD align=right>8.47</TD>
    <TD align=right>4,000.00</TD>
    <TD align=center>MMBTU</TD>
    <TD align=right>1,354</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=center>25/06/2008</TD>
    <TD align=center>01/01/2009</TD>
    <TD align=center>30/06/2011</TD>
    <TD align=right>11.12</TD>
    <TD align=right>24,000.00</TD>
    <TD align=center>MMBTU</TD>
    <TD align=right>29,566</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=center>02/09/2008</TD>
    <TD align=center>01/01/2009</TD>
    <TD align=center>30/06/2011</TD>
    <TD align=right>8.44</TD>
    <TD align=right>1,750.00</TD>
    <TD align=center>MMBTU</TD>
    <TD align=right>1,061</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=center>02/09/2008</TD>
    <TD align=center>01/07/2011</TD>
    <TD align=center>30/06/2012</TD>
    <TD align=right>8.47</TD>
    <TD align=right>6,875.00</TD>
    <TD align=center>MMBTU</TD>
    <TD align=right>2,327</TD>
  </TR>
  <TR vAlign=bottom>
    <TD colspan="7" align=center><hr size="1" noshade></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 colSpan=2>Net Derivative Liabilities</TD>
    <TD align=right>Ps. 216,753</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 colSpan=2>&nbsp;</TD>
    <TD align=right><hr size="2" noshade></TD>
  </TR>
</TABLE>
<BR>
<TABLE width="100%" border=0 cellSpacing=0 style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'">
  <TR vAlign=top>
    <TD width="3%"> <P>&nbsp;</P></TD>
    <TD> <P>The following table shows the existing natural gas swap as of December
        31, 2008:</P></TD>
  </TR>
</TABLE>
<br>
<TABLE width="100%" border=0 cellpadding="0" cellSpacing=0 style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'">
  <TR>
    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
  </TR>
  <TR vAlign=bottom>
    <td></td>
  </TR>
  <TR vAlign=bottom>
    <TD align=center><B>Date of</B><BR> <B>Contract</B></TD>
    <TD align=center><B>Starting</B><BR> <B>Date</B></TD>
    <TD align=center><B>Ending</B><BR> <B>Date</B></TD>
    <TD align=center><B>Price</B><br> <b>(US$) /</b><B><br>
      MMBTU /</B><BR> <B>G. CAL.</B></TD>
    <TD align=center><B>Quantity</B></TD>
    <TD align=center><B>Units</B></TD>
    <TD align=center><B>Fair</B><BR> <B>Value</B></TD>
  </TR>
  <TR vAlign=bottom>
    <TD colspan="7" align=center><hr size="1" noshade></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=center>25/06/2008</TD>
    <TD align=center>01/08/2008</TD>
    <TD align=center>31/07/2009</TD>
    <TD align=right>11.19</TD>
    <TD align=right>43,400.00</TD>
    <TD align=center>MMBTU</TD>
    <TD align=right>Ps. 22,798</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=center>25/06/2008</TD>
    <TD align=center>01/07/2008</TD>
    <TD align=center>30/06/2011</TD>
    <TD align=right>11.45</TD>
    <TD align=right>21,420.00</TD>
    <TD align=center>G.CAL.</TD>
    <TD align=right>169,115</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=center>25/06/2008</TD>
    <TD align=center>01/07/2008</TD>
    <TD align=center>30/06/2011</TD>
    <TD align=right>11.45</TD>
    <TD align=right>45,000.00</TD>
    <TD align=center>MMBTU</TD>
    <TD align=right>89,532</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=center>13/09/2008</TD>
    <TD align=center>01/01/2007</TD>
    <TD align=center>31/12/2009</TD>
    <TD align=right>7.92</TD>
    <TD align=right>16,071.50</TD>
    <TD align=center>MMBTU</TD>
    <TD align=right>5,640</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=center>08/02/2008</TD>
    <TD align=center>01/04/2008</TD>
    <TD align=center>31/12/2009</TD>
    <TD align=right>9.00+0.64</TD>
    <TD align=right>16,071.50</TD>
    <TD align=center>MMBTU</TD>
    <TD align=right>454</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=center>08/02/2008</TD>
    <TD align=center>01/01/2009</TD>
    <TD align=center>31/12/2009</TD>
    <TD align=right>8.32</TD>
    <TD align=right>16,071.50</TD>
    <TD align=center>MMBTU</TD>
    <TD align=right>6,674</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=center>20/06/2008</TD>
    <TD align=center>01/01/2009</TD>
    <TD align=center>31/12/2009</TD>
    <TD align=right>9.00+3.22</TD>
    <TD align=right>16,071.50</TD>
    <TD align=center>MMBTU</TD>
    <TD align=right>(454)</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=center>25/06/2008</TD>
    <TD align=center>01/01/2009</TD>
    <TD align=center>30/06/2011</TD>
    <TD align=right>11.12</TD>
    <TD align=right>8,000.00</TD>
    <TD align=center>MMBTU</TD>
    <TD align=right>14,867</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=center>02/09/2008</TD>
    <TD align=center>01/01/2009</TD>
    <TD align=center>30/06/2011</TD>
    <TD align=right>8.44</TD>
    <TD align=right>4,000.00</TD>
    <TD align=center>MMBTU</TD>
    <TD align=right>3,170</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=center>02/09/2008</TD>
    <TD align=center>01/07/2011</TD>
    <TD align=center>30/06/2012</TD>
    <TD align=right>8.47</TD>
    <TD align=right>4,000.00</TD>
    <TD align=center>MMBTU</TD>
    <TD align=right>737</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=center>13/09/2008</TD>
    <TD align=center>01/01/2007</TD>
    <TD align=center>31/12/2009</TD>
    <TD align=right>7.92</TD>
    <TD align=right>21,428.50</TD>
    <TD align=center>MMBTU</TD>
    <TD align=right>7,519</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=center>08/02/2008</TD>
    <TD align=center>01/04/2008</TD>
    <TD align=center>31/12/2009</TD>
    <TD align=right>9.00+0.64</TD>
    <TD align=right>21,428.50</TD>
    <TD align=center>MMBTU</TD>
    <TD align=right>605</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=center>08/02/2008</TD>
    <TD align=center>01/01/2009</TD>
    <TD align=center>31/12/2009</TD>
    <TD align=right>8.32</TD>
    <TD align=right>21,428.50</TD>
    <TD align=center>MMBTU</TD>
    <TD align=right>8,899</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=center>20/06/2008</TD>
    <TD align=center>01/01/2009</TD>
    <TD align=center>31/12/2009</TD>
    <TD align=right>9.00+3.22</TD>
    <TD align=right>21,428.50</TD>
    <TD align=center>MMBTU</TD>
    <TD align=right>(605)</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=center>25/06/2008</TD>
    <TD align=center>01/01/2009</TD>
    <TD align=center>30/06/2011</TD>
    <TD align=right>11.12</TD>
    <TD align=right>24,000.00</TD>
    <TD align=center>MMBTU</TD>
    <TD align=right>44,600</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=center>02/09/2008</TD>
    <TD align=center>01/01/2009</TD>
    <TD align=center>30/06/2011</TD>
    <TD align=right>8.44</TD>
    <TD align=right>1,750.00</TD>
    <TD align=center>MMBTU</TD>
    <TD align=right>1,387</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=center>02/09/2008</TD>
    <TD align=center>01/07/2011</TD>
    <TD align=center>30/06/2012</TD>
    <TD align=right>8.47</TD>
    <TD align=right>6,875.00</TD>
    <TD align=center>MMBTU</TD>
    <TD align=right>1,268</TD>
  </TR>
  <TR vAlign=bottom>
    <TD colspan="7" align=center><hr size="1" noshade></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 colSpan=2>Net Derivative Liabilities</TD>
    <TD align=right>Ps. 376,206</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 colSpan=2>&nbsp;</TD>
    <TD align=right><hr size="2" noshade></TD>
  </TR>
</TABLE>
<BR>
<P style="TEXT-ALIGN: center">F-23</P>
<HR align=center width="100%" noshade SIZE=5>
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<DIV title="EE+ Page Break" style="FONT-SIZE: 1pt; PAGE-BREAK-AFTER: always; WIDTH: 100%; HEIGHT: 1px"></DIV>
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<BR>
<TABLE width="100%" border=0 cellSpacing=0 style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'">
  <TR vAlign=top>
    <TD width="3%"> <P>&nbsp;</P></TD>
    <TD> <P style="text-align: left;">At December 31, 2008, new swaps gave rise
        to the recognition of a liability of Ps. 376,206 and deferred income tax
        asset of Ps. 105,338. The amount recorded in equity as part of comprehensive
        income in the year 2008 was a loss of Ps. 270,868. At December 31, 2009,
        these swaps gave rise to the recognition of a liability of Ps. 216,753
        and deferred income tax asset of Ps. 65,026. The amount recorded in equity
        as part of comprehensive income in the year 2009 was an income of Ps.
        119,141 as result of settlement of a portion of these swaps.</P>
      <P style="text-align: left;"> 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 31st, 2009, 2008 and 2007,
        the Company recorded an increase of Ps. 419.2, Ps. 60.2 million and Ps.
        1 million respectively to its cost of sales resulting from settled transactions.</P>
      <P style="text-align: left;"> In the case of Republic, gas swap contracts
        are used to cover changes in the cost of natural gas. The contracts are
        usually no longer than one year. At December 31, 2009 and 2008, Republic
        had no active natural gas swap contracts.</P></TD>
  </TR>
  <TR vAlign=top>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD><B>8.</B></TD>
    <TD><p><B>Property, plant and equipment</B></p>
      <p>Property, plant and equipment are comprised of the following:</p></TD>
  </TR>
</TABLE>
<br>
<TABLE width=100% border=0 cellpadding="0" cellspacing=0 style="font-family: 'Times New Roman';font-size: 10pt;">
  <TR>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp; </TD>
    <TD colspan="2" align=center> <B>2009</B></TD>
    <TD align=center>&nbsp;</TD>
    <TD colspan="2" align=center> 2008</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD colspan="6" align=left><hr size="1" noshade></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Buildings</TD>
    <TD align=left> <B>Ps.</B></TD>
    <TD align=right> <B>2,914,243</B></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left> Ps.</TD>
    <TD align=right> 2,909,141</TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Machinery and equipment</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>12,943,069</B></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 12,759,738</TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Transportation equipment</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>104,849</B></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 102,718</TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Furniture, fixtures and computer equipment</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>127,426</B></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 127,297</TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD colspan="6" align=left><hr size="1" noshade></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>16,089,587</B></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 15,898,894</TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR>
    <TD colspan=7>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Less accumulated depreciation</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>(7,504,768</B></TD>
    <TD align=left> <B>)&nbsp;&nbsp;&nbsp;</B></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> (6,847,468</TD>
    <TD align=left> )</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD colspan="6" align=left><hr size="1" noshade></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>8,584,819</B></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 9,051,426</TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR>
    <TD colspan=7>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Land</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>820,038</B></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 822,554</TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Construction-in-progress (1)</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>359,517</B></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 386,597</TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Machinery and equipment out of use</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>30,568</B></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 30,568</TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD colspan="6" align=left><hr size="1" noshade></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp; </TD>
    <TD align=left> <B>Ps.</B></TD>
    <TD align=right> <B>9,794,942</B></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left> Ps.</TD>
    <TD align=right> 10,291,145</TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD colspan="6" align=left><hr size="2" noshade></TD>
  </TR>
</TABLE>
<BR>
<TABLE width="100%" border=0 cellSpacing=0 style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'">
  <TR vAlign=top>
    <TD width="3%"> <P>(1) </P></TD>
    <TD> <P style="text-align: left;">Construction in progress corresponds primarily
        to improvements intended to increase the installed capacity. The completion
        date of these projects in progress at December 31, 2009, is scheduled
        for March 2011 and the pending investment amount is Ps. 193,210.</P></TD>
  </TR>
  <TR vAlign=top>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD colspan="2">The depreciation expense for the years ended December 31,
      2009, 2008 and 2007 amounted to Ps. 682,257, Ps. 578,125 and Ps. 464,726
      respectively.</TD>
  </TR>
</TABLE>
<P style="text-align: center;">F-24</P>
<HR noshade align="center" width="100%" size="5">
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<BR>
<TABLE width="100%" border=0 cellSpacing=0 style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'">
  <TR vAlign=top>
    <TD colspan="2">As of December 31, 2009 and 2008, balances in buildings and
      machinery and equipment, include capitalized comprehensive financial cost
      as a complement to the acquisition cost of Ps. 524,298.</TD>
  </TR>
  <TR vAlign=top>
    <TD width="3%">&nbsp;</TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD><B>9.</B></TD>
    <TD><p><B>Intangible assets</B></p>
      <p>As a result of the acquisition of Republic, the Company identified and
        recognized intangible assets to their fair value totaling Ps. 307 million.
        As a result of the acquisition of Grupo San, the Company identified and
        recognized intangible assets to their fair value totaling Ps. 7,192 million.
        Until December 31, 2007 intangibles were updated for inflation based on
        the NCPI at that date. At December 31, 2009 and 2008, this item is comprised
        of the following:</p></TD>
  </TR>
</TABLE>
<br>
<TABLE width="100%" border=0 cellpadding="0" cellSpacing=0 style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'">
  <TR>
    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>
    <TD colspan="2" align=center><b>Cost</b></TD>
    <TD align=center>&nbsp;</TD>
    <TD colspan="2" align=center><b>Accrued<br>
      amortization</b></TD>
    <TD align=center>&nbsp;</TD>
    <TD colSpan=2 align=center><b>Balances as of<br>
      Dec-31-09</b></TD>
    <TD align=center>&nbsp;</TD>
    <TD colspan="2" align=center>Cost</TD>
    <TD align=center>&nbsp;</TD>
    <TD colspan="2" align=center>Accrued<br>
      amortization</TD>
    <TD align=center>&nbsp;</TD>
    <TD colSpan=2 align=center>Balances as of<br>
      Dec-31-08</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>
    <TD colspan="17" align=left><hr size="1" noshade></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>Recorded name Republic</TD>
    <TD align=left><B>Ps.</B></TD>
    <TD align=right><B>70,264</B></TD>
    <TD align=left>&nbsp;&nbsp;&nbsp;</TD>
    <TD align=left><B>Ps.</B></TD>
    <TD align=right><B>-</B></TD>
    <TD align=left>&nbsp;&nbsp;&nbsp;</TD>
    <TD align=left><B>Ps.</B></TD>
    <TD align=right><B>70,264</B></TD>
    <TD align=right>&nbsp;&nbsp;&nbsp;</TD>
    <TD align=left>Ps.</TD>
    <TD align=right> 72,850</TD>
    <TD align=left>&nbsp;&nbsp;&nbsp;</TD>
    <TD align=left>Ps.</TD>
    <TD align=right>- </TD>
    <TD align=left>&nbsp;&nbsp;&nbsp;</TD>
    <TD align=left>Ps.</TD>
    <TD align=right>72,850</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>Kobe Tech Contract (Republic)</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>81,974</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>31,372</B></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><B>50,602</B></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right>84,980</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>24,193</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>60,787</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>Listing of customers Republic</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>42,939</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>9,860</B></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><B>33,079</B></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right>44,514</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>7,609</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>36,905</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>Listing of customers Grupo San</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>2,205,700</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>388,040</B></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><B>1,817,660</B></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right>2,205,700</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>142,962</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>2,062,738</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>No competition contract Grupo San</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>394,700</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>156,235</B></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><B>238,465</B></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right>394,700</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>57,560</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>337,140</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>Trademark San 42 (1)</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>329,600</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>-</B></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><B>329,600</B></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right>345,600</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>-</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>345,600</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>Gas contracts Grupo San</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>68,200</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>68,200</B></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><B>-</B></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right>68,200</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>68,200</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>-</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>Technological platform</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>8,800</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>2,787</B></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><B>6,013</B></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right>8,800</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>1,027</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>7,773</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>Goodwill Grupo San (1)</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>1,814,160</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>-</B></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><B>1,814,160</B></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right>4,166,160</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>-</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>4,166,160</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>
    <TD colspan="17" align=left><hr size="1" noshade></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>5,016,337</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>656,494</B></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><B>4,359,843</B></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right>7,391,504</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>301,551</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>7,089,953</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>
    <TD colspan="17" align=left><hr size="2" noshade></TD>
  </TR>
</TABLE>
<BR>
<TABLE width="100%" border=0 cellpadding="0" cellSpacing=0 style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'">
  <TR>
    <TD width="3%" vAlign=top nowrap>(1)&nbsp; &nbsp; &nbsp; </TD>
    <TD> <P align=left>As of December 31, 2009 the Company recognized an impairment
        loss of $2,368,000. That resulted in the decrease of the value of the
        Goodwill of Grupo San and the trademark San for Ps. 2,352,000 and Ps.
        16,000, respectively.</P></TD>
  </TR>
  <TR>
    <TD vAlign=top nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD colspan="2" vAlign=top nowrap>The estimated useful lives and amortizations
      for the following five years are as follows:</TD>
  </TR>
</TABLE>
<br>
<TABLE width="100%" border=0 cellpadding="0" cellSpacing=0 style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'">
  <TR>
    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>
    <TD colspan="2" align=center>&nbsp;</TD>
    <TD align=center>&nbsp;</TD>
    <TD align=center>&nbsp;</TD>
    <TD align=center>&nbsp;</TD>
    <TD colspan="2" align=center>Amortization<br>
      for the year<br>
      ended<br>
      December 31,
      <hr size="1" noshade></TD>
    <TD align=center>&nbsp;</TD>
    <TD colSpan=8 align=center>Estimated future amortization
      <hr size="1" noshade></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>
    <TD colspan="2" align=center>Value at<br>
      31-Dec-09
      <hr size="1" noshade></TD>
    <TD align=center>&nbsp;</TD>
    <TD align=center>Useful<br>
      Life
      <hr size="1" noshade></TD>
    <TD align=center>&nbsp;</TD>
    <TD colspan="2" align=center>2009
      <hr size="1" noshade></TD>
    <TD align=center>&nbsp;</TD>
    <TD colSpan=2 align=center>2010 &#150; 2012
      <hr size="1" noshade></TD>
    <TD align=center>&nbsp;</TD>
    <TD colspan="2" align=center>2013
      <hr size="1" noshade></TD>
    <TD align=center>&nbsp;</TD>
    <TD colSpan=2 align=center>2014
      <hr size="1" noshade></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>Recorded name Republic</TD>
    <TD align=left><B>Ps. </B></TD>
    <TD align=right><B>70,264</B></TD>
    <TD align=center>&nbsp;&nbsp;&nbsp;</TD>
    <TD align=center>Indefinite</TD>
    <TD align=left>&nbsp;&nbsp;&nbsp;</TD>
    <TD align=left>Ps.</TD>
    <TD align=right>-</TD>
    <TD align=left>&nbsp;&nbsp;&nbsp;</TD>
    <TD align=left> Ps.</TD>
    <TD align=right>-</TD>
    <TD align=left>&nbsp;&nbsp;</TD>
    <TD align=left>Ps.</TD>
    <TD align=right>-</TD>
    <TD align=left>&nbsp;&nbsp;&nbsp;</TD>
    <TD align=left>Ps.</TD>
    <TD align=right>-</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>Kobe Tech Contract (Republic)</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>50,602</B></TD>
    <TD align=center>&nbsp;</TD>
    <TD align=center>144 months</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>7,179</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>21,537</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>7,179</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right>7,179</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>List of clients Republic</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>33,079</B></TD>
    <TD align=center>&nbsp;</TD>
    <TD align=center>240 months</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>2,251</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>6,753</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>2,251</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right>2,251</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>Listing of customers Grupo San</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>1,817,660</B></TD>
    <TD align=center>&nbsp;</TD>
    <TD align=center>108 months</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>245,078</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>735,234</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>245,078</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right>245,078</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>No competition contract Grupo San</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>238,465</B></TD>
    <TD align=center>&nbsp;</TD>
    <TD align=center>48 months</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>98,675</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>238,465</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>-</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right>-</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>Trademark San 42</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>329,600</B></TD>
    <TD align=center>&nbsp;</TD>
    <TD align=center>Indefinite</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>-</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>-</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>-</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right>-</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>Gas contracts Grupo San</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>-</B></TD>
    <TD align=center>&nbsp;</TD>
    <TD align=center>7 months</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>-</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>-</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>-</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right>-</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>Technological platform</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>6,013</B></TD>
    <TD align=center>&nbsp;</TD>
    <TD align=center>60 months</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>1,760</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>5,280</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>733</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right>-</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>Goodwill Grupo San</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>1,814,160</B></TD>
    <TD align=center>&nbsp;</TD>
    <TD align=center>Indefinite</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>-</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>-</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>-</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right>-</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>
    <TD colspan="16" align=left><hr size="1" noshade></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>
    <TD align=left><B>Ps.</B></TD>
    <TD align=right><B> 4,359,843</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>Ps. </TD>
    <TD align=right>354,943</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>Ps. </TD>
    <TD align=right>1,007,269</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>Ps. </TD>
    <TD align=right>255,241</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=left>$</TD>
    <TD align=right>254,508</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>
    <TD align=left><hr size="2" noshade></TD>
    <TD align=right><hr size="2" noshade></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD colspan="11" align=left><hr size="2" noshade></TD>
  </TR>
</TABLE>
<BR>
<TABLE width="100%" border=0 cellpadding="0" cellSpacing=0 style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'">
  <TR>
    <TD width="3%" vAlign=top nowrap><B>10. </B>&nbsp; &nbsp; </TD>
    <TD> <P style="TEXT-ALIGN: left"><B>Other assets and deferred charges</B></P>
      <P style="TEXT-ALIGN: left">Until December 31, 2007 other assets were updated
        for inflation based on the NCPI at that date. At December 31, 2009 and
        2008, this item is comprised of the following:</P></TD>
  </TR>
</TABLE>
<br>
<TABLE width="100%" border=0 cellpadding="0" cellSpacing=0 style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'">
  <TR>
    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>
    <TD colspan="2" align=center><b>Cost</b> <hr size="1" noshade></TD>
    <TD align=center>&nbsp;</TD>
    <TD colspan="2" align=center><b><br>
      Accrued <br>
      amortization</b> <hr size="1" noshade></TD>
    <TD align=center>&nbsp;</TD>
    <TD colspan="2" align=center><b>Balances as of<br>
      Dec-31-09</b> <hr size="1" noshade></TD>
    <TD align=center>&nbsp;</TD>
    <TD colspan="2" align=center>Cost
      <hr size="1" noshade></TD>
    <TD align=center>&nbsp;</TD>
    <TD colspan="2" align=center>Accrued<br>
      amortization
      <hr size="1" noshade></TD>
    <TD align=center>&nbsp;</TD>
    <TD colspan="2" align=center>Balances as of<br>
      Dec-31-08
      <hr size="1" noshade></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>Preoperative expenses and deferred</TD>
    <TD align=left>&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>
    <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>
    <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>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>charges (1)</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>23,563</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>10,682</B></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><B>12,881</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>668,287</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>492,898</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right>175,389</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>Other assets (2)</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>96,227</B></TD>
    <TD align=left>&nbsp;&nbsp;&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>-</B></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><B>96,227</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>89,878</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>-</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right>89,878</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>
    <TD colspan="17" align=left><hr size="1" noshade></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>
    <TD align=left><B>Ps.</B></TD>
    <TD align=right><B>119,790</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left><B>Ps.&nbsp;&nbsp;&nbsp;</B></TD>
    <TD align=right><B>10,682</B></TD>
    <TD align=left>&nbsp;&nbsp;&nbsp;</TD>
    <TD align=left><B>Ps. </B></TD>
    <TD align=right><B>109,108</B></TD>
    <TD align=left>&nbsp;&nbsp;&nbsp;</TD>
    <TD align=left>Ps.</TD>
    <TD align=right>758,165</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>Ps.</TD>
    <TD align=right>492,898</TD>
    <TD align=right>&nbsp;&nbsp;&nbsp;</TD>
    <TD align=left>Ps. </TD>
    <TD align=right>265,267</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>
    <TD colspan="17" align=left><hr size="2" noshade></TD>
  </TR>
</TABLE>
<br>
<TABLE width="100%" border=0 cellpadding="0" cellSpacing=0 style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'">
  <TR>
    <TD width="3%" vAlign=top nowrap>(1)&nbsp; &nbsp; &nbsp; </TD>
    <TD> <P align=left>According to the adoption of the new MFRS C-8 the preoperative
        expenses were cancelled to retained earnings. The unamortizated preoperative
        expenses that were cancelled to retained earnings was Ps. 151,826 less
        its deferred income tax liability of Ps. 42,511.</P></TD>
  </TR>
  <TR>
    <TD vAlign=top nowrap>(2)&nbsp; &nbsp; &nbsp; </TD>
    <TD> <P align=left>The other assets are not subject to amortization and are
        comprised mainly of guarantee deposits, among others.</P></TD>
  </TR>
</TABLE>
<P style="TEXT-ALIGN: center">F-25</P>
<HR align=center width="100%" noshade SIZE=5>
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<BR>
<TABLE width="100%" border=0 cellSpacing=0 style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'">
  <TR>
    <TD width="3%" vAlign=top nowrap>&nbsp; &nbsp; &nbsp; </TD>
    <TD> <P align=left>The estimated useful lives and amortizations for the following
        five years are as follows:</P></TD>
  </TR>
</TABLE>
<br>
<TABLE width="100%" border=0 cellpadding="0" cellSpacing=0 style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'">
  <TR>
    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>
    <TD colspan="2" align=center>&nbsp;</TD>
    <TD align=center>&nbsp;</TD>
    <TD align=center>&nbsp;</TD>
    <TD align=center>&nbsp;</TD>
    <TD colspan="2" align=center>Amortization<BR>
      for the year<br>
      ended<br>
      December 31,
      <hr size="1" noshade></TD>
    <TD align=center>&nbsp;</TD>
    <TD colspan="8" align=center>Estimated future amortization
      <hr size="1" noshade></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>
    <TD colspan="2" align=center>Value at<br>
      31-Dec-09
      <hr size="1" noshade></TD>
    <TD align=center>&nbsp;</TD>
    <TD align=center>Useful<br>
      Life
      <hr size="1" noshade></TD>
    <TD align=center>&nbsp;</TD>
    <TD colspan="2" align=center>2009
      <hr size="1" noshade></TD>
    <TD align=center>&nbsp;</TD>
    <TD colspan="2" align=center>2010 - 2012
      <hr size="1" noshade></TD>
    <TD align=center>&nbsp;</TD>
    <TD colspan="2" align=center>2013
      <hr size="1" noshade></TD>
    <TD align=center>&nbsp;</TD>
    <TD colspan="2" align=center>2014
      <hr size="1" noshade></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>Preoperative expenses and deferred</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;&nbsp;&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;&nbsp;&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;&nbsp;&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD 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>charges</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right><B>12,881</B></TD>
    <TD align=center>&nbsp;</TD>
    <TD align=center>10 -20 years</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=center>10,682</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>12,881</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>-</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>-</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>
    <TD colspan="16" align=left><hr size="1" noshade></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>
    <TD align=left><B>Ps. </B></TD>
    <TD align=right><B>12,881</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>Ps.</TD>
    <TD align=center>10,682</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>Ps. </TD>
    <TD align=right>12,881</TD>
    <TD align=left>&nbsp;&nbsp;&nbsp;</TD>
    <TD align=left>Ps.</TD>
    <TD align=right>-</TD>
    <TD align=right>&nbsp;&nbsp;&nbsp;</TD>
    <TD align=left> Ps.</TD>
    <TD align=right>-</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>
    <TD colspan="2" align=left><hr size="2" noshade></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD colspan="11" align=left><hr size="2" noshade></TD>
  </TR>
</TABLE>
<BR>
<TABLE width="100%" border=0 cellSpacing=0 style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'">
  <TR>
    <TD width="3%" vAlign=top nowrap><B>11.</B>&nbsp; &nbsp; &nbsp; </TD>
    <TD> <P align=left><B>Notes payable, Debt and Medium Term Notes</B></P></TD>
  </TR>
  <TR>
    <TD width="3%" vAlign=top nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR>
    <TD width="3%" vAlign=top nowrap><B>(a)</B>&nbsp; &nbsp; &nbsp; </TD>
    <TD> <P align=left><B>Revolving line of credit with General Electric (GE)
        Capital</B></P>
      <P style="TEXT-ALIGN: left">On December 31, 2008, the subsidiary Republic
        Inc. maintained a U.S.$150.0 million Senior Secured Credit Agreement (GE
        credit facility) with General Electric Capital Corporation (GE Capital).
        This facility was scheduled to mature on May 20, 2009. However, on December
        1, 2008, Republic Inc. was granted an extension of the GE credit facility
        until May 20, 2010, at the Company&#146;s election. However, on October
        30, 2009, the Company changed the termination date to December 31,2009,
        and the Company did not have access to a revolving credit facility on
        December 31, 2009.</P>
      <P style="TEXT-ALIGN: left">At December 31, 2008, Republic Inc. had U.S.$0.6
        million (Ps. 8,800 million), in outstanding borrowings and had issued
        U.S.$5.8 million, in letters of credit under the GE credit facility. As
        this agreement was terminated on December 31, 2009, there were no outstanding
        borrowings at December 31, 2009. However, there were outstanding letters
        of credit of $6.4 million (Ps. 83.6 million) still open as of December
        31, 2009 creating an event of default under the GE Credit Facility. In
        this event of default, GE Capital withheld U.S.$6.7 million (Ps. 87.5
        million) of funds from Republic Inc.&#146;s bank account during January
        2010 to cover the outstanding letters of credit plus 5% cash collateral
        to be held as security until the letters of credit issued by GE Capital
        are cancelled. During February 2010, one of the letters of credit was
        replaced by JP Morgan Chase and GE Capital refunded U.S.$3.9 million (Ps.
        50.9 million) to the Company.</P>
      <P style="TEXT-ALIGN: left">Borrowings under the GE credit facility were
        bearing 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. Through October 29, 2009, the applicable
        margins ranged 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 margins on the unused facility fee ranged from 0.50%
        to 0.375%. Through October 29, 2009, Republic Inc. was required to pay
        an unused facility fee of 0.50% per annum. On October 30, 2009 through
        December 31, 2009, the applicable margin was 2% for index rate loans and
        3% for LIBOR loans, and the unused facility fee was increased to 0.75%
        per annum.</P></TD>
  </TR>
</TABLE>
<P style="TEXT-ALIGN: center">F-26</P>
<HR align=center width="100%" noshade SIZE=5>
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<BR>
<TABLE width="100%" border=0 cellSpacing=0 style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'">
  <TR>
    <TD width="3%" vAlign=top nowrap><B>12.</B> &nbsp; &nbsp; </TD>
    <TD> <P style="TEXT-ALIGN: left"><B>Seniority Premiums and Termination Payments</B></P>
      <P style="TEXT-ALIGN: left">The cost, obligations and other components of
        seniority premiums and termination payments were determined based on computations
        made by independent actuaries at December 31, 2009, 2008 and 2007.</P>
      <P align=left>The components of the net period cost for the years ended
        December 31, 2009, 2008 and 2007 corresponding to seniority premiums and
        termination benefits are as follows:</P></TD>
  </TR>
</TABLE>
<br>
<TABLE border=0 width=100% cellspacing=0 style="font-family: 'Times New Roman';font-size: 10pt;">
  <TR>
    <TD width=47%></TD>
    <TD width=8%></TD>
    <TD width=11%></TD>
    <TD width=6%></TD>
    <TD width=6%></TD>
    <TD width=11%></TD>
    <TD width=6%></TD>
    <TD width=6%></TD>
    <TD width=7%></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp; </TD>
    <TD colspan="2" align=center> <B>2009</B></TD>
    <TD align=center>&nbsp;</TD>
    <TD colspan="2" align=center> 2008</TD>
    <TD align=center>&nbsp;</TD>
    <TD colspan="2" align=center> 2007</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD colspan="8" align=left><hr size="1" noshade></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Net period cost:</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp;</TD>
    <TD 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;Labor cost</TD>
    <TD align=left> <B>Ps.</B></TD>
    <TD align=right> <B>8,098</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left> Ps.</TD>
    <TD align=right> 5,602</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left> Ps.</TD>
    <TD align=right> 2,654</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> &nbsp;&nbsp;&nbsp;Financial cost</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>9,609</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 8,517</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 755</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> &nbsp;&nbsp;&nbsp;Amortization of transition liability</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>1,342</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 1,342</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 990</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> &nbsp;&nbsp;&nbsp;Amortization of prior service cost and plan</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp;</TD>
    <TD 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;amendments</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>6,872</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 5,715</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 176</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> &nbsp;&nbsp;&nbsp;Contributions to pensions</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>-</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 3,940</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> -</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> &nbsp;&nbsp;&nbsp;Actuarial loss and others</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>9,787</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 1,900</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> -</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD colspan="8" align=left><hr size="1" noshade></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> &nbsp;&nbsp;&nbsp;Net period cost</TD>
    <TD align=left> <B>Ps.</B></TD>
    <TD align=right> <B>35,708</B></TD>
    <TD align=left>&nbsp;&nbsp;&nbsp;</TD>
    <TD align=left> Ps.</TD>
    <TD align=right> 27,016</TD>
    <TD align=left>&nbsp;&nbsp;&nbsp;</TD>
    <TD align=left> Ps.</TD>
    <TD align=right> 4,575</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD colspan="8" align=left><hr size="2" noshade></TD>
  </TR>
</TABLE>
<br>
<TABLE width="100%" border=0 cellSpacing=0 style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'">
  <TR>
    <TD width="3%" vAlign=top nowrap>&nbsp; </TD>
    <TD> <P style="TEXT-ALIGN: left">An analysis of the present value of benefit
        obligations is as follows:</P></TD>
  </TR>
</TABLE>
<br>
<TABLE width=100% border=0 cellpadding="0" cellspacing=0 style="font-family: 'Times New Roman';font-size: 10pt;">
  <TR valign="bottom">
    <TD align=left>&nbsp; </TD>
    <TD colspan="2" align=center> <B>2009</B></TD>
    <TD align=center>&nbsp;</TD>
    <TD colspan="2" align=center> 2008</TD>
    <TD align=right>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD colspan="6" align=left><hr size="1" noshade></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Projected benefits obligations</TD>
    <TD align=left> <B>Ps.</B></TD>
    <TD align=right> <B>77,688</B></TD>
    <TD align=left>&nbsp;&nbsp;&nbsp;</TD>
    <TD align=left> Ps.</TD>
    <TD align=right>202,965</TD>
    <TD align=right>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Plan assets</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>-</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right>(100,460</TD>
    <TD align=left> )</TD>
  </TR>
  <TR>
    <TD colspan=7>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Unamortized items</TD>
    <TD align=left>&nbsp; </TD>
    <TD 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;Transition liability</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>(37,751</B></TD>
    <TD align=left><B>)</B></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right>(47,050</TD>
    <TD align=left> )</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> &nbsp;&nbsp;&nbsp;Prior service cost and plan amendments</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>(2,616</B></TD>
    <TD align=left><B>)</B></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right>49</TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> &nbsp;&nbsp;&nbsp;Variations in assumptions and experience
      adjustments</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>(4,181</B></TD>
    <TD align=left><B>)</B></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right>(21,409</TD>
    <TD align=left> )</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> &nbsp;&nbsp;&nbsp;Additional liability</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>-</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right>-</TD>
    <TD align=right>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD colspan="6" align=left><hr size="1" noshade></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> &nbsp;&nbsp;&nbsp;Accumulated benefit obligations</TD>
    <TD align=left> <B>Ps.</B></TD>
    <TD align=right> <B>33,140</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left> Ps.</TD>
    <TD align=right>34,095</TD>
    <TD align=right>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD colspan="6" align=left><hr size="2" noshade></TD>
  </TR>
</TABLE>
<BR>
<TABLE width="100%" border=0 cellSpacing=0 style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'">
  <TR>
    <TD width="3%" vAlign=top nowrap>&nbsp; </TD>
    <TD> <P style="TEXT-ALIGN: left">The most important assumptions used in determining
        the net period cost of the plans are:</P></TD>
  </TR>
</TABLE>
<br>
<TABLE width=100% border=0 cellpadding="0" cellspacing=0 style="font-family: 'Times New Roman';font-size: 10pt;">
  <TR valign="bottom">
    <TD align=left>&nbsp; </TD>
    <TD align=center> <B>2009</B></TD>
    <TD align=center> 2008</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD colspan="2" align=center><hr size="1" noshade></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Actual discount rate used to reflect current value of obligations</TD>
    <TD align=center> <B>8.0%</B></TD>
    <TD align=center> 8.4%</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Actual rate of future salary increases</TD>
    <TD align=center> <B>5%</B></TD>
    <TD align=center> 4%</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Actual expected return rate of plan assets</TD>
    <TD align=center> <B>5.8%</B></TD>
    <TD align=center> 8.4%</TD>
  </TR>
</TABLE>
<BR>
<TABLE border=0 cellspacing=0 style="font-family: 'Times New Roman';font-size: 10pt;">
  <TR>
    <TD></TD>
    <TD></TD>
  </TR>
  <TR valign="top">
    <TD width=3%> <P><B>13.</B></P></TD>
    <TD colspan=1> <P><B>Other employment benefit plan</B></P>
      <P>Republic is the only subsidiary of the Group which offers other benefits
        and pension plans to their employees. Benefit plans to employees with
        Republic are described below.</P>
      <P><B>Collective Bargaining Agreements</B></P>
      <P>Eighty-three percent of the Republic&#146;s production workers are covered
        by a collective bargaining agreement with the United Steelworkers of America
        (USWA). The collective bargaining agreement expires on August 15, 2012
        (labor agreement). For the Mexican operations, approximately 60% of the
        employees are under collective contracts. The Mexican collective contracts
        expire in periods greater than one year.</P>
      <P><B>Defined Contribution Plans</B></P>
      <P>The labor agreement provides for a defined contribution program for retirement
        healthcare and pension benefits. Republic is required to make a contribution
        for every hour worked. The labor agreement requires a contribution to
        the retirement healthcare plan of U.S.&#36;3.00 (Ps. 39.2) for every hour
        worked, not to be less than U.S.&#36;2.85 million (Ps. 37.2 million) per
        quarter, but not to exceed U.S.&#36;11.4 million (Ps. 149 million) per
        year. Contributions are made to the pension plan at a rate of U.S.&#36;1.68
        (Ps. 22) per hour as defined in the labor agreement. For the years ended
        December 31, 2009 and 2008, Republic recorded Ps. 251 million, Ps. 216
        million and Ps. 176 million, respectively, of expense related to the funding
        obligations of both the retirement healthcare and pension benefits.</P></TD>
  </TR>
</TABLE>
<P style="text-align: center;"> F-27</P>
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  <TR valign="top">
    <TD width=3%> <P>&nbsp;</P></TD>
    <TD colspan=1> <P style="text-align: left;">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
        Republic 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 Republic&#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 three years of
        service. In addition, employees are permitted to make contributions into
        a 401(k) retirement plan through payroll deferrals. Republic provides
        a 25.0% matching contribution for the first 5.0% of payroll that an employee
        elects to contribute. Employees are 100.0% vested in both their and Republic&#146;s
        matching 401(k) contributions. For years ended December 31, 2009, 2008
        and 2007, Republic recorded expense of Ps. 26 million, Ps. 31.3 million
        and Ps. 26 million, respectively, related to this defined contribution
        retirement plan.</P>
      <P style="text-align: left;"> 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 through voluntary deferrals of employees&#146; compensation. There
        are no Republic contributions or employer matching contributions.</P>
      <P style="text-align: left;"> <B>Profit Sharing Plans</B></P>
      <P style="text-align: left;"> The labor agreement includes a profit sharing
        plan to which Republic is required to contribute 2.5% of its quarterly
        pre-tax income, as defined in the labor agreement. At the end of the year,
        the contribution will be based upon annual pre-tax income up to U.S.&#36;50.0
        million (Ps. 653million) multiplied by 2.5%, U.S.&#36;50.0 million (Ps.
        653 million) to U.S.&#36;100.0 million (Ps. 1,306 million) multiplied
        by 3.0%, and above U.S.&#36;100.0 million (Ps. 1,306 million) multiplied
        by 3.5%, less the previous payouts during the year. For the year ended
        December 31, 2008, Republic recorded U.S.&#36;4.6 million (Ps. 51 million)
        related to its profit sharing funding obligation under the labor agreement.
        For the year ended December 31, 2009, there was no profit sharing earned,
        accrued or recorded.</P>
      <P style="text-align: left;"> In 2004, Republic Inc. adopted a profit sharing
        plan for salary and nonunion hourly employees excluding a select group
        of managers and executives. Republic is required to contribute 3.0% of
        its quarterly pre-tax income, as defined in the plan, in excess of Ps.
        163 million (U.S.&#36;12.5 million). For the years ended December 31,
        2008 and 2007, Republic recorded expense of Ps. 26 million and Ps. 16
        million under this plan. For the year ended December 31, 2009, there was
        no profit sharing earned, accrued, or recorded.</P>
      <P style="text-align: left;"> <B>Incentive Compensation Plans</B></P>
      <P style="text-align: left;"> During 2007, Republic Inc. had a Key Employee
        Incentive Plan which was in effect beginning February 1, 2007. The plan
        was based on attaining the 2007 Business Plan earnings before income taxes,
        depreciation and amortization (EBITDA) and individual performance targets.
        The objectives were measured on an annual basis. For the year ended December
        31, 2007, Republic did not record expense under this plan due to not meeting
        the annual measurement objectives.</P>
      <P style="text-align: left;"> Effective January 1, 2008, Republic Inc. adopted
        a Key Manager Incentive Plan and Operations and Maintenance Incentive
        Plan. Additionally, effective April 1, 2008, Republic adopted a Commercial
        Sales Incentive Plan and a Production Planning Incentive Plan. The plans
        were based on attaining the 2008 Business Plan (EBITDA) and other performance
        targets. The objectives were measured on a quarterly basis. Individuals
        designated as participants in these plans were excluded from the profit
        sharing plan. For the year ended December 31, 2008, Republic recorded
        Ps. 26 million and Ps. 16 million, respectively, of expense under these
        incentive plans. For the year ended December 31, 2009, there were no incentives
        earned under these plans as the target thresholds for the year were not
        met.</P></TD>
  </TR>
</TABLE>
<P style="text-align: center;"> F-28</P>
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  <TR>
    <TD></TD>
    <TD></TD>
  </TR>
  <TR valign="top">
    <TD width=3%>&nbsp;</TD>
    <TD colspan=1> <P style="text-align: left;"><B>Deferred Compensation Plan</B></P>
      <P style="text-align: left;"> Republic had a deferred compensation plan
        covering certain key employees. This plan was terminated on December 31,
        2009. The plan allows for the covered employees to make annual deferrals
        of base salary and provides for a fixed annual contribution by the Company
        based on a percentage of salary. For the years ended December 31, 2009,
        2008, and 2007 the Company recorded expense of Ps. 1.3 million, Ps. 1.1
        million and Ps. 1.1 million respectively, related to the deferred compensation
        plan.</P></TD>
  </TR>
  <TR>
    <TD colspan=2>&nbsp; </TD>
  </TR>
  <TR valign="top">
    <TD> <P><B>14.</B></P></TD>
    <TD colspan=1> <P><B>Employees Profit Sharing (EPS)</B></P>
      <P>EPS is computed in similar terms to the taxable profit for income tax,
        excluding the annual adjustment due to inflation and the inflation effects
        in tax depreciation. The EPS is recorded in the Income Statement in the
        caption of general expenses. For the years 2009, 2008 and 2007 EPS was
        as following:</P></TD>
  </TR>
</TABLE>
<BR>
<TABLE width=600 border=0 align="center" cellpadding="0" cellspacing=0 style="font-family: 'Times New Roman';font-size: 10pt;">
  <TR>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp; </TD>
    <TD colspan=2 align=center> <B>2009</B></TD>
    <TD align=center>&nbsp; </TD>
    <TD colspan=2 align=center>2008</TD>
    <TD align=center>&nbsp;</TD>
    <TD colspan="2" align=center> 2007 </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD colspan="8" align=left><hr size="1" noshade></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Current</TD>
    <TD align=left> <B>Ps.</B></TD>
    <TD align=right> <B>7,385</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left> Ps.</TD>
    <TD align=right> 23,979</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left> Ps.</TD>
    <TD align=right> 269</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Deferred</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>(124</B></TD>
    <TD align=left><B>)</B>&nbsp;&nbsp;&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> (38</TD>
    <TD align=left>)&nbsp;&nbsp;&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>-</B></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD colspan="8" align=left><hr size="1" noshade></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Total</TD>
    <TD align=left> <B>Ps.</B></TD>
    <TD align=right> <B>7,261</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left> Ps.</TD>
    <TD align=right> 23,941</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left> Ps.</TD>
    <TD align=right> 269</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD colspan="8" align=left><hr size="2" noshade></TD>
  </TR>
</TABLE>
<BR>
<TABLE width=100% border=0 cellspacing=0 style="font-family: 'Times New Roman';font-size: 10pt;">
  <TR>
    <TD></TD>
    <TD></TD>
  </TR>
  <TR valign="top">
    <TD width=3%>&nbsp;</TD>
    <TD colspan=1> <P>As of December 31, 2009, the Company does not have deferred
        EPS. As of December 31, 2008, the Company has deferred EPS for Ps. 124
        and it is included in the balance sheet under the Other Assets caption.</P></TD>
  </TR>
  <TR>
    <TD colspan=2>&nbsp; </TD>
  </TR>
  <TR valign="top">
    <TD> <P><B>15.</B></P></TD>
    <TD colspan=1> <P><B>Stockholder&acute;s equity</B></P>
      <P>The most significant characteristics of stockholders&#146; equity accounts
        are described below:</P></TD>
  </TR>
  <TR>
    <TD colspan=2>&nbsp; </TD>
  </TR>
  <TR valign="top">
    <TD> <P><B>(a)</B></P></TD>
    <TD colspan=1> <P><B>Capital stock structure</B></P>
      <P>i) On July 22, 2008 at a Shareholders Meeting, an increase was approved
        to the capital stock in its variable portion of Ps. 134,695, represented
        by 27,699,442 ordinary shares corresponding to &#147;B&#148; series, with
        a subscription price of 50.64 Pesos which included a stock premium of
        45.7772612088 Pesos for each share. In this same meeting, Industrias CH,
        two of its affiliates companies and other related companies were authorized
        to subscribe and acquire 23,087,603 of the shares and the 4,611,839 remaining
        shares were offered to the rest of the shareholders in accordance with
        their preemptive rights. Once the subscription term expired, the Board
        of Directors in exercise of its powers delegated by the Shareholders Meeting
        on February 24, 2009, cancelled these additional shares corresponding
        to an amount of Ps. 22,426. The increase of capital stock paid was Ps.
        112,269 plus there was a stock premium of Ps. 1,056,887.</P>
      <P>ii) At an Extraordinary Meeting held on October 24, 2006, the stockholders
        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 45.70 pesos per share. The offer price for the ADSs (American Despoisitary
        Shares) was 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.</P>
      <P>The Mexican Banking and Securities Commission (Comisi&oacute;n Nacional
        Bancaria y de Valores) 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.</P></TD>
  </TR>
</TABLE>
<BR>
<P style="text-align: center;"> F-29</P>
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  <TR valign="top">
    <TD width=3%> <P>&nbsp;</P></TD>
    <TD colspan=1> <P>Subsequent to the above-mentioned resolutions and activities,
        the Company&#146;s capital stock aggregates Ps. 4,142,696, represented
        by 497,709,214 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>The number of shares corresponding to B series originated without nominal
        value as of December 31, 2009, 2008 and 2007 are the following:</P></TD>
  </TR>
</TABLE>
<br>
<TABLE width=600 border=0 align="center" cellpadding="0" cellspacing=0 style="font-family: 'Times New Roman';font-size: 10pt;">
  <TR>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp; </TD>
    <TD align=center> <B>2009</B></TD>
    <TD align=center> 2008</TD>
    <TD align=center> 2007</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD colspan="3" align=center><hr size="1" noshade></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Common series &#147;B&#148; shares</TD>
    <TD align=center> <B>497,709,214</B></TD>
    <TD align=center> 497,709,214</TD>
    <TD align=center> 474,621,611</TD>
  </TR>
</TABLE>
<br>
<TABLE width=100% border=0 cellspacing=0 style="font-family: 'Times New Roman';font-size: 10pt;">
  <TR valign="top">
    <TD width=3%> <P>&nbsp;</P></TD>
    <TD colspan=1> <P>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.</P></TD>
  </TR>
  <TR valign="top">
    <TD>&nbsp;</TD>
    <TD colspan=1>&nbsp;</TD>
  </TR>
  <TR valign="top">
    <TD><B>(b) </B></TD>
    <TD colspan=1><P style="text-align: left;"><B>Comprehensive Income</B></P>
      <P style="text-align: left;"> 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 (loss) income:</P></TD>
  </TR>
</TABLE>
<br>
<TABLE width=100% border=0 cellpadding="0" cellspacing=0 style="font-family: 'Times New Roman';font-size: 10pt;">
  <TR>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp; </TD>
    <TD colspan="2" align=center> <B>2009</B></TD>
    <TD align=center>&nbsp;</TD>
    <TD colspan="2" align=center> 2008</TD>
    <TD align=center>&nbsp;</TD>
    <TD colspan="2" align=center> 2007</TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD colspan="9" align=left><hr size="1" noshade></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Net (loss) income &#150; controlling interest</TD>
    <TD align=left> <B>Ps.</B></TD>
    <TD align=right> <B>(322,938</B></TD>
    <TD align=left><B>)</B></TD>
    <TD align=left> Ps.</TD>
    <TD align=right> 1,796,137</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left> Ps.</TD>
    <TD align=right> 1,529,057</TD>
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Result from holding non-monetary assets (1)</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>-</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> -</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 292,936</TD>
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Deferred taxes applied to result from holding</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD 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;non-monetary assets.</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>-</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> -</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right>(77,903</TD>
    <TD align=left> )</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Fair value of derivative financial instruments</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>159,453</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> (376,206</TD>
    <TD align=left>)</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right>6,329</TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Deferred taxes in fair value of derivative</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD 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;financial instruments</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>(40,312</B></TD>
    <TD align=left><B>)</B></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 105,338</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right>(1,772</TD>
    <TD align=left> )</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Translation effect of foreign subsidiaries, net</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>(158,317</B></TD>
    <TD align=left><B>)</B></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 1,245,032</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right>(12,226</TD>
    <TD align=left> )</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>(362,114</B></TD>
    <TD align=left><B>)</B></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 2,770,301</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 1,736,421</TD>
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> &nbsp;&nbsp;&nbsp;Non-controlling interest (2)</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>(852,174</B></TD>
    <TD align=left><B>)</B></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 104,212</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 96,118</TD>
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD colspan="9" align=left><hr size="1" noshade></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total</TD>
    <TD align=left> <B>Ps.</B></TD>
    <TD align=right> <B>(1,214,288</B></TD>
    <TD align=left><B>)</B>&nbsp;&nbsp;&nbsp;&nbsp;</TD>
    <TD align=left> Ps.</TD>
    <TD align=right> 2,874,513</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left> Ps.</TD>
    <TD align=right> 1,832,539</TD>
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD colspan="9" align=left><hr size="2" noshade></TD>
  </TR>
</TABLE>
<BR>
<TABLE width=100% border=0 cellspacing=0 style="font-family: 'Times New Roman';font-size: 10pt;">
  <TR>
    <TD></TD>
    <TD></TD>
  </TR>
  <TR valign="top">
    <TD width=3%></TD>
    <TD> <P>(1) Includes primarily the result from holding nonmonetary assets
        due to fixed assets.</P>
      <P>(2) The non-controlling interest is the due to the investment of Industrias
        CH, S.A.B. de C.V. (Holding Company) in SimRep Corporation.</P></TD>
  </TR>
  <TR>
    <TD colspan=2>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left><b>(c)</b> </TD>
    <TD align=left> <B>Restrictions on stockholder&#146;s equity</B></TD>
  </TR>
  <TR>
    <TD colspan=2>&nbsp; </TD>
  </TR>
  <TR valign="top">
    <TD></TD>
    <TD> <P>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, 2009, the legal reserve aggregates to Ps. 484 million.</P>
      <P>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.</P>
      <P>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 30%, consequently, the stockholders
        may only receive 70% of such dividends.</P></TD>
  </TR>
</TABLE>
<BR>
<P style="text-align: center;"> F-30</P>
<HR noshade align="center" width="100%" size="5">
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<BR>
<TABLE width=100% border=0 cellspacing=0 style="font-family: 'Times New Roman';font-size: 10pt;">
  <TR valign="bottom">
    <TD width="3%" align=left> <B>16.</B></TD>
    <TD colspan="4" align=left> <B>Income tax</B></TD>
  </TR>
  <TR>
    <TD colspan=5>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp; </TD>
    <TD colspan="4" align=left> I) Flat Rate Business Tax</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD width="3%" align=left>&nbsp;</TD>
    <TD colspan="3" align=left>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD colspan="3" align=left><P style="text-align: left;">The Flat-Rate Business
        Tax (FRBT) Law was published in the Official Gazette on October 1, 2007.
        This Law became into force as of January 1, 2008 and abolished the Asset
        Tax Law.</P>
      <P style="text-align: left;">Current-year FRBT is computed by applying the
        17% rate (16.5% for 2008) to income determined on the basis of cash flows,
        net of authorized credits.</P>
      <P style="text-align: left;"> 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.</P>
      <P style="text-align: left;"> 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.</P>
      <P style="text-align: left;"> 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.</P>
      <P style="text-align: left;"> Based on the financial projections for the
        next four years, and retrospectively on historical results, the Company
        considers which of the Group subsidiaries will be subject to income tax
        and which will be subject to FRBT. The deferred taxes of the period were
        determined based on the specific rules of each tax.</P></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD colspan="3" align=left>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD colspan="4" align=left>II) Income Tax</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD width="3%" align=left valign="top">a) </TD>
    <TD colspan="2" align=left valign="top"><p>On December 7, 2009, a tax reform
        bill was approved and published for 2010 fiscal year, which reforms, amends
        and annual certain tax dispositions. This reform came into force as of
        January 1, 2010.</p>
      <p>This tax reform bill enacts an ISR rate increase that will be effective
        as follows:</p></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left valign="top">&nbsp;</TD>
    <TD align=left valign="top">&nbsp;</TD>
    <TD align=left valign="top">&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left valign="top">&nbsp;</TD>
    <TD width="3%" align=left valign="top">1)</TD>
    <TD align=left valign="top">for years 2010 to 2012: 30%</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left valign="top">&nbsp;</TD>
    <TD align=left valign="top">2)</TD>
    <TD align=left valign="top">for year 2013 29% and</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left valign="top">&nbsp;</TD>
    <TD align=left valign="top">3)</TD>
    <TD align=left valign="top">for year 2014 and future years 28%.</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left valign="top">&nbsp;</TD>
    <TD align=left valign="top">&nbsp;</TD>
    <TD align=left valign="top">&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left valign="top">b)</TD>
    <TD colspan="2" align=left valign="top">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 standalone basis.</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left valign="top">&nbsp;</TD>
    <TD colspan="2" align=left valign="top">&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD colspan="4" align=left><ul>
        <li>An analysis of income tax charged to results of operations for the
          years ended December 31, 2009, 2008 and 2007 is as follows:</li>
      </ul></TD>
  </TR>
</TABLE>
<P style="text-align: center;"> F-31</P>
<HR noshade align="center" width="100%" size="5">
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<BR>
<TABLE width=100% border=0 cellpadding="0" cellspacing=0 style="font-family: 'Times New Roman';font-size: 10pt;">
  <TR>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp; </TD>
    <TD colspan="2" align=center> <B>2009</B></TD>
    <TD align=center>&nbsp;</TD>
    <TD colspan="2" align=center> 2008</TD>
    <TD align=center>&nbsp;</TD>
    <TD colspan="2" align=center> 2007</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD colspan="8" align=left><hr size="1" noshade></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Current income tax Mexican</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp;</TD>
    <TD 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> subsidiaries</TD>
    <TD align=left> <B>Ps.</B></TD>
    <TD align=right> <B>183,070</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left> Ps.</TD>
    <TD align=right> 545,490</TD>
    <TD align=left>&nbsp;&nbsp;&nbsp;</TD>
    <TD align=left> Ps.&nbsp;</TD>
    <TD align=right> 80,119</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Current income Tax foreign</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=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> subsidiaries</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>(824,812</B></TD>
    <TD align=left><B>)</B></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 197,765</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 31,403</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Deferred income tax Mexican</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=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> subsidiaries</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>(1,250,496</B></TD>
    <TD align=left><B>)</B></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 392,271</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 356,059</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Deferred income tax foreign</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=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> subsidiaries</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>(153,164</B></TD>
    <TD align=left><B>)</B></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> (99,223</TD>
    <TD align=left>)&nbsp;&nbsp;&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 153,093</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD colspan="8" align=left><hr size="1" noshade></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Total income tax</TD>
    <TD align=left> <B>Ps.</B></TD>
    <TD align=right> <B>(2,045,402</B></TD>
    <TD align=left><B>)</B>&nbsp;&nbsp;&nbsp;</TD>
    <TD align=left> Ps.</TD>
    <TD align=right> 1,036,303</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left> Ps.</TD>
    <TD align=right> 620,674</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD colspan="8" align=left><hr size="2" noshade></TD>
  </TR>
</TABLE>
<br>
<TABLE width=100% border=0 cellspacing=0 style="font-family: 'Times New Roman';font-size: 10pt;">
  <TR valign="bottom">
    <TD width="3%" align=left>&nbsp;</TD>
    <TD width="3%" align=left>&nbsp;</TD>
    <TD width="3%" align=left valign="top">c)</TD>
    <TD align=left valign="top">At December 31 2009 and 2008, deferred taxes were
      analyzed as follows:
      <P>&nbsp;</P></TD>
  </TR>
</TABLE>
<br>
<TABLE width=100% border=0 cellpadding="0" cellspacing=0 style="font-family: 'Times New Roman';font-size: 10pt;">
  <TR valign="bottom">
    <TD align=left>&nbsp; </TD>
    <TD colspan="2" align=center> <B>2009</B></TD>
    <TD align=center>&nbsp;</TD>
    <TD colspan="2" align=center> 2008</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD colspan="6" align=left><hr size="1" noshade></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Deferred tax assets:</TD>
    <TD align=left>&nbsp; </TD>
    <TD 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;Allowance for bad debts</TD>
    <TD align=left> <B>Ps.</B></TD>
    <TD align=right> <B>118,459</B></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left> Ps.</TD>
    <TD align=right> 62,401</TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> &nbsp;&nbsp;&nbsp;Liability provisions</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>141,509</B></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 144,333</TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> &nbsp;&nbsp;&nbsp;Advances from customers</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>52,401</B></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 20,735</TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> &nbsp;&nbsp;&nbsp;Tax Loss Carryforwards (NOLs) (1)</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>935,530</B></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 1,731,612</TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> &nbsp;&nbsp;&nbsp;Republic tax credits (AMT)</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>142,039</B></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 192,596</TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> &nbsp;&nbsp;&nbsp;Recoverable asset tax</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>99,610</B></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 99,610</TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> &nbsp;&nbsp;&nbsp;EPS provision</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>2,057</B></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 19,874</TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> &nbsp;&nbsp;&nbsp;Derivative financial instruments</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>65,026</B></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 105,338</TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD colspan="6" align=left><hr size="1" noshade></TD>
  </TR>
  <TR>
    <TD colspan=7>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Deferred assets</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>1,556,631</B></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 2,376,499</TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR>
    <TD colspan=7>&nbsp; </TD>
  </TR>
  <TR>
    <TD colspan=7>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Less:</TD>
    <TD align=left>&nbsp; </TD>
    <TD 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;Valuation allowance for deferred tax asset</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>(138,930</B></TD>
    <TD align=left> <B>)&nbsp;&nbsp;&nbsp;</B></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> (182,344</TD>
    <TD align=left> )</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> &nbsp;&nbsp;&nbsp;Valuation allowance for NOLs from acquisitions</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>(458,173</B></TD>
    <TD align=left> <B>)</B></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> (1,067,785</TD>
    <TD align=left> )</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD colspan="6" align=left><hr size="1" noshade></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total valuation allowance</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>(597,103</B></TD>
    <TD align=left> <B>)</B></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> (1,250,129</TD>
    <TD align=left> )</TD>
  </TR>
  <TR>
    <TD colspan=7>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Deferred
      assets, net</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>959,528</B></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 1,126,370</TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD colspan="6" align=left><hr size="1" noshade></TD>
  </TR>
  <TR>
    <TD colspan=7>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Deferred tax liabilities:</TD>
    <TD align=left>&nbsp; </TD>
    <TD 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;Inventories</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>392,279</B></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 644,822</TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> &nbsp;&nbsp;&nbsp;Property, plant and equipment</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>2,243,398</B></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 2,230,251</TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> &nbsp;&nbsp;&nbsp;Additional liabilities from other tax transactions</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>-</B></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 1,142,882</TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> &nbsp;&nbsp;&nbsp;Preoperative expenses</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>1,833</B></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 51,001</TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> &nbsp;&nbsp;&nbsp;Intangibles from Grupo San acquisition</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>693,335</B></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 765,542</TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> &nbsp;&nbsp;&nbsp;Deferred flat rate business tax, net</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>41,400</B></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 39,693</TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> &nbsp;&nbsp;&nbsp;Prepaid expenses</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>68,340</B></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> -</TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> &nbsp;&nbsp;&nbsp;Other</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>-</B></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 4,384</TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD colspan="6" align=left><hr size="1" noshade></TD>
  </TR>
  <TR>
    <TD colspan=7>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total
      deferred liabilities</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>3,440,585</B></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 4,878,575</TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD colspan="6" align=left><hr size="1" noshade></TD>
  </TR>
  <TR>
    <TD colspan=7>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Deferred credit for future tax benefits from NOLs</TD>
    <TD align=left>&nbsp; </TD>
    <TD 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> from acquisitions</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>256,713</B></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 420,046</TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD colspan="6" align=left><hr size="1" noshade></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Deferred
      liabilities, net</TD>
    <TD align=left> <B>Ps.</B></TD>
    <TD align=right> <B>2,737,770</B></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left> Ps.</TD>
    <TD align=right> 4,172,251</TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD colspan="6" align=left><hr size="2" noshade></TD>
  </TR>
</TABLE>
<BR>
<TABLE border=0 cellspacing=0 style="font-family: 'Times New Roman';font-size: 10pt;">
  <TR>
    <TD nowrap valign=top width="3%"> (1)&nbsp; &nbsp; &nbsp; </TD>
    <TD width="98%"> <P align="left">At December 31, 2009 the Tax Loss Carryforwards
        include Ps. 46,437 originating in state and local fiscal losses of Republic.</P></TD>
  </TR>
</TABLE>
<P style="text-align: center;"> F-32</P>
<HR noshade align="center" width="100%" size="5">
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<div title="EE+ Page Break" style="FONT-SIZE: 1pt; PAGE-BREAK-AFTER: always; WIDTH: 100%; HEIGHT: 1px"></div>
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<BR>
<TABLE width=100% border=0 cellspacing=0 style="font-family: 'Times New Roman';font-size: 10pt;">
  <TR valign="bottom">
    <TD width="3%" align=left>&nbsp;</TD>
    <TD width="3%" align=left>&nbsp;</TD>
    <TD width="3%" align=left valign="top">d)</TD>
    <TD align=left valign="top">At December 31, 2009, 2008 and 2007 the tax (benefit)
      expense attributable to income before income tax and non-controlling interest
      differed from the expense computed by applying the income tax rate of 28%
      in 2009, 2008 and 2007 to income before these provisions and non- controlling
      interest. An analysis is as follows:</TD>
  </TR>
</TABLE>
<br>
<TABLE width=100% border=0 cellpadding="0" cellspacing=0 style="font-family: 'Times New Roman';font-size: 10pt;">
  <TR>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp; </TD>
    <TD colspan="2" align=center> <B>2009</B></TD>
    <TD align=center>&nbsp;</TD>
    <TD colspan="2" align=center> 2008</TD>
    <TD align=center>&nbsp;</TD>
    <TD colspan="2" align=center> 2007</TD>
    <TD align=center>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD colspan="9" align=left><hr size="1" noshade></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Expected tax (benefit) expense</TD>
    <TD align=left> <B>Ps.</B></TD>
    <TD align=right> <B>(901,744</B></TD>
    <TD align=left><B>)</B>&nbsp;&nbsp;&nbsp;</TD>
    <TD align=left> Ps.</TD>
    <TD align=right> 822,262</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left> Ps.</TD>
    <TD align=right> 628,838</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Increase (decrease) resulting from:</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD 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> Net effect of inflation</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>(2,724</B></TD>
    <TD align=left><B>)</B></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> (27,152</TD>
    <TD align=left>)&nbsp;&nbsp;&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 15,541</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Cancellation on asset tax</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>-</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> -</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 90,889</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Effect on Republic&#146;s effective income tax rate</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>(152,501</B></TD>
    <TD align=left><B>)</B></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 12,849</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 80,191</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Change in valuation allowance of deferred tax</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>(43,414</B></TD>
    <TD align=left><B>)</B></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 82,734</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right>(14,612</TD>
    <TD align=left> )</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> assets <SUP>(1)</SUP></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD 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> FRBT paid in excess of income tax</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>39,353</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 87,407</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right>-</TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Change of valuation allowance of NOLs from</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD 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> acquisitions <SUP>(3)</SUP></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>(334,622</B></TD>
    <TD align=left><B>)</B></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> (446,909</TD>
    <TD align=left>)</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right>(493,010</TD>
    <TD align=left> )</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Change in the additional liability from other tax</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD 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> transactions <SUP>(2)</SUP></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>(1,142,882</B></TD>
    <TD align=left><B>)</B></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 446,909</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 342,933</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Amortization of deferred credit (note 2r)</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>(163,333</B></TD>
    <TD align=left><B>)</B></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> -</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> -</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Impairment loss</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>663,040</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> -</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> -</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Other, net</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>(6,575</B></TD>
    <TD align=left><B>)</B></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 58,203</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right>(30,096</TD>
    <TD align=left> )</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD colspan="9" align=left><hr size="1" noshade></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Income tax (benefit) expenses</TD>
    <TD align=left> <B>Ps.</B></TD>
    <TD align=right> <B>(2,045,402</B></TD>
    <TD align=left><B>)&nbsp;&nbsp;&nbsp;<B></B></B></TD>
    <TD align=left> Ps.</TD>
    <TD align=right> 1,036,303</TD>
    <TD align=left>&nbsp;&nbsp;&nbsp;</TD>
    <TD align=left> Ps.</TD>
    <TD align=right>620,674</TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD colspan="9" align=left><hr size="2" noshade></TD>
  </TR>
</TABLE>
<BR>
<TABLE border=0 cellspacing=0 style="font-family: 'Times New Roman';font-size: 10pt;" width="100%">
  <TR>
    <TD></TD>
    <TD></TD>
    <TD></TD>
  </TR>
  <TR valign="top">
    <TD width=3%>(1)</TD>
    <TD colspan=2>
      <P> At December 31, 2009 and 2008 the total valuation allowance
        for deferred tax assets was Ps. 597,103   and Ps. 1,250,129, respectively.
        For 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 reduced its valuation
        allowance. During 2008 the subsidiary SimRep generated a tax credit (AMT)
        for Ps. 192,596 and the Company determined that part of that credit was
        not going to be recovered and consequently increased its valuation allowance
        Ps. 82,734 with respect to this asset. For the year 2009 based on the
        recoverability analysis made on SimRep deferred tax assets the Company
        decreased its valuation allowance on Ps. 43,414. To evaluate the recoverability
        of deferred tax assets, management considers the probability of not recovering
        all or a portion of it. The final realization of deferred tax 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 tax liabilities, projected
        taxable profit and planning strategies.</P>
    </TD>
  </TR>
  <TR valign="top">
    <TD></TD>
    <TD colspan=2>&nbsp;</TD>
  </TR>
  <TR valign="top">
    <TD>(2) </TD>
    <TD colspan=2>The Company determines an additional deferred tax liability
      from transactions that result in a deferral of current income tax expense,
      but they will result in a tax expense in the future. For the years ended
      December 31, 2008 and 2007, the increases in this liability are related
      to the amortization of NOLs from acquisitions. In 2009 the additional deferred
      tax liability reversed mainly due to the impairment loss and the Republic
      losses incurred during 2009.</TD>
  </TR>
  <TR valign="top">
    <TD></TD>
    <TD colspan=2>&nbsp;</TD>
  </TR>
  <TR valign="top">
    <TD>(3) </TD>
    <TD colspan=2>This benefit is the result of the change in valuation allowance
      for recognition of tax loss carry forwards from acquisitions. In 2009, Simec
      sold a subsidiary to ICH for Ps. 6 million at book value, that included
      fully reserved NOLs for Ps. 274,990. The amount for 2009 in this caption
      is presented net of the change in the valuation allowance from the fully
      reserved NOLs included in a subsidiary that was sold to ICH at book value.</TD>
  </TR>
  <TR valign="top">
    <TD>&nbsp;</TD>
    <TD colspan=2>&nbsp;</TD>
  </TR>
  <TR valign="top">
    <TD></TD>
    <TD colspan=2>The effective rate for the years ended on December 31st, 2009,
      2008 and 2007 were (63.5%), 35.3% and 27.6%, respectively.</TD>
  </TR>
</TABLE>
<P style="text-align: center;">F-33</P>
<HR noshade align="center" width="100%" size="5">
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<BR>
<table width="100%" border=0 cellspacing=0 style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'">
  <tr>
    <td width="3%" valign=top nowrap>&nbsp;&nbsp;&nbsp;</td>
    <td width="3%" valign=top nowrap>&nbsp;&nbsp;&nbsp;</td>
    <td width="3%" valign=top nowrap>e)&nbsp; &nbsp; &nbsp; </td>
    <td>
      <p align=left>The Company has available Mexican 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.</p>
    </td>
  </tr>
  <tr>
    <td width="3%" valign=top nowrap>&nbsp;</td>
    <td width="3%" valign=top nowrap>&nbsp;</td>
    <td width="3%" valign=top nowrap>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
</table>
<br>
<table border="0" cellspacing="0" cellpadding="0" width="450" align="center">
  <tr>
    <td valign="bottom" width="107">
      <div align="center"><b><font size="2" face="Times New Roman, Times, serif">Year
        of <br>
        Origin </font></b> </div>
    </td>
    <td valign="bottom" width="147">
      <div align="center"><b><font size="2" face="Times New Roman, Times, serif">Expiration
        </font></b> </div>
    </td>
    <td colspan="3" valign="bottom">
      <div align="center"><b><font size="2" face="Times New Roman, Times, serif">Tax
        Losses <br>
        Carryforward (1) </font></b> </div>
    </td>
  </tr>
  <tr>
    <td valign="bottom" width="107">
      <hr noshade size="1" width="90%">
    </td>
    <td valign="bottom" width="147">
      <hr noshade size="1" width="90%">
    </td>
    <td valign="bottom" colspan="3">
      <hr noshade size="1" width="90%">
    </td>
  </tr>
  <tr>
    <td valign="bottom" width="107">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">2004</font></div>
    </td>
    <td valign="bottom" width="147">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">2014</font></div>
    </td>
    <td valign="bottom" width="47"><font face="Times New Roman, Times, serif"></font></td>
    <td valign="bottom" width="89">
      <div align="right"><font size="2" face="Times New Roman, Times, serif">362</font></div>
    </td>
    <td width="60">&nbsp;</td>
  </tr>
  <tr>
    <td valign="bottom" width="107">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">2005</font></div>
    </td>
    <td valign="bottom" width="147">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">2015</font></div>
    </td>
    <td valign="bottom" width="47"><font face="Times New Roman, Times, serif"></font></td>
    <td valign="bottom" width="89">
      <div align="right"><font size="2" face="Times New Roman, Times, serif">1,115,217</font></div>
    </td>
    <td width="60">&nbsp;</td>
  </tr>
  <tr>
    <td valign="bottom" width="107">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">2006</font></div>
    </td>
    <td valign="bottom" width="147">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">2016</font></div>
    </td>
    <td valign="bottom" width="47"><font face="Times New Roman, Times, serif"></font></td>
    <td valign="bottom" width="89">
      <div align="right"><font size="2" face="Times New Roman, Times, serif">126,242</font></div>
    </td>
    <td width="60">&nbsp;</td>
  </tr>
  <tr>
    <td valign="bottom" width="107">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">2007</font></div>
    </td>
    <td valign="bottom" width="147">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">2017</font></div>
    </td>
    <td valign="bottom" width="47"><font face="Times New Roman, Times, serif"></font></td>
    <td valign="bottom" width="89">
      <div align="right"><font size="2" face="Times New Roman, Times, serif">293,129</font></div>
    </td>
    <td width="60">&nbsp;</td>
  </tr>
  <tr>
    <td valign="bottom" width="107">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">2008</font></div>
    </td>
    <td valign="bottom" width="147">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">2018</font></div>
    </td>
    <td valign="bottom" width="47"><font face="Times New Roman, Times, serif"></font></td>
    <td valign="bottom" width="89">
      <div align="right"><font size="2" face="Times New Roman, Times, serif">1,247,876</font></div>
    </td>
    <td width="60">&nbsp;</td>
  </tr>
  <tr>
    <td valign="bottom" width="107">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">2009</font></div>
    </td>
    <td valign="bottom" width="147">
      <div align="center"><font size="2" face="Times New Roman, Times, serif">2019</font></div>
    </td>
    <td valign="bottom" width="47"><font face="Times New Roman, Times, serif"></font></td>
    <td valign="bottom" width="89">
      <div align="right"><font size="2" face="Times New Roman, Times, serif">180,816</font></div>
    </td>
    <td width="60">&nbsp;</td>
  </tr>
  <tr>
    <td valign="bottom" width="107">&nbsp;</td>
    <td valign="bottom" width="147">&nbsp;</td>
    <td valign="bottom" colspan="2">
      <hr noshade size="1">
    </td>
    <td width="60">&nbsp;</td>
  </tr>
  <tr>
    <td valign="bottom" width="107"><font face="Times New Roman, Times, serif"></font></td>
    <td valign="bottom" width="147"><font face="Times New Roman, Times, serif"></font></td>
    <td valign="bottom" width="47">
      <div align="left"><font size="2" face="Times New Roman, Times, serif">Ps.</font></div>
    </td>
    <td valign="bottom" width="89">
      <div align="right"><font size="2" face="Times New Roman, Times, serif">2,963,642</font></div>
    </td>
    <td width="60">&nbsp;</td>
  </tr>
  <tr>
    <td valign="bottom" width="107">&nbsp;</td>
    <td valign="bottom" width="147">&nbsp;</td>
    <td valign="bottom" colspan="2">
      <hr noshade size="2">
    </td>
    <td width="60">&nbsp;</td>
  </tr>
</table>
<br>
<TABLE width="100%" border=0 cellSpacing=0 style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'">
  <TR>
    <TD width="3%" vAlign=top nowrap>&nbsp;</TD>
    <TD colspan="3" vAlign=top nowrap>At December 31, 2009 there were available
      tax loss carryforwards, restated for inflation, as follows:</TD>
  </TR>
</TABLE>
<br>
<TABLE width="100%" border=0 cellSpacing=0 style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'">
  <TR>
    <TD></TD>
    <TD colspan="2"></TD>
  </TR>
  <TR vAlign=top>
    <TD>&nbsp;&nbsp;&nbsp;</TD>
    <TD colspan="2">(1) Tax losses carryforward include Ps. 2,599,576 from acquisitions.</TD>
  </TR>
  <TR vAlign=top>
    <TD></TD>
    <TD colspan="2">&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD></TD>
    <TD colspan="2"> <P>III) Asset tax (AT)</P>
      <P>&nbsp;</P></TD>
  </TR>
  <TR vAlign=top>
    <TD width="3%"></TD>
    <TD width="3%">&nbsp;&nbsp;&nbsp;</TD>
    <TD>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 2009 and 2008 Company determined an asset tax of Ps.
      99,610 will not be recovered based on the prospective analysis of its results
      and it has been reserved in its totality.</TD>
  </TR>
</TABLE>
<BR>
<TABLE width="100%" border=0 cellSpacing=0 style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'">
  <TR>
    <TD></TD>
    <TD></TD>
  </TR>
  <TR vAlign=top>
    <TD> <P><B>17.</B></P></TD>
    <TD> <P><B>Acquisitions</B></P></TD>
  </TR>
  <TR>
    <TD colSpan=2>&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD width="3%">a)</TD>
    <TD>On December 26, 2008 the Company acquired 99.95% of the shares of Northarc
      Express, S. A. de C. V. a subsidiary of Grupo TMM, S. A. de C. V., to turn
      this company in to the operating subsidiary of the manufacturing plants
      steel plants located in Mexico. The total cost of this acquisition was Ps.
      202 million. On January 6, 2009 this company was renamed to Simec International
      2, S. A. de C. V.</TD>
  </TR>
  <TR vAlign=top>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD> <P>b)</P></TD>
    <TD> <P>On July 29, 2008, the Company acquired 100% of the shares of Aroproc,
        S. A. de C. V., Del-Ucral, S. A. de C. V., Qwer, S. A. de C. V. and Transporte
        Integral Dom&#233;stico, S.A. de C.V., subsidiaries of Grupo TMM, S. A.
        de C. V., to turn them into the distribution subsidiaries of the manufacturing
        plants located in Mexico. The total cost of these acquisitions was Ps.
        33 million. On July 30 2008, these companies were renamed to Promotora
        de Aceros San Luis, S. A. de C. V., Comercializadora Aceros DM, S.A. de
        C.V., Comercializadora Msan, S.A. de C.V. and Productos Sider&#250;rgicos
        de Tlaxcala, S.A. de C.V. respectively. The only asset of these acquisitions
        was a deferred tax asset from NOLs that was reserved up to the amount
        paid by them.</P></TD>
  </TR>
  <TR>
    <TD colSpan=2>&nbsp;</TD>
  </TR>
  <TR vAlign=top>
    <TD> <P>c)</P></TD>
    <TD> <P>In order to increase its market share in Mexico, on February 21, 2008,
        the Company entered into a purchase agreement to acquire 100% of the shares
        of Corporaci&#243;n Aceros DM, S. A. de C. V. and certain affiliated companies
        (Grupo San). On May 30, 2008 the acquisition was consummated. Grupo San
        is a large steel producer and one of the most important producers of corrugated
        rebar of Mexico. The facilities of Grupo San are located in San Luis Potos&#237;,
        Mexico.</P>
      <P>The fair value of the net assets acquired amounted Ps. 4,564 and the
        acquisition cost was Ps. 8,730 million, giving rise to a goodwill of Ps.
        4,166 million. The factors that led to the recognition of goodwill are
        mainly the synergies expected with the incorporation of Grupo San to the
        Company, as well as other non-separable intangibles. The fair value of
        the net assets acquired is as follows:</P></TD>
  </TR>
</TABLE>
<br>
<TABLE width=600 border=0 align="center" cellpadding="0" cellspacing=0 style="font-family: 'Times New Roman';font-size: 10pt;">
  <TR>
    <TD></TD>
    <TD></TD>
    <TD></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Current assets</TD>
    <TD align=left> Ps.</TD>
    <TD align=right> 1,455,815</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Property, plant and equipment</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 2,052,368</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Intangible assets and deferred charges</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 7,189,160</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Other assets</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 56,269</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD align=left><hr size="1" noshade></TD>
    <TD align=right><hr size="1" noshade></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Total Assets</TD>
    <TD align=left> Ps.</TD>
    <TD align=right> 10,753,612</TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD><hr size="2" noshade></TD>
    <TD><hr size="2" noshade></TD>
  </TR>
</TABLE>
<BR>
<P style="TEXT-ALIGN: center">F-34</P>
<HR align=center width="100%" noshade SIZE=5>
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<BR>
<TABLE width=600 border=0 align="center" cellpadding="0" cellspacing=0 style="font-family: 'Times New Roman';font-size: 10pt;">
  <TR valign="bottom">
    <TD align=left> Current liabilities</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 589,808</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Deferred taxes</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 1,426,436</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Other long-term liabilities</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 7,047</TD>
  </TR>
  <tr valign="bottom">
    <td align=left>&nbsp;</td>
    <td align=left>
      <hr size="1" noshade>
    </td>
    <td align=right>
      <hr size="1" noshade>
    </td>
  </tr>
  <TR valign="bottom">
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 2,023,291</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD align=left>
      <hr size="1" noshade>
    </TD>
    <TD align=right>
      <hr size="1" noshade>
    </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Net assets acquired</TD>
    <TD align=left> Ps.</TD>
    <TD align=right> 8,730,321</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD align=left>
      <hr size="2" noshade>
    </TD>
    <TD align=right>
      <hr size="2" noshade>
    </TD>
  </TR>
</TABLE>
<P style="text-align: left;">As of December 31, 2009 the Company recognized an
  impairment loss of &#36;2,368,000 (see note 9) on some of the intangibles obtained
  in the Grupo San acquisition.</P>
<P style="text-align: left;"> The following combined pro forma financial information
  (unaudited) for 2008 and 2007 is based on the Company&#146;s combined historical
  financial statements adjusted to reflect the acquisition of Grupo San and certain
  accounting adjustments related to the net profits of the acquired company.</P>
<P style="text-align: left;"> The pro forma adjustments (non-audited) assume that
  the acquisition was conducted at the beginning of 2008 and 2007, respectively,
  and is based on available data and certain suppositions that management considers
  to be reasonable.</P>
<P style="text-align: left;"> 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>
<TABLE width=600 border=0 align="center" cellpadding="0" cellspacing=0 style="font-family: 'Times New Roman';font-size: 10pt;">
  <TR>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=center> 2008</TD>
    <TD align=center>&nbsp;</TD>
    <TD align=center>&nbsp; </TD>
    <TD align=center> 2007</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=center> (unaudited)</TD>
    <TD align=center>&nbsp;</TD>
    <TD align=center>&nbsp; </TD>
    <TD align=center> (unaudited)</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD align=left><hr size="1" noshade></TD>
    <TD align=right><hr size="1" noshade></TD>
    <TD align=left><hr size="1" noshade></TD>
    <TD align=left><hr size="1" noshade></TD>
    <TD align=right><hr size="1" noshade> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Net Sales</TD>
    <TD align=left> Ps.</TD>
    <TD align=right> 37,869,617</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left> Ps.</TD>
    <TD align=right> 28,402,386</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Marginal Profit</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 6,301,519</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 4,587,178</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Net Income</TD>
    <TD align=left> Ps.</TD>
    <TD align=right> 2,378,033</TD>
    <TD align=left>&nbsp;&nbsp;&nbsp;</TD>
    <TD align=left> Ps.</TD>
    <TD align=right> 1,867,191</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD align=left><hr size="1" noshade></TD>
    <TD align=right><hr size="1" noshade></TD>
    <TD align=left><hr size="1" noshade></TD>
    <TD align=left><hr size="1" noshade></TD>
    <TD align=right><hr size="1" noshade> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Controlling interest Earnings</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> per Share (Pesos)</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 4.90</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 3.99</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD align=left><hr size="2" noshade></TD>
    <TD align=right><hr size="2" noshade></TD>
    <TD align=left><hr size="2" noshade></TD>
    <TD align=left><hr size="2" noshade></TD>
    <TD align=right><hr size="2" noshade></TD>
  </TR>
</TABLE>
<P style="text-align: left;"> <B>18. Segments</B></P>
<P style="text-align: left;"> The Company segments its information by region,
  due to the operational structure and the organization of its business. The Company&#146;s
  sales are made mainly in Mexico and the United States of America. The Mexican
  segment includes the plants in Mexicali, Guadalajara, Tlaxcala and San Luis
  Potosi. The USA segment includes the seven plants from Republic, 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.</P>
<TABLE width=100% border=0 cellpadding="0" cellspacing=0 style="font-family: 'Times New Roman';font-size: 10pt;">
  <TR valign="bottom">
    <TD align=left>&nbsp; </TD>
    <TD colspan="12" align=center> For the year ended on December 31st, 2009
      <hr size="1" noshade></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp; </TD>
    <TD colspan="2" align=center> Mexico</TD>
    <TD align=center>&nbsp;</TD>
    <TD colspan="2" align=center> USA</TD>
    <TD align=center>&nbsp;</TD>
    <TD colspan="2" align=center>Operations<br>
      between <br>
      Segments</TD>
    <TD align=center>&nbsp;</TD>
    <TD colspan="2" align=center> Total</TD>
    <TD align=center>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD colspan="12" align=left><hr size="1" noshade></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Net Sales</TD>
    <TD align=left> Ps.</TD>
    <TD align=right> 11,366,780</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left> Ps.</TD>
    <TD align=right> 7,864,749</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left> Ps.</TD>
    <TD align=right> -</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> Ps.</TD>
    <TD align=right> 19,231,529</TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Cost of Sales</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 7,927,728</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 9,789,026</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> -</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 17,716,754</TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD colspan="12" align=left><hr size="1" noshade></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Marginal Profit (loss)</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 3,439,052</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> (1,924,277</TD>
    <TD align=left> )</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> -</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 1,514,775</TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Indirect overhead, selling and</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD 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> administrative expenses</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 1,612,770</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 688,212</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> -</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 2,300,982</TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD colspan="12" align=left><hr size="1" noshade></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Operating (loss) income</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 1,826,282</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> (2,612,489</TD>
    <TD align=left> )</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> -</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> (786,207</TD>
    <TD align=left> )</TD>
  </TR>
  <TR>
    <TD colspan=13>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Other income (expense), net</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 70,102</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> (40,111</TD>
    <TD align=left> )</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> -</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 29,991</TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Impairment of intangible assets</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> (2,368,000</TD>
    <TD align=left> )</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> -</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> -</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> (2,368,000</TD>
    <TD align=left> )</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Financial income (expenses), net</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 21,726</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> (39,595</TD>
    <TD align=left> )</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> -</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> (17,869</TD>
    <TD align=left> )</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Exchange loss, net</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> (78,429</TD>
    <TD align=left> )</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> -</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> -</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> (78,429</TD>
    <TD align=left> )</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD colspan="12" align=left><hr size="1" noshade></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Loss before income tax</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> (528,319</TD>
    <TD align=left> )</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> (2,692,195</TD>
    <TD align=left> )</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> -</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> (3,220,514</TD>
    <TD align=left> )</TD>
  </TR>
  <TR>
    <TD colspan=13>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Income tax</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> (1,067,426</TD>
    <TD align=left> )&nbsp;&nbsp;&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> (977,976</TD>
    <TD align=left> )&nbsp;&nbsp;&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> -</TD>
    <TD align=left>&nbsp;&nbsp;&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> (2,045,402</TD>
    <TD align=left> )</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD colspan="12" align=left><hr size="1" noshade></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Net income (loss)</TD>
    <TD align=left> Ps.</TD>
    <TD align=right> 539,107</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left> Ps.</TD>
    <TD align=right> (1,714,219</TD>
    <TD align=left> )</TD>
    <TD align=left> Ps.</TD>
    <TD align=right> -</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> Ps.</TD>
    <TD align=right> (1,175,112</TD>
    <TD align=left> )</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD colspan="12" align=left><hr size="2" noshade></TD>
  </TR>
</TABLE>
<P style="text-align: center;">F-35</P>
<HR noshade align="center" width="100%" size="5">
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<BR>
<TABLE width=100% border=0 cellpadding="0" cellspacing=0 style="font-family: 'Times New Roman';font-size: 10pt;">
  <TR>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left><b>Other Data</b> </TD>
    <TD colspan="2" align=center> Mexico</TD>
    <TD align=center>&nbsp;</TD>
    <TD colspan="2" align=center>United States <br>
      of America</TD>
    <TD align=center>&nbsp;</TD>
    <TD colspan="2" align=center>Operations<br>
      between <br>
      Segments</TD>
    <TD align=center>&nbsp;</TD>
    <TD colspan="2" align=center> Total</TD>
    <TD align=center>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD colspan="12" align=left><hr size="1" noshade></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Total Assets</TD>
    <TD align=left> Ps.</TD>
    <TD align=right> 18,128,431</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left> Ps.</TD>
    <TD align=right> 8,581,370</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left> Ps.</TD>
    <TD align=right> -</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> Ps.</TD>
    <TD align=right> 26,709,801</TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Depreciation and Amortization</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 783,414</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 264,468</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> -</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 1,047,882</TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Additions of property, plant and</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD 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> equipment, net</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 176,249</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 86,958</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> -</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 263,207</TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR>
    <TD colspan=13>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp; </TD>
    <TD colspan="12" align=center> For the year ended on December 31st, 2008
      <hr size="1" noshade></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp; </TD>
    <TD colspan="2" align=center> Mexico</TD>
    <TD align=center>&nbsp;</TD>
    <TD colspan="2" align=center> USA</TD>
    <TD align=center>&nbsp;</TD>
    <TD colspan="2" align=center>Operations<br>
      between <br>
      Segments</TD>
    <TD align=center>&nbsp;</TD>
    <TD colspan="2" align=center> Total</TD>
    <TD align=center>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD colspan="12" align=left><hr size="1" noshade></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Net Sales</TD>
    <TD align=left> Ps.</TD>
    <TD align=right> 12,780,358</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left> Ps.</TD>
    <TD align=right> 22,448,283</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left> Ps.</TD>
    <TD align=right> (43,421</TD>
    <TD align=left> )</TD>
    <TD align=right> Ps.</TD>
    <TD align=right> 35,185,220</TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Cost of Sales</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 8,402,516</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 21,438,719</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> (45,072</TD>
    <TD align=left> )&nbsp;&nbsp;&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 29,796,163</TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD colspan="12" align=left><hr size="1" noshade></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Marginal Profit</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 4,377,842</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 1,009,564</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 1,651</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 5,389,057</TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Indirect overhead, selling and</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD 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> administrative expenses</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 1,567,060</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 706,768</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> -</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 2,273,828</TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD colspan="12" align=left><hr size="1" noshade></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Operating income</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 2,810,782</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 302,796</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 1,651</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 3,115,229</TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR>
    <TD colspan=13>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Other (expense) income, net</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> (29,166</TD>
    <TD align=left> )&nbsp;&nbsp;&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 25,250</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> -</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> (3,916</TD>
    <TD align=left> )</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Financial income (expenses), net</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 100,522</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> (22,000</TD>
    <TD align=left> )&nbsp;&nbsp;&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> -</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 78,522</TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Exchange loss, net</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> (253,183</TD>
    <TD align=left> )</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> -</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> -</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> (253,183</TD>
    <TD align=left> )</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD colspan="12" align=left><hr size="1" noshade></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Income before income tax</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 2,628,955</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 306,046</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 1,651</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 2,936,652</TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR>
    <TD colspan=13>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Income tax</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 937,761</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 98,542</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> -</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 1,036,303</TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD colspan="12" align=left><hr size="1" noshade></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Net income</TD>
    <TD align=left> Ps.</TD>
    <TD align=right> 1,691,194</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left> Ps.</TD>
    <TD align=right> 207,504</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left> Ps.</TD>
    <TD align=right> 1,651</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> Ps.</TD>
    <TD align=right> 1,900,349</TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD colspan="12" align=left><hr size="2" noshade></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=right>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&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><b>Other Data</b> </TD>
    <TD colspan="2" align=center> Mexico</TD>
    <TD align=center>&nbsp;</TD>
    <TD colspan="2" align=center>United States <br>
      of America</TD>
    <TD align=center>&nbsp;</TD>
    <TD colspan="2" align=center>Operations<br>
      between <br>
      Segments</TD>
    <TD align=center>&nbsp;</TD>
    <TD colspan="2" align=center> Total</TD>
    <TD align=center>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD colspan="12" align=left><hr size="1" noshade></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Total Assets</TD>
    <TD align=left> Ps.</TD>
    <TD align=right> 19,885,862</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left> Ps.</TD>
    <TD align=right> 10,928,155</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left> Ps.</TD>
    <TD align=left colspan=2> - Ps.</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 30,814,017</TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Depreciation and Amortization</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 677,339</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 217,967</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> -</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 895,306</TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Additions of property, plant and</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD 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> equipment, net</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 148,749</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 331,055</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> -</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 479,804</TD>
    <TD align=left>&nbsp; </TD>
  </TR>
</TABLE>
<BR>
<P style="text-align: center;">F-36</P>
<HR noshade align="center" width="100%" size="5">
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<BR>
<TABLE width=100% border=0 cellpadding="0" cellspacing=0 style="font-family: 'Times New Roman';font-size: 10pt;">
  <TR>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp; </TD>
    <TD colspan="12" align=center> For the year ended on December 31st, 2007
      <hr size="1" noshade></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD colspan="2" align=center> Mexico</TD>
    <TD align=center>&nbsp;</TD>
    <TD colspan="2" align=center>United States <br>
      of America</TD>
    <TD align=center>&nbsp;</TD>
    <TD colspan="2" align=center>Operations<br>
      between <br>
      Segments</TD>
    <TD align=center>&nbsp;</TD>
    <TD colspan="2" align=center> Total</TD>
    <TD align=center>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD colspan="12" align=left><hr size="1" noshade></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Net Sales</TD>
    <TD align=left> Ps.</TD>
    <TD align=right> 8,407,018</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left> Ps.</TD>
    <TD align=right> 16,118,609</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left> Ps.</TD>
    <TD align=right> (419,533</TD>
    <TD align=left> )</TD>
    <TD align=left> Ps.</TD>
    <TD align=right> 24,106,094</TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Cost of sales</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 5,716,571</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 15,199,112</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> (416,765</TD>
    <TD align=left> )</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 20,498,918</TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD colspan="12" align=left><hr size="1" noshade></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Marginal Profit</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 2,690,447</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 919,497</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> (2,768</TD>
    <TD align=left> )</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 3,607,176</TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Indirect overhead, selling and</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD 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> administrative expenses</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 837,246</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 585,913</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> -</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 1,423,159</TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD colspan="12" align=left><hr size="1" noshade></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Operating Income</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 1,853,201</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 333,584</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> (2,768</TD>
    <TD align=left> )&nbsp;&nbsp;&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 2,184,017</TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR>
    <TD colspan=13>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Other (expense) income, net</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> (8,666</TD>
    <TD align=left> )</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 29,995</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> -</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 21,329</TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Financial income (expenses), net</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 291,189</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> (17,876</TD>
    <TD align=left> )&nbsp;&nbsp;&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> -</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 273,313</TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Exchange loss, net</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> (37,879</TD>
    <TD align=left> )</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> -</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> -</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> (37,879</TD>
    <TD align=left> )</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Result on monetary position</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> (227,014</TD>
    <TD align=left> &nbsp;&nbsp;&nbsp;)</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 32,083</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> -</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> (194,931</TD>
    <TD align=left> )</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD colspan="12" align=left><hr size="1" noshade></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Income before income tax</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 1,870,831</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 377,786</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> (2,768</TD>
    <TD align=left> )</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 2,245,849</TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR>
    <TD colspan=13>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Income Tax</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 435,973</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 184,701</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> -</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 620,674</TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD colspan="12" align=left><hr size="1" noshade></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Net income</TD>
    <TD align=left> Ps.</TD>
    <TD align=right> 1,434,858</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left> Ps.</TD>
    <TD align=right> 193,085</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left> Ps.</TD>
    <TD align=right> (2,768</TD>
    <TD align=left> )</TD>
    <TD align=left> Ps.</TD>
    <TD align=right> 1,625,175</TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR>
    <TD colspan=13>&nbsp; </TD>
  </TR>
  <TR>
    <TD colspan=13>&nbsp; </TD>
  </TR>
  <TR>
    <TD colspan=13>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <B>Other Data</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> Total Assets</TD>
    <TD align=left> Ps.</TD>
    <TD align=right> 15,221,534</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left> Ps.</TD>
    <TD align=right> 7,619,723</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left> Ps.</TD>
    <TD align=right> -</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left> Ps.</TD>
    <TD align=right> 22,841,257</TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Depreciation and Amortization</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD 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; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 334,010</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 215,246</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> -</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 549,256</TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Additions of property, plant and</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD 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> equipment, net</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 168,926</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 316,742</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> -</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 485,668</TD>
    <TD align=left>&nbsp; </TD>
  </TR>
</TABLE>
<P style="text-align: left;"> The Company&#146;s net sales to foreign or regional
  customers during 2009, 2008 and 2007 are as follows:</P>
<TABLE width=100% border=0 cellpadding="0" cellspacing=0 style="font-family: 'Times New Roman';font-size: 10pt;">
  <TR>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp; </TD>
    <TD colspan="8" align=center> <B>Sales</B> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD colspan="8" align=left><hr size="1" noshade></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp; </TD>
    <TD colspan="2" align=center> <B>2009</B></TD>
    <TD align=center>&nbsp;</TD>
    <TD colspan="2" align=center> 2008</TD>
    <TD align=center>&nbsp;</TD>
    <TD colspan="2" align=center> 2007</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD colspan="8" align=left><hr size="1" noshade></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Mexico</TD>
    <TD align=left> <B>Ps.</B></TD>
    <TD align=right> <B>10,685,259</B></TD>
    <TD align=left>&nbsp;&nbsp;&nbsp;</TD>
    <TD align=left> Ps.</TD>
    <TD align=right> 11,366,526</TD>
    <TD align=left>&nbsp;&nbsp;&nbsp;</TD>
    <TD align=left> Ps.</TD>
    <TD align=right> 7,393,755</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> USA</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>7,829,024</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 21,622,442</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 15,296,430</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Canad&aacute;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>502,286</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 598,711</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 583,917</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Latin America</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>135,965</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 394,998</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 113,058</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Other (Europe and Asia)</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>78,995</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 1,202,543</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 718,934</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD colspan="8" align=left><hr size="1" noshade></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Total</TD>
    <TD align=left> <B>Ps.</B></TD>
    <TD align=right> <B>19,231,529</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left> Ps.</TD>
    <TD align=right> 35,185,220</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left> Ps.</TD>
    <TD align=right> 24,106,094</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD colspan="8" align=left><hr size="2" noshade></TD>
  </TR>
</TABLE>
<div align="left"><BR>
  <B>19. Commitments and contingencies -</B><BR>
  <BR>
  <B><I>Commitments</I></B><B><I><STRIKE>-</STRIKE></I></B> </div>
<TABLE border=0 cellspacing=0 style="font-family: 'Times New Roman';font-size: 10pt;">
  <TR>
    <TD></TD>
    <TD></TD>
    <TD></TD>
  </TR>
  <TR valign="top">
    <TD width=3%>&nbsp;&nbsp;&nbsp;</TD>
    <TD width=3%> <P><B><I>(a)</I></B></P></TD>
    <TD colspan=1> <P>During 2008, Republic entered into an agreement with Integrys
        Energy Services (US Energy) which enables Republic to receive payments
        for allowing reduction of electricity demands during identified time periods.
        This agreement term is two twelve month periods beginning June 1, 2008
        and ending May 31, 2010. During 2009, U.S.&#36;3.0 million was recognized
        as revenue related to the received payments from Integrys in relation
        to the end of the first annual revenue cycle May 31, 2009, as the Company
        fulfilled its performance obligations under the terms of the agreement
        at that time. Relating to the term ending May 31, 2010, U.S.&#36;0.4 million
        was recorded as deferred revenue at December 31,2009.</P></TD>
  </TR>
  <TR>
    <TD colspan=3>&nbsp; </TD>
  </TR>
  <TR valign="top">
    <TD>&nbsp;</TD>
    <TD> <P><B><I>(b)</I></B></P></TD>
    <TD colspan=1> <P>Republic leases certain equipment, office space and computers
        through operating contracts under non- cancelable operating leases. These
        lease contracts will expire in several different dates by the end of 2013.
        During the years ended December 31, 2009, 2008 and 2007, the expenses
        for operating leases were Ps. 80 million, Ps. 84 million and Ps. 77 million,
        respectively. At December 31, 2009, total minimum lease payments under
        non-cancelable operating leases are Ps. 30 million in 2010, Ps. 21 million
        in 2011, Ps. 7.8 million in 2012 and Ps. 3.9 million in 2013. At December
        31, 2009 there are no additional obligations after 2013.</P></TD>
  </TR>
</TABLE>
<p align="center">F-37</p>
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<P style="text-align: left;"><B><I>Contingencies</I></B></P>
<TABLE border=0 cellspacing=0 style="font-family: 'Times New Roman';font-size: 10pt;">
  <TR>
    <TD></TD>
    <TD></TD>
    <TD></TD>
  </TR>
  <TR valign="top">
    <TD width=3%>&nbsp;&nbsp;&nbsp;</TD>
    <TD width=3%> <P><B><I>(a)</I></B></P></TD>
    <TD colspan=1> <P>During 2009, Republic was awarded U.S.&#36;6.7 million resulting
        from a settlement with their predecessor owners related to pre-acquisition
        contingency indemnification provisions contained in the 2005 purchase
        agreement. The full amount of this settlement was received and recognized
        as other income during 2009.</P></TD>
  </TR>
  <TR>
    <TD colspan=3>&nbsp; </TD>
  </TR>
  <TR valign="top">
    <TD>&nbsp;</TD>
    <TD> <P><B><I>(b)</I></B></P></TD>
    <TD colspan=1> <P>During 2009, Republic was required to pay back U.S.&#36;2.2
        million in settlement of what was determined to be &#147;preference payments&#148;
        from a customer bankruptcy. The full amount was expensed and paid during
        2009.</P></TD>
  </TR>
  <TR>
    <TD colspan=3>&nbsp; </TD>
  </TR>
  <TR valign="top">
    <TD>&nbsp;</TD>
    <TD> <P><B><I>(c)</I></B></P></TD>
    <TD colspan=1> <P>During 2009, Republic agreed to settle a dispute with a
        vendor of iron ore pellets by paying U.S.&#36;9.1 million. U.S.&#36;4.5
        million was paid during 2009, and U.S.&#36;4.6 million was paid in January
        of 2010. The full amount of this settlement was expensed during 2009,
        U.S.&#36;4.6 million of which was accrued at December 31, 2009 in other
        accrued liabilities (current).</P></TD>
  </TR>
  <TR>
    <TD colspan=3>&nbsp; </TD>
  </TR>
  <TR valign="top">
    <TD>&nbsp;</TD>
    <TD> <P><B><I>(d)</I></B></P></TD>
    <TD colspan=1> <P>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 totals
        Ps. 44.4 million and Ps. 54.2 million as of December 31, 2009 and 2008,
        respectively. The current and non-current portions of the environmental
        reserve are included in the attached consolidated balance sheet, as &#147;Other
        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.</P></TD>
  </TR>
  <TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan=1>&nbsp;</TD>
  </TR>
  <TR valign="top">
    <TD>&nbsp;</TD>
    <TD><B><I>(e) </I></B><B></B></TD>
    <TD colspan=1><B>California Regional Water Control Board, CRWCB</B></TD>
  </TR>
  <TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan=1>&nbsp;</TD>
  </TR>
  <TR valign="top">
    <TD width="3%">&nbsp;</TD>
    <TD colspan="2"><p style="text-align: left;">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 underground
        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.</p>
      <p style="text-align: left;"> 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.</p></TD>
  </TR>
</TABLE>
<P style="text-align: center;"> F-38</P>
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<TABLE border=0 cellspacing=0 style="font-family: 'Times New Roman';font-size: 10pt;">
  <TR valign="top">
    <TD width="3%">&nbsp;</TD>
    <TD colspan="2"><p style="text-align: left;"><B>Department of Toxic Substances
        Control, DTSC</B></p>
      <P style="text-align: left;"> 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.</P>
      <P style="text-align: left;"> 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.</P>
      <P style="text-align: left;"> 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 style="text-align: left;"> 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. During the year 2009 the
        company incurred in cleaning expenses of Ps. 6.7 million that were cancelled
        against the allowance created by the Company for this matter. At December
        31, 2009 the allowance amounts to Ps. 6.2 million (US&#36;0.5 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.</P>
      <P style="text-align: left;"> <B>Community Development Commission, CDC</B></P>
      <P style="text-align: left;"> 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.</P>
      <P style="text-align: left;"> 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.</P></TD>
  </TR>
</TABLE>
<P style="text-align: center;">F-39</P>
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<TABLE border=0 cellspacing=0 style="font-family: 'Times New Roman';font-size: 10pt;">
  <TR>
    <TD></TD>
    <TD></TD>
    <TD></TD>
  </TR>
  <TR valign="top">
    <TD width=3%>&nbsp;&nbsp;&nbsp;</TD>
    <TD width=3%> <P><B><I>(f)</I></B></P></TD>
    <TD colspan=1> <P>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.</P></TD>
  </TR>
  <TR valign="top">
    <TD>&nbsp;&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan=1>&nbsp;</TD>
  </TR>
  <TR valign="top">
    <TD><b>19) </b></TD>
    <TD colspan="2"><P style="text-align: left;"><B>Subsequent event</B></P>
      <P style="text-align: left;"> As a result of the earthquake in the city
        of Mexicali on April 4, 2010, the plant located in this city suffered
        some small damages to its equipment and facilities mainly in a transformer
        of the electrical substation, causing the temporary lack of energy and
        temporary stop in the steel mill and the rolling mill. The Company considers
        that this event did not significantly affect its financial situation and
        to the date of the release of these financial statements the Mexicali
        plant is operating as normal.</P></TD>
  </TR>
  <TR valign="top">
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
  </TR>
  <TR valign="top">
    <TD><b>20) </b></TD>
    <TD colspan="2"><p style="text-align: left;"><b>Differences between Mexican
        financial reporting standards and United States accounting principles:</b></p>
      <p style="text-align: left;"> 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).</p>
      <p style="text-align: left;"> As described in Note 2 (c), effective January
        1, 2008, the Company ceased to recognize the effects of inflation on its
        financial statements as required by Mexican FRS B-10. However, as required
        by such new standard, the financial statement amounts that were previously
        reported remained unchanged, and the inflation adjustments previously
        recognized have been maintained in their corresponding caption. This new
        standard requires that the re-expressed amounts of non-monetary assets
        as reported at December 31, 2007 become the carrying amounts for those
        assets effective January 1, 2008. The carrying amounts will also affect
        net income in future periods. For example, depreciation expense after
        the adoption of Mexican FRS B-10 will be based on carrying amounts of
        fixed assets that include inflation adjustments recorded prior to the
        adoption of Mexican FRS B-10.</p>
      <p style="text-align: left;"> The Mexican and US GAAP amounts included in
        this Note, as they relate to the year ended December 31, 2009 and 2008,
        are presented in the carrying amounts as required by Mexican FRS B-10,
        and the effects of inflation that were recorded prior to 2008 have not
        been included in the reconciliations to US GAAP.</p>
      <p style="text-align: left;">In December 2007, the Financial Accounting
        Standards Board (&#147;FASB&#148;) issued Statement of Financial Accounting
        Standards No. 160, &#147;Non-controlling Interest in Consolidated Financial
        Statements &#151; an amendment of ARB No. 51&#148; (&#147;FAS 160&#148;).
        FAS 160 was codified as a component of ASC 810.10. ASC 810.10 requires
        non-controlling interests held by parties other than the parent in subsidiaries
        to be clearly identified, labeled, and presented in the consolidated statements
        of financial position within equity, but separate from the parent&#146;s
        equity. Additionally, consolidated net income shall be adjusted to include
        the net income attributed to the non-controlling interest. The consolidated
        cumulative other comprehensive income shall be adjusted to include the
        net income attributed to the non-controlling interest. Accordingly, in
        2009 no further classification difference exists between Mexican GAAP
        and US GAAP related to non-controlling interests. Previous year&#146;s
        reconciliations of net income and equity presented below have been retrospectively
        adjusted (reclassified) for all periods to reflect the adoption of ASC
        810.10. The adoption of this new guidance resulted in a retrospective
        adjustment of equity and income, for presentation and disclosures as shown
        in the following reconciliations of net income and equity.</p>
      <P style="text-align: left;"> Other significant differences between Mexican
        GAAP and US GAAP and the effects on consolidated net (loss) income and
        consolidated stockholders&#146; equity are presented below, in thousands
        of Mexican pesos as of December 31, 2009, with an explanation of the adjustments.</P></TD>
  </TR>
</TABLE>
<P style="text-align: center;">F-40</P>
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  <TR valign="top">
    <TD width="3%">&nbsp;&nbsp;&nbsp;</TD>
    <TD colspan="2"><p style="text-align: left;"><B>Reconciliation of net (loss)
        income:</B></p></TD>
  </TR>
</TABLE>
<br>
<TABLE width=100% border=0 cellpadding="0" cellspacing=0 style="font-family: 'Times New Roman';font-size: 10pt;">
  <TR>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp; </TD>
    <TD colspan="2" align=center> <B>2009</B></TD>
    <TD align=center>&nbsp;</TD>
    <TD align=center> 2008</TD>
    <TD align=center>&nbsp;</TD>
    <TD align=center> 2007</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp; </TD>
    <TD colspan="7" align=left>
      <hr size="1" noshade>
    </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Net (loss) income as reported under Mexican</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD 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;GAAP</TD>
    <TD align=left> <B>Ps.</B></TD>
    <TD align=right> <B>(1,175,112</B></TD>
    <TD align=left> <B>)</B></TD>
    <TD align=right> 1,900,349</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 1,625,175</TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <tr valign="bottom">
    <td align=left>&nbsp; </td>
    <td colspan="7" align=left>
      <hr size="1" noshade>
    </td>
  </tr>
  <TR valign="bottom">
    <TD align=left> Inventory indirect costs</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>(65,832</B></TD>
    <TD align=left> <B>)</B></TD>
    <TD align=right> 41,465</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 76,695</TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Depreciation on restatement of machinery and</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD 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;equipment</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>(5,607</B></TD>
    <TD align=left> <B>)</B></TD>
    <TD align=right> (5,185</TD>
    <TD align=left> )</TD>
    <TD align=right> 1,496</TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Deferred income taxes</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>(19,105</B></TD>
    <TD align=left> <B>)&nbsp;&nbsp;&nbsp;</B></TD>
    <TD align=right> (20,925</TD>
    <TD align=left> )&nbsp;&nbsp;&nbsp;</TD>
    <TD align=right> (32,660</TD>
    <TD align=left> )</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Deferred employee profit sharing</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>-</B></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> (700</TD>
    <TD align=left> )</TD>
    <TD align=right> 50</TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Pre-operating expenses, net</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>-</B></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 30,698</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 30,698</TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Amortization of gain from monetary position and</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD 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;exchange loss capitalized under Mexican
      GAAP</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>7,755</B></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 7,755</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 7,755</TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Adjustment for implied goodwill for impairment</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>102,000</B></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> -</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> -</TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <tr valign="bottom">
    <td align=left>&nbsp; </td>
    <td colspan="7" align=left>
      <hr size="1" noshade>
    </td>
  </tr>
  <TR valign="bottom">
    <TD align=left> Total US GAAP adjustments</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>19,211</B></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 53,108</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 84,034</TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp; </TD>
    <TD colspan="7" align=left>
      <hr size="1" noshade>
    </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Net (loss) income under US GAAP</TD>
    <TD align=left> <B>Ps</B></TD>
    <TD align=right> <B>(1,155,901</B></TD>
    <TD align=left> <B>)</B></TD>
    <TD align=right> 1,953,457</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 1,709,209</TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD colspan="7" align=left>
      <hr size="2" noshade>
    </TD>
  </TR>
  <TR>
    <TD colspan=8>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Allocation of net (loss) income under US GAAP:</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD 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;Non-controlling interest on Mexican GAAP</TD>
    <TD align=left> <B>Ps.</B></TD>
    <TD align=right> <B>(852,174</B></TD>
    <TD align=left> <B>)</B></TD>
    <TD align=right> 104,212</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 96,118</TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> &nbsp;&nbsp;&nbsp;US GAAP adjustment on non &#150; controlling</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD 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;interest</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>(24,644</B></TD>
    <TD align=left> <B>)</B></TD>
    <TD align=right> 5,536</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 25,438</TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp; </TD>
    <TD colspan="7" align=left>
      <hr size="1" noshade>
    </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> &nbsp;&nbsp;&nbsp;Non-controlling interest under USGAAP</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>(876,818</B></TD>
    <TD align=left> <B>)</B></TD>
    <TD align=right> 109,748</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 121,556</TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> &nbsp;&nbsp;&nbsp;Controlling interest under USGAAP</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>(279,083</B></TD>
    <TD align=left> <B>)</B></TD>
    <TD align=right> 1,843,709</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 1,587,653</TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp; </TD>
    <TD colspan="7" align=left>
      <hr size="1" noshade>
    </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp; </TD>
    <TD align=left> <B>Ps.</B></TD>
    <TD align=right> <B>(1,155,901</B></TD>
    <TD align=left> <B>)</B></TD>
    <TD align=right> 1,953,457</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 1,709,209</TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD colspan="7" align=left>
      <hr size="2" noshade>
    </TD>
  </TR>
  <TR>
    <TD colspan=8>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Weighted average shares outstanding</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>497,709,214</B></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 484,903,795</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 468,228,497</TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp; </TD>
    <TD colspan="7" align=left>
      <hr size="1" noshade>
    </TD>
  </TR>
  <TR>
    <TD colspan=8>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> &nbsp;&nbsp;&nbsp;Net (loss) earnings per share (pesos) &#150;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>&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;&nbsp;controlling interest</TD>
    <TD align=left> <B>Ps.</B></TD>
    <TD align=right> <B>(0.56</B></TD>
    <TD align=left> <B>)</B></TD>
    <TD align=right> 3.80</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 3.39</TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD colspan="7" align=left>
      <hr size="2" noshade>
    </TD>
  </TR>
</TABLE>
<br>
<TABLE width="100%" border=0 cellspacing=0 style="font-family: 'Times New Roman';font-size: 10pt;">
  <TR valign="top">
    <TD width="3%">&nbsp;&nbsp;&nbsp;</TD>
    <TD colspan="2"><p style="text-align: left;">Under US GAAP impairment loss
        is recorded as an operating expense. In 2009, recorded impairment loss
        under US GAAP totals Ps. 2,266 million. In 2009 and 2008, the Company
        recorded expense from employee profit sharing of Ps. 7 million and Ps.
        24 million, respectively, recorded as other expenses that was reclassified
        to operating expenses for US GAAP purposes. In 2009, 2008 and 2007 the
        Company recorded Ps. 7 million, Ps. 5 million and Ps. 9 million, respectively,
        under other income which was reclassified under operating income for US
        GAAP purposes.</p></TD>
  </TR>
</TABLE>
<br>
<TABLE width="100%" border=0 cellspacing=0 style="font-family: 'Times New Roman';font-size: 10pt;">
  <TR valign="top">
    <TD width="3%">&nbsp;&nbsp;&nbsp;</TD>
    <TD><p style="text-align: left;"><B>Reconciliation of stockholders&#146; equity:</B></p></TD>
  </TR>
</TABLE>
<br>
<TABLE width="100%" border=0 cellpadding="0" cellSpacing=0 style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'">
  <TR>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>
    <TD colspan="2" align=center><B>2009</B></TD>
    <TD align=center>&nbsp;</TD>
    <TD align=center>2008</TD>
    <TD align=center>&nbsp;</TD>
    <TD align=center>2007</TD>
    <TD align=center>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>
    <TD colspan="7" align=left><hr size="1" noshade></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>Total stockholders&#146; equity reported under</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD 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;Mexican GAAP</TD>
    <TD align=left><B>Ps.</B></TD>
    <TD align=right><B>19,981,894</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>21,305,497</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>17,252,034</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>
    <TD colspan="7" align=left><hr size="1" noshade></TD>
  </TR>
  <TR>
    <TD colSpan=8>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>Inventory indirect costs</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>138,083</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>203,915</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>162,450</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>Restatement of machinery and equipment</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>174,113</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>179,720</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>184,905</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>Deferred income taxes</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>(44,080</B></TD>
    <TD align=left><B>)&nbsp;&nbsp;&nbsp;</B></TD>
    <TD align=right>(21,217</TD>
    <TD align=left>)&nbsp;&nbsp;&nbsp;</TD>
    <TD align=right>(292</TD>
    <TD align=left>)</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>Deferred employee profit sharing</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>-</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>-</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>700</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>Pre-operating expenses</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>-</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>(135,473</TD>
    <TD align=left>)</TD>
    <TD align=right>(166,171</TD>
    <TD align=left>)</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>Gain from monetary position and exchange</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD 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;loss capitalized, net</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>(164,631</B></TD>
    <TD align=left><B>)</B></TD>
    <TD align=right>(172,386</TD>
    <TD align=left>)</TD>
    <TD align=right>(180,141</TD>
    <TD align=left>)</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>Adjustment for implied goodwill</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>102,000</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>-</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>-</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>
    <TD colspan="7" align=left><hr size="1" noshade></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>Total US GAAP adjustments</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>205,485</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>54,559</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>1,451</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>
    <TD colspan="7" align=left><hr size="1" noshade></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>Total stockholders&#146; equity under US GAAP</TD>
    <TD align=left><B>Ps.</B></TD>
    <TD align=right><B>20,187,379</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>21,360,056</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>17,253,485</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>
    <TD colspan="7" align=left><hr size="2" noshade></TD>
  </TR>
</TABLE>
<P style="text-align: center;"> F-41</P>
<HR noshade align="center" width="100%" size="5">
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<div title="EE+ Page Break" style="FONT-SIZE: 1pt; PAGE-BREAK-AFTER: always; WIDTH: 100%; HEIGHT: 1px"></div>
<!-- -->
<BR>
<TABLE width="100%" border=0 cellspacing=0 style="font-family: 'Times New Roman';font-size: 10pt;">
  <TR valign="top">
    <TD width="3%">&nbsp;&nbsp;&nbsp;</TD>
    <TD colspan="2"><p style="text-align: left;">A summary of changes in stockholders&#146;
        equity, after the US GAAP adjustments described above, is as follows:</p></TD>
  </TR>
</TABLE>
<BR>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'" cellspacing=0 border=0 width="100%">
  <tr>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
  </tr>
  <tr valign=bottom>
    <td align=left><font size="1"></font></td>
    <td colspan="2" align=center><font size="1">Capital<br>
      Stock and<br>
      Paid-in<br>
      Capital</font></td>
    <td align=center><font size="1">Retained<br>
      Earnings</font></td>
    <td align=center><font size="1"></font></td>
    <td align=center><font size="1">Fair Value<br>
      of<br>
      Derivative<br>
      Financial<br>
      Instruments</font></td>
    <td align=center><font size="1"></font></td>
    <td align=center><font size="1">Translation<br>
      effect of<br>
      foreign<br>
      subsidiaries</font></td>
    <td align=center><font size="1"></font></td>
    <td align=center><font size="1">Cumulative<br>
      Restatement<br>
      Effect</font></td>
    <td align=center><font size="1">Total<br>
      Controlling<br>
      Stockholders&#146; <br>
      Equity</font></td>
    <td align=center><font size="1"></font></td>
    <td align=center><font size="1">Non-controlling<br>
      interest</font></td>
    <td align=center><font size="1"></font></td>
    <td align=center><font size="1">Total<br>
      stockholders&#146;<br>
      equity</font></td>
    <td align=center><font size="1"></font></td>
  </tr>
  <tr valign=bottom>
    <td align=left><font size="1"></font></td>
    <td colspan="15" align=left>
      <hr size="1" noshade>
    </td>
  </tr>
  <tr valign=bottom>
    <td align=left><font size="1">Balances as of</font></td>
    <td align=left><font size="1"></font></td>
    <td align=left><font size="1"></font></td>
    <td align=left><font size="1"></font></td>
    <td align=left><font size="1"></font></td>
    <td align=left><font size="1"></font></td>
    <td align=left><font size="1"></font></td>
    <td align=left><font size="1"></font></td>
    <td align=left><font size="1"></font></td>
    <td align=left><font size="1"></font></td>
    <td align=left><font size="1"></font></td>
    <td align=left><font size="1"></font></td>
    <td align=left><font size="1"></font></td>
    <td align=left><font size="1"></font></td>
    <td align=left><font size="1"></font></td>
    <td align=left><font size="1"></font></td>
  </tr>
  <tr valign=bottom>
    <td align=left><font size="1">&nbsp;&nbsp;&nbsp;December 31, 2006</font></td>
    <td align=left><font size="1"></font></td>
    <td align=right><font size="1">4,181,805</font></td>
    <td align=right><font size="1">5,673,145</font></td>
    <td align=left><font size="1"></font></td>
    <td align=right><font size="1">(4,557</font></td>
    <td align=left><font size="1">)</font></td>
    <td align=right><font size="1">(25,539</font></td>
    <td align=left><font size="1">)</font></td>
    <td align=right><font size="1">975,909</font></td>
    <td align=right><font size="1">10,800,763</font></td>
    <td align=left><font size="1"></font></td>
    <td align=right><font size="1">2,277,408</font></td>
    <td align=left><font size="1"></font></td>
    <td align=right><font size="1">13,078,171</font></td>
    <td align=left><font size="1"></font></td>
  </tr>
  <tr>
    <td colspan=16><font size="1"></font></td>
  </tr>
  <tr valign=bottom>
    <td align=left><font size="1">Increase in capital stock</font></td>
    <td align=left><font size="1"></font></td>
    <td align=right><font size="1">2,420,726</font></td>
    <td align=right><font size="1">-</font></td>
    <td align=left><font size="1"></font></td>
    <td align=right><font size="1">-</font></td>
    <td align=left><font size="1"></font></td>
    <td align=right><font size="1">-</font></td>
    <td align=left><font size="1"></font></td>
    <td align=right><font size="1">-</font></td>
    <td align=right><font size="1">2,420,726</font></td>
    <td align=left><font size="1"></font></td>
    <td align=right><font size="1">38,436</font></td>
    <td align=left><font size="1"></font></td>
    <td align=right><font size="1">2,459,162</font></td>
    <td align=left><font size="1"></font></td>
  </tr>
  <tr>
    <td colspan=16><font size="1"></font></td>
  </tr>
  <tr valign=bottom>
    <td align=left><font size="1">Net comprehensive income</font></td>
    <td align=left><font size="1"></font></td>
    <td align=right><font size="1">-</font></td>
    <td align=right><font size="1">1,587,653</font></td>
    <td align=left><font size="1"></font></td>
    <td align=right><font size="1">4,557</font></td>
    <td align=left><font size="1"></font></td>
    <td align=right><font size="1">(6,171</font></td>
    <td align=left><font size="1">)</font></td>
    <td align=right><font size="1">5,393</font></td>
    <td align=right><font size="1">1,591,432</font></td>
    <td align=left><font size="1"></font></td>
    <td align=right><font size="1">124,720</font></td>
    <td align=left><font size="1"></font></td>
    <td align=right><font size="1">1,716,152</font></td>
    <td align=left><font size="1"></font></td>
  </tr>
  <tr valign=bottom>
    <td align=left><font size="1"></font></td>
    <td colspan="15" align=left>
      <hr size="1" noshade>
    </td>
  </tr>
  <tr valign=bottom>
    <td align=left><font size="1">Balances as of</font></td>
    <td align=left><font size="1"></font></td>
    <td align=left><font size="1"></font></td>
    <td align=left><font size="1"></font></td>
    <td align=left><font size="1"></font></td>
    <td align=left><font size="1"></font></td>
    <td align=left><font size="1"></font></td>
    <td align=left><font size="1"></font></td>
    <td align=left><font size="1"></font></td>
    <td align=left><font size="1"></font></td>
    <td align=left><font size="1"></font></td>
    <td align=left><font size="1"></font></td>
    <td align=left><font size="1"></font></td>
    <td align=left><font size="1"></font></td>
    <td align=left><font size="1"></font></td>
    <td align=left><font size="1"></font></td>
  </tr>
  <tr valign=bottom>
    <td align=left><font size="1">&nbsp;&nbsp;&nbsp;December 31, 2007</font></td>
    <td align=left><font size="1"></font></td>
    <td align=right><font size="1">6,602,531</font></td>
    <td align=right><font size="1">7,260,798</font></td>
    <td align=left><font size="1"></font></td>
    <td align=right><font size="1">-</font></td>
    <td align=left><font size="1"></font></td>
    <td align=right><font size="1">(31,710</font></td>
    <td align=left><font size="1">)</font></td>
    <td align=right><font size="1">981,302</font></td>
    <td align=right><font size="1">14,812,921</font></td>
    <td align=left><font size="1"></font></td>
    <td align=right><font size="1">2,440,564</font></td>
    <td align=left><font size="1"></font></td>
    <td align=right><font size="1">17,253,485</font></td>
    <td align=left><font size="1"></font></td>
  </tr>
  <tr>
    <td colspan=16><font size="1"></font></td>
  </tr>
  <tr valign=bottom>
    <td align=left><font size="1">Increase in capital stock</font></td>
    <td align=left><font size="1"></font></td>
    <td align=right><font size="1">1,169,156</font></td>
    <td align=right><font size="1">-</font></td>
    <td align=left><font size="1"></font></td>
    <td align=right><font size="1">-</font></td>
    <td align=left><font size="1"></font></td>
    <td align=right><font size="1">-</font></td>
    <td align=left><font size="1"></font></td>
    <td align=right><font size="1">-</font></td>
    <td align=right><font size="1">1,169,156</font></td>
    <td align=left><font size="1"></font></td>
    <td align=right><font size="1">-</font></td>
    <td align=left><font size="1"></font></td>
    <td align=right><font size="1">1,169,156</font></td>
    <td align=left><font size="1"></font></td>
  </tr>
  <tr>
    <td colspan=16><font size="1"></font></td>
  </tr>
  <tr valign=bottom>
    <td align=left><font size="1">Net comprehensive income</font></td>
    <td align=left><font size="1"></font></td>
    <td align=right><font size="1">-</font></td>
    <td align=right><font size="1">1,843,709</font></td>
    <td align=left><font size="1"></font></td>
    <td align=right><font size="1">(270,868</font></td>
    <td align=left><font size="1">)</font></td>
    <td align=right><font size="1">626,875</font></td>
    <td align=left><font size="1"></font></td>
    <td align=right><font size="1">-</font></td>
    <td align=right><font size="1">2,199,716</font></td>
    <td align=left><font size="1"></font></td>
    <td align=right><font size="1">737,699</font></td>
    <td align=left><font size="1"></font></td>
    <td align=right><font size="1">2,937,415</font></td>
    <td align=left><font size="1"></font></td>
  </tr>
  <tr valign=bottom>
    <td align=left><font size="1"></font></td>
    <td colspan="15" align=left>
      <hr size="1" noshade>
    </td>
  </tr>
  <tr valign=bottom>
    <td align=left><font size="1">Balances as of</font></td>
    <td align=left><font size="1"></font></td>
    <td align=left><font size="1"></font></td>
    <td align=left><font size="1"></font></td>
    <td align=left><font size="1"></font></td>
    <td align=left><font size="1"></font></td>
    <td align=left><font size="1"></font></td>
    <td align=left><font size="1"></font></td>
    <td align=left><font size="1"></font></td>
    <td align=left><font size="1"></font></td>
    <td align=left><font size="1"></font></td>
    <td align=left><font size="1"></font></td>
    <td align=left><font size="1"></font></td>
    <td align=left><font size="1"></font></td>
    <td align=left><font size="1"></font></td>
    <td align=left><font size="1"></font></td>
  </tr>
  <tr valign=bottom>
    <td align=left><font size="1">&nbsp;&nbsp;&nbsp;December 31, 2008</font></td>
    <td align=left><font size="1"></font></td>
    <td align=right><font size="1">7,771,687</font></td>
    <td align=right><font size="1">9,104,507</font></td>
    <td align=left><font size="1"></font></td>
    <td align=right><font size="1">(270,868</font></td>
    <td align=left><font size="1">)&nbsp;&nbsp;&nbsp;</font></td>
    <td align=right><font size="1">595,165</font></td>
    <td align=left><font size="1"></font></td>
    <td align=right><font size="1">981,302</font></td>
    <td align=right><font size="1">18,181,793</font></td>
    <td align=left><font size="1"></font></td>
    <td align=right><font size="1">3,178,263</font></td>
    <td align=left><font size="1"></font></td>
    <td align=right><font size="1">21,360,056</font></td>
    <td align=left><font size="1"></font></td>
  </tr>
  <tr>
    <td colspan=16><font size="1"></font></td>
  </tr>
  <tr valign=bottom>
    <td align=left><font size="1">Net comprehensive loss</font></td>
    <td align=left><font size="1"></font></td>
    <td align=right><font size="1">-</font></td>
    <td align=right><font size="1">(279,083</font></td>
    <td align=left><font size="1">)&nbsp;&nbsp;&nbsp;</font></td>
    <td align=right><font size="1">119,141</font></td>
    <td align=left><font size="1"></font></td>
    <td align=right><font size="1">(79,507</font></td>
    <td align=left><font size="1">)&nbsp;&nbsp;&nbsp;</font></td>
    <td align=right><font size="1">-</font></td>
    <td align=right><font size="1">(239,449</font></td>
    <td align=left><font size="1">)&nbsp;&nbsp;&nbsp;</font></td>
    <td align=right><font size="1">(955,628</font></td>
    <td align=left><font size="1">)&nbsp;&nbsp;&nbsp;</font></td>
    <td align=right><font size="1">(1,195,077</font></td>
    <td align=left><font size="1">)&nbsp;&nbsp;&nbsp;</font></td>
  </tr>
  <tr valign=bottom>
    <td align=left><font size="1">Net effect of adopting C-8</font></td>
    <td align=left><font size="1"></font></td>
    <td align=right><font size="1">-</font></td>
    <td align=right><font size="1">-</font></td>
    <td align=left><font size="1"></font></td>
    <td align=right><font size="1">22,400</font></td>
    <td align=left><font size="1"></font></td>
    <td align=right><font size="1">-</font></td>
    <td align=left><font size="1"></font></td>
    <td align=right><font size="1">-</font></td>
    <td align=right><font size="1">22,400</font></td>
    <td align=left><font size="1"></font></td>
    <td align=right><font size="1">-</font></td>
    <td align=left><font size="1"></font></td>
    <td align=right><font size="1">22,400</font></td>
    <td align=left><font size="1"></font></td>
  </tr>
  <tr valign=bottom>
    <td align=left><font size="1"></font></td>
    <td colspan="15" align=left>
      <hr size="1" noshade>
    </td>
  </tr>
  <tr valign=bottom>
    <td align=left><font size="1">Balances as of</font></td>
    <td align=left><font size="1"></font></td>
    <td align=left><font size="1"></font></td>
    <td align=left><font size="1"></font></td>
    <td align=left><font size="1"></font></td>
    <td align=left><font size="1"></font></td>
    <td align=left><font size="1"></font></td>
    <td align=left><font size="1"></font></td>
    <td align=left><font size="1"></font></td>
    <td align=left><font size="1"></font></td>
    <td align=left><font size="1"></font></td>
    <td align=left><font size="1"></font></td>
    <td align=left><font size="1"></font></td>
    <td align=left><font size="1"></font></td>
    <td align=left><font size="1"></font></td>
    <td align=left><font size="1"></font></td>
  </tr>
  <tr valign=bottom>
    <td align=left><font size="1">&nbsp;&nbsp;&nbsp;December 31, 2009</font></td>
    <td align=left><font size="1">Ps.</font></td>
    <td align=right><font size="1">7,771,687</font></td>
    <td align=right><font size="1">8,825,424</font></td>
    <td align=left><font size="1"></font></td>
    <td align=right><font size="1">(129,327</font></td>
    <td align=left><font size="1">)</font></td>
    <td align=right><font size="1">515,658</font></td>
    <td align=left><font size="1"></font></td>
    <td align=right><font size="1">981,302</font></td>
    <td align=right><font size="1">17,964,744</font></td>
    <td align=left><font size="1"></font></td>
    <td align=right><font size="1">2,222,635</font></td>
    <td align=left><font size="1"></font></td>
    <td align=right><font size="1">20,187,379</font></td>
    <td align=left><font size="1"></font></td>
  </tr>
  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td colspan="15" align=left>
      <hr size="2" noshade>
    </td>
  </tr>
</table>
<BR>
<TABLE width="100%" border=0 cellspacing=0 style="font-family: 'Times New Roman';font-size: 10pt;">
  <TR valign="top">
    <TD width="3%">&nbsp;&nbsp;&nbsp;</TD>
    <TD><p style="text-align: left;">The cumulative difference between the amounts
        included under Capital Stock and Paid-in Capital for US GAAP and Capital
        Stock for Mexican GAAP arise from the following items:</p></TD>
  </TR>
  <TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="top">
    <TD colspan="2"><b>Issuance of capital stock</b></TD>
  </TR>
  <TR valign="top">
    <TD colspan="2">&nbsp;</TD>
  </TR>
  <TR valign="top">
    <TD>&nbsp;</TD>
    <TD>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 US GAAP purposes these items were shown as
      a reduction of cost of issuance of the shares, thereby increasing the net
      proceeds from the offering. </TD>
  </TR>
  <TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="top">
    <TD colspan="2"><b>Maritime operations and amortization of negative goodwill</b></TD>
  </TR>
  <TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="top">
    <TD>&nbsp;</TD>
    <TD><p style="text-align: left;">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 Sidek for its approximate book value.</p></TD>
  </TR>
</TABLE>
<P style="TEXT-ALIGN: center">F-42</P>
<HR align=center width="100%" noshade SIZE=5>
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<BR>
<TABLE width="100%" border=0 cellspacing=0 style="font-family: 'Times New Roman';font-size: 10pt;">
  <TR valign="top">
    <TD width="3%">&nbsp;&nbsp;&nbsp;</TD>
    <TD><p style="text-align: left;">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 style="text-align: left;"> For US 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></TD>
  </TR>
  <TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="top">
    <TD colspan="2"><b>Gain on extinguishment</b></TD>
  </TR>
  <TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="top">
    <TD>&nbsp;</TD>
    <TD>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 US 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 US 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, 2009 is Ps. 626,203.</TD>
  </TR>
  <TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="top">
    <TD colspan="2"><b>Reconciliation of Net (Loss) Income and Stockholders&#146;
      Equity</b></TD>
  </TR>
  <TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="top">
    <TD>&nbsp;</TD>
    <TD>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 (Loss) Income and the Reconciliation of stockholders&#146; equity
      are explained below:</TD>
  </TR>
  <TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="top">
    <TD colspan="2"><b>Inventory</b></TD>
  </TR>
  <TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="top">
    <TD>&nbsp;</TD>
    <TD><p style="text-align: left;">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 style="text-align: left;"> Under Mexican GAAP, inventories include prepaids
        advance to suppliers. For US GAAP purposes, the prepaids advance to suppliers
        are considered as prepaid expenses.</p></TD>
  </TR>
  <TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="top">
    <TD colspan="2"><b>Restatement of property, machinery and equipment</b></TD>
  </TR>
  <TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="top">
    <TD width="3%">&nbsp;</TD>
    <TD><p style="text-align: left;">As explained in note 2(j), in accordance
        with Mexican GAAP, imported machinery and equipment has been restated
        until December 31, 2007 by applying devaluation and inflation factors
        of the country of origin.</p>
      <p style="text-align: left;"> Under US GAAP, until December 31, 2007 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 style="text-align: left;">Accordingly, a reconciling item for the difference
        in methodologies of restating imported machinery and equipment is included
        in the reconciliation of net (loss) income and stockholders&#146; equity.</p></TD>
  </TR>
</TABLE>
<P style="text-align: center;"> F-43</P>
<HR noshade align="center" width="100%" size="5">
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<BR>
<TABLE width="100%" border=0 cellspacing=0 style="font-family: 'Times New Roman';font-size: 10pt;">
  <TR valign="top">
    <TD colspan="2"><b>Deferred income taxes and employee profit sharing</b></TD>
  </TR>
  <TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
  </TR>
  <TR valign="top">
    <TD width="3%">&nbsp;</TD>
    <TD><p style="text-align: left;">As explained in Note 2(r) under Mexican GAAP,
        the Company accounts for deferred income tax following the guidelines
        of Mexican FRS D-4. The main differences between ASC 740 Income Taxes
        (formerly SFAS No. 109) and FRS D-4, as they relate to the Company, which
        are included as reconciling items between Mexican and US GAAP are:</p>
      <UL>
        <LI>
          <P align="left">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 until December
            31, 2007,</P>
        </LI>
        <LI>
          <P align="left">the income tax effect until December 31, 2008 of capitalized
            pre-operating expenses. With adoption of new MFRS C-8 in 2009 these
            capitalized expenses were cancelled to retained earnings. For US GAAP
            purposes, these are expensed when incurred,</P>
        </LI>
        <LI>
          <P align="left">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 align="left">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>
      <P style="text-align: left;"> 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 through December 31, 2007, and then was reclassified
        to Retained Earnings in 2008.</P>
      <P style="text-align: left;"> In addition, the Company is required to pay
        employee profit sharing in accordance with Mexican labor law. Deferred
        employee profit sharing under US GAAP has been determined following the
        guidelines of ASC 740 Income Taxes (formerly SFAS No. 109). Until December
        31, 2007, under Mexican GAAP, the deferred portion of employee profit
        sharing is determined on temporary non-recurring differences with a known
        turnaround time. As mentioned in Note 2(p), beginning in 2008, the company
        recognizes deferred employee profit sharing under the new MFRS D-3 for
        Mexican GAAP. There are no significant differences between ASC 740 Income
        Taxes (formerly SFAS No. 109) and MFRS D-3.</P>
      <P style="text-align: left;"> Employee statutory profit-sharing expense
        is classified as an operating expense under US GAAP, and as other (expenses)
        income, net under MFRS.</P>
      <P style="text-align: left;">The effects of temporary differences giving
        rise to significant portions of the deferred assets and liabilities for
        Income Tax (IT) at December 31, 2009 and 2008, under US GAAP are present
        below:</P></TD>
  </TR>
</TABLE>
<br>
<TABLE width=100% border=0 cellpadding="0" cellspacing=0 style="font-family: 'Times New Roman';font-size: 10pt;">
  <TR>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp; </TD>
    <TD colspan="2" align=center> <B>2009</B></TD>
    <TD align=center>&nbsp;</TD>
    <TD align=center> 2008</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD colspan="4" align=left><hr size="1" noshade></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Deferred tax assets:</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> Allowance for doubtful receivables</TD>
    <TD align=left> <B>Ps.</B></TD>
    <TD align=right> <B>118,459</B></TD>
    <TD align=right>&nbsp;&nbsp;&nbsp;</TD>
    <TD align=right> 62,401</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Accrued expenses</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>141,509</B></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> 144,333</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Advances from customers</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>52,401</B></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> 20,735</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Derivative financial instruments</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>65,026</B></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> 105,338</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Net operating loss carryforwards</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>935,530</B></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> 1,731,612</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Republic tax credits</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>142,039</B></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> 192,596</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Recoverable asset tax</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>99,610</B></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> 99,610</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Employee profit sharing provision</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>2,057</B></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> 19,874</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD colspan="4" align=left><hr size="1" noshade></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Total gross deferred tax assets</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>1,556,631</B></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> 2,376,499</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> &nbsp;&nbsp;&nbsp;Less valuation allowance</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>597,103</B></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> 1,250,129</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD colspan="4" align=left><hr size="1" noshade></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Net deferred tax assets</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>959,528</B></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> 1,126,370</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD colspan="4" align=left><hr size="1" noshade></TD>
  </TR>
  <TR>
    <TD colspan=5>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Deferred tax liabilities:</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> Inventories, net</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>433,704</B></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> 701,918</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Property, plant and equipment</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>2,246,053</B></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> 2,232,304</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Pre-operating expenses</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>-</B></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> 13,069</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Intangible assets in acquisition of Grupo San</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>693,335</B></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> 765,542</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Deferred flat-rate business tax</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>41,400</B></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> 39,693</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Prepaid expenses and others</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>70,173</B></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> 4,384</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD colspan="4" align=left><hr size="1" noshade></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Subtotal</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>3,484,665</B></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> 3,756,910</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Additional liabilities from other tax</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;Transactions</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>-</B></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> 1,142,882</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD colspan="4" align=left><hr size="1" noshade></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Total deferred liabilities</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>3,484,665</B></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> 4,899,792</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD colspan="4" align=left><hr size="1" noshade></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Net deferred tax liability</TD>
    <TD align=left> <B>Ps.</B></TD>
    <TD align=right> <B>2,525,137</B></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right> 3,773,422</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD colspan="4" align=left><hr size="2" noshade></TD>
  </TR>
</TABLE>
<P style="text-align: left;">&nbsp; </P>
<P style="text-align: center;">F-44</P>
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<BR>
<blockquote>
  <p style="text-align: left;"> For the years ended December 31, 2009 and 2008,
    the classification of deferred income tax under U.S. GAAP is as follows:</p>
</blockquote>
<TABLE width=100% border=0 cellpadding="0" cellspacing=0 style="font-family: 'Times New Roman';font-size: 10pt;">
  <TR>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp; </TD>
    <TD colspan="2" align=center> <B>2009</B></TD>
    <TD align=center>&nbsp;</TD>
    <TD colspan="2" align=center> 2008</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD colspan="5" align=left><hr size="1" noshade></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Deferred tax assets:</TD>
    <TD 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;Current portion of deferred income tax asset</TD>
    <TD align=left> <B>Ps.</B></TD>
    <TD align=right> <B>619,044</B></TD>
    <TD align=left>&nbsp;&nbsp;&nbsp;</TD>
    <TD align=left> Ps.</TD>
    <TD align=right> 525,403</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> &nbsp;&nbsp;&nbsp;Non-current portion of deferred income tax
      asset</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>340,484</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 600,967</TD>
  </TR>
  <TR>
    <TD colspan=6>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Deferred tax liabilities:</TD>
    <TD 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;Current portion of deferred income tax liabilities&nbsp;&nbsp;&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>545,277</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 745,995</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> &nbsp;&nbsp;&nbsp;Long-term deferred income tax liability</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>2,939,388</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 4,153,797</TD>
  </TR>
</TABLE>
<blockquote>
  <p style="text-align: left;"> For US GAAP the Company presents the deferred
    credit from NOLs from acquisitions as of December 31, 2009 and 2008 of Ps.
    256,713 and Ps. 420,046, respectively, as long-term liability. The amortization
    of the deferred credit during 2009 was Ps. 163,333. There was no deferred
    credit amortization in 2008 and 2007.</p>
  <p style="text-align: left;"> The deferred income taxes of Ps. 2,246,053 and
    Ps. 2,232,304 result from differences between the financial reporting and
    tax bases of property, plant and equipment at December 31, 2009 and 2008,
    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 style="text-align: left;"> Domestic operations accounted for 83% of the Company&#146;s
    pre-tax income in 2007, 90% in 2008 and 16% of pre-tax loss in 2009.</p>
  <p style="text-align: left;"> In accordance with ASC 740 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. 40 million at December
    31, 2009.</p>
</blockquote>
<P style="text-align: left;"> <B>Pre-operating expenses</B></P>
<blockquote>
  <p style="text-align: left;"> 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. In 2009, according to the adoption of the new MFRS C-8, the preoperative
    expenses were cancelled to retained earnings. For US GAAP purposes, these
    items are expensed when incurred.</p>
</blockquote>
<P style="text-align: left;"> <B>Financial expense capitalized</B></P>
<blockquote>
  <p style="text-align: left;"> 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 style="text-align: center;"> F-45</P>
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<BR>
<P style="text-align: left;"><B>Disclosure about Fair Value of Financial Instruments</B></P>
<blockquote>
  <p style="text-align: left;"> In accordance with ASC 825 Financial Instruments
    (formerly SFAS No. 107 Disclosures about Fair Value of Financial Instruments),
    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 cash equivalents, accounts receivable
    and accounts payable and short-term debt approximate fair values due to the
    short term maturity of these instruments.</p>
</blockquote>
<P style="text-align: left;"><B>Pension and other retirement benefits</B></P>
<blockquote>
  <p style="text-align: left;"> The Company accrues for seniority premiums and
    termination payments based on actuarial computations as described in note
    2(o).</p>
  <p style="text-align: left;"> ASC 715 Compensation &#150; Retirement Benefits
    (formerly SFAS No. 158 Employers&#146; Accounting for Defined Benefit Pension
    and Other Postretirement Plans, SFAS No. 87 Employers&acute;Accounting for
    Pensions, SFAS No. 88 Employers&acute;Accounting for Setlements and Curtailments
    of Defined Benefit Pension Plan and for Termination Benefits, SFAS No. 106
    Employers&#146; Accounting for Post-retirement Benefits Other than Pensions
    and SFAS No. 132(R) Employers&acute; Disclosures about Pensions and Other
    Postretirement Benefits), 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 (loss) income. ASC 715 also requires
    accrual of post-retirement benefits other than pensions during the employment
    period. ASC 715 is also applied for purposes of determining seniority premium
    costs. Adjustments to US GAAP for these benefits were not individually or
    in the aggregate significant for any period.</p>
  <p style="text-align: left;"> The additional disclosures for U.S. GAAP related
    to Pension and other retirement benefits are as follows:</p>
</blockquote>
<TABLE width=100% border=0 cellpadding="0" cellspacing=0 style="font-family: 'Times New Roman';font-size: 10pt;">
  <TR>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD colspan="2" align=center><b>2009</b></TD>
    <TD align=center>&nbsp;</TD>
    <TD colspan="2" align=center>2008</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD colspan="6" align=left><hr size="1" noshade></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Change in projected benefit obligation-</TD>
    <TD align=left>&nbsp; </TD>
    <TD 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;Net projected benefit obligation at beginning
      of year</TD>
    <TD align=left> <B>Ps.</B></TD>
    <TD align=right> <B>34,095</B></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left> Ps.</TD>
    <TD align=right> 18,759</TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Service cost</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>8,098</B></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 5,602</TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Financial cost</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>9,609</B></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 8,517</TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Projected benefit obligations
      from Grupo San</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>-</B></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 182,500</TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Plan assets from Grupo
      San acquisition</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>-</B></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> (99,042</TD>
    <TD align=left> )</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Transitional liability
      from Grupo San acquisition</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>-</B></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> (47,763</TD>
    <TD align=left> )</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Actuarial losses from
      Grupo San acquisition</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>-</B></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> (28,810</TD>
    <TD align=left> )</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Amortization of prior
      service cost and plan amendments</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>6,872</B></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 5,715</TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Contributions to pensions</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>-</B></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 3,940</TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Actuarial loss and others</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>9,787</B></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 1,949</TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Benefits paid</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>(35,321</B></TD>
    <TD align=left> <B>)&nbsp;&nbsp;&nbsp;</B></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> (17,272</TD>
    <TD align=left> )</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD colspan="6" align=left><hr size="1" noshade></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> &nbsp;&nbsp;&nbsp;Net accumulated benefit obligation at end
      of year</TD>
    <TD align=left> <B>Ps.</B></TD>
    <TD align=right> <B>33,140</B></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left> Ps.</TD>
    <TD align=right> 34,095</TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD colspan="6" align=left><hr size="2" noshade></TD>
  </TR>
</TABLE>
<BR>
<P style="text-align: center;">F-46</P>
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<blockquote>
  <p style="text-align: left;">In 2009 the Company terminated the pension plan
    from the Grupo San acquisition and the total amount of this fund was liquidated
    and paid to employees during the first and second quarter of 2009. The policies
    and strategies of the Company in the funding of the Grupo San plan were based
    on the requirements of Mexican Income Tax Law, which establishes that such
    funds should be composed by at least 30% of securities issued by federal government
    and the remaining balance on securities approved by the National Bank and
    Securities Commission (Comision Nacional Bancaria y de Valores). At December
    31, 2008, in accordance with this rule, the fund of the company is 32.53 %
    of securities issued by the federal government and 67.47% of other securities
    approved by the National Bank and Securities Commission. Also in conformity
    with the Mexican Income Tax Law, the fund was managed through a trust managed
    by Banco Santander S.A.</p>
</blockquote>
<P style="text-align: left;"> <B>No Right of Redemption</B></P>
<blockquote>
  <p style="text-align: left;"> The Mexican Securities Market Law and our bylaws
    provide that our shareholders do not have redemption rights for their shares.</p>
</blockquote>
<P style="text-align: left;"> <B>Goodwill and intangibles</B></P>
<blockquote>
  <p style="text-align: left;"> In assessing the recoverability of the goodwill
    and other intangibles the Company must make assumptions regarding estimated
    future cash flows and other factors to determine the fair value of the respective
    assets. The Company performs an annual review in the fourth quarter of each
    year, or more frequently if indicators of potential impairment exist, to determine
    if the carrying value of recorded goodwill is impaired. The impairment review
    process compares the fair value of the reporting unit in which goodwill resides
    to its carrying value. The Company estimates the reporting unit&#146;s fair
    value based on a discounted future cash flow approach that requires estimating
    income from operations based on historical results and discount rates based
    on a weighted average cost of capital from a market participant perspective.
    Under U.S. GAAP, if the carrying amount of the reporting units exceeds its
    related fair value, the Company should apply a &#147;second step&#148; process
    by means of which the fair value of such reporting unit should be allocated
    to the fair value of its net assets in order to determine the reporting unit&#146;s
    &#147;implied&#148; goodwill. The resulting impairment loss under US GAAP
    is the difference between the carrying amount of the related goodwill as of
    the valuation date and the implied goodwill amount. As of December 31, 2009,
    the implied goodwill under the second step process is Ps. 1,916 million, resulting
    in a U.S. GAAP reconciliation adjustment of Ps. 102 million. Additionally,
    the Company reconciles the aggregate fair value of the reporting units to
    its market capitalization. The Company's market capitalization as of December
    31, 2009 indicates an implied control premium of approximately 25% percent.
    This implied control premium is consistent with recent observed control premiums.
    Assumptions used in the analysis considered the current market conditions
    in developing short and long-term growth expectations.</p>
  <p style="text-align: left;">Other intangible assets are mainly comprised by
    trademarks, customer listings and non competition agreements. When impairment
    indicators exists, or at least annually for indefinite live intangibles, the
    Company determines its projected revenue streams over the estimated useful
    life of the asset. In order to obtain undiscounted and discounted cash flows
    attributable to each intangible asset, such revenues are adjusted for operating
    expenses, changes in working capital and other expenditures as applicable,
    and discounted to net present value using the risk adjusted discount rates
    of return. As of December 31, 2009 there was no impairment charge related
    to other intangible assets.</p>
  <p style="text-align: left;"> As a result of the downturn in the construction
    industry in Mexico during 2009 and the negative impact this downturn had in
    the Company&#146;s operations mainly at the San Luis facilities, in which
    goodwill resides, the Company adjusted the key assumptions used in the valuation
    model. As of December 31, 2009 the main key assumptions used in the valuation
    models of San Luis reporting unit are as follows:</p>
  <ul>
    <li>
      <p>Discount rate: 18.1%</p>
    </li>
    <li>
      <p>Sales: the Company estimates sales will start a recovery in the years
        2010, 2011 and 2012 to basically reach its 2008 sales level at the year
        2012. After the year 2012 no sales increases in volume terms are considered
        in the valuation model.</p>
    </li>
  </ul>
  <p style="text-align: left;"> If these estimates or their related assumptions
    for prices and demand change in the future, we may be required to record additional
    impairment charges for these assets.</p>
</blockquote>
<P style="text-align: left;"> <B>Long-lived assets</B></P>
<blockquote>
  <p style="text-align: left;"> The Company reviews the recoverability of our
    long-lived assets as required by ASC 360 Property, Plant and Equipment (formerly
    SFAS No. 144 Accounting for the Impairment or Disposal of Long &#150; Lived
    Assets) and must make assumptions regarding estimated future cash flows and
    other factors to determine the fair value of the respective assets. As of
    December 31, 2009 and 2008 there was no impairment charges recorded for these
    type of assets. If these estimates or their related assumptions change in
    the future, the Company may be required to record impairment charges not previously
    recorded.</p>
</blockquote>
<P style="text-align: left;"> <B>Statement of cash flow</B></P>
<blockquote>
  <p style="text-align: left;"> Until December 31, 2007, under Mexican GAAP, the
    Company presented a consolidated statement of changes in financial position
    in accordance with MFRS B-12 which identified the generation and application
    of resources as representing differences between beginning and ending financial
    statement balances in constant Mexican pesos. It also required that monetary
    and unrealized exchange gains and losses be treated as cash items in the determination
    of resources generated by operations. As mentioned in Note 2 (v), upon the
    adoption of MFRS B-2 in January 1, 2008, the Company presents a statement
    of cash flow under Mexican GAAP.</p>
</blockquote>
<P style="text-align: center;">F-47</P>
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<blockquote>
  <p style="text-align: left;">The following presents a statement of cash flow
    under U.S. GAAP: </p>
</blockquote>
<TABLE width=100% border=0 cellpadding="0" cellspacing=0 style="font-family: 'Times New Roman';font-size: 10pt;">
  <TR>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp; </TD>
    <TD colspan="2" align=center> <B>2009</B></TD>
    <TD align=center>&nbsp;</TD>
    <TD align=center> 2008</TD>
    <TD align=center>&nbsp;</TD>
    <TD align=center> 2007</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD colspan="7" align=left><hr size="1" noshade></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <B>Net (Loss) Income under U.S. GAAP</B></TD>
    <TD align=left> <B>Ps.</B></TD>
    <TD align=right> <B>(1,155,901</B></TD>
    <TD align=left> <B>)</B></TD>
    <TD align=right> 1,953,457</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 1,709,209</TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR>
    <TD colspan=8>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Impairment loss on intangible assets</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>2,266,000</B></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> -</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> -</TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Depreciation and Amortization</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>1,045,734</B></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 862,038</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 509,304</TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Deferred income taxes</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>(1,384,555</B></TD>
    <TD align=left> <B>)</B></TD>
    <TD align=right> 313,973</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 541,813</TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Monetary position loss</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>-</B></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> -</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 194,931</TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Trade receivable, net</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>760,413</B></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 367,249</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> (323,456</TD>
    <TD align=left> )</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Other accounts receivable and prepaid expenses</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>(696,584</B></TD>
    <TD align=left> <B>)</B></TD>
    <TD align=right> (251,920</TD>
    <TD align=left> )</TD>
    <TD align=right> (294,091</TD>
    <TD align=left> )</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Inventories</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>2,103,460</B></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> (2,071,739</TD>
    <TD align=left> )</TD>
    <TD align=right> 38,848</TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Accounts payable and accrued expenses</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>(1,832,454</B></TD>
    <TD align=left> <B>)</B></TD>
    <TD align=right> 712,730</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 182,579</TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Other long-term liabilities</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>53,578</B></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 16,084</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> (25,529</TD>
    <TD align=left> )</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD colspan="7" align=left><hr size="1" noshade></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <B>Funds provided by operating activities</B></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>1,159,691</B></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 1,901,872</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 2,533,608</TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR>
    <TD colspan=8>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Acquisition of property, plant and equipment</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>(263,207</B></TD>
    <TD align=left> <B>)</B></TD>
    <TD align=right> (479,804</TD>
    <TD align=left> )</TD>
    <TD align=right> (485,668</TD>
    <TD align=left> )</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Effect from the acquisition of Grupo San</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>-</B></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> (8,450,796</TD>
    <TD align=left> )</TD>
    <TD align=right> -</TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> (Increase) decrease in other non-current assets</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>6,932</B></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> (205,266</TD>
    <TD align=left> )</TD>
    <TD align=right> 9,779</TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD colspan="7" align=left><hr size="1" noshade></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <B>Funds used by investing activities</B></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>(256,275</B></TD>
    <TD align=left> <B>)</B></TD>
    <TD align=right> (9,135,866</TD>
    <TD align=left> )</TD>
    <TD align=right> (475,889</TD>
    <TD align=left> )</TD>
  </TR>
  <TR>
    <TD colspan=8>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Financial debt</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>-</B></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 1,350,810</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> -</TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Financial debt repayment</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>(11,483</B></TD>
    <TD align=left> <B>)</B></TD>
    <TD align=right> (1,325,329</TD>
    <TD align=left> )</TD>
    <TD align=right> (4</TD>
    <TD align=left> )</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Increase Common Stock and related equity accounts</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>-</B></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 1,169,156</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 2,403,302</TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Related parties payable (financing)</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>1,189,850</B></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 232,943</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> -</TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Related parties payable (repayment)</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>(709,219</B></TD>
    <TD align=left> <B>)</B></TD>
    <TD align=right> (36,138</TD>
    <TD align=left> )</TD>
    <TD align=right> (129,038</TD>
    <TD align=left> )</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Increase of investment in Pav Republic by ICH</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>-</B></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> -</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 37,895</TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD colspan="7" align=left><hr size="1" noshade></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <B>Funds obtained from financing activities</B></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>469,148</B></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 1,391,442</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 2,312,155</TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR>
    <TD colspan=8>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Effects of inflation accounting</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>-</B></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> -</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> (177,737</TD>
    <TD align=left> )</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Translation effect in cash and cash equivalents from</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=left>&nbsp; </TD>
    <TD 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> foreign subsidiaries</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>(405</B></TD>
    <TD align=left> <B>)&nbsp;&nbsp;&nbsp;</B></TD>
    <TD align=right> 1,238</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> -</TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Exchange rate effect on cash and cash equivalents</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>-</B></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 21,900</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> -</TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD colspan="7" align=left><hr size="1" noshade></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Increase (decrease) in cash</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>1,372,159</B></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> (5,819,414</TD>
    <TD align=left> )&nbsp;&nbsp;&nbsp;</TD>
    <TD align=right> 4,192,137</TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Cash beginning of the year</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> <B>576,741</B></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 6,396,155</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 2,204,018</TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD colspan="7" align=left><hr size="1" noshade></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <B>Cash end of the year</B></TD>
    <TD align=left> <B>Ps.</B></TD>
    <TD align=right> <B>1,948,900</B></TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 576,741</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=right> 6,396,155</TD>
    <TD align=left>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD colspan="7" align=left><hr size="2" noshade></TD>
  </TR>
</TABLE>
<blockquote>
  <p style="text-align: left;"> Funds provided by operating activities include
    cash payments for interest and income taxes as follows:</p>
</blockquote>
<TABLE width=100% border=0 cellpadding="0" cellspacing=0 style="font-family: 'Times New Roman';font-size: 10pt;">
  <TR>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp; </TD>
    <TD colspan="2" align=center> <B>2009</B></TD>
    <TD align=center> 2008</TD>
    <TD align=center> 2007</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD colspan="4" align=left><hr size="1" noshade></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Total interest paid</TD>
    <TD align=left> <B>Ps.</B></TD>
    <TD align=center> <B>33,441</B></TD>
    <TD align=center> 40,607</TD>
    <TD align=center> 10,225</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD colspan="4" align=left><hr size="2" noshade></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Income taxes paid</TD>
    <TD align=left> <B>Ps.</B></TD>
    <TD align=center> <B>217,285</B></TD>
    <TD align=center> 695,852</TD>
    <TD align=center> 377,281</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD colspan="4" align=left><hr size="2" noshade></TD>
  </TR>
</TABLE>
<BR>
<P style="text-align: center;">F-48</P>
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<BR>
<P style="text-align: left;"> <B>Accounting for uncertainty in income taxes</B></P>
<P style="text-align: left;"> The Company adopted the provisions of ASC 740 (formerly
  FASB Interpretation No. 48,&#148;Accounting for Uncertainty in Income Taxes&#148;
  &#147;FIN 48&#148;) as of January 1,2007. FIN 48 did not have a material impact
  on the Company&#146;s financial statements either upon adoption or for the years
  ended December 31, 2007-2009.</P>
<P style="text-align: left;"> Under ASC 740 (formerly 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 style="text-align: left;"> 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 style="text-align: left;"> 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 three to five years for the countries
  in which the Company principally operates. 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>
<P style="text-align: left;"> <B>Recent accounting pronouncements in the US</B></P>
<P style="text-align: left;"> In September 2006, the FASB issued SFAS No. 157,
  &#147;Fair Value Measurement.&#148; SFAS No. 157 was codified as a component
  of ASC 820.10 and it 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. ASC 820.10 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. ASC 820.10 establishes
  a fair value hierarchy that prioritizes the inputs to valuation techniques used
  to measure fair value. The hierarchy gives the highest priority to unadjusted
  quoted prices in active markets for identical assets or liabilities (Level 1
  measurements) and the lowest priority to unobservable inputs (Level 3 measurements).
  The three levels of the fair value hierarchy under ASC 820.10 are described
  below:</P>
<P style="text-align: left;"> Level 1 - Unadjusted quoted prices in active markets
  that are accessible at the measurement date for identical, unrestricted assets
  or liabilities;</P>
<P style="text-align: left;"> Level 2 - Quoted prices in markets that are not
  active, or inputs that are observable, either directly or indirectly, for substantially
  the full term of the asset or liability;</P>
<P style="text-align: left;"> Level 3 - Prices or valuation techniques that require
  inputs that are both significant to the fair value measurement and unobservable
  (supported by little or no market activity).</P>
<P style="text-align: left;"> ASC 820.10 was adopted by the Company effective
  January 1, 2008, for financial assets and liabilities and January 1, 2009, for
  nonfinancial assets and liabilities. ASC 820.10 is applied prospectively. ASC
  820.10 did not have a material impact on the Company&#146;s financial statements
  either upon adoption or for the years ended December 31, 2008 and 2009.</P>
<P style="text-align: center;">F-49</P>
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<P style="text-align: left;"> The Company is exposed to counterparty credit risk
  on all derivative financial instruments. Because the amounts are recorded at
  fair value, the full amount of the Company&#146;s exposure is the carrying value
  of these instruments. Credit risk is monitored through established approval
  procedures, including setting concentration limits by counterparty. The Company
  only enters into derivative transactions with well-established financial institutions;
  the Company believes such risk is minimal.</P>
<P style="text-align: left;"> The following table provides a summary of significant
  liabilities at December 31, 2009 and 2008 that are measured at fair value on
  a recurring basis:</P>
<TABLE width=100% border=0 cellpadding="0" cellspacing=0 style="font-family: 'Times New Roman';font-size: 10pt;">
  <TR>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp; </TD>
    <TD colspan="4" align=center> <B>2009</B> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp; </TD>
    <TD colspan="4" align=center> <B>Fair Value Measurement</B> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD colspan="4" align=center><hr size="1" noshade></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp; </TD>
    <TD align=center> <B>Level 1</B></TD>
    <TD align=center> <B>Level 2</B></TD>
    <TD align=center> <B>Level 3</B></TD>
    <TD align=center> <B>Total</B></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD colspan="4" align=center><hr size="1" noshade></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <B>Liabilities</B></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=left> Derivative financial instruments</TD>
    <TD align=center> -</TD>
    <TD align=center> Ps. 216,753</TD>
    <TD align=center> -</TD>
    <TD align=center> Ps. 216,753</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> Related party debt</TD>
    <TD align=center> -</TD>
    <TD align=center> -</TD>
    <TD align=center> Ps. 302,139</TD>
    <TD align=center> Ps. 302,139</TD>
  </TR>
  <TR>
    <TD colspan=5>&nbsp; </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp; </TD>
    <TD colspan="4" align=center> 2008 </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp; </TD>
    <TD colspan="4" align=center> Fair Value Measurement </TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD colspan="4" align=center><hr size="1" noshade></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp; </TD>
    <TD align=center> Level 1</TD>
    <TD align=center> Level 2</TD>
    <TD align=center> Level 3</TD>
    <TD align=center> Total</TD>
  </TR>
  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD colspan="4" align=center><hr size="1" noshade></TD>
  </TR>
  <TR valign="bottom">
    <TD align=left> <B>Liabilities</B></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=left> Derivative financial instruments</TD>
    <TD align=center> -</TD>
    <TD align=center> Ps. 376,206</TD>
    <TD align=center> -</TD>
    <TD align=center> Ps. 376,206</TD>
  </TR>
</TABLE>
<P style="text-align: left;"> As of December 31, 2008, the estimated fair value
  approximates the carrying value of the related party debt</P>
<P style="text-align: left;"> The fair value of financial derivative instruments
  is calculated based on Level 2 inputs, which includes the following: natural
  gas commodity prices, foreign exchange rates, LIBOR interest rates and the reporting
  entity own credit risk.</P>
<P style="text-align: left;"> In December 2007, ASC 805 (formerly FASB issued
  SFAS No. 141) (revised 2007), <I>&#147;Business Combinations&#148; </I>was issued
  and 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. ASC 805 also expands
  required disclosures surrounding the nature and financial effects of business
  combinations. ASC 805 was adopted by the Company beginning January 1, 2009.
  The Company will apply ASC 805 to business combinations executed on a prospective
  basis (none were executed in 2009).</P>
<P style="text-align: left;"> In March 2008, an amendment of ASC 815 (formerly
  SFAS No. 161), <I>Disclosures about Derivatives Instruments and Hedging Activities
  - an amendment of ASC 815(formerly FASB Statement No. 133) </I>(formerly SFAS
  No. 161) was issued. This Statement amends the disclosure requirements of ASC
  815 with the intent to provide users of financial statements with an enhanced
  understanding of a) how and why an entity uses derivative instruments, b) how
  derivative instruments and related hedged items are accounted for under Statement
  133, and c) how derivative instruments and related hedged items affect an entity&#146;s
  financial position, financial performance, and cash flows. This amendment of
  ASC 815 is effective for financial statements issued for fiscal years and interim
  periods beginning after November 15, 2008. The adoption of this amendment of
  ASC 815 did not have a material impact on the Company&#146;s financial statements.</P>
<P style="text-align: center;">F-50</P>


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<P style="TEXT-ALIGN: right"><b>SCHEDULE 1</b></P>
<P align="left" style="TEXT-ALIGN: center">GRUPO SIMEC, S.A.B. DE C.V. (PARENT COMPANY ONLY)</P>
<P align="left" style="TEXT-ALIGN: center"> <a name="s1"></a>Condensed balance sheets</P>
<P align="left" style="TEXT-ALIGN: center"> December 31, 2009 and 2008</P>
<P align="left" style="TEXT-ALIGN: center"> (In thousands of Mexican pesos)</P>
<TABLE style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'" cellSpacing=0 cellpadding=0 border=0 width="100%">
  <TR>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>
    <TD align=left colspan="3"> <div align="center"><B>2009</B></div></TD>
    <TD align=left colspan="3"> <div align="center">2008</div></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>
    <TD align=left colspan="6"> <hr size="1" noshade> </TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=center><B>Assets</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;&nbsp;&nbsp;&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>Current assets:</TD>
    <TD align=left>&nbsp;</TD>
    <TD 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>Cash and cash equivalents</TD>
    <TD align=left><B>Ps.</B></TD>
    <TD align=right><B>218,651</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>Ps.</TD>
    <TD align=right>1,327</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=left colspan="6"> <hr size="1" noshade> </td>
  </tr>
  <TR vAlign=bottom>
    <TD align=left>Accounts receivable</TD>
    <TD align=left>&nbsp;</TD>
    <TD 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;Related parties</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>5,972,984</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>11,385</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD  align=left>&nbsp;&nbsp;&nbsp;&nbsp;Other receivables</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>29,504</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>32,828</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=left colspan="6"> <hr size="1" noshade> </td>
  </tr>
  <TR vAlign=bottom>
    <TD  align=left>&nbsp;&nbsp;&nbsp;&nbsp;Total accounts receivables, net</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>6,002,488</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>44,213</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=left colspan="6"> <hr size="1" noshade> </td>
  </tr>
  <TR vAlign=bottom>
    <TD  align=left>&nbsp;&nbsp;&nbsp;&nbsp;Total current assets</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>6,221,139</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>45,540</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR>
    <TD colSpan=7>&nbsp;</TD>
  </TR>
  <TR>
    <TD colSpan=7>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>Investment in subsidiary companies</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>13,178,697</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>23,524,339</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>Property, net</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>173,115</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>177,591</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>Other assets</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>127,382</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>136,496</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=left colspan="6"> <hr size="1" noshade> </td>
  </tr>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>
    <TD align=left><B>Ps.</B></TD>
    <TD align=right><B>19,700,333</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>Ps.</TD>
    <TD align=right>23,883,966</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=left colspan="6"> <hr size="2" noshade> </td>
  </tr>
  <TR>
    <TD colSpan=7>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD  align=center><B>Liabilities and stockholders&#146; equity</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>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>Current liabilities:</TD>
    <TD align=left>&nbsp;</TD>
    <TD 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;Current installments of long-term
      debt</TD>
    <TD align=left><B>Ps.</B></TD>
    <TD align=right><B>3,944</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>Ps.</TD>
    <TD align=right>4,055</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD  align=left>&nbsp;&nbsp;&nbsp;&nbsp;Other accounts payable and accrued
      expenses</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>43,484</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>43,140</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD  align=left>&nbsp;&nbsp;&nbsp;&nbsp;Accounts payable to related parties</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>1,770,155</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>4,970,732</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=left colspan="6"> <hr size="1" noshade> </td>
  </tr>
  <TR vAlign=bottom>
    <TD align=left>Total current liabilities</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>1,817,583</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>5,017,927</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR>
    <TD colSpan=7>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD  align=left>&nbsp;&nbsp;&nbsp;&nbsp;Deferred income taxes</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>92,214</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>682,884</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=left colspan="6"> <hr size="1" noshade> </td>
  </tr>
  <TR vAlign=bottom>
    <TD align=left>Total liabilities</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>1,909,797</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>5,700,811</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=left colspan="6"> <hr size="1" noshade> </td>
  </tr>
  <TR>
    <TD colSpan=7>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>Stockholders&#146; equity:</TD>
    <TD align=left>&nbsp;</TD>
    <TD 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>Capital stock</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>4,142,696</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>4,142,696</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>Additional paid-in capital</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>4,208,204</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>4,208,204</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>Retained earnings</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>9,075,705</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>9,507,958</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>Effect of translation of foreign entities, net</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>515,658</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>595,165</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>Fair value of derivative financial instruments</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>(151,727</B></TD>
    <TD align=left><B>)</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>(270,868</TD>
    <TD align=left>)</TD>
  </TR>
  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=left colspan="6"> <hr size="1" noshade> </td>
  </tr>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>17,790,536</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>18,183,155</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>Total stockholders&#146; equity</TD>
    <TD align=left><B>Ps.</B></TD>
    <TD align=right><B>19,700,333</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>Ps.</TD>
    <TD align=right>23,883,966</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=left colspan="6"> <hr size="2" noshade> </td>
  </tr>
</TABLE>
<P style="text-align: left;"> See accompanying notes to consolidated financial statements.</P>
<p align="center">S-1

</p>
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<P style="TEXT-ALIGN: center">GRUPO SIMEC, S.A.B. DE C.V. (PARENT COMPANY ONLY)<br>
  <a name="s2"></a>Condensed statements of operations</P>
<P style="TEXT-ALIGN: center"> Years ended December 31, 2009, 2008 and 2007</P>
<P style="TEXT-ALIGN: center"> (In thousands of Mexican pesos)</P>
<TABLE width="100%" border=0 cellpadding=0 cellSpacing=0 style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'">
  <TR>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>
    <TD align=center colspan="3"><b>2009</b></TD>
    <TD align=center>&nbsp;&nbsp;&nbsp;&nbsp;</TD>
    <TD align=center colspan="3">2008</TD>
    <TD align=center>&nbsp;&nbsp;&nbsp;&nbsp;</TD>
    <TD align=center colspan="3">2007</TD>
  </TR>
  <tr>
    <td>&nbsp;</td>
    <td colspan=11> <hr size="1" noshade> </td>
  </tr>
  <TR vAlign=bottom>
    <TD align=left>Income:</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD 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>Equity in results of subsidiary companies</TD>
    <TD align=left><B>Ps.</B></TD>
    <TD align=right><B>(698,985</B></TD>
    <TD align=left><B>)</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>Ps.</TD>
    <TD align=right>2,073,966</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>Ps.</TD>
    <TD align=right>1,502,425</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>For leasing</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>20,556</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>20,556</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>20,982</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <tr>
    <td>&nbsp;</td>
    <td colspan=11> <hr size="1" noshade> </td>
  </tr>
  <TR vAlign=bottom>
    <TD  align=left>&nbsp;&nbsp;&nbsp;&nbsp;Total of income</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>(678,429</B></TD>
    <TD align=left><B>)</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>2,094,522</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>1,523,407</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR>
    <TD colSpan=12>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>Costs and expenses:</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD 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;Depreciation</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>13,590</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>6,751</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>3,597</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD  align=left>&nbsp;&nbsp;&nbsp;&nbsp;Administrative</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>12,420</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>9,073</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>8,680</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <tr>
    <td>&nbsp;</td>
    <td colspan=11> <hr size="1" noshade> </td>
  </tr>
  <TR vAlign=bottom>
    <TD align=left>Total costs and expenses</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>26,010</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>15,824</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>12,277</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <tr>
    <td>&nbsp;</td>
    <td colspan=11> <hr size="1" noshade> </td>
  </tr>
  <TR vAlign=bottom>
    <TD align=left>Operating income</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>(704,439</B></TD>
    <TD align=left><B>)</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>2,078,698</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>1,511,130</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR>
    <TD colSpan=12>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>Other income (expenses), net</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>562</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>(7,170</TD>
    <TD align=left>)</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>8,568</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR>
    <TD colSpan=12>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>Comprehensive financing result:</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD 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;Interest expense</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>(218,029</B></TD>
    <TD align=left><B>)</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>(203,131</TD>
    <TD align=left>)</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>(949</TD>
    <TD align=left>)</TD>
  </TR>
  <TR vAlign=bottom>
    <TD  align=left>&nbsp;&nbsp;&nbsp;&nbsp;Interest income</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>6,201</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>79,443</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>176,207</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD  align=left>&nbsp;&nbsp;&nbsp;&nbsp;Foreign exchange gain ( loss), net</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>3,430</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>(155,451</TD>
    <TD align=left>)</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>(23,115</TD>
    <TD align=left>)</TD>
  </TR>
  <TR vAlign=bottom>
    <TD  align=left>&nbsp;&nbsp;&nbsp;&nbsp;Monetary position loss</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>-</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>-</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>(105,638</TD>
    <TD align=left>)</TD>
  </TR>
  <tr>
    <td>&nbsp;</td>
    <td colspan=11> <hr size="1" noshade> </td>
  </tr>
  <TR>
    <TD colSpan=12>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD  align=left>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Comprehensive
      financial result, net</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>(208,398</B></TD>
    <TD align=left><B>)</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>(279,139</TD>
    <TD align=left>)</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>46,505</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <tr>
    <td>&nbsp;</td>
    <td colspan=11> <hr size="1" noshade> </td>
  </tr>
  <TR vAlign=bottom>
    <TD  align=left>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(Loss) income
      before income tax</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>(912,275</B></TD>
    <TD align=left><B>)</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>1,792,389</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>1,566,203</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR>
    <TD colSpan=12>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>Income tax:</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD 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;Current</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>1,333</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>461</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>35,883</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD  align=left>&nbsp;&nbsp;&nbsp;&nbsp;Deferred</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>(590,670</B></TD>
    <TD align=left><B>)</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>(4,209</TD>
    <TD align=left>)</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>1,263</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD colSpan=11> <hr size="1" noshade> </TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left><B>Net (loss) income</B></TD>
    <TD align=left><B>Ps.</B></TD>
    <TD align=right><B>(322,938</B></TD>
    <TD align=left><B>)</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>Ps.</TD>
    <TD align=right>1,796,137</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>Ps.</TD>
    <TD align=right>1,529,057</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD colSpan=11> <hr size="2" noshade> </TD>
  </TR>
</TABLE>
<P style="text-align: left;"> See accompanying notes to consolidated financial statements.</P>
<p align="center">S-2
<BR>

</p>
<HR align=center width="100%" noshade SIZE=5>
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<DIV title="EE+ Page Break" style="FONT-SIZE: 1pt; PAGE-BREAK-AFTER: always; WIDTH: 100%; HEIGHT: 1px"></DIV>
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<BR>

<P style="TEXT-ALIGN: center">GRUPO SIMEC, S.A.B. DE C.V. (PARENT COMPANY ONLY)<BR>

<a name="s3"></a>Condensed statements of cash flow<BR>

<BR>

Year ended December 31, 2009 and 2008<BR>

<BR>

(In thousands of Mexican pesos)</P>
<TABLE width="100%" border=0 cellpadding=0 cellSpacing=0 style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'">
  <TR>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>
    <TD align=center colspan="2"><b>2009</b></TD>
    <TD align=center>&nbsp;</TD>
    <TD align=center>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</TD>
    <TD align=center colspan="3">2008</TD>
  </TR>
  <TR vAlign=bottom>
    <TD  align=left>&nbsp;</TD>
    <TD colspan="7" align=left><hr size="1" noshade></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>Operating activities:</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD 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>(Loss) income before income tax</TD>
    <TD align=left><B>Ps.</B></TD>
    <TD align=right><B>(912,275</B></TD>
    <TD align=left><B>)</B></TD>
    <TD align=left>&nbsp;&nbsp;&nbsp;</TD>
    <TD align=left>Ps.</TD>
    <TD align=right>1,792,389</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR>
    <TD colSpan=8>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD  align=left>&nbsp;&nbsp;&nbsp;Depreciation and amortization</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>13,590</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>6,751</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD  align=left>&nbsp;&nbsp;&nbsp;Equity in net results of subsidiary companies</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>698,985</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>(2,073,966</TD>
    <TD align=left>)</TD>
  </TR>
  <TR vAlign=bottom>
    <TD  align=left>&nbsp;&nbsp;&nbsp;Interest income</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>(6,201</B></TD>
    <TD align=left><B>)</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>(79,443</TD>
    <TD align=left>)</TD>
  </TR>
  <TR vAlign=bottom>
    <TD  align=left>&nbsp;&nbsp;&nbsp;Accrued interest</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>218,029</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>203,131</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD  align=left>&nbsp;</TD>
    <TD colspan="7" align=left><hr size="1" noshade></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>12,128</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>(151,138</TD>
    <TD align=left>)</TD>
  </TR>
  <TR>
    <TD colSpan=8>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD  align=left>&nbsp;&nbsp;&nbsp;(Increase) decrease in related parties receivables</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>(746,331</B></TD>
    <TD align=left><B>)</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>1,646,861</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD  align=left>&nbsp;&nbsp;&nbsp;Decrease in other accounts receivable</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>3,324</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>22,063</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD  align=left>&nbsp;&nbsp;&nbsp;Increase in other accounts payable and accrued
      expenses</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>344</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>11,653</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD  align=left>&nbsp;&nbsp;&nbsp;(Decrease) increase in related parties payable</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>(3,405,306</B></TD>
    <TD align=left><B>)</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>3,443,414</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD  align=left>&nbsp;</TD>
    <TD colspan="7" align=left><hr size="1" noshade></TD>
  </TR>
  <TR vAlign=bottom>
    <TD  align=left>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Resources (used in) provided
      by operating activities</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>(4,135,841</B></TD>
    <TD align=left><B>)</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>4,972,853</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD  align=left>&nbsp;</TD>
    <TD colspan="7" align=left><hr size="1" noshade></TD>
  </TR>
  <TR>
    <TD colSpan=8>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>Investing activities:</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD 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;Acquisition of Grupo San</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>-</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>(8,450,796</TD>
    <TD align=left>)</TD>
  </TR>
  <TR vAlign=bottom>
    <TD  align=left>&nbsp;&nbsp;&nbsp;Net assets from mergers</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>-</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>(323,495</TD>
    <TD align=left>)</TD>
  </TR>
  <TR vAlign=bottom>
    <TD  align=left>&nbsp;&nbsp;&nbsp;Acquisition of property</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>-</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>(46</TD>
    <TD align=left>)</TD>
  </TR>
  <TR vAlign=bottom>
    <TD  align=left>&nbsp;&nbsp;&nbsp;Interest collected</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>6,201</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>79,443</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD  align=left>&nbsp;&nbsp;&nbsp;Acquisition of new subsidiary companies&nbsp;&nbsp;&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>(1,333</B></TD>
    <TD align=left><B>)</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>-</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD  align=left>&nbsp;&nbsp;&nbsp;Sales of shares of Grupo San to Simec International
      subsidiary</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>4,351,882</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>-</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD  align=left>&nbsp;</TD>
    <TD colspan="7" align=left><hr size="1" noshade></TD>
  </TR>
  <TR vAlign=bottom>
    <TD  align=left>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Resources provided by
      (used in) investing activities</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>4,356,750</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>(8,694,894</TD>
    <TD align=left>)</TD>
  </TR>
  <TR vAlign=bottom>
    <TD  align=left>&nbsp;</TD>
    <TD colspan="7" align=left><hr size="1" noshade></TD>
  </TR>
  <TR>
    <TD colSpan=8>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>Financing activities:</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD 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;Exchange rate effect on financial debt</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>(111</B></TD>
    <TD align=left><B>)</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>773</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD  align=left>&nbsp;&nbsp;&nbsp;Financial debt</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>-</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>1,325,329</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD  align=left>&nbsp;&nbsp;&nbsp;Financial debt repayment</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>-</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>(1,325,329</TD>
    <TD align=left>)</TD>
  </TR>
  <TR vAlign=bottom>
    <TD  align=left>&nbsp;&nbsp;&nbsp;Increase in capital stock</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>-</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>112,269</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD  align=left>&nbsp;&nbsp;&nbsp;Additional paid-in-capital</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>-</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>1,056,886</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD  align=left>&nbsp;&nbsp;&nbsp;Interest paid</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>(3,474</B></TD>
    <TD align=left><B>)</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>(13,956</TD>
    <TD align=left>)</TD>
  </TR>
  <TR vAlign=bottom>
    <TD  align=left>&nbsp;</TD>
    <TD colspan="7" align=left><hr size="1" noshade></TD>
  </TR>
  <TR vAlign=bottom>
    <TD  align=left>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Resources (used in ) provided
      by financing activities</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>(3,585</B></TD>
    <TD align=left><B>)</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>1,155,972</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD  align=left>&nbsp;</TD>
    <TD colspan="7" align=left><hr size="1" noshade></TD>
  </TR>
  <TR>
    <TD colSpan=8>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD  align=left>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net increase (decrease)
      in cash and cash equivalents</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>217,324</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>(2,566,069</TD>
    <TD align=left>)</TD>
  </TR>
  <TR vAlign=bottom>
    <TD  align=left>&nbsp;&nbsp;&nbsp;Cash and cash equivalents at beginning of
      year</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>1,327</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>2,567,396</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD  align=left>&nbsp;</TD>
    <TD colspan="7" align=left><hr size="1" noshade></TD>
  </TR>
  <TR vAlign=bottom>
    <TD  align=left>&nbsp;&nbsp;&nbsp;Cash and cash equivalents at end of year</TD>
    <TD align=left><B>Ps.</B></TD>
    <TD align=right><B>218,651</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>Ps.</TD>
    <TD align=right>1,327</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD  align=left>&nbsp;</TD>
    <TD colspan="7" align=left><hr size="2" noshade></TD>
  </TR>
</TABLE>
<P style="text-align: left;"> See accompanying notes to consolidated financial statements.</P>
<BR><p align="center">S-3
 <BR>
<HR align=center width="100%" noshade SIZE=5>
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<BR>

<P style="TEXT-ALIGN: center">GRUPO SIMEC, S.A.B. DE C.V. (PARENT COMPANY ONLY)<BR>

<a name="s4"></a>Condensed statement of Changes in Financial Position<BR>

<BR>

Year ended December 31, 2007<BR>

<BR>

(In thousands of Mexican pesos)</P>
<TABLE width="100%" border=0 cellpadding=0 cellSpacing=0 style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'">
  <TR>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>
    <TD colspan="2" align=center>2007</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>
    <TD colspan="3" align=left><hr size="1" noshade></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>Operating activities:</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;Net income</TD>
    <TD align=left>Ps.</TD>
    <TD align=right>1,529,057</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;&nbsp;&nbsp;Add (deduct) items not requiring the use
      of</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;resources:</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;Depreciation</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>3,597</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Equity in net results of
      subsidiary companies</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>(1,502,425</TD>
    <TD align=left>)</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Deferred income tax</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>1,263</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>
    <TD colspan="3" align=left><hr size="1" noshade></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>Funds provided by operations</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>31,492</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR>
    <TD colSpan=4>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>Net changes in operating assets and liabilities:</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;Related parties, net</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>103,431</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other accounts receivable,
      net</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>(5,745</TD>
    <TD align=left>)</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other accounts payable
      and accrued expenses</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>(11,687</TD>
    <TD align=left>)</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>
    <TD colspan="3" align=left><hr size="1" noshade></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>Funds provided by operating activities</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>117,491</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>
    <TD colspan="3" align=left><hr size="1" noshade></TD>
  </TR>
  <TR>
    <TD colSpan=4>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>Financing activities:</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;Increases in capital stock</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>2,420,726</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;&nbsp;&nbsp;Financial debt</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>(124</TD>
    <TD align=left>)</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;&nbsp;&nbsp;Long term account receivables to subsidiary
      companies</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>24,509</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>
    <TD colspan="3" align=left><hr size="1" noshade></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>Funds provided by financing activities</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>2,445,111</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>
    <TD colspan="3" align=left><hr size="1" noshade></TD>
  </TR>
  <TR>
    <TD colSpan=4>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net increase
      (decrease) in cash and equivalents</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>2,562,602</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR>
    <TD colSpan=4>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>Cash and equivalents:</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;At beginning of year</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>4,794</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>
    <TD colspan="3" align=left><hr size="1" noshade></TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;&nbsp;&nbsp;At end of year</TD>
    <TD align=left>Ps.</TD>
    <TD align=right>2,567,396</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>
    <TD colspan="3" align=left><hr size="2" noshade></TD>
  </TR>
</TABLE>
<P style="text-align: left;"> See accompanying notes to consolidated financial statements.</P>
<BR><p align="center">S-4<BR>
<BR>
<hr align=center width="100%" noshade size=5>

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<P style="text-align: center;">GRUPO SIMEC, S.A.B.  DE C.V. (PARENT COMPANY ONLY)
  <br>
  Condensed Note to the Parent Only Financial Statements <br>
  <br>
  Years ended December 31, 2009, 2008 and 2007 <br>
  <br>
  (In thousands of Mexican pesos)</P>
<table width="100%" border="0" cellspacing="0" cellpadding="0">
  <tr valign="top">
    <td width="3%"><b><font size="2">1.</font></b></td>
    <td width="97%"><b><font size="2">Organization of the Company and certain other information:</font></b></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font size="2"></font></td>
    <td width="97%"><font size="2">&nbsp;&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font size="2"></font></td>
    <td width="97%"><font size="2">The accompany condensed financial statements reflect the results of operations of the Company since its incorporation in August 1990.</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font size="2"></font></td>
    <td width="97%"><font size="2">&nbsp;&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font size="2"></font></td>
    <td width="97%"><font size="2">Information with respect to the Company&#146;s material contingencies are presented in note 19 of the consolidated financial statements.</font></td>
  </tr>
</table>

<BR><p align="center">S-5<BR>
<BR>
<hr align=center width="100%" noshade size=5>








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`
end
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-12.1
<SEQUENCE>3
<FILENAME>e40100ex12_1.htm
<DESCRIPTION>SECTION 302 CERTIFICATION
<TEXT>
<HTML>
<HEAD>
<TITLE></TITLE>
</HEAD>
<BODY>






<!-- MARKER FORMAT-SHEET="Left Head 2 Bold" FSL="Workstation" -->
<P ALIGN=right><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Exhibit 12.1 </B></FONT></P>




<!-- MARKER FORMAT-SHEET="Center Head 2-Bold" FSL="Workstation" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Annual Certifications </B></FONT></P>


<!-- MARKER FORMAT-SHEET="Center Head 2-Bold" FSL="Workstation" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Pursuant to Section
302 of the Sarbanes-Oxley Act of 2002 </B></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;I,
  Adolfo Luna Luna, certify that: </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;1.
I have reviewed this  annual report on Form 20-F of 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;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; </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;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; </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;4.
The company&#146;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)) and internal control over financial reporting (as de3fined in
Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and have: </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;(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; </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;(b)
Designed such internal control over financial reporting, or caused such internal control
over financial reporting to be designed under our supervision, to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with general accepted accounting
principles; </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;(c)
Evaluated the effectiveness of the company&#146;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 </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;(d)
Disclosed in this report any change in the company&#146;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&#146;s internal
control over financial reporting; and </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;5.
The company&#146;s other certifying officer(s) and I have disclosed, based on our most recent
evaluation of internal control over financial reporting, to the company&#146;s auditors and
the audit committee of the company&#146;s board of directors (or persons performing the
equivalent functions): </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;(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&#146;s ability to record, process, summarize and report financial information; and </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;(b)
Any fraud, whether or not material, that involves management or other employees who have
a significant role in the company&#146;s internal control over financial reporting. </FONT></P>


<!-- MARKER FORMAT-SHEET="Para Flush 00" FSL="Workstation" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Dated: September 17, 2010</FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush 00" FSL="Workstation" -->
<table border="0" cellspacing="0" cellpadding="0" width="100%">
  <tr>
    <td width="50%">&nbsp;&nbsp;</td>
    <td width="4%">
      <p><font face="Times New Roman, Times, Serif" size=2>By: &nbsp; </font></p>
      <!-- MARKER FORMAT-SHEET="Para Flush 00" FSL="Workstation" -->
</td>
    <td><font size="2">/s/<font face="Times New Roman, Times, Serif"> Adolfo Luna Luna</font></font></td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>
      <hr size="1" noshade>
    </td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td><font size="2"><font face="Times New Roman, Times, Serif">Adolfo Luna Luna</font></font><font face="Times New Roman, Times, Serif" size=2><br>
                                                                      Chief Financial
Officer</font></td>
  </tr>
</table>
<!-- MARKER FORMAT-SHEET="5 pt rule no space" FSL="Workstation" --> <br>
<HR SIZE=5 noshade WIDTH=100% ALIGN=LEFT>

</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-12.2
<SEQUENCE>4
<FILENAME>e40100ex12_2.htm
<DESCRIPTION>SECTION 302 CERTIFICATION
<TEXT>
<HTML>
<HEAD>
<TITLE></TITLE>
</HEAD>
<BODY>






<!-- MARKER FORMAT-SHEET="Left Head 2 Bold" FSL="Workstation" -->
<P ALIGN=right><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Exhibit 12.2 </B></FONT></P>




<!-- MARKER FORMAT-SHEET="Center Head 2-Bold" FSL="Workstation" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Annual Certifications </B></FONT></P>


<!-- MARKER FORMAT-SHEET="Center Head 2-Bold" FSL="Workstation" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Pursuant to Section
302 of the Sarbanes-Oxley Act of 2002 </B></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;I,
Luis Garcia Lim&#243;n, certify that: </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;1.
I have reviewed this   annual report on Form 20-F of 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;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; </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;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; </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;4.
The company&#146;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)) and internal control over financial reporting (as de3fined in
Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and have: </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;(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; </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;(b)
Designed such internal control over financial reporting, or caused such internal control
over financial reporting to be designed under our supervision, to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with general accepted accounting
principles; </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;(c)
Evaluated the effectiveness of the company&#146;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 </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;(d)
Disclosed in this report any change in the company&#146;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&#146;s internal
control over financial reporting; and </FONT></P>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.
The company&#146;s other certifying officer(s) and I have disclosed, based on our most recent
evaluation of internal control over financial reporting, to the company&#146;s auditors and
the audit committee of the company&#146;s board of directors (or persons performing the
equivalent functions): </FONT></P>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(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&#146;s ability to record, process, summarize and report financial information; and </FONT></P>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)
Any fraud, whether or not material, that involves management or other employees who have
a significant role in the company&#146;s internal control over financial reporting. </FONT></P>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Dated:  September 17, 2010</FONT></P>

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      <p><font face="Times New Roman, Times, Serif" size=2>By: &nbsp; </font></p>
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    <td><font size="2">/s/ <font face="Times New Roman, Times, Serif">Luis Garcia Lim&#243;n
</font></font><font face="Times New Roman, Times, Serif" size=2>                                                                     </font></td>
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    <td>&nbsp;</td>
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    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td><font face="Times New Roman, Times, Serif" size=2>Luis Garcia Lim&#243;n
                                                                     <br>
      Chief Executive
Officer </font></td>
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<DOCUMENT>
<TYPE>EX-13.1
<SEQUENCE>5
<FILENAME>e40100ex13_1.htm
<DESCRIPTION>ANNUAL CERTIFICATES
<TEXT>

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<P align="right">
Exhibit 13.1</P>
<P align="center">
<B>Annual Certifications</B></P>
<P align="center">
<B>Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002</B></P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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
&#147;Company&#148;), does hereby certify, to such officer&#146;s knowledge, that:</P>
<P align="left">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Annual Report on Form 20-F for the year ended December 31, 2009 of the Company, as filed with the Securities and Exchange Commission on <font face="Times New Roman, Times, Serif" size=2> September 17, 2010</font>, 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.</P>
<P align="left">
Dated: <font face="Times New Roman, Times, Serif" size=2> September 17, 2010</font></P>
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    <td width=46%></td>
    <td width=4%>&nbsp;</td>
    <td width=50%>/s/ Luis Garcia Lim&oacute;n</td>
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    <td width=46%></td>
    <td width=4%>&nbsp;</td>
    <td width=50%>
      <hr noshade align="left" width="300" size="1">
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    <td width=4%>&nbsp;</td>
    <td width=50%>Luis Garcia Lim&oacute;n</td>
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    <td width=46%>
        </td>
    <td width=4%>&nbsp;</td>
    <td width=50%>Chief Executive Officer</td>
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    <td width=4%>&nbsp;</td>
    <td width=50%>&nbsp;</td>
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    <td width=4%>&nbsp;</td>
    <td width=50%>/s/ Adolfo Luna Luna</td>
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    <td width=4%>&nbsp;</td>
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    <td width=4%>&nbsp;</td>
    <td width=50%>Adolfo Luna Luna</td>
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    <td width=4%>&nbsp;</td>
    <td width=50%>Chief Financial Officer</td>
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